Arabian Contracting Services Company Prospectus

Offering Period: Three (3) days

starting on Tuesday 20/ 03/1443H (corresponding to 26/10/2021G) and

ending on Thursday 22/03/1443H (corresponding to 28/10/2021G).

A Saudi joint stock company pursuant to Commercial Register No. 1010048419 dated

18/05/1403H (corresponding to 3 March 1983G), and Ministerial Resolution No. 1132 dated

02/05/1427H (corresponding to 30 May 2006G).

Offering of fifteen million (15,000,000) ordinary shares, representing 30% of the Arabian

Contracting Services Company’s capital at an offer price of [•] SAR per share.

The Arabian Contracting Services Company (hereinafter “the Company”, “ Al Arabia”, “ Al Arabia

Company” or the “Issuer”) was incorporated as a Saudi limited liability company in Riyadh under

Commercial Register No. 1010048419 dated 18/05/1403H (corresponding to 3 March 1983G), with

a share capital of one million Saudi riyals (SAR 1,000,000) for the objective of engaging in outdoor

advertising, particularly installing, and operating outdoor advertising billboards. The Company

was converted into a (closed) joint stock company under HE Minister of Commerce Resolution No.

1132 issued on 02/05/1427H (corresponding to 30 May 2006G). At the same time, the Company’s

capital was increased from one million Saudi riyals (SAR 1,000,000) to sixty million Saudi riyals (SAR

60,000,000) by transferring twenty-three million, nine hundred nine thousand, one hundred three

Saudi riyals (SAR 23,909,103) from the shareholder’s accounts receivable and capitalising a sum of

thirty-five million, ninety thousand, eight hundred ninety-seven Saudi riyals (SAR 35,090,897) out

of the retained earnings. On 02/12/1429H (corresponding to 30 November 2008G), the Company

increased its capital from sixty million Saudi riyals (SAR 60,000,000) to one hundred fifty million

Saudi riyals (SAR 150,000,000) divided into fifteen million (15,000,000) ordinary shares with a fully

paid-up nominal value of ten Saudi riyals (SAR 10) per share through a cash contribution from the

current shareholders of thirteen million, four hundred thousand Saudi riyals (SAR 13,400,000), the

capitalisation of sixty-nine million, eight hundred eighty-five thousand, five hundred eighty-two

Saudi riyals (SAR 69,885,582) out of the retained earnings, and the transfer of six million, seven

hundred fourteen thousand, four hundred eighteen Saudi riyals (SAR 6,714,418) from the balance

of the statutory reserve. On 22/06/1433H (13 May 2012G), the Company increased its capital from

one hundred fifty million Saudi riyals (SAR 150,000,000) to two hundred ten million Saudi riyals

(SAR 210,000,000) divided into twenty-one million (21,000,000) ordinary shares with a fully paid

nominal value of ten Saudi riyals (SAR 10) per share through capitalisation of forty-four million,

four hundred sixty-four thousand, nine hundred sixty-six Saudi riyals (SAR 44,464,966) from the

retained earnings and fifteen million, five hundred thirty-five thousand, thirty-four Saudi riyals

(SAR 15,535,034) from the balance of the statutory reserve. On 21/06/1435H (corresponding to

21 April 2014G), the Company increased its capital from two hundred ten million Saudi riyals (SAR

210,000,000) to five hundred fifty million Saudi riyals (SAR 550,000,000) divided into fifty-five million

(55,000,000) ordinary shares with a fully paid nominal value of ten Saudi riyals (SAR 10) per share,

through capitalisation of three hundred one million, forty-six thousand, six hundred forty-five Saudi

riyals (SAR 301,046,645) from the retained earnings and thirty-eight million, nine hundred fifty-three

thousand, three hundred fifty-five Saudi riyals (SAR 38,953,355) from balance of the statutory reserve.

On 27/03/1440H (corresponding to 5 December 2018G), it was decreased (for further details, see

Section 4 (“The Company”) because it was in excess of the Company’s needs from five hundred fifty

million Saudi riyals (SAR 550,000,000) to two hundred fifty million Saudi riyals (SAR 250,000,000)

divided into twenty-five million (25,000,000) ordinary shares with a fully paid-up nominal value of

ten Saudi riyals (SAR 10) per share. On 01/04/1441H (corresponding to 28 November 2019G), the

Company increased its capital to meet its future expansion needs from two hundred fifty million

Saudi riyals (SAR 250,000,000) to five hundred million Saudi riyals (SAR 500,000,000) divided into fifty

million (50,000,000) ordinary shares with a fully paid nominal value of ten Saudi riyals (SAR 10) per

share, through the capitalisation of one hundred seventy-five million Saudi riyals (SAR 175,000,000)

from the retained earnings and seventy-five million Saudi riyals (75,000,000) from the balance of the

statutory reserve. (For more information, see Section 4.2 (“Development of Company’s Capital and

Ownership Structure”)).

The initial public offering (hereinafter the “Offering”) consists of the sale of fifteen million (15,000,000)

ordinary shares (collectively, the “Offer Shares” and individually an “Offer Share”), with a fully paid

nominal value of ten Saudi riyals (SAR 10) per ordinary share. The offer price shall be [•] Saudi riyals

per share (hereinafter the “Offer Price”). The Offer Shares represent 30% of the Company’s capital.

The Offer Shares are restricted to the following two categories of investors (hereinafter the “Investors”):

Tranche A - Participating Parties: This category consists of the parties entitled to participate in

the book-building process as specified under the Capital Market Authority (hereinafter the “CMA”)

Instructions on Book-Building and Allocation of Shares in Initial Public Offerings (hereinafter

the “Book-Building Instructions”) (collectively, the “Participating Parties” and individually a

“Participating Party”) (For more information, see Section 1 (“Definitions and Abbreviations”)).

The number of Offer Shares to be allocated to the Participating Parties actually involved in the

book building process is 15,000,000 (fifteen million) ordinary shares, representing 100% of the total

Offer Shares. In the event that there is sufficient demand from individual investors (as defined in

Tranche B below), the Bookrunner is entitled to reduce the number of Offer Shares allocated to the

Participating Parties to a minimum of thirteen million, five hundred thousand (13,500,000) ordinary

shares, representing 90% of the total Offer Shares. The number and percentage of Offer Shares to be

allocated to the Participating Parties will be determined by the Financial Advisor in consultation with

the Company and the Selling Shareholders using the optional allocation mechanism mentioned in

Section 18.4.1.

Tranche B - Individual Investors: This category consists of Saudi natural persons, including any

divorced or widowed Saudi woman with minor children from a marriage to a non-Saudi who is

entitled to subscribe to the Offer Shares in their names on her own behalf, on the condition that she

provides proof that she is divorced or widowed and the mother of her minor children. It also includes

GCC investors who are natural persons and resident foreign investors holding valid residency permits

and having bank accounts (collectively, the “Individual Investors” and individually an “Individual

Investor”). Subscription of a person in the name of his divorcee shall be deemed invalid, and if a

transaction of this nature is demonstrated to have occurred, then the law shall be enforced against

the applicant. If a duplicate subscription is made, the second subscription will be considered void

and only the first subscription will be accepted. Individual Investors will be allocated a maximum of one

million, five hundred thousand (1,500,000) ordinary shares, representing 10% of the Offer Shares. If there

is not sufficient demand by Individual Investors for all the Offer Shares allocated to them, the Bookrunner

is entitled to reduce the number of Offer Shares allocated to Individual Investors in proportion to the

number of Offer Shares that they subscribed for.

The Company’s Current Shareholders (collectively, the “Current Shareholders”) hold all of the Company’s

shares prior to the Offering. All Offer Shares will be sold by the shareholders Abdelellah Abdulrahman

Alkhereiji and Engineer Holding Group Company (hereinafter the “Selling Shareholders”) as per Table

12.1 (“The Company’s Ownership Structure Pre- and Post-Offering”). Prior to the Offering, Abdelellah

Abdulrahman Alkhereiji and Engineer Holding Group Company directly own 25% and 70% of the

Company’s shares respectively. Upon completion of the Offering, Abdelellah Abdulrahman Alkhereiji will

not directly own any shares.

Upon completion of the Offering, the Current Shareholders will own 70% of the Company’s shares and

will consequently retain a controlling interest in the Company. The Company’s Current Shareholders are

Abdelellah Abdulrahman Alkhereiji, Engineer Holding Group Company, and MBC Group Holdings Ltd.

The Substantial Shareholders, (with the exception of Abdelellah Abdulrahman Alkhereiji as he will not

directly own any Company shares after completion of the Offering), will be subject to a lock-up period

during which they will be prohibited from selling or disposing of their shares for a period of six (6) months

(hereinafter the “Lock-up Period”) as at the date trading starts on Saudi Tadawul Group (hereinafter

“Tadawul”, “ Exchange”, or “Stock Exchange”). After the lock-up period, Substantial Shareholders shall be

entitled to dispose of their shares. The Substantial Shareholders are: Abdelellah Abdulrahman Alkhereiji,

Engineer Holding Group Company, and MBC Group Holdings Ltd. Details of their respective ownership

ratios are shown in Table 1.2 (“Substantial Shareholders and Their Shareholding Percentages in the

Company Pre- and Post-Offering”) of the Offering Summary on page (l). After deducting the Offering

expenses, the proceeds from the Offering (hereinafter “Net Offering Proceeds”) will be distributed to

the Selling Shareholders. The Company will not receive any part of the Net Offering Proceeds (For more

information, see Section 8 (“Use of Offering Proceeds”)). The Offering will be fully underwritten by the

Underwriter (For more information, see Section 13 (“Underwriting”)).

The offering period starts on Tuesday 20/03/1443H (corresponding to 26/10/2021G) and remains open

for a period of (3) three days including and up to the Offering closing date at the end of Thursday

22/03/1443H (corresponding to 28/10/2021G) (hereinafter the “Offering Period”). Subscription to

the Offer Shares can be made through any of the branches of the receiving agents (hereinafter the

“Receiving Agents”) listed on Page I during the Offering Period (For more information, please see Page

R (“Key Dates and Subscription Procedures”)). The Participating Parties may subscribe for the Offer

Shares through the Bookrunner (as defined in Section 1 (“Definitions and Abbreviations”)) during

the book-building process, which will take place prior to offering of the shares to Individual Investors.

Individual Investors who subscribe for the Offer Shares shall submit a Subscription Application Form for a

minimum of ten (10) ordinary shares, noting that the maximum subscription is three hundred thousand

(300,000) ordinary shares. The remaining Offer Shares (if any) will be allocated on a pro rata basis based

on the portion of the Offer Shares applied for by each Individual Investor out of the total number of

shares applied for. If the number of Individual Investors exceeds one hundred fifty thousand (150,000)

investors, the Company will not guarantee the minimum allocation of Offer Shares and the Offer Shares

will be allocated at the discretion of the Issuer and the Financial Advisor. Excess subscription monies, if

any, will be refunded to the Individual Investors without any charge or withholding by the Receiving

Agents. Announcement of the final allotment and refund of excess subscription monies, if any, will be

made no later than 29/03/1443H (corresponding to 04/11/2021G) (For more information, see Page R

(“Key Dates and Subscription Procedures”) and Section 18 (“Subscription Terms and Conditions”)).

The Company has one class of ordinary shares. Each share entitles its holder to one vote. Each

shareholder (hereinafter “Shareholder”) has the right to attend and vote at the Shareholders’ General

Assembly meetings (hereinafter the “General Assembly”). The shares do not confer preferential voting

rights upon their Shareholder. The Offer Shares will be entitled to receive dividends declared and paid

by the Company as at the date of this Prospectus (“Prospectus”) and in subsequent fiscal years (for more

information, see Section 7 (“Dividend Distribution Policy”)).

