Optimiza struggles in liquidity bind

AMMAN — Several deals clinched in Jordan, Morocco, Egypt, Palestine, United Arab Emirates and Kuwait are expected to generate JD20 million in income for Al-Faris National Company for Investment and Export. Operating under the trade name Optimiza, Al-Faris is a public shareholding company that provides fully integrated solutions and services in four areas: consulting, technology , outsourcing and training.

The company’s operations and solutions are spread over four major units: business, infrastructure, intellectual property and healthcare. 

According to the company’s annual report, sent to the Amman Stock Exchange to fulfill a disclosure requirement, the contracts valued at JD20 million are sevenfold the business volume at the start of 2014.

Detailing some achievements, Al-Faris Chairman Rudain Kawar told the shareholders in a foreword that a single deal with Saraya Aqaba for an information technology project is double the general earnings of the company.

The project, to be completed in two years, entails supplying the mega resort in Aqaba with modern smart building systems, security and surveillance systems, and the necessary technological infrastructure in general.    

Kawar also mentioned the application of programmes, owned by Al-Faris as intellectual property rights, such as the system to manage a hospital in Kuwait.

Under an deal with Al Omooma Hospital, Al-Faris will supply the Kuwaiti maternity and pediatric hospital with the hospital management system eHOpe to support its administrative and financial operations. 

In the foreword, the chairman said that an arbitration court in Dubai awarded the company $3 million in compensation for damages, as well as interest and fees, related to its acquisition of the Saudi firm Al Royah from its previous owners Al Malaz Group (Saudi Arabia) 

A row erupted between the two entities in 2010/2011 when Al-Faris claimed it was defrauded with an inflated price it paid for a 70 per cent stake in Al Royah.

“We expect more liquidity to flow once the compensation is fully implemented,” he said, noting that most of the losses that Al-Faris incurred were due to financing fees and exceptional provisions taken to cover diminution in the value of various investments and intangible assets such as trademarks and patents.

He expressed hope that the Jordan Securities Commision will soon lift the trading suspension of Al Faris shares allowing investors to trade the company’s shares on Amman Bourse.   

The company’s balance sheet as of December 31, 2014, shows an accumulated JD8.9 million in losses. Last year, the loss amounted to JD2 million compared with a JD1.7 million loss in 2013.

“For another year we managed to achieve an operational profit in our activities in Jordan,” Kawar said, noting that the gross profit margin was higher. 

“But still, it was not enough to arrive at a net profit for the company,” he added.

According to the income statement, Al-Faris  last year generated JD1.4 million gross profit compared to JD1.5 million in 2013, although the overall earnings were lower at JD9 million, 24 per cent down from JD11.8 million recorded in 2013.

The report highlighted the increase of the company’s capital to JD16 million in 2014 indicating that Consolidated Contractors Company Ltd. Jordan, and Al Numeir Investment Company joined major shareholders with a 25 per cent and 37.85 per cent stake as they invested JD4 million and JD6 million respectively last year.

The financial support  will contribute to lowering debts, settling obligations to banks, and enabling the company to manage its operations.

Notes to the consolidated financial statements showed Al-Faris owing JD10.3 million to seven banks compared to JD8.7 million at the end of 2013.

Of the total amount, JD1.6 million is current and JD8.7 million is long-term.

The report listed the lack of sufficient liquidity as the top impediment hampering the company from carrying out its operations as expected.

Detailing the risks that the company faced in 2014 or could face this year with material consequences, the report mentioned inability to expand operations and increasing profits needed to implement plans for spreading out in some Arab markets.

It also mentioned delays in repaying banking dues which overburden the company with high interest rates besides inability to meet obligations towards suppliers or to find mechanisms for financing new purchases.

“These constraints make it difficult to easy payment terms from key suppliers and leave the company with no option but to buy from local distributors at higher prices,” the report explained.

Besides the uncertainties related to supplies, marketing and sales, liquidity shortage heightens risks of a freeze on banking facilities, a loss of highly qualified personnel if their work is not timely compensated financially, and inability to launch promotional campaigns.  

Al-Faris lamented regional turbulence for its negative impact on the company’s growth, describing neighbouring countries as main markets for its sales of programmes and technological solutions which mostly provide a high profit margin and good return on investments.

Financially, the balance sheet as of December 31, 2014, showed total assets at JD29.9 million (JD31.9 milliion in 2013) and total liabilities at JD22.7 million (JD28.7 million in 2013).   

According to the annual report, the company’s capital investment was JD19.3 million at the end of last year spread over eight subsidiaries, some of which are inoperative.

The subsidiaries are AlAhlia for Computers Company (100.00 per cent), Gulf Electronic for Technical Solutions Company (100.00 per cent), Foster Electronics Company (100.00 per cent), Optmiza Morocco LL (100.00 per cent), Arigon Bermuda (Optimiza Consulting) (100.00 per cent), Optimiza for Computer Systems (100.00 per cent), Advanced Training Company ( Optimiza Academy) (100.00 per cent), Alliance Software Inc (92.00 per cent), and Royah (70.00 per cent).