Catering: Decline in operating profitability contracts return on equity

The average return on equity declined from 48.87 to 38.78 percent, mainly on the impacts of the drop in return on net operating assets(RNOA) from 72.85 to 49.16 percent mainly due to the decrease in Net operating assets turnover(NOAT).In addition, the operating spread fell from 72.68 to 48.88. As to the second part of the equation i.e. Net non-operating activities(NNOAT), its contribution decreased as a result of the fall in operating spread. Worth mentioning that the company had not financial obligations but financial assets, so some of the company’s funds have been invested in financial assets, thus it had a Return on net financial assets(RNFA).

The company`s Net operating profit margin(NOPM) that measures the efficiency of profitability decreased from 27.69 to 22.97 percent in the last TTM, mainly that attributed to the decline in net operating profit after tax(NOPAT) with regard to the versus period. Thus, for each riyal of sales the company earns about 0.23 riyal after all operating expenses and tax.
On the other hand, Net operating assets turnover (NOAT) which measures the efficiency of productivity of the company`s net operating assets, dropped from 263.10 to 214.05 percent by the end of June 2017 and that can be explained by the largely growth recorded by Net operating assets(NOA) against the decrease in revenues as compared to the versus period
Free cash flow:
 The amount of cash that Saudi Catering company generates by the end of June 2017, and after accounting for all capital expenditures increased to 226,63  million riyals as compared to 60.41 million riyals during the same period of the previous year.











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