Prior to the Offering, there has been no public trading or listing of the shares in any market in the

Kingdom of Saudi Arabia (hereinafter “Kingdom of Saudi Arabia” or “Saudi Arabia”) or elsewhere. The

Company has submitted an application to: (1) the CMA for the registration and offering of the shares,

and (2) the Exchange for acceptance to list its shares. All supporting documents required by the CMA

have been submitted. All requirements have been met, including requirements for listing the Company

on the Exchange, and all approvals pertaining to the Offering, including this Prospectus (hereinafter the

“Prospectus”), have been granted. Trading of the shares on the Exchange is expected to commence once

Offer Share allocation is concluded and all necessary legal requirements and relevant procedures are

fulfilled (For more information, see Page R (“Key Dates and Subscription Procedures”)). Saudi nationals,

GCC nationals, Saudi and GCC companies, banks, and investment funds, and residents holding valid

residency permits in the Kingdom of Saudi Arabia will be permitted to trade in the Offer Shares once

they begin to be traded in Tadawul. Moreover, qualified foreign investors will be permitted to trade in

the shares in accordance with the Rules for Qualified Foreign Financial Institutions Investment in Listed

Shares. Non-Saudi nationals living outside the Kingdom of Saudi Arabia and institutions registered

outside the Kingdom of Saudi Arabia (hereinafter “Foreign Investors”) are also entitled to acquire

economic benefits in the shares by entering into Swap Agreements through a Capital Market Institution

authorised by the CMA to acquire and trade in shares on Tadawul on behalf of a Foreign Investor

(hereinafter “Capital Market Institutions”). Under Swap agreements, Capital Market Institutions will be

registered as legal owners of the shares.

Investment in Offer Shares involves certain risks and uncertainties. For a discussion of certain factors

that should be carefully considered prior to making a decision to subscribe to the Offer Shares, see Page

A (“Important Notice”) and Section 2 (“Risk Factors”) of this Prospectus. These two sections should be

considered carefully before any decision to invest in the Offer Shares is made.

This Prospectus includes information provided as part of the application for the registration and offer of securities in compliance with the Rules on the Offer of Securities and Continuing Obligations of the Capital Market Authority (the “CMA”) and the application

for listing securities in compliance with Tadawul Group’s Listing Rules. The Board Members, whose names appear on Page D, jointly and severally, accept full responsibility for the accuracy of the information contained in this Prospectus and confirm, having made

all reasonable inquiries that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading. The CMA and the Exchange do not take any responsibility for the contents of this Prospectus, do not

make any representations as to its accuracy or completeness, and expressly disclaim any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this Prospectus.

This Prospectus is dated 18/11/1442H (corresponding to 28/06/2021G)

This Red Herring prospectus will be made available to Participating Parties participating in the Book-building process, and does not include the Offer Price. The final version of this Prospectus which will include the Offer Price shall be published after the completion of the Book-building process and the determination of the Offer Price.

This Prospectus is an unofficial English translation of the official Arabic Prospectus and is provided for information purpose only. The Arabic Prospectus published on the CMA's website (www.cma.org.sa) remains the only official, legally binding version and shall prevail in the event of any conflict between the two languages.

Financial Advisor, Lead Manager,

Bookrunner and Lead Underwriter

Co-Underwriter

al-arabia.com

Important Notice

This Prospectus contains detailed information relating to the Company and the Offer Shares. When submitting a

Subscription Application Form for the Offer Shares, Participating Parties and Individual Investors will be considered to be

applying based on the information contained in this Prospectus, copies of which can be obtained from the Company, the

Lead Manager, the Receiving Agents, or by visiting the CMA website (www.cma.org.sa), the Saudi Tadawul Group website

(www.saudiexchange.com), the Company website (www.al-arabia.com), or the Financial Advisor and Lead Manager

website (www.gibcapital.com).

The Company has appointed GIB Capital as Financial Advisor in connection with the Offering (hereinafter the “Financial

Advisor”), and as Lead Underwriter (hereinafter “Lead Underwriter”). The Company also appointed GIB Capital to act as

the Bookrunner and Lead Manager (hereinafter “Bookrunner” or “Lead Manager”). Albilad Investment Company has been

appointed as the co-underwriter (hereinafter “Co-Underwriter”).

This Prospectus includes information that has been presented in accordance with the Rules on the Offer of Securities and

Continuing Obligations issued by the CMA and Listing Rules of Saudi Tadawul Group. The Board Members, whose names

appear on Page D, jointly and severally accept full responsibility for the accuracy of the information contained in this

Prospectus and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no

other facts the omission of which would make any statement herein misleading.

Whilst the Company has made all reasonable enquiries as to the accuracy of the information contained in this Prospectus

as at the date hereof, substantial portions of the information herein regarding the market and industry are derived from

external sources. While neither the Company nor any of the Company’s advisors, whose names appear on Pages F and G of

this Prospectus (collectively referred to with the Financial Advisor as the “Advisors”) has any reason to believe that any of the

market and industry data is materially inaccurate, neither the Company nor any of the Advisors has independently verified

such information. Accordingly, no representation or assurance is made with respect to the accuracy or completeness of any

of this information.

The information contained in this Prospectus as at the date hereof is subject to change. In particular, the Company’s

financial position and the value of the Offer Shares may be adversely affected by future developments such as inflation,

interest rates, taxation or other economic and political factors and factors over which the Company has no control (for

further details, see Section 2 (“Risk Factors”)). Neither the delivery of this Prospectus nor any oral, written or printed

information in relation to the Offer Shares is intended to be nor should be construed as or relied upon in any way as a

promise, confirmation or representation as to future earnings, results or events.

The Prospectus is not to be regarded as a recommendation on the part of the Company, the Board Members, the Current

Shareholders, the Receiving Agents, or the Advisors to subscribe to the Offer Shares. Moreover, information provided in this

Prospectus is of a general nature and has been prepared without taking into account the individual investment objectives,

financial situation or particular investment needs of those intending to invest in the Offer Shares. Prior to making an

investment decision, each recipient of this Prospectus is responsible for obtaining professional advice from a CMA licensed

financial advisor in relation to the Offering to consider the appropriateness of both the investment and the information

herein with regard to the recipient’s individual objectives, financial situation and needs, including the merits and risks

involved in investing in the Offer Shares. An investment in the Offer Shares may be appropriate for some investors but not

others, and prospective investors should not rely on another party’s decision on whether or not to invest as a basis for their

own examination of the investment opportunity and their individual circumstances.

Subscribing for the Offer Shares shall be limited to two categories of investors as follows:

Tranche A - Participating Parties: consisting of the parties entitled to participate in the book-building process in accordance

with the Book-Building Instructions (for further details, see Section 1 (“Definitions and Abbreviations”)); and Tranche

B - Individual Investors, consisting of Saudi natural persons, including any divorced or widowed Saudi woman with minor

children from a marriage to a non-Saudi, who is entitled to subscribe to the Offer Shares in their names on her own behalf,

on the condition that she provides proof that she is divorced or widowed and the mother of her minor children. It also

includes GCC investors who are natural persons and resident foreign investors holding valid residency permits and having

bank accounts. Subscription of a person in the name of his divorcee shall be deemed invalid, and if a transaction of this

nature is demonstrated to have occurred, then the law shall be enforced against the applicant. If a duplicate subscription is

made, the second subscription will be considered void and only the first subscription will be accepted.

Distribution of this Prospectus and the sale of the Offer Shares in any country other than Saudi Arabia are expressly

prohibited except for Qualified Foreign Financial Institutions and/or Foreign Investors by entering into swap agreements

with a Capital Market Institution in accordance with the terms and conditions for swap agreements, and subject to the

relevant applicable laws and instructions. Recipients of this Prospectus are required to inform themselves of any regulatory

restrictions relevant to the Offering or the sale of Offer Shares and to observe all such restrictions. Both qualified Individual

Investors and qualified investing institutions shall read this Prospectus in full and seek advice from their attorneys, financial

advisors and any professional advisors regarding statutory, tax, regulatory and economic considerations related to their

investment in the shares, and will personally assume the fees associated with such advice obtained from their attorneys,

accountants and other advisors regarding all matters related to investment in the Company’s shares. No guarantees with

regard to profits can be provided.

Market and Industry Data

The information contained in Section 3 (“Market and Industry Data”) is taken from the market study report prepared

for the Company on 12 April 2020G by the market consultant, Frost & Sullivan (“Market Consultant”), on the outdoor

advertising sector in the Kingdom of Saudi Arabia (“Market Study”).

The Board Members believe that the information and data from the Market Study provided in this Prospectus and obtained

from other sources, including those provided by the Market Consultant, are reliable. However, this information was not

independently verified by the Company, its Board Members, Advisors, or Selling Shareholders, and they assume no liability

for the accuracy or completeness of this information.

The Market Consultant was established in 1961G and has over 1,200 employees in over 40 offices worldwide working

exclusively for it as at March 2020G. The Market Consultant is headquartered in the United States of America. For more

information, please visit the Market Consultant’s website (ww2.frost.com).

The Market Consultant does not, nor do any of its subsidiaries, associates, partners, shareholders, board members,

managers or relatives thereof, own any shares or interest of any kind in the Company or its subsidiaries. As at the date of

this Prospectus, the Market Consultant has given and not withdrawn its written consent for the use of its name and logo

and the market information and data supplied thereby to the Company in the manner and form set out in this Prospectus.

Financial and Statistical Information

The financial statements mentioned below are presented in the annexes of this Prospectus:

The Company’s audited financial statements for the fiscal year ended 31 December 2018G and the Company’s audited

financial statements for the fiscal year ended 31 December 2019G and 31 December 2020G, along with notes thereto,

prepared in accordance with the International Financial Reporting Standards (IFRS) as approved in the Kingdom (IFRS-

Kingdom of Saudi Arabia) and other standards and pronouncements issued by the Saudi Organisation for Certified

Chartered Accountants (SOCPA), and audited by Baker Tilly, as detailed in its report attached to this Prospectus.

The statements for fiscal year 2019G are the Company’s first consolidated financial statements. Since 2018G, the financial

statements have been prepared in accordance with IFRS-Kingdom of Saudi Arabia.

The above financial statements are found in Section 20 (“Financial Statements and Auditor’s Report”). The Company

publishes its financial statements in Saudi riyals.

To assess the operational and financial performance of its business, the Company uses certain measures that are unaudited

supplemental measures and are not required by, or presented in accordance with, Saudi GAAP or IFRS-Kingdom of Saudi

Arabia. These non-Saudi GAAP financial measures include gross profit margin, operating margin, and net profit margin.

Management uses such measures to assess operating performance and as a basis for strategic planning and forecasting.

Management believes that these and similar measures are used widely by certain investors, securities analysts and other

stakeholders as supplemental performance metrics. These non-Saudi GAAP measures may not be comparable to other

similarly titled measures used by other companies and have limitations as analytical tools and should not be considered

in isolation of or as a substitute for the analysis of the Company’s operating results as reported under Saudi GAAP or IFRS-

Kingdom of Saudi Arabia. For further details on how the Company measures its gross profit margin, operating margin, and

net profit margin, see the margins listed in the “Summary of Financial Information” table below. The financial and statistical

data contained in this Prospectus has been rounded to the nearest integer. Therefore, there may be minor differences

between the figures shown for the same item in the different tables and figures shown as totals in some tables may

not equal the mathematical sum of the figures that preceded them. Where amounts cited in this Prospectus have been

converted from a foreign currency into Saudi riyals, the exchange rate of the Saudi riyal against the relevant currency as at

the date of this Prospectus was used.

In this Prospectus, Hijri dates are mentioned along with their Gregorian counterparts where appropriate. The Hijri

calendar is calculated based on the anticipated lunar cycles. However, the start of each month is determined by the actual

observation of the moon. Therefore, conversions from the Hijri calendar to the Gregorian calendar are often subject to one-

day discrepancies. In addition, any reference to a “year” or “years” shall refer to Gregorian years unless otherwise expressly

stated in this Prospectus.

Forecasts and Forward-Looking Statements

The forecasts set forth in this Prospectus have been prepared on the basis of projections made from the Company’s

information based on its market experience, as well as on publicly available market information. Future operating

conditions may differ from the projections used, and consequently no representation or guarantee is made with respect to

the accuracy or completeness of any of these forecasts. The Company confirms that, to the best of its reasonable knowledge,

all professional due diligence has been taken in preparing the statements contained in this Prospectus.

Certain statements in this Prospectus constitute “forward-looking statements”. Such statements can generally be identified

by their use of forward-looking terminology such as “plans”, “estimates”, “believes”, “expects”, “anticipates”, “may”, “would

be”, “should”, “expected”, or the negation of these terms or other comparable terminology or terms with corresponding

meanings.

