Savola : 2022 Final Accounts

SAVOLA GROUP COMPANY (A Saudi Joint Stock Company)

CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2021 together with the Independent Auditor's Report

KPMG Professional Services

Zahran Business Center

Prince Sultan Street P.O. Box 55078 Jeddah 21534

Kingdom of Saudi Arabia

Commercial Registration No 4030290792

Headquarters in Riyadh

Independent Auditor's Report

To the Shareholders of Savola Group Company

ةينهملا تاراشتسل يج مإ يب يك

لامعل نارهز زكرم ناطلس ريما عراش

55078 ب.ص 21534 هدـج

ةيدوعسلا ةيبرعلا ةكلمملا 4030290792 مقر يراجت لجس

ضايرلا يف يسيئرلا زكرملا

Opinion

We have audited the consolidated financial statements of Savola Group Company ("the Company") and its subsidiaries ("the Group") which comprise the consolidated statement of financial position as at December 31, 2021, the consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and notes to the consolidated financial statements, comprising significant accounting policies and other explanatory information.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2021, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS) that are endorsed in the Kingdom of Saudi Arabia and other standards and pronouncements issued by the Saudi Organization for Chartered and Professional Accountants (SOCPA).

We conducted our audit in accordance with International Standards on Auditing that are endorsed in the Kingdom of Saudi Arabia. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the professional code of conduct and ethics that are endorsed in the Kingdom of Saudi Arabia that are relevant to our audit of the consolidated financial statements, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current year. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

KPMG Professional Services, a professional closed joint stock company registered in the Kingdom of Saudi Arabia. With the paid-up capital of (25,000,000) SAR. (Previously known as "KPMG Al Fozan & Partners Certified Public Accountants") A non-partner member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

نوعجارمو نوبساحم هاكرشو نازوفلا يج مإ يب يك ةكرش" ًاقباس ةامسملا ،لماكلاب عوفدم يدوعس  )25,000,000( هلام سأر ،ةيدوعسلا ةيبرعلا ةكلمملا يف ةلجسم ،ةلفقم ةمهاسم ةينهم ةكرش ةينهملا تاراشتسل يج مإ يب يك ةظوفحم قوقحلا عيمج .نامضب ةدودحم ةيزيلجنا ةكرش ،ةدودحملا ةيملاعلا يج مإ يب يك ـل ةعباتلاو ةلقتسملا يج مإ يب يك تاكرشل ةيملاعلا ةكبشلا يف كيرش ريغ وضع يه و ."نوينوناق

Commercial Registration of the headquarters in Riyadh is 1010425494.

Independent Auditor's Report

To the Shareholders of Savola Group Company (continued)

Refer Note 3(b)(ii) for the accounting policy relating to goodwill, Note 3(f) for accounting policy relating to property, plant and equipment Note 3(g) for the accounting policy relating to intangible assets, Note 3(j) for the accounting policy relating to impairment, Note 3(q) for accounting policies relating to right-of-use assets, Note 4 for the property, plant and equipment disclosure, Note 5 for the right-of-use assets, Note 6 for the intangible assets and goodwill disclosure and Note 36 for the impairment loss disclosure.

Key audit matter

How the matter was addressed in our audit

As at December 31, 2021, the carrying value of intangible assets and goodwill amounted to SR 1,858 million (2020: SR 912 million), the carrying value of property, plant and equipment and right-of-use (RoU) assets amounted to SR 5,872 million (2020: SR 6,228 million) and SR 3,313 million (2020: 3,912 million) respectively. Impairment loss (net) recognised on the non-financial assets during the year ended December 31, 2021 amounted to SR 363 million (2020: SR 50 million).

Intangible assets with indefinite useful life and Goodwill are subject to a mandatory annual impairment test and the intangible assets with definite useful life, property, plant and equipment and RoU assets are subject to impairment testing where there are internal or external indicators of impairment. The Group reviews the carrying amounts of these non-financial assets to determine whether their carrying values exceed the recoverable amounts, which is the higher of value in use or the fair value less costs to sell. For the purpose of the Group's impairment assessment, management has used the value in use model, to determine the recoverable amount, under which the future cash flows relating to each Cash Generating Unit (CGU) were discounted and compared to their respective carrying amounts. A value in use model requires input of several key assumptions, including estimates of future sales volumes, prices, operating costs, terminal value, growth rates and discount rates.

There is uncertainty in estimating the recoverable amount of non-financial assets which principally arises from the inputs used in both forecasting and discounting future cash flows. A combination of the significance of the asset balances and the inherent uncertainty in the assumptions supporting the valuations of non-financial assets, means that an assessment of their carrying value is one of the key judgmental areas.

We considered valuation of non-financial assets including items of PPE, intangible assets and goodwill, as a key audit matter due to the significant judgment and key assumptions involved in the impairment assessment process.

We performed the following audit procedures in relation to non-financial assets impairment:

• - Assessed the appropriateness of the Group's accounting policies for measurement of non-financial assets in line with the requirements of International Financial Reporting Standards (IFRS);

• - Assessed the design and implementation, and tested the operating effectiveness of the Group's controls around impairment assessment;

• - Checked the accuracy and completeness of the information produced by management, which was used as the basis of the impairment assessment;

• - Checked mathematical accuracy of the models used by the management;

• - Engaged our internal valuations specialist to assess the key assumptions used in the value in use calculation. Further, we assessed the reasonableness of key management assumptions in respect of estimated future cash flows, growth and discount rates;

• - Compared forecasts to historical experience and applied our understanding of the future prospects of the business from internal and external sources;

• - Performed a sensitivity analysis, which included assessing the effect of reasonably possible reductions in growth rates and forecast cash flows to evaluate the impact on the currently estimated headroom for the respective CGUs; and

• - Considered the adequacy of the Group's related disclosures in terms of applicable accounting standards.

Independent Auditor's Report

To the Shareholders of Savola Group Company (continued)

Refer Note 3(b)(iii) for the accounting policy relating to equity-accounted investees and Note 9 for the related disclosures:

Key audit matter

How the matter was addressed in our audit

As at December 31, 2021, the carrying value of equity-accounted investees amounted to SR 8,986 million (2020: SR 9,054 million).

Equity accounted investments are accounted for using the equity method in accordance with IAS 28 - Investments in Associates and Joint Ventures. This has been identified as a key audit matter due to the significance of the amounts involved, the complexities attached to the determination of carrying values at reporting dates, trade and capital transactions with investees and judgment involved in the determination of possible impairment loss.

We performed the following audit procedures in relation to valuation of equity-accounted investees:

• - Assessed the appropriateness of the Group's accounting policies for measurement of equity accounted investments in line with the requirements of International Financial Reporting Standards (IFRS);

• - Assessed the design and implementation, and tested the operating effectiveness of the Group's controls around recognition and subsequent measurement of Equity accounted investees including the impairment assessment process;

• - Verified components of equity accounted investments from underlying details and supporting documentation;

• - Evaluated the process by which the Group's cash flow forecasts for the equity-accounted investees (where there are indicators of impairment) were developed;

• - Engaged our internal valuations specialist to assess the key assumptions used in the recoverable amount calculation. Further, we assessed the reasonableness of key management assumptions in respect of estimated future cash flows, growth and discount rates and performed a sensitivity analysis on these key assumptions;

• - Checked the mathematical accuracy of the impairment models;

• - Tested the accuracy and completeness of the information produced by management, which was used for the basis of the impairment assessment; and

• - Considered the adequacy of the Group's equity- accounted investees' disclosures in terms of applicable accounting standards.

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