Leejam Sports Company, owner and operator of the popular Fitness Time chain of clubs in Saudi Arabia, announced its financial results for the fourth quarter of 2023, which showed a 22.6% year-on-year decrease in net profit. Net profit reached SAR 79 million, compared to SAR 102 million in the same period of 2022.
Analysis of the reasons for the decline in profits
According to the official statement published by the company on the Saudi Stock Exchange (Tadawul) website, this decline in financial performance is attributed to a range of operational and investment factors. The most prominent of these factors is the increased costs associated with the company's growth and expansion strategy, with the total cost of revenue rising by 4% due to the opening of new sports centers. Financing costs also increased sharply by 60%, driven by a rise in the average loan balance and lease costs for the new centers, reflecting the global high interest rate environment.
In addition, the results were affected by some non-recurring items that put pressure on net profit, including:
- A decrease in the value of an investment in an associate company of 9.6 million riyals was recorded.
- A decrease in the value of an investment in a subsidiary company was recorded, amounting to 3.2 million riyals.
- Losses from the company’s share of the results of an associate company amounting to 1.3 million riyals.
Despite these challenges, the company was able to achieve some positive aspects, such as achieving a one-off profit of 3.2 million riyals from the sale of a plot of land in Qatif Governorate, and a decrease in general and administrative expenses and sales and marketing expenses by 1%.
Annual performance and growth context within the framework of Vision 2030
For the full year 2023, “Lejam Sports” recorded a net profit of 305 million riyals, a decrease of 33% compared to 2022. A large part of this decrease is due to the fact that 2022 witnessed the achievement of exceptional non-recurring profits of 92 million riyals resulting from the sale of three plots of land, which makes the annual comparison less indicative of the underlying operating performance.
This performance comes within the context of a broader strategic approach adopted by the company, aligned with the goals of Saudi Vision 2030, which prioritizes improving quality of life and increasing the percentage of people who participate in sports. Leejam Sports is a key player in this sector, continuing its investments in opening new and diverse branches, including affordable Fitness Time Express clubs and women's clubs, to meet the growing demand for sports services in the Kingdom. This expansion, while having a short-term impact on profit margins due to initial costs, aims to strengthen the company's market share and build a sustainable revenue base in the long term.
Impact on investors and dividend distribution decision
The current financial results reflect the challenges facing companies in a phase of rapid growth, where expansionary ambitions are balanced against pressure on profitability. However, the company's board of directors demonstrated its confidence in future cash flows by recommending a cash dividend for shareholders for the fourth quarter of 2023. The total amount distributed was SAR 47.56 million, equivalent to SAR 0.93 per share. This decision should reassure investors that the company remains capable of delivering returns for them while simultaneously implementing its long-term strategic plans, reflecting an optimistic outlook for the future of the sports and fitness sector in the Kingdom.