These forward-looking statements reflect the Company’s current views with respect to future events and are not a guarantee

of future performance, as there are many factors that could affect the Company’s real performance, actual achievements

or results and cause them to be significantly different from what was expected, whether expressed or implied. Some of

the risks and factors that could have such effect are described in more detail in other sections of this Prospectus (for more

information, see Section 2 (“Risk Factors”)). Should one or more of these risks or uncertainties materialise or any underlying

assumptions prove to be inaccurate or incorrect, the Company’s actual results may materially vary from those mentioned,

described, expected, estimated or planned in this Prospectus.

Pursuant to the requirements of the Rules on the Offer of Securities and Continuing Obligations (OSCOs), the Company

must submit a supplementary prospectus to the CMA if, at any time after the date of the Prospectus and prior to completion

of the Offering, the Company becomes aware that:

a) There has been a significant change in material matters contained in the Prospectus or any document required by

OSCOs.

b) Any additional significant matters have become known which should have been included in the Prospectus.

Except in the aforementioned circumstances, the Company does not intend to update or otherwise revise any industry

or market information or forward-looking statements in this Prospectus, whether as a result of new information, future

events or otherwise. As a result of the aforementioned and other risks, uncertainties and assumptions, the forward-looking

events and circumstances discussed in this Prospectus might not occur in the way the Company expects, or at all. Therefore,

prospective investors should consider all forward-looking statements in light of these explanations and should not unduly

rely on forward-looking statements.

Corporate Directory

Company’s Board of Directors

Table (1-1): Company’s Board Members

No. Name Position

Nation-

ality

Status

Inde-

pen-

dence

Date of

Ap-

point-

ment

Direct Ownership

(%)

Indirect Owner-

ship (%)

Pre-Of-

fering

Post-Of-

fering

Pre-Of-

fering

Post-Of-

fering

Abdelellah

Abdulrahman

Alkhereiji

Chairman

of the

Board

Saudi

Non-ex-

ecutive

Non-in-

depen-

dent

2015G 25% - 35%

32.5%

Abdel Mohsen

Abdulrahman

Alkhereiji

Vice

Chairman

Saudi

Non- ex-

ecutive

Non-in-

depen-

dent

2020G - - -

Muhammad

Abdelellah

Alkhereiji

Managing

Director

Saudi

Execu-

tive

Non-in-

depen-

dent

2015G - 7.7%

7.1%

Samuel James

Killion Barnett

Member British

Non- ex-

ecutive/

Repre-

senta-

tive of

MBC

Group

Holding

Ltd.

Non-in-

depen-

dent

2020G - - - -

Munaji Fouad

Zamakhshari

Member Saudi

Non- ex-

ecutive

Indepen-

dent

2020G - - -

Muhammad

Abdullah Al-

Nimr

Member Saudi

Non- ex-

ecutive

Indepen-

dent

2020G - - -

Source: The Company

The current Secretary of the Company’s Board of Directors is Mustafa Fawzi Al-Saeedi, who does not own any shares in the

Company.

1 Pre-Offering, Abdelellah Abdulrahman Alkhereiji indirectly owns 35% as a result of a 50% ownership percentage in Engineer Holding Group Company,

which directly holds 70% of the Company’s shares.

2 Post-Offering, Abdelellah Abdulrahman Alkhereiji will indirectly own 32.5% as a result of a 50% ownership percentage in Engineer Holding Group

Company, which will directly hold 65% of the Company’s shares after the Offering.

3 Pre-Offering, Mohammed Abdelellah Alkhereiji indirectly owns 7.7% as a result of a 11% ownership percentage in Engineer Holding Group Company,

which directly holds 70% of the Company’s shares.

4 Post-Offering, Mohammed Abdelellah Alkhereiji will indirectly own 7.1% as a result of a 11% ownership percentage in Engineer Holding Group Company,

which will directly hold 65% of the Company’s shares after the Offering.

Company’s Address, Representatives and Board Secretary

Arabian Contracting Services Company

P.O. Box 55905

Riyadh 11544,

Olaya Towers - Floor 33

Kingdom of Saudi Arabia

Unified Tel: +966 92 003 3343

Tel: +966 11 271 6900

Fax: +966 11 229 2550

Website: www.al-arabia.com

Email: [email protected]

Company’s Representatives

Abdelellah Abdulrahman Al-Khereiji

Arabian Contracting Services Company

P.O. Box 55905 Riyadh 11544

Olaya Towers – Floor 33

Kingdom of Saudi Arabia

Unified Tel: +966 92 003 3343

Direct Tel: +966 11 271 6901

Fax: +966 11 229 2550

Website: www.al-arabia.com

Email : [email protected]

Muhammad Abdelellah Al-Khereiji

Arabian Contracting Services Company

P.O. Box 55905 Riyadh 11544

Olaya Towers – Floor 33

Kingdom of Saudi Arabia

Unified Tel: +966 92 003 3343

Direct Tel: +966 11 271 6990

Fax: +966 11 229 2550

Website: www.al-arabia.com

Email : [email protected]

Secretary of the Board

Mustafa Fawzi Al-Saeedi

Arabian Contracting Services Company

P.O. Box 55905 Riyadh 11544

Olaya Towers – Floor 33

Kingdom of Saudi Arabia

Unified Tel: +966 92 003 3343

Direct Tel: +966 11 271 6904

Fax: +966 11 229 2550

Website: www.al-arabia.com

Email : [email protected]

The Exchange

Saudi Tadawul Group (Tadawul)

King Fahd Road – Al Olaya 6897

Unit No. 15

Riyadh 12211- 3388

Kingdom of Saudi Arabia

Tel: +966 92 000 1919

Fax: +966 11 218 9133

Website: www.saudiexchange.sa

Email: [email protected]

Financial Advisor, Lead Manager, Bookrunner and Lead Underwriter

GIB Capital

Low Rise Building 1 Granada Business & Residential Park

Eastern Ring Road

P.O. Box 89589

Riyadh 11692,

Kingdom of Saudi Arabia

Tel: +966 11 511 2200

Fax: +966 11 511 2201

Website: www.gibcapital.com

Email: customercare@gibcapital.com

Co-Underwriter

Albilad Investment Company

King Fahad Road

P.O. Box 140

Riyadh 11411,

Kingdom of Saudi Arabia

Tel: +966 92 000 3636

Fax: +966 11 290 6299

Website: www.albilad-capital.com

Email: clientservices@albilad-capital.com

The Issuer’s Legal Advisor

Legal Advisors, Abdulaziz Alajlan & Partners

Olayan Complex, Tower II, 3rd Floor

Al Ahsa Street, Malaz

P.O. Box 69103

Riyadh 11547,

Kingdom of Saudi Arabia

Tel: +966 11 265 8900

Fax: +966 11 265 8999

Website: www.legal-advisors.com

Email : [email protected]

Financial Due Diligence Advisor

Ernst & Young & Co (Chartered Accountants)

6th & 14th Floors – Al Faisaliah Tower, King Fahd Street

P.O. Box 2732 Riyadh 11461

Kingdom of Saudi Arabia

Tel: + 966 (11) 273 4740

Fax: + 966 (11) 273 4730

Website: www.ey.com

Email: [email protected].com

Market Consultant

Frost & Sullivan

Al-Akaria Plaza, 6th Floor

Gate D, Olaya Road

P.O. Box 86334

Riyadh 11622

Kingdom of Saudi Arabia

Tel: +966 11 486 8463

Fax: +966 11 486 8463

Website: ww2.frost.com

Email: [email protected]om

Independent Auditors

Baker Tilly MKM & CO (Certified Accountants)

Suite 1, Level 3

Uthman Ibn Affan Rd, At Taawun

P.O. Box 300467

Riyadh 11373

Kingdom of Saudi Arabia

Tel: +966 11 835 1600

Fax: +966 11 835 1601

Website: www.bakertillymkm.com

Email: [email protected]

Note:

Up to the date of this Prospectus, all the above-mentioned Advisors and Independent Auditors have given and have not

withdrawn their written consent for the publication of the names and logos attributed to each of them in the form and

content appearing herein. Moreover, they do not themselves, or any of their employees or relatives, have any shareholding

or interest of any kind in the Company as at the date of this Prospectus.

Receiving Agents

Saudi National Bank

King Abdul Aziz Road

P.O Box 3555

Jeddah 21481

Kingdom of Saudi Arabia

Tel: +966 12 649 3333

Fax: +966 12 643 7426

Website: www.alahli.com

E-Mail: [email protected]

Bank Albilad

King Abdullah Road, Al-Worood District

P.O. Box 140

Riyadh 11411

Kingdom of Saudi Arabia

Tel: +966 11 203 9815

Fax: +966 11 401 3030

Website: www.bankalbilad.com

Email: [email protected]

Saudi British Bank (SABB)

Prince Abdulaziz Ibn Musaid Ibn Jalawi St, Al Murabba

P.O. Box 9084

Riyadh 11413

Kingdom of Saudi Arabia

Tel: +966 11 440 8440

Fax: +966 11 276 3414

Website: www.sabb.com

Email: [email protected]

Riyad Bank

Eastern Ring Road

P.O. Box 22622

Riyadh 11614

Kingdom of Saudi Arabia

Tel: +966 11 401 3030

Fax: +966 11 403 0016

Website: www.riyadbank.com

Email: [email protected]

The Company’s Main Banks

Riyad Bank

Eastern Ring Road

P.O. Box 22622

Riyadh 11614

Kingdom of Saudi Arabia

Tel: +966 11 401 3030

Fax: +966 11 403 0016

Website: www.riyadbank.com

Email: [email protected]

Arab National Bank

King Faisal Street

P.O Box 9802

Riyadh 11423

Kingdom of Saudi Arabia

Tel: +966 11 402 9000

Fax: +966 11 404 7535

Website: www.anb.com.sa

Email: info@anb.com.sa

Saudi British Bank (SABB)

Prince Abdulaziz Ibn Musaid Ibn Jalawi St

P.O. Box 9084

Riyadh 11413

Kingdom of Saudi Arabia

Tel: +966 11 276 4779

Fax: +966 11 276 4356

Website: www.sabb.com

Email: [email protected]

The Saudi Investment Bank (SAIB)

Al Maathar District

P.O. Box 3144

Riyadh 12622

Kingdom of Saudi Arabia

Tel: +966 11 418 3100

Fax: +966 11 477 6781

Website: www.saib.com.sa

Email: [email protected]

Bank Albilad

King Abdullah Road, Al-Worood District

P.O. Box 140

Riyadh 11411

Kingdom of Saudi Arabia

Tel: +966 11 203 9815

Fax: +966 11 401 3030

Website: www.bankalbilad.com

Email: [email protected]

Summary of the IPO

This summary of the IPO aims to give a brief overview of the information contained in this Prospectus. As such, it does not contain all of the

information that may be important to prospective investors. Accordingly, this summary must be read as an introduction to this Prospectus,

and prospective investors should read this entire Prospectus in full. Any decision to invest in the Offer Shares by prospective investors

should be based on a consideration of this Prospectus as a whole. In particular, it is important to carefully consider Page A (Important

Notice) and Section 2 (Risk Factors) prior to making any decision to invest in the Offer Shares.

