BinDawood Holding company, one of the leading grocery retail operators of hypermarkets and supermarkets in Saudi Arabia has reported its nine-month financial results for the year.
Third-quarter net loss was SAR48 million versus a net profit of SAR70.2 million in Q3 2021, while BinDawood Holding sales are up 7.6 per cent year-on-year.
The company has 83 stores, which include 54 hypermarkets, 26 supermarkets, and three express stores, located across KSA and Bahrain, operating two complementary brands: BinDawood and Danube.
Financials: Q3 2022
Revenue for the third quarter was SAR1,182.5 million, 9.7 per cent higher than Q3 2021, as a result of the company’s continued marketing and promotions activity. In the third quarter, Bindawood store sales were SAR374.5 million versus SAR270.2 million in Q3 2021.
The increase was across the full store’s portfolio. Danube stores sales have decreased to SAR770 million, versus SAR807.6 million, mainly because of lower sales to corporate customers.
Third-quarter gross profit was SAR307.2 million, equivalent to 26 per cent of sales revenues versus SAR397.3 million, equivalent to 36.9 per cent of sales revenues in Q3 2021. The decline in gross profit was led by the marketing and promotions activity, and the realigning of supplier terms.
Third-quarter operating expenses were SAR336.5 million versus SAR 304.1million in Q3 2021 as a result of higher employment costs, acquisition related costs and higher bank charges, as more customers reverted to paying by credit card.
Third-quarter net loss was SAR48 million versus a net profit of SAR70.2 million in Q3 2021, which reflects the cumulative impact of lower gross margin and higher operating expenses.
The company’s financial position remained strong with no bank debt. Cash generated from operations in Q3 this year was SAR221 million versus SAR16.4 million in Q3 2021. The increase of 1,247.6 per cent in Q3 2022 was due to working capital management. Net Working Capital amounted to SAR360.5 million on September 30, 2022, compared with SAR772.6 million on September 30, 2021, and SAR600.5 million on December 31, 2021.
As of September 30, 2022, the company had a cash balance of SAR485.9 million, including short-term deposits, which represented a decrease of 32.8 per cent, compared to June 30, due to the declaration of SAR102.9 million cash dividend in H1 2022.
During the third quarter, the company completed the acquisition of 80.5 per cent stake in France-based marketing agency Ykone through its wholly owned subsidiary Future Retail for Information Technology Company. Ykone’s performance since the date of acquisition has been much better than expected and the financials will be reflected in the full-year results.
Furthermore, the company appointed a new chief operating officer, Mark Lack, who joined BinDawood Holding from Urban Foods in Dubai, where he was CEO for nearly four years.
In regard to the online division, BinDawood Holding has seen both its sales slowly improve and an increase in its fleet of cars as it anticipates further growth in sales. In line with its online strategy, the company opened five dark stores during the third quarter to facilitate fulfillment and delivery of online orders.
After the close of Q3, the company opened its first international supermarket in Bahrain and will be reporting its sales and revenues in the full-year financial results.
Financials: nine months 2022
Revenues increased by 7.6 per cent to SAR3,578.7 million compared to SAR3,325 million for the same period last year. Sales increase was driven by BinDawood stores’ sales, which was 27.6 per cent higher in the first nine months of 2022 versus the same period in 2021.
The return of the religious pilgrims, spurred by the lifting of the travel ban and the return of promotions and marketing activities during Hajj, Umrah and Back to School seasons helped lift sales across all BinDawood stores and not just those serving pilgrims. Danube stores’ sales were slower in the third quarter, affecting its overall year-to-date sales which was marginally lower by 1.4%, mainly due to a slow-down in sales related to corporate customers.
Gross profit was SAR1,069 million equivalent to 29.9 per cent of sales revenues versus SAR1,170.1 million equivalent to 35.2 per cent of sales revenues in 9M 2021. The reduction in gross profit is directly attributable to the third quarter’s decreased gross profit led by the marketing and promotions activity, and the realigning of our supplier terms.
Operating expenses were SAR964.6 million versus SAR877.1 million in 9M 2021, reflecting higher employment costs, expenses associated with new branch openings, as well as acquisition related costs.
Net profit was SAR59.8 million as compared to SAR227.3 million in 9M 2021, representing a net profit margin of 1.7 per cent and 6.8 per cent respectively. The strong sales performance in 9M 2022 was unable to offset the reduction in gross margin and higher operating expenses, particularly during the loss-making third quarter, resulting in a much smaller net profit year-to-date.
Khalid BinDawood, managing director of BinDawood Holding, said: “Our sales were up 7.6% on a year-to-date basis, which is hugely encouraging, as we see shoppers returning to our stores and responding positively to our loyalty program launched earlier this year. However, this revenue increase has come by sacrificing gross margin because of continued promotional and marketing activity. In addition, the costs associated with opening of new stores, M&A costs and the continued strengthening of the management team has resulted in a substantial increase in operating expenses. The combined effect has translated in a net loss of SAR 48 million for this quarter,” reports Zawya.
“While continuing in our efforts to increase footfall and market share, we have also started to refocus our supplier relationship and operating model by putting in place the necessary building blocks to support a turnaround with our commercial team, starting with our newly appointed Chief Operating Officer and Deputy Chief Commercial Officer.
“The structural change that the Chief Operating Officer and his team will deliver, including a critical review of the profitability of each store, will underwrite our front and back margin improvement over the next six months. I am encouraged by the progress made and initiatives taken, such as the opening of our first international supermarket in Bahrain. I am confident the actions taken will return BinDawood Holding to profitable growth in the short-term.”
