The Multi-Business Group announced a sharp decline in its annual net profit of nearly 98%, reaching only 352,000 riyals, compared to a net profit of 20.5 million riyals in the previous year. This significant drop reflects the operational challenges and competitive pressures the company faces in the Saudi contracting sector.
Reasons for the decline in profits
According to the statement published by the company on the Saudi Stock Exchange (Tadawul), this substantial decrease in net profit is attributed to a combination of interconnected factors. Firstly, building contracting revenues declined by 2%. More significantly, gross profit fell by a substantial 73%, as profit margins were impacted by intensely competitive pricing policies in the market, particularly given the limited number of new project awards, which led to a greater contribution from low-margin projects to the revenue structure.
In addition, the company incurred additional operating expenses, including workforce costs for certain ongoing projects whose commencement was delayed due to client-related regulatory issues. This delay negatively impacted resource utilization rates and available operational capacity, while the recognition of revenue associated with those projects was postponed, directly impacting the final financial results.
Economic context and challenges of the contracting sector
The company's performance comes at a time when the Saudi contracting sector is experiencing unprecedented activity, driven by mega-projects linked to the Kingdom's Vision 2030. While this massive government spending and investment creates significant opportunities, it has also intensified competition among companies to secure contracts. This competitive environment puts considerable pressure on prices and profit margins, making operational efficiency and cost management critical to success. The case of "Multi-Business" exemplifies how overall sector growth does not necessarily guarantee profitability for all players, particularly those facing challenges in securing high-yield projects or experiencing operational delays.
Strategic recommendation to increase capital
In a strategic move to address these challenges and strengthen its financial position for the future, the company's board of directors recommended to the extraordinary general assembly a 200% increase in the company's capital. This increase aims to bolster the company's capital base to support the execution of current and future projects and align its financial structure with its ambitious growth and expansion plans.
The capital increase will be achieved by issuing bonus shares to shareholders, capitalizing SAR 30 million from the share premium balance. Under this recommendation, two bonus shares will be issued for each share held. Subject to regulatory and shareholder approval, the company's capital will increase from SAR 15 million to SAR 45 million, and the number of shares will increase from 15 million to 45 million. The company confirmed that it is currently working to improve resource utilization efficiency and expand new awarding opportunities to correct profit margins in the coming periods.