Company Name, Description and

Establishment Information

The Arabian Contracting Services Company was incorporated as a Saudi limited liability

company in Riyadh under Commercial Register No. 1010048419 dated 18/05/1403H (corre-

sponding to 3 March 1983G), with a share capital of one million Saudi riyals (SAR 1,000,000)

for the objective of engaging in outdoor advertising, particularly installing, and operating

outdoor advertising billboards. The Company was converted into a (closed) joint stock com-

pany under HE Minister of Commerce Resolution No. 1132 issued on 02/05/1427H (corre-

sponding to 30 May 2006G). At the same time, the Company’s capital was increased from

one million Saudi riyals (SAR 1,000,000) to sixty million Saudi riyals (SAR 60,000,000) by trans-

ferring twenty-three million, nine hundred nine thousand, one hundred three Saudi riyals

(SAR 23,909,103) from the shareholder’s accounts receivable and capitalising a sum of thir-

ty-five million, ninety thousand, eight hundred ninety-seven Saudi riyals (SAR 35,090,897)

out of the retained earnings. On 02/12/1429H (corresponding to 30 November 2008G),

the Company increased its capital from sixty million Saudi riyals (SAR 60,000,000) to one

hundred fifty million Saudi riyals (SAR 150,000,000) divided into fifteen million (15,000,000)

ordinary shares with a fully paid-up nominal value of ten Saudi riyals (SAR 10) per share

through a cash contribution from the current shareholders of thirteen million, four hundred

thousand Saudi riyals (SAR 13,400,000), the capitalisation of sixty-nine million, eight hun-

dred eighty-five thousand, five hundred eighty-two Saudi riyals (SAR 69,885,582) out of the

retained earnings, and the transfer of six million, seven hundred fourteen thousand, four

hundred eighteen Saudi riyals (SAR 6,714,418) from the balance of the statutory reserve. On

22/06/1433H (13 May 2012G), the Company increased its capital from one hundred fifty mil-

lion Saudi riyals (SAR 150,000,000) to two hundred ten million Saudi riyals (SAR 210,000,000)

divided into twenty-one million (21,000,000) ordinary shares with a fully paid nominal value

of ten Saudi riyals (SAR 10) per share through capitalisation of forty-four million, four hun-

dred sixty-four thousand, nine hundred sixty-six Saudi riyals (SAR 44,464,966) from the re-

tained earnings and fifteen million, five hundred thirty-five thousand, thirty-four Saudi riyals

(SAR 15,535,034) from the balance of the statutory reserve. On 21/06/1435H (corresponding

to 21 April 2014G), the Company increased its capital from two hundred ten million Saudi

riyals (SAR 210,000,000) to five hundred fifty million Saudi riyals (SAR 550,000,000) divided

into fifty-five million (55,000,000) ordinary shares with a fully paid nominal value of ten Saudi

riyals (SAR 10) per share, through capitalisation of three hundred one million, forty-six thou-

sand, six hundred forty-five Saudi riyals (SAR 301,046,645) from the retained earnings and

thirty-eight million, nine hundred fifty-three thousand, three hundred fifty-five Saudi riyals

(SAR 38,953,355) from balance of the statutory reserve.

On 27/03/1440H (corresponding to 5 December 2018G), it was decreased (for further details,

see Section 4 (“The Company”) because it was in excess of the Company’s needs from five

hundred fifty million Saudi riyals (SAR 550,000,000) to two hundred fifty million Saudi riyals

(SAR 250,000,000) divided into twenty-five million (25,000,000) ordinary shares with a fully

paid-up nominal value of ten Saudi riyals (SAR 10) per share.

On 01/04/1441H (corresponding to 28 November 2019G), the Company increased its cap-

ital to meet its future expansion needs from two hundred fifty million Saudi riyals (SAR

250,000,000) to five hundred million Saudi riyals (SAR 500,000,000) divided into fifty mil-

lion (50,000,000) ordinary shares with a fully paid nominal value of ten Saudi riyals (SAR 10)

per share, through the capitalisation of one hundred seventy-five million Saudi riyals (SAR

175,000,000) from the retained earnings and seventy-five million Saudi riyals (75,000,000).

Company’s Activities

The Company’s business includes setting up and operating outdoor advertising billboards,

including roadside advertising and indoor advertising. In roadside advertising, the Company

participates in the tenders organised by various secretariat, municipalities, and government

agencies in all provinces and cities of KSA to lease and invest in the many sites belonging to

these agencies and secretariat by installing billboards in them and selling these billboards’

advertising spaces to their clients. The Company has recently expanded its business by en-

tering the indoor advertising market. In this regard, the Company entered into a number of

exclusive contracts with the owners of commercial centres in different regions within the

Kingdom.

The main objectives of the Company in accordance with its Bylaws include:

y Promotion and advertising, printing advertisement materials, commercial printing, and

binding.

y Manufacture of steel, aluminium and plastic materials used in advertising.

y Implementation of contracting and construction works.

y Purchase of lands and properties to construct buildings for the Company’s benefit.

y Import, export, wholesale and retail of materials, advertising billboards, and printing

supplies and equipment of all kinds.

y Installation and equipment of displays.

y Road works and maintenance, electrical works and maintenance, mechanical works and

maintenance, construction works and maintenance.

y Manufacturing and assembly of advertisements and informational billboards, including

digital TV billboards.

Selling Shareholders

y The Company’s Shareholders, whose names and shareholding percentages are listed in

Table 12.1 (“The Company’s Ownership Structure Pre- and Post-Offering”) and who

will sell a portion of their shares in the Offering, include:

y Abdelellah Abdulrahman Alkhereiji.

y Engineer Holding Group Company.

Substantial Shareholders, No. of

Shares and Shareholding Percentag-

es Pre- and Post-Oering

The following table sets out the names and shareholding percentages of the Company’s

Substantial Shareholders pre- and post-Offering.

Table (1-2): Substantial Shareholders and Their Shareholding Percentages in the

Company Pre- and Post-Offering

Shareholders

Pre-Offering Post-Offering

No. of Shares

Direct Owner-

ship (%)

Nominal

Value (SAR)

No. of

Direct

Owner-

ship (%)

Nominal

Value (SAR)

Selling Shareholders

Abdelellah Abdulrahman Alkhereiji 12,500,000 25% 125,000,000 - - -

Engineer Holding Group Company 35,000,000 70% 350,000,000 32,500,000 65% 325,000,000

Other Current Shareholders

MBC Group Holdings Ltd. 2,500,000 5% 25,000,000 2,500,000 5% 25,000,000

The Public - - - 15,000,000 30% 150,000,000

Total 50,000,000 100% 500,000,000 50,000,000 100% 500,000,000

The Company’s Share Capital (As at

the Date of this Prospectus)

Five hundred million Saudi riyals (SAR 500,000,000).

Total No. of Issued Shares (As at the

Date of this Prospectus)

Fifty million (50,000,000) fully paid ordinary shares.

Oering

Fifteen million (15,000,000) ordinary shares with a fully paid nominal value of ten Saudi riyals

(SAR 10) per share, representing 30% of the Company’s share capital, are offered at a price of

SAR [•] Saudi riyals per share.

Total No. of Oer Shares

Fifteen million (15,000,000) fully paid ordinary shares.

Nominal Value Per Share

Ten Saudi riyals (SAR 10) per share.

Oer Shares as a Percentage of

Company Capital

The Offer Shares represent 30% of the Company’s share capital.

Oer Price

[•] Saudi riyals per share.

Total Oering Value

[•] Saudi riyals.

Use of Oering Proceeds

The net Offering proceeds of SAR [•] Saudi riyals, after deducting the full Offering expenses

amounting to thirty-five million Saudi riyals (SAR 35,000,000), will be distributed to the Sell-

ing Shareholders in proportion to their Offer Shares. The Company will not receive any share

of the Offering proceeds. For more information, see Section 8 (“Use of Offering Proceeds”).

Number of Underwritten Oer

Fifteen million (15,000,000) ordinary shares.

Amount to be Underwritten

[•] Saudi Riyals.

Categories of Target Investors

Subscription for Offer Shares is restricted to:

Tranche A - Participating Parties: This category consists of the parties entitled to partic-

ipate in the book-building process in accordance with the Book Building Instructions (for

further details, see Section 1 (“Definitions and Abbreviations”)).

Tranche B - Individual Investors: Saudi natural persons, including any divorced or wid-

owed Saudi woman with minor children from a marriage to a non-Saudi, who is entitled to

subscribe to the Offer Shares in their names on her own behalf, on the condition that she

provides proof that she is divorced or widowed and the mother of her minor children. It

also includes GCC investors who are natural persons and resident foreign investors holding

valid residency permits having bank accounts. Subscription of a person in the name of his

divorcee shall be deemed invalid, and if a transaction of this nature is demonstrated to have

occurred, then the law shall be enforced against the applicant. If a duplicate subscription is

made, the second subscription will be considered void and only the first subscription will be

accepted.

Total Offer Shares Available for Each Category of Target Investors

No. of Shares Oered to Participat-

ing Parties

Fifteen million (15,000,000) ordinary shares, representing 100% of the total Offer Shares.

Note that if there is sufficient demand by Individual Investors, the Bookrunner shall be en-

titled to reduce the number of shares allocated to Participating Parties to thirteen million,

five hundred thousand (13,500,000) ordinary shares, representing 90% of the Offer Shares.

The number and percentage of Offer Shares to be allocated to the Participating Parties will

be determined by the Financial Advisor in consultation with the Company and the Selling

Shareholders using the allocation mechanism mentioned in Section 18.4.1.

No. of Shares Oered to Individual

Investors

A maximum of one million, five hundred thousand (1,500,000) shares, representing 10% of

the total Offer Shares. If Individual Investors have not subscribed for all shares allocated to

them, the Lead Manager may reduce the number of shares allotted thereto in proportion to

the number of shares they subscribed for.

Subscription Method for Each Category of Target Investors

Subscription Method for Participat-

ing Parties

Participating Parties, as defined in Section 1 (“Definitions and Abbreviations”) may apply

for subscription. The Bookrunner will provide the Subscription Application Forms to Partic-

ipating Parties during the book building process. Following the provisional allocation, the

Bookrunner will provide Subscription Forms to Participating Parties, which shall fill out such

forms in accordance with the instructions set forth in Section 18 (“Subscription Terms and

Conditions”).

Subscription Methods for Individual

Investors

Subscription Application Forms will be made available to Individual Investors during the Of-

fering Period at all Receiving Agents’ branches. Subscription Application Forms for Individual

Investors must be filled out according to the instructions set forth in Section 18 (“Subscrip-

tion Terms and Conditions”). Individual Investors who have already subscribed in previous

IPOs in the Kingdom of Saudi Arabia may also subscribe through the Internet, telephone

banking or ATMs at any of the Receiving Agents’ branches that offer any of these services,

provided that: (a) the investor has a bank account with the Receiving Agent that offers such

services; and (b) there have been no changes to the Individual Investor’s personal or private

information since they last participated in an IPO.

Minimum No. of Offer Shares for Each Category of Target Investors

Minimum No. of Oer Shares to be

Applied for by Participating Parties

One hundred thousand (100,000) shares.

Minimum Subscription for Individu-

al Investors

Ten (10) shares.

Minimum Subscription Amount for Each Category of Target Investors

Minimum Subscription Amount for

Participating Parties

[•] Saudi riyals.

Minimum Subscription Amount for

Individual Investors

[•] Saudi riyals.

Maximum No. of Offer Shares for Each Category of Target Investors

Maximum Subscription for Partici-

pating Parties

Two million, four hundred ninety-nine thousand, nine hundred ninety-nine (2,499,999)

Maximum No. Oer Shares for Indi-

vidual Investors

Three hundred thousand (300,000) shares.

Maximum Subscription Amount for Each Category of Target Investors

Maximum Subscription Amount for

Participating Parties

[•] Saudi riyals.

Maximum Subscription Amount for

Individual Investors

[•] Saudi riyals.

Allocation of Offer Shares and Refund of Excess Proceeds for Each Category of Target Investors

Allocation of Oer Shares to Partici-

pating Parties

Final allocation of the Offer Shares to Participating Parties shall be made through the Lead

Manager upon completion of the Individual Investors’ subscription process. Fifteen million

(15,000,000) Offer Shares, representing 100% of the total Offer Shares, will be initially allocat-

ed to Participating Parties. If there is sufficient demand from Individual Investors, the Lead

Manager is entitled to reduce the number of Offer Shares allocated to Participating Parties

to a minimum of thirteen million, five hundred thousand (13,500,000) ordinary shares, repre-

senting 90% of the total Offer Shares, upon completion of the Individual Investors’ subscrip-

tion process. The number and percentage of Offer Shares to be allocated to Participating

Parties will be determined by the Financial Advisor in consultation with the Company and

the Selling Shareholders using the allocation mechanism mentioned in Section 18.4.1.

