|17 February, 2020

Zain KSA to restructure capital through a rights issue

The new recommendation involves a reduction in capital by around 28%

An investor walks past a screen displaying stock information at the Saudi Stock Exchange (Tadawul) in Riyadh, Saudi Arabia June 29, 2016.Image used for illustrative purpose.

An investor walks past a screen displaying stock information at the Saudi Stock Exchange (Tadawul) in Riyadh, Saudi Arabia June 29, 2016.Image used for illustrative purpose.

REUTERS/Faisal Al Nasser

RIYADH — In light of Zain KSA’s achieving profitability during the last three years in its revenue growth and net profits where the company achieved SR485 million net profit in 2019, a growth of 46% compared to 2018, it was able to reduce its accumulated losses significantly from 38% to 28%.

In this regard, the company’s Board of Directors has revised its previous recommendation for a capital restructuring where the new recommendation involves a reduction in capital by around 28%, which is a reduction from SR5,837 million to SR4,229 million as a means to offset accumulated losses of SR1,608 million.

The change in the percentage is due to the improvement in the financial results and the continuous profits that led to 28% in accumulated losses.

In the 2020 recommendation, the capital post-reduction remains higher than that of the 2017 recommendation, or SR4,229 million for 2020 from SR3,616 million in 2017.

Zain KSA’s voluntarily repayment of part of its debt totaling SR600 million and SR525 million in 2018 and SR300 million in 2019 has improved the company’s financial and operational status.

For year 2020, the Board recommended capital increase through a rights issue of SR4,500 million, whereas in 2017 the recommended capital increase through a rights issue is SR6,000 million.

The capital will be reduced by canceling around 161 million shares. This will be followed by an increase in the company’s capital through a rights issue, which will pave the way for dividend distribution to shareholders.

Zain KSA reassures that capital reduction will not change any shareholder’s percentage of ownership in the company nor will it have any implications on the company’s existing obligations or operations. In addition, the capital restructuring proposed will help Zain KSA in the injection of fresh cash which will be used to reduce the company’s debt on the balance sheets and therefore result in significant cost-saving financial burdens. The capital restructuring is expected to improve the financial performance, profitability and leverage ratios of the company.

The Board’s recommendation for a capital increase will be carried out through a rights issue with a total value of SR4,500 million, increasing its capital from SR4,229 million to SR8,729 million.

In line with Zain KSA’s positive course, the company had previously voluntarily repaid parts of its loan in 2018 and 2019. The first installment amounted to SR600 million in Q3 2018, the second totaled SR525 million in Q4 2018, followed by a third installment of SR300 million paid in Q2 2019.

Zain KSA’s revenue in 2019 hit SR8,386 million, compared to SR31 million in 2018, posting a growth of 11 %.

The Board’s recommendations in 2020 is SR 5,837 million, a capital reduction from 38% to 28%. The change in the percentage is due to the improvement in the financial results and the continuous profits that led to 28% in accumulated losses SR 3,616 million.

In the 2020 recommendation, the capital post-reduction remains higher than that of the 2017 recommendation. Recommended capital increase SR6,000 million through a rights issue. .

Zain KSA’s voluntarily repayment of part of its debt totaling SR600 million and SR525 million in 2018 and SR300 million in 2019 has improved the company’s financial and operational status.

 
 

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