Allocation of Oer Shares to Indi-

vidual Investors

Allocation of Offer Shares to Individual Investors is expected to be completed no later than

29/03/1443H (corresponding to 04/11/2021G). The minimum allocation per Individual In-

vestor is ten (10) shares and the maximum allocation per Individual Investor is three hun-

dred thousand (300,000) shares, with the remaining Offer Shares, if any, being allocated on

a pro-rata basis based on the portion of the Offer Shares applied for by each Individual In-

vestor out of the total number of shares applied for. If the number of Individual Investors

exceeds one hundred fifty thousand (150,000) investors, the Company will not guarantee

the minimum allocation. In this case, the allocation shall be made in accordance with the

allocation mechanism mentioned in Section 18.4.1.

Refund of Excess Subscription

Monies

Any surplus subscription proceeds will be refunded without charge or withholding by the

Lead Manager or Receiving Agents. Notification of the final allotment and refund of sub-

scription monies, if any, will be made by 29/03/1443H (corresponding to 04/11/2021G) at

the latest. (For further details, see Page O (“Key Dates and Subscription Procedures”) and

Section 18 (“Subscription Terms and Conditions”).)

Oering Period

The Offering Period will commence on Tuesday 20/03/1443H (corresponding to 26/10/2021G)

and will remain open for a period of three days, including and up to the Offering closing

date, which occurs on 22/03/1443H (corresponding to 28/10/2021G).

Dividend Distributions

The Offer Shares will be entitled to receive any dividends declared and paid by the Company

as at the date of this Prospectus and for subsequent fiscal years. (For further details, see Sec-

tion 7(“Dividend Distribution Policy”).)

Voting Rights

All Company shares are one class of ordinary shares, and none of the shares confer prefer-

ential voting rights. Each share entitles its holder to one vote and each Shareholder has the

right to attend and vote at General Assembly meetings. A Shareholder has the right to dele-

gate another non-Board Member Shareholder to attend General Assembly meetings on their

behalf (for further details, see Section 12.16 (“Description of the Shares”)).

Restrictions on the Shares (Lock-Up

Period)

The Substantial Shareholders will be subject to a lock-up period during which they will

be prohibited from disposing of any of their shares for a period of six (6) months from the

date trading begins on the Exchange. Substantial Shareholders may not dispose of any of

their shares during the Lock-up Period. (For more information, see Table 1.2 (“Substantial

Shareholders and Their Shareholding Percentages in the Company Pre- and Post-Of-

fering”) of the Offering Summary on Page K.)

Listing and Trading of Shares

Prior to the Offering, there has been no public trading or listing of the shares in any market

in the Kingdom of Saudi Arabia or elsewhere. The Company has submitted an application to

the CMA to register and offer the shares in accordance with OSCOs. The Company has also

submitted a listing application to the Exchange in accordance with the Listing Rules. All rel-

evant approvals pertaining to the Offering have been obtained. All supporting documents

required by the CMA have been submitted. All requirements have been met, including re-

quirements for listing the Company on the Exchange, and all approvals pertaining to the

Offering have been granted. Trading in the Offer Shares is expected to commence on the

Exchange soon after the final allocation of the Offer Shares.

Risk Factors

There are certain risks related to the investment in the Offer Shares. These risks can be gener-

ally categorised into: (i) risks relating to the Company’s business; (ii) risks relating to the mar-

ket, industry and regulatory environment; and (iii) risks relating to the Offer Shares. These

risks are described in Section 2 (“Risk Factors”) of this Prospectus and the Important Notice

in the introduction, which should be considered carefully prior to making a decision to invest

in the Offer Shares.

Oering Expenses

The Selling Shareholders will bear all Offering expenses and costs, estimated at around thir-

ty-five million Saudi riyals (SAR 35,000,000). These costs will be deducted from the Offering

Proceeds and include the fees of the Financial Advisor, the Underwriters, the Issuer’s Legal

Advisor, the Chartered Accountants, the Financial Due Diligence Advisor, the Auditors, the

Receiving Agents, and the Market Consultant in addition to marketing, printing, distribution

and other relevant expenses.

Financial Advisor, Lead Manager,

Bookrunner and Lead Underwriter

GIB Capital.

Co-Underwriter

Albilad Investment Company.

Note

Page A (“Important Notice”) and Section 2 (“Risk Factors”) should be read thoroughly prior to making any decision to

invest in the Offer Shares.

Key Dates and Subscription Procedures

Table (1-3): Projected Offering Timetable

Projected Offering Timetable Date

Processing Participating Parties’ Applications and Book-Building

Starting on Sunday 04/03/1443H (corresponding to

10/10/2021G), until 12 pm Tuesday 13/03/1443H (correspond-

ing to 19/10/2021G)

Individual Investors’ Subscription Period

The Offering Period will last for three days, commencing

on Tuesday 20/03/1443H (corresponding to 26/10/2021G),

until the end of Thusday 22/03/1443H (corresponding to

28/10/2021G)

Deadline for Participating Parties to Submit Application Forms Based

on the Provisionally Allocated Offer Shares

Sunday 18/03/1443H (corresponding to 24/10/2021G) 4 pm

Deadline for Individual Investors to Submit Application Forms and

Pay Subscription Monies

Thursday 22/03/1443H (corresponding to 28/10/2021G)

Deadline for Participating Parties to Pay Subscription Monies Based

on the Provisionally Allocated Offer Shares

Wednesday 21/03/1443H (corresponding to 27/10/2021G)

Announcement of Final Offer Shares Allotment Thursday 29/03/1443H (corresponding to 04/11/2021G)

Refund of Excess Subscription Monies (if any) 29/03/1443H (corresponding to 04/11/2021G)

Expected Start Date of Trading on the Exchange

Trading in the Offer Shares is expected to commence after all

relevant legal requirements and procedures have been com-

pleted. An announcement of the commencement of trading

of the shares will be made on Tadawul’s website: www.saudi-

exchange.sa

Note: The above timetable and dates therein are approximate. Actual dates will be communicated through announcements

appearing on the Tadawul website, (www.saudiexchange.sa), the Financial Advisor’s website, www.gibcapital.com, and the

Company website, www.al-arabia.com

How to Apply for the Offering

Subscription for the Offer Shares is restricted to the following categories of Investors:

Tranche A - Participating Parties: This tranche includes all parties entitled to participate in the book-building process as

specified under the Book-Building Instructions (for further details, see Section 1 (“Definitions and Abbreviations”) and

Section 18 (“Subscription Terms and Conditions”)).

Tranche B - Individual Investors: This category consists of Saudi natural persons, including any divorced or widowed

Saudi woman with minor children from a marriage to a non-Saudi, who is entitled to subscribe to the Offer Shares in their

names on her own behalf on the condition that she provides proof that she is divorced or widowed and the mother of her

minor children. It also includes GCC investors who are natural persons holding bank accounts. Subscription of a person

in the name of his divorcee shall be deemed invalid, and if a transaction of this nature is demonstrated to have occurred,

then the law shall be enforced against that person. If a duplicate subscription is made, the second subscription will be

considered void and only the first subscription will be accepted.

Participating Parties:

Participating Parties can obtain Application Forms from the Bookrunner during the book-building process period and can

obtain Subscription Application Forms following the provisional allocation. The Bookrunner shall, with the approval of the

CMA, offer the Offer Shares to Participating Parties only during the book-building period. Subscriptions by Participating

Parties shall commence during the Offering Period, which also includes Individual Investors, in accordance with the

terms and conditions detailed in the Subscription Application Forms. A signed Subscription Application Form must be

submitted to the Bookrunner. This form represents a legally binding agreement between the Selling Shareholders and the

Participating Party submitting the form.

Individual Investors:

Subscription Application Forms will be made available to Individual Investors during the Offering Period at Receiving Agent

branches. Individual Investors may also subscribe through the Internet, telephone banking or ATMs of Receiving Agents

that offer any of these services to Individual Investors who have recently participated in previous Offerings, provided that

the following requirements are satisfied:

a) the Individual Investor has a bank account with a Receiving Agent which offers such services; and

b) there have been no changes to the Individual Investor’s personal or private information (removal or addition of a family

member) since they last participated in an IPO.

Subscription Application Forms must be completed in accordance with the instructions set out in Section 18 (“Subscription

Terms and Conditions”) of this Prospectus. An applicant must complete all relevant sections of the Subscription

Application Form. The Company reserves the right to reject any Subscription Application Form, in whole or in part, if any of

the subscription terms and conditions are not met. The Subscription Application Form may not be amended or withdrawn

once submitted. Furthermore, the Subscription Application Form shall, upon submission, be a binding agreement

between the relevant Investor and the Selling Shareholders (for further details, see Section 18 (“Subscription Terms and

Conditions”)).

Excess subscription monies, if any, will be refunded to the Investor’s main account at the Receiving Agent from which the

subscription value was debited, without any commissions or withholding by the Lead Manager or Receiving Agents. Excess

subscription monies shall not be refunded in cash or to third-party accounts.

For more information on the subscription of Individual Investors and the Participating Parties, see Section 18 (“Subscription

Terms and Conditions”) of this Prospectus.

Summary of Key Information

This summary of key information is intended to provide an overview of the information contained in this Prospectus. This

Prospectus does not contain all information that may be important to prospective investors. Accordingly, this summary

must be treated as an introduction to this Prospectus, and recipients of this Prospectus are advised to read the entire

Prospectus in full. Any decision by a prospective investor to invest in the Offer Shares should be based on the consideration

of this Prospectus as a whole. In particular, it is important to carefully consider Page A (“Important Notice”) and Section 2

(“Risk Factors”) prior to making a decision to invest in the Offer Shares.

Overview of the Company

The Arabian Contracting Services Company was incorporated as a Saudi Arabian limited liability company in Riyadh under

Commercial Register No. 1010048419 on 18/05/1403H (corresponding to 03 March 1983G) with a capital of one million

Saudi riyals (SAR 1,000,000) for the objective of engaging in the business of outdoor advertising, particularly installing

and operating outdoor advertising billboards. The Company was converted into a (closed) joint stock company under

HE Minister of Commerce Resolution No. 1132 issued on 02/05/1427H (corresponding to 30 May 2006G). At the same

time, the Company’s capital was increased from one million Saudi riyals (SAR 1,000,000) to sixty million Saudi riyals

(SAR 60,000,000) by transferring twenty-three million, nine hundred nine thousand, one hundred three Saudi riyals

(SAR 23,909,103) from the shareholder’s accounts receivable and capitalising a sum of thirty-five million, ninety thousand,

eight hundred ninety-seven Saudi riyals (SAR 35,090,897) out of the retained earnings. On 02/12/1429H (corresponding to

30 November 2008G), the Company increased its capital from sixty million Saudi riyals (SAR 60,000,000) to one hundred

fifty million Saudi riyals (SAR 150,000,000) divided into fifteen million (15,000,000) ordinary shares with a fully paid-

up nominal value of ten Saudi riyals (SAR 10) per share through a cash contribution from the shareholders of thirteen

million, four hundred thousand Saudi riyals (SAR 13,400,000), capitalisation of sixty-nine million, eight hundred eighty-five

thousand, five hundred eighty-two Saudi riyals (SAR 69,885,582) out of the retained earnings, and the transfer of six million,

seven hundred fourteen thousand, four hundred eighteen Saudi riyals (SAR 6,714,418) from the balance of the statutory

reserve. On 22/06/1433H (13 May 2012G), the Company increased its capital from one hundred fifty million Saudi riyals

(SAR 150,000,000) to two hundred ten million Saudi riyals (SAR 210,000,000) divided into twenty-one million (21,000,000)

ordinary shares with a fully paid nominal value of ten Saudi riyals (SAR 10) per share through capitalisation of forty-four

million, four hundred sixty-four thousand, nine hundred sixty-six Saudi riyals (SAR 44,464,966) from the retained earnings

and fifteen million, five hundred thirty-five thousand, thirty-four Saudi riyals (SAR 15,535,034) from the balance of the

statutory reserve. On 21/06/1435H (corresponding to 21 April 2014G), the Company increased its capital from two hundred

ten million Saudi riyals (SAR 210,000,000) to five hundred fifty million Saudi riyals (SAR 550,000,000) divided into fifty-

five million (55,000,000) ordinary shares with a fully paid nominal value of ten Saudi riyals (SAR 10) per share, through

capitalisation of three hundred one million, forty-six thousand, six hundred forty-five Saudi riyals (SAR 301,046,645) from

the retained earnings and thirty-eight million, nine hundred fifty-three thousand, three hundred fifty-five Saudi riyals (SAR

38,953,355) from the balance of the statutory reserve. On 27/03/1440H (corresponding to 12 May 2018G), due to the capital

being in excess of the Company’s needs, it was decreased from five hundred fifty million Saudi riyals (SAR 550,000,000) to

two hundred fifty million Saudi riyals (SAR 250,000,000), divided into twenty-five million (25,000,000) ordinary shares with a

fully paid-up nominal value of ten Saudi riyals (SAR 10) per share. On 01/04/1441H (corresponding to 28 November 2019G),

the Company increased its capital to meet its future expansion needs from two hundred fifty million Saudi riyals (SAR

250,000,000) to five hundred million Saudi riyals (SAR 500,000,000) divided into fifty million (50,000,000) ordinary shares

with a fully paid nominal value of ten Saudi riyals (SAR 10) per share, through the capitalisation of one hundred seventy-five

million Saudi riyals (SAR 175,000,000) from the retained earnings and seventy-five million Saudi riyals (75,000,000) from the

balance of the statutory reserve.

The Company’s head office is located in Olaya Towers, Olaya District, Riyadh. The Company owns Al Arabia Out of Home

Advertising Company, a wholly owned subsidiary in the United Arab Emirates. There are also Company branches in Jeddah

and Riyadh, through which the Company conducts its various activities in the sectors mentioned below.

The Company’s main activity is in the Kingdom of Saudi Arabia outdoor advertising sector. It started operating in this sector

about thirty-five years ago. The Company is currently considered the frontrunner of companies operating in this sector in

the Kingdom of Saudi Arabia in terms of market share and revenue. The Company’s business includes setting up, operating

and maintaining outdoor advertising billboards, specifically roadside advertising and indoor advertising.

Al Arabia is a leading company in outdoor advertising in the Kingdom of Saudi Arabia. As at 31 December 2020G, the

Company had about 4,942 roadside billboards and 73 indoor billboards. The Company has a variety of billboards utilising

different technologies to meet various client needs, including static billboards, dynamic billboards and digital billboards.

The Company has recently introduced new types of billboards in line with global developments in the outdoor advertising

sector that maximise the direct impact of these billboards on the public and users. This was demonstrated by “The Guide”

screen that was installed and operated at the beginning of 2021G on Prince Mohammed Bin Abdulaziz Street – Tahlia

Street, in Riyadh. These billboards are located in about 28 cities across the Kingdom of Saudi Arabia, making Al Arabia

the company in this sector with the greatest geographical coverage in the country according to the market study report

prepared by the Market Consultant, Frost & Sullivan.

Outdoor advertising is a core advertising method that specifically targets people outside their homes, whether they are

pedestrians, drivers, passengers, shopping centre visitors, or airport travellers. Outdoor advertising is divided into three

categories, by location: (1) roadside advertising, (2) indoor advertising, and (3) transit advertising. The Company’s business

is currently limited to roadside advertising and indoor advertising. The Company carries out its activities through an

integrated business model that encompasses all operational processes that serve the outdoor advertising sector, involving

billboard installation (including site construction operations and electrical works), marketing and selling advertising

spaces to clients, printing advertisements and installing them on billboards, and maintenance operations. The Company

carries out silk-screen printing (a printing technique using a silk screen to print advertisements), offset printing (a printing

technique using metal printing plates in various printing operations) and digital printing (a printing technique in which

computer systems are used to print advertisements).

Recently, the Company introduced digital billboard technology to its billboards. These billboards are attractive and

capable of displaying a greater number of advertising panels, and the advertisements displayed thereon can be instantly

changed from the Company’s main control centre, thus facilitating the implementation of advertising campaigns for the

Company’s clients.

The Company’s business includes setting up and operating outdoor advertising billboards, including roadside advertising

and indoor advertising. With respect to roadside advertising, the Company participates in tenders organised by various

secretariats, municipalities, and government agencies throughout the Kingdom of Saudi Arabia to lease and invest in

numerous sites belonging to these agencies and secretariats by installing billboards and selling the advertising space on

such billboards to clients. The Company has recently expanded its business by entering the indoor advertising market.

In this regard, the Company has entered into a number of exclusive contracts with the owners of commercial centres in

different regions within the Kingdom of Saudi Arabia.

Vision

To cement our position as the leading Saudi company in out-of-home media and to become the catalyst of the national

economy, in the media sector, by expanding our leadership in the Middle East region.

Mission

To provide cities and clients with top-notch advertising products, data driven solutions and world-class services using

international standards and the latest technologies.

Strategy

 Maintain a market leading position to help the Company stay at the forefront of companies operating in its field.

 Maintain and increase market share to enhance revenues and profits.

 Raise the operational efficiency of the Company’s integrated business model and increase revenues from support

services within said model.

 Maintain and improve the quality of services by introducing the latest technologies in the field of outdoor advertising.

 Increase sales through direct marketing to strategic clients.

 Maintain the Company’s excellent financial position and establish factors of resistance to recession stages in economic

cycles through proper advance planning.

 Expand the field of information technology by using data to grow the Company’s business and provide effective

information solutions to clients, which serve their goals and help them reach their clients in a scientific manner and

analyse the available data on consumers.

 Consider remunerative alliances and partnerships that support geographical expansion to enhance the Company’s

position, maintain its leadership locally and regionally and benefit from global experiences in this field.

Competitive Advantages

 The Company operates in the largest economy in the Middle East and North Africa, in addition to a developing

market supported by stable macroeconomics and the Kingdom of Saudi Arabia’s Vision: The Saudi economy is

the largest and most attractive economy in GCC countries and the Middle East, with a GDP of about 3.0 trillion Saudi

riyals in 2019G. It is supported by developments related to macroeconomic factors and enhanced by the following:

− A high population growth rate. The total population of the Kingdom of Saudi Arabia is expected to reach about

34.3 million persons, with the percentage of people aged 29 years and younger estimated to be 47% of the total

population as at the end of 2019G. CAGR is expected to reach 1.4% from 2020-2024G.

− Per capita disposable income increased at a CAGR of about 1.8% (in terms of nominal value) from 2017-2019G,

with an expected CAGR of 3.5% (in terms of nominal value) from 2020-2024G, due to general economic growth

and women’s empowerment in the labour market, along with an expected decline in unemployment rates.

− The continuing trend of horizontal urbanisation (with about 84% of the total population residing in cities in

2019G), and the increasing number of middle- and high-income families (with the number of high-income

families expected to increase by about 40% from 2020-2024G).

− Continued economic reforms having a positive impact on the Kingdom of Saudi Arabia, including providing

investment opportunities for the private sector in multiple economic sectors and activities, increasing

investments in infrastructure, developing new economic sectors (such as the tourism and entertainment sector)

and encouraging women’s participation in the labour market.

 The Company has a leading position in the outdoor advertising sector in local and regional markets and is

ranked the world’s 14th top advertising company: According to Frost & Sullivan, the Company was ranked 14th

among the world’s top outdoor advertising companies in 2018G and 12th in 2019G in terms of revenue. Locally and

regionally, the Company is considered the largest company operating in the field of outdoor advertising in terms of

revenue. Its market share was estimated at about 65.8% of total spending on outdoor advertising in the Kingdom of

Saudi Arabia during 2019G and 62.3% during 2020G, according to the market study report prepared by the Market

Consultant, Frost & Sullivan.

 The Company operates in the outdoor advertising sector, which has unique characteristics that fundamentally

distinguish it from all other forms of advertising: The outdoor advertising sector witnessed growth of 20% for the

period between 2013G and 2019G due to its advantages over all other audio-visual advertising methods, which cannot

compete with outdoor advertising due to their inability to provide advertisers with the same features as roadside

advertisements. For example, roadside advertising is not subject to consumers’ choice or ability to control whether

or not it is viewed. Outdoor advertisements are considered less expensive than other advertising channels. With the

introduction of new digital screens that are able to collect viewing data and viewer characteristics, outdoor advertising

possesses all the features advertisers are looking for to increase views and grow their profits, by using and analysing the

available data to determine how, when and where ads are displayed according to the viewer data collected.

 The Company’s financial performance and profits dating back several decades, and its strong financial and

profit position: The Company has a strong financial position and high profit margins of 30%, 43% and 19.8% in the

past three years (2018G to 2020G) respectively. Note that gross profit margin decreased from 42.7% in 2019G to 19.8%

in 2020G due to the curfew and complete shut-down in the Kingdom of Saudi Arabia to curb the spread of coronavirus

(COVID-19). The Company has demonstrated its strong financial position and ability to achieve sustainable profitability

by facing the recession stages of economic cycles, such as the recent phases that occurred in 2016G and 2017G,

affecting the sector in general. However, the Company continued to record profits in all those years. Moreover, the

Company has not recorded any operating losses to date.

 The Company leads major transformations in the outdoor advertising sector by introducing modern technical

methods to take advantage of information technology in the outdoor advertising sector: The Company has been

a leader in, and continues to contribute to, finding and creating new trends in the outdoor advertising sector. For

example, it is the first company to start operating digital billboards (Mezah) in the Kingdom of Saudi Arabia, such as

those installed on King Fahd Road in Riyadh. This type of billboard has greatly improved how ads are displayed on

the roadside due to the flexibility it provides to advertisers. With respect to the Company, this type of screen provides

the ability to centralise control through a main control room to broadcast, monitor and collect all data related to

advertisements, such as viewing rates, viewers’ impressions, and viewers’ demographic factors. This is undoubtedly

considered the most important data for advertisers, as it enables them to conduct proper planning for their target

groups.

 The Company has a management team with extensive experience in outdoor advertising, led by the founding

family: The Company has a management team with extensive experience in outdoor advertising. The management

team includes members of the Company’s founding family who have been working to maintain a cohesive work

culture in line with the family’s values, which reflects the extent of their commitment to the Company and achieving its

objectives. The Company takes care of governance, including the powers of the Board of Directors and its committees,

in accordance with the relevant instructions.

Market Study Summary

The data and information contained in this Prospectus pertaining to the market and sector in which the Company operates

were obtained from the Market Study Report prepared by Frost & Sullivan (“Market Consultant” or “Frost & Sullivan”),

which specialises in market studies and joint research. The study was released on 3 June 2021G.

Founded in 1961G, Frost & Sullivan has more than 1,200 employees in over 40 offices worldwide working exclusively

therefor as at March 2020G. For more information, please visit the Market Consultant’s website (ww2.frost.com).

Neither the Market Consultant nor its shareholders, board members or relatives thereof own any share or interest of any

kind in the Company or its subsidiary. The Market Consultant has given and not withdrawn as at the date of the publication

its written consent to use the market data and research in the manner and form presented in this Prospectus.

Overview of the Outdoor Advertising Market and Sector

Outdoor advertising is an important and essential media for advertising agencies and their clients. A large billboard with

an eye-catching appearance will attract the attention of consumers better than other mediums. The importance of outdoor

advertising is mainly due to the nature of its distribution in an outdoor environment and the ease of displaying it to a very

large number of passers-by.

While an advertisement in a newspaper or magazine can be skipped or ignored, or a commercial break on the TV or Internet

can be avoided by switching channels (or even fast-forwarding through DVRs), a large billboard or even a series of Mupi

advertisements in malls or Megacom billboards cannot be ignored when people are travelling, walking or shopping.

The unique nature of this advertising method makes it an indispensable option for all major marketing campaigns and a

means for brand-building. It is often the preferred choice for publicising the launch of major campaigns and new ads. This

method has managed to survive and compete with other methods because it encompasses several features that are not

provided by other advertising mediums.

2020G was fraught with challenges for the outdoor advertising market. The decrease in outdoor advertising expenditure in

2020G is attributed to lower consumer mobility and traffic together with limited international transportation. The sectors

that witnessed a significant decrease in advertising expenditure were automotive trade, retail trade, travel and tourism. In

2020G, the global market share for outdoor advertising decreased to 4.75% of the total advertising expenditure. However,

it is estimated that it will grow to 5% in 2021G and will continue to grow thereafter.

While advertising expenditure will increase proportionate to the economic recovery, improved business conditions,

increased mobility and consumer high morale in 2021G, outdoor advertising, especially digital advertising, will continue to

push the advertising market ecosystem forward.

With the advent of the Internet, digital media, and social media sites (Facebook, Instagram and Twitter) introducing new

advertising platforms, traditional mediums used by advertisers have undergone radical change. Most traditional media

such as print (magazines and newspapers), television and radio have suffered a decline in their share of advertising revenue

in the past decade. Digital media is expected to dominate advertising expenditure in 2021G, accounting for 50% of the

market share, with social media, search and video expected to be key factors of this growth.

Meanwhile, the oldest outdoor advertising medium has not been affected by the onslaught of digital technology. Instead,

it has thrived and still has a bright future. Through the principle of ‘adapt or perish’, outdoor advertising has been able to

continually adapt to changing circumstances. Outdoor advertising is experiencing a wave of prominence by incorporating

digital sophistication into digital outdoor advertising media options. Some outdoor media sites can display changing

videos and images in a loop with a mechanism that enables consumers to express opinions and make automated purchases

without human intervention.

The following table details total global advertising expenditure on various media and the resulting growth rate on an

annual basis from 2013G to 2020G:

Table (1-4): Global Advertising Expenditure by Media (2013G-2020G)

Advertising Media

2013G

SAR

Million

2014G

SAR

Million

2015G

SAR

Million

2016G

SAR

Million

2017G

SAR

Million

2018G

SAR

Million

2019G

SAR

Million

2020G

SAR

Million

Television 738,667 759,484 760,121 786,108 781,192 779,819 774,828 674,875

Newspapers 270,807 256,647 235,731 214,334 194,891 179,642 159,486 120,795

Magazines 147,120 142,195 134,362 132,064 122,403 112,707 101,324 79,350

Radio 125,609 129,061 128,513 134,121 135,195 139,481 138,728 118,077

Cinema 9,092 10,857 11,549 12,773 13,671 14,537 15,909 6,354

Outdoor Advertising 115,740 113,102 123,696 126,979 129,045 135,891 139,723 104,150

Digital Media 385,531 464,911 555,433 650,363 755,608 869,065 1,032,101 1,088,248

Total Advertising Expenditure 1,792,566 1,876,257 1,949,405 2,056,742 2,132,005 2,231,142 2,362,099 2,191,849

Source: Frost & Sullivan

According to the above table, global outdoor advertising expenditure amounted to approximately SAR 139,723 million in

2019G, with a CAGR of 3.2% from 2013G to 2019G. Apart from digital advertising, which is growing rapidly, expenditure on

the outdoor advertising sector has increased continuously during this period compared to the growth of other advertising

media sectors. As a result of the COVID-19 pandemic, it is estimated that this sector has witnessed a significant decrease in

expenditure, as it decreased by approximately 25.5% to SAR 104,150 million by 2020G due to the effects of the shutdown

and the significant drop in the movement of persons.

Notwithstanding digitisation, which is growing rapidly, spending on the outdoor advertising sector has grown at a fairly

steady rate between 2013 and 2020G compared to the growth of other advertising media sectors.

In general, it is expected that brands will benefit from outdoor advertising media through customised offers, targeted

messages and services designed specifically to influence the target audiences. The key factors of success and successful

expenditure in outdoor advertising for any brand depend on understanding consumers’ changing expectations and

reorienting the brand’s perception of consumers’ changing values and behaviours.

Key Trends in the Global Outdoor Advertising Market

A major development in the media market is the rapid conversion to and adoption of digital media options for outdoor

advertising. These digital media options for outdoor advertising are growing at a much faster rate than traditional outdoor

advertising media. It is expected to continue to drive global expenditure on outdoor advertising in the short term. Globally,

there is enormous potential in strategically placed digital outdoor advertising sites, especially within indoor spaces such as

malls, gyms and retail stores. As such, digital outdoor advertising expenditure will be the driving force behind the growth

of the outdoor advertising business in the future.

In some developed advertising markets such as the UK and Australia, the share of digital outdoor advertising as a percentage

of outdoor advertising is already more than 40%. According to specialists’ expectations, the growth of digital outdoor

advertising expenditure is likely to exceed two to three times the growth in traditional outdoor advertising. Some of the

main drivers of the growth of digital outdoor advertising worldwide are the general drop in the cost of digital screens, the

development of automated advertising software and the integration of technologies such as the Internet of Things into

digital outdoor advertising.

One of the major factors driving the growth of the outdoor advertising sector around the world is advertisers’ shift from

traditional static outdoor media to digital outdoor advertising media by digitising existing static sites. The effectiveness of

digital outdoor advertising can be assessed through key performance indicators such as traffic patterns, weather, special

occasions, changes in time of day and an overall ROI measure. Digital outdoor advertising media can also measure the total

number of people who have passed by billboards during certain times and so on.

Table (1-5): Global Expenditure on Outdoor Advertising and Digital Outdoor Advertising (2013G-2020G)

Gregorian

Year

Global Expenditure

on Non-Digital Out-

door Advertising

Annual Growth Rate

of Outdoor Advertis-

ing (%)

Global Expenditure

on Digital Outdoor

Advertising

SAR Million

Annual Growth Rate

of Digital Outdoor

Advertising (%)

2013G 115,740 - 11,060 -

2014G 113,102 (2.3%) 11,876 7.4%

2015G 123,696 9.4% 14,716 23.9%

2016G 126,979 2.7% 17,565 19.4%

2017G 129,045 1.6% 19,142 9.0%

2018G 135,891 5.3% 22,252 16.2%

2019G 139,723 8.2% 27,673 24.4%

2020G 104,150 (25.5%) 22,785 (17.70%)

Source: Frost & Sullivan and the Company

As shown in the table above, digital outdoor advertising expenditure has been growing at a higher rate compared to

overall expenditure on outdoor advertising media over the past years. Outdoor advertising includes billboards in outdoor

spaces such as highways, bridges, streets and other open areas. Digital outdoor advertising includes all types of outdoor

billboards using electronic LED screens to display advertisements. These billboards may also contain smart technologies

and integrated software dedicated to ensuring a higher percentage of views by displaying selected advertisements based

on location and regional demographics, thus improving the ROI.

Most outdoor billboards account for the majority of digital outdoor advertising media expenditure and comprise the

market share majority of the global outdoor advertising market based on the type of advertising site. However, this

sector is expected to gradually decline, as most expenditure over the next few years is expected to be made on the public

transportation and roadside furniture sectors, which are growth/expenditure attractive sectors. It is also a low-cost option

for advertisers.

Globally, the widespread adoption of 5G technology is also driving expenditure on programmable digital outdoor

advertising. This trend is expected to drive the growth of the global outdoor advertising market. For example, 5G technology

will allow greater coordination between mobile site services and digital outdoor advertising. Relying on cell phone data,

messages on digital outdoor advertising media in malls, neighbourhoods or high traffic centres can be used to send people

to a theatre or restaurant or inform them of a specific store offer, etc.

Meanwhile, the willingness of advertisers to embrace programmed outdoor advertising media along with new developments

in artificial intelligence, machine learning and analysis is expected to increase tailored advertising campaigns by targeting

specific demographic areas, which in turn will lead to higher ROI and sales.

In light of the foregoing, the Kingdom of Saudi Arabia is well-positioned to increasingly adopt new digital technologies

in outdoor advertising, which will lead to sustainable growth in expenditure on digital outdoor advertising in the future.

The Outdoor Advertising Market in the Kingdom of Saudi Arabia

The performance of the Saudi advertising market is closely related to the Kingdom of Saudi Arabia’s economic outlook.

However, outdoor advertising expenditure was unpredictable and inconsistent with the usual pattern. Compared to global

growth trends, the rise in outdoor advertising expenditure in the Kingdom of Saudi Arabia was volatile. Over the past five

years, the outdoor advertising market in the Kingdom of Saudi Arabia witnessed an initial decline, followed by a gradual

recovery in 2018G and 2019G.

Table (1-6): Advertising Expenditure and Outdoor Advertising Expenditure in the Kingdom of Saudi Arabia (2015G-2020G)

Gregorian

Year

Advertising Expen-

diture

SAR Million

Annual Growth

Rate of Advertising

Expenditure (%)

Outdoor Advertising

Expenditure

SAR Million

Annual Growth Rate of

Outdoor Advertising

Expenditure (%)

2015G 3,863 - 1,132 -

2016G 3,335 (13.7%) 1,068 (5.7%)

2017G 2,994 (10.2%) 959 (10.2%)

2018G 2,836 (5.3%) 974 1.6%

2019G 2,611 (7.9%) 1,197 22.9%

2020G 2,170 (16.9%) 798 (33.3%)

Source: Frost & Sullivan

Advertising expenditure in the Kingdom of Saudi Arabia has been slow, with negative growth of 10.2% and 5.3% in

2016-2017G and 2017-2018G respectively. During the same time period, Saudi expenditure on outdoor advertising

witnessed negative growth of 10.2% in 2016-2017G, followed by positive growth of 1.6% in 2017-2018G. Accordingly, it

should be noted that despite the recession and the consequential declines in advertising expenditure in 2016G-2018G,

outdoor advertising expenditure in the Kingdom of Saudi Arabia gradually recovered by 2018G, which reinforces growing

expenditure on outdoor advertising. It also supports the idea that outdoor advertising is advertisers’ preferred medium

and confirms that outdoor advertising is primarily affected by economic cycle and expenditure trends. However, it is not

affected by competition from other available advertising channels. Other factors contributing to this growth include

government expenditure on outdoor advertising and the benefits of the digitisation of many indoor sites in the region.

Summary of Financial Information

The summary financial information set out below should be read in conjunction with the Company’s financial statements

for the fiscal year 2018G and the Company’s consolidated financial statements for the fiscal years 2019G and 2020G, and

the accompanying notes thereto, which are included in this Prospectus as part of the Auditors’ Report and Management’s

Discussion and Analysis of Financial Position and Results of Operations. The financial statements for the fiscal years ended

31 December 2018G, 2019G and 2020G were audited by Baker Tilly MKM (Chartered Accountants).

Table (1-7): Financial Statements for 2018G, 2019G and 2020G

Fiscal Year Ended 31 December

SAR’000

2018G

Audited

2019G

Audited

2020G

Audited

CAGR

2018G-2020G

Statement of Income

Revenues 639,157 787,498 497,585 (11.8%)

Cost of Revenue (449,023) (451,075) (398,540) (5.8%)

Gross Profit 190,134 336,424 99,046 (27.8%)

Selling & Marketing Expenses (20,369) (42,422) (11,066) (26.3%)

General and Administrative Expenses (22,864) (29,550) (36,553) (26.4%)

Profit from the Main Ongoing Business 146,900 264,452 51,427 (40.8%)

Finance Expenses (4,649) (31,573) (21,252) 113.8%

Other Revenues, Net 600 1,213 327 (26.2%)

Net Profit Before Zakat 142,850 234,092 30,502 (53.8%)

Zakat (9,164) (8,746) (5,301) (23.9%)

Net Profit 133,686 225,346 25,201 (56.6%)

Total Comprehensive Income 132,999 224,660 26,136 (55.7%)

Cash Flow

Net Cash Generated from Operating Activities 352,015 526,706 348,655

Net Cash Used in Investing Activities (47,391) (43,862) (56,753)

Net Cash Used in Financing Activities (330,824) (465,278) (301,405)

Net Change in Cash on Hand and in Banks (26,200) 17,566 (9,503)

Cash on Hand and in Banks as at December 31 18,523 36,089 26,586

Financial Position

Total Non-Current Assets 105,727 899,545 849,291 183.4%

Total Current Assets 642,756 489,517 465,579 (14.9%)

Total Assets 748,483 1,389,062 1,314,870 32.5%

Total Equity 439,321 524,281 526,417 9.5%

Total Non-Current Liabilities 12,139 329,646 328,935 420.6%

Total Current Liabilities 297,022 535,135 459,518 24.4%

Total Liabilities 309,161 864,781 788,453 59.7%

Total Liabilities and Equity 748,483 1,389,062 1,314,870 32.5%

Key Performance Indicators

Gross Profit Margin 29.7% 42.7% 19.9% (18.2%)

Net Profit Margin 20.9% 28.6% 5.1% (50.8%)

Return on Assets 17.9% 16.2% 1.9% -

Return on Equity 30.4% 43.0% 4.8% -

Current Assets/Current Liabilities 2.2x 0.9x 1.0x -

Debt to Total Equity 0.32x 0.46x 0.25x -

Source: Audited financial statements

* The Company’s management calculates financial performance indicators, such as gross profit margin, net profit margin, liquidity ratios, returns on assets

and shareholders’ equity, and growth rates, by using items of the financial statements, whose classification may differ from that used by other companies

which calculate the same financial performance indicators. Accordingly, the Company does not guarantee that the indicators calculated by it will be

consistent with those calculated by other companies.

** Calculated using the balance of bank loans to total equity for the relevant period. Lease liabilities are excluded from the equation.

Summary of Risk Factors

Before deciding to invest in the Offer Shares, prospective investors should carefully study all the information included in

this Prospectus, in particular the risk factors listed below and described in detail in Section 2 (“Risk Factors”).

a- Risks Related to the Company’s Operations

1. Risks related to the conclusion of lease agreements for new advertising sites and renewal of lease agreements

for existing sites.

2. Risks related to the Company’s reliance on contracts with government and quasi-governmental entities.

3. Risks related to the concentration of the Company’s business and revenue in the outdoor advertising sector.

4. Risks related to reliance on major clients.

5. Risks related to the level of services and products provided and positive reputation.

6. Risks related to the protection of intellectual property rights.

7. Risks related to damage or destruction of Company billboards.

8. Risks related to the Company’s reliance on proper maintenance of its assets.

9. Risks related to transactions and contracts with related parties.

10. Risks related to the availability of raw materials and spare parts and fluctuation in the prices thereof.

11. Risks related to the realisation of expansion plans.

12. Risks related to potential Zakat assessments.

13. Risks related to credit

14. Risks related to keeping pace with developments in the field of advertising.

15. Risks related to adequacy of insurance coverage.

16. Risks related to financing.

17. Risks related to bank guarantees provided to the Company by two shareholders.

18. Risks related to the high ratio of advertising site rental costs to total operating income costs.

19. Risks related to regulatory licenses and permits.

20. Reliance on key employees and their job performance and the ability to recruit qualified persons.

21. Risks related to employee mistakes or misconduct.

22. Risks related to the formation of the Board of Directors.

23. Risks related to the possession of confidential information about the Company’s customers, employees and

business.

24. Risks related to the requirements of Saudization and the Labour Law.

25. Risks related to litigation.

26. Risks related to the Company’s implementation of the newly approved internal governance regulations.

27. Risks related to the recent conversion into a joint stock company listed on Saudi Tadawul Group.

28. Risks related to organisational risk.

29. Risks related to Current Shareholders and some Board Members engaging in business competing with the

Company’s business.

30. Risks related to the Company’s inability to exploit its leased advertising sites.

31. Risks related to operating systems and information technology.

32. Risks related to the Company’s implementation of International Financial Reporting Standards (IFRS).

33. Risks related to acquisitions and joint ventures.

34. Risks related to the depreciation of the book value of some assets.

35. Risks related to infectious disease outbreaks or other public health concerns, including the ongoing global

spread of the coronavirus (COVID-19).

36. Risks related to housing the Company’s employees during the COVID-19 pandemic.

37. Risks related to assessment of ECL on accounts receivables.

38. Risks related to the registration of discounts and the extension of campaign periods.

39. Risks related to the Companies Law.

40. Risks related to the Shareholders Agreement and rights granted to MBC Group Holdings.

41. Risks related to working capital management.

42. Risks related to using short-term loans to pay rent.

43. Risks related to the Company’s capital investments.

44. Risks related to commissions earned by sales personnel.

45. Risks related to the Company’s exposure to unforeseen operational risks and commercial obstacles.

b- Risks Related to the Market, Industry and Regulatory Environment

1. Risks related to the impact of economic risks in the Kingdom of Saudi Arabia on the Company’s operations.

2. Risks related to political instability and security concerns in MENA.

3. Risks related to competition.

4. Risks related to the Competition Law and its Implementing Regulations.

5. Risks related to seasonal factors.

6. Risks related to dependence on favourable economic conditions and advertising trends.

7. Risks related to currency exchange and interest rate fluctuation.

8. Risks related to imports.

9. Risks related to higher government fees imposed on non-Saudi employees.

10. Risks related to the implementation of the Value-Added Tax Law and the violations related thereto.

11. Risks related to imposing additional fees or new taxes.

12. Risks related to changes to the mechanism for calculating Zakat and income tax.

13. Risks Related to changes in the prices of energy, electricity, water and services related to the Company’s operating

expenses.

c- Risks Related to the Offer Shares

1. Risks related to absence of a previous market for the Company’s shares.

2. Risks related to actual control by the Current Shareholders after the Offering.

3. Risks related to potential volatility of share price in the market.

4. Risks related to selling a large number of shares in the market after the Offering.

5. Risks related to the inability to distribute dividends.

6. Risks related to offering new shares in the future.

Table of Contents

1- Definitions and Abbreviations 1

2- Risk Factors 7

2.1 Risks Related to the Company’s Business 7

2.1.1 Risks Related to the Conclusion of Lease Agreements for New Advertising Sites and the Renewal

of Lease Agreements for Existing Sites ............................................................................................................... 7

2.1.2 Risks Related to the Company’s Reliance on Contracts with Government and Quasi-governmental

Entities ......................................................................................................................................................................... 8

2.1.3 Risks Related to the Concentration of the Company’s Business and Revenue in the Outdoor

Advertising Sector ..................................................................................................................................................... 9

2.1.4 Risks Related to Reliance on Major Clients ........................................................................................................ 9

2.1.5 Risks Related to the Quality of Services and Products Provided and Positive Reputation ................ 9

2.1.6 Risks Related to Protecting Intellectual Property Rights ............................................................................10

2.1.7 Risks Related to Damage or Destruction of Company Billboards ............................................................10

2.1.8 Risks Related to the Company’s Reliance on Proper Maintenance of its Assets .................................. 10

2.1.9 Risks Related to Transactions and Contracts with Related Parties. ..........................................................10

2.1.10 Risks Related to the Availability and Price Fluctuation of Raw Materials and Spare Parts ..............11

2.1.11 Risks Related to the Realisation of Expansion Plans .....................................................................................12

2.1.12 Risks Related to Potential Zakat Assessments ................................................................................................12

2.1.13 Risks Related to Credit ...........................................................................................................................................13

2.1.14 Risks Related to Keeping Pace with Developments in the Advertising Sector .................................... 13

2.1.15 Risks Related to Adequacy of Insurance Coverage ....................................................................................... 13

2.1.16 Risks Related to Financing ....................................................................................................................................14

2.1.17 Risks Related to Bank Guarantees Provided on the Company’s Behalf by Two Shareholders.........15

2.1.18 Risks Related to Higher Rental Costs for Advertising Sites as a ratio to Total Operating Revenue

Costs ............................................................................................................................................................................15

2.1.19 Risks Related to Regulatory Licenses and Permits ........................................................................................ 16

2.1.20 Risks Related to Reliance on Key Personnel, Job Performance and the Ability to Recruit Qualified

Persons ........................................................................................................................................................................ 16

2.1.21 Risks Related to Employee Mistakes or Misconduct .....................................................................................16

2.1.22 Risks Related to the Composition of the Board of Directors .....................................................................16

2.1.23 Risks Related to Possessing Confidential Information on the Company’s Clients, Employees and

Business ......................................................................................................................................................................17

2.1.24 Risks Related to Saudization and the Labour Law Requirements ............................................................ 17

2.1.25 Risks Related to Litigation .....................................................................................................................................18

2.1.26 Risks Related to the Company’s Implementation of Recently Adopted Corporate Governance

Regulations ................................................................................................................................................................19

2.1.27 Risks Related to Recent Conversion into a Joint Stock Company Listed on Saudi Tadawul Group

....................................................................................................................................................................................... 19

2.1.28 Risks Related to Changes in the Regulatory Environment ......................................................................... 20

2.1.29 Risks Related to Current Shareholders and Some Board Members Conducting Business Competing

with Company Business .........................................................................................................................................20

2.1.30 Risks Related to the Company’s Inability to Use its Leased Advertising Sites ......................................21

2.1.31 Risks Related to Operational and IT Systems .................................................................................................. 21

2.1.32 Risks Related to the Company’s Implementation of International Financial Reporting Standards

(IFRS) ........................................................................................................................................................................... 21

2.1.33 Risks Related to Acquisitions and Joint Ventures .......................................................................................... 23

2.1.34 Risks Related to Depreciation of the Book Value of Certain Assets .........................................................23

2.1.35 Risks Related to Infectious Disease Outbreaks or Other Public Health Concerns, Including the

Ongoing Global Coronavirus (COVID-19) Pandemic .................................................................................... 24

2.1.36 Risks Related to Housing Company Staff during the COVID-19 Pandemic ........................................... 25

2.1.37 Risks Related to Assessment of ECL on Accounts Receivables ..................................................................25

2.1.38 Risks Related to Recording Discounts and Extending Advertising Campaign Periods ..................... 26

2.1.39 Risks Related to the Companies Law ................................................................................................................. 26

2.1.40 Risks Related to the Shareholders Agreement and Rights Granted to MBC Group Holdings ........26

2.1.41 Risks Related to Working Capital Management .............................................................................................27

2.1.42 Risks Related to the Use of Short-term Financing to Pay Rent ..................................................................27

2.1.43 Risks Related to the Company’s Capital Investments .................................................................................27

2.1.44 Risks Related to Commissions Earned by Sales Personnel .........................................................................27

2.1.45 Risks Related to the Company’s Exposure to Unforeseen Operational Risks and Commercial

Obstacles .................................................................................................................................................................... 28

2.2 Risks Related to the Market, Industry and Regulatory Environment 28

2.2.1 Risks Related to the Impact of Economic Risks in the Kingdom of Saudi Arabia on the Company’s

Operations .................................................................................................................................................................28

2.2.2 Risks Related to Political Instability and Security Concerns in MENA .....................................................28

2.2.3 Risks Related to Competition ..............................................................................................................................28

2.2.4 Risks Related to the Competition Law and its Implementing Regulations ...........................................29

2.2.5 Risks Related to Seasonal Factors .......................................................................................................................29

2.2.6 Risks Related to Reliance on Favourable Economic Conditions and Advertising Trends ................. 30

2.2.7 Risks Related to Currency Exchange and Interest Rate Fluctuation ........................................................30

2.2.8 Risks Related to Imports ........................................................................................................................................30

2.2.9 Risks Related to Higher Government Fees Imposed on Non-Saudi Employees ..................................30

2.2.10 Risks Related to Implementing the Value-Added Tax Law and the Violations Related Thereto ..... 31

2.2.11 Risks Related to Imposing Additional Fees or New Taxes ........................................................................... 31

2.2.12 Risks Related to Change in the Zakat and Income Tax Calculation Mechanism ..................................31

2.2.13 Risks Related to Changes in the Prices of Energy, Electricity, Water and Services Related to the

Company’s Operating Expenses .........................................................................................................................32

2.3 Risks Related to the Shares 32

2.3.1 Risks Related to the Absence of a Prior Market for the Company’s Shares ...........................................32

2.3.2 Risks Related to Existing Shareholders’ Actual Control Post-Offering .................................................... 32

2.3.3 Risks Related to Potential Volatility of Share Price in the Market ............................................................. 32

2.3.4 Risks Related to the Sale of a Large Number of Shares in the Market Post-Offering ......................... 33

2.3.5 Risks Related to Dividend Distributions .......................................................................................................... 33

2.3.6 Risks Related to the Future Offering of New Shares ..................................................................................... 34

3- Market and Industry Data 35

3.1 Introduction to the Market Consultant 35

3.2 Overview of the Saudi Economy 35

3.2.1 Kingdom of Saudi Arabia: A Promising New Chapter in Economic Growth ........................................ 35

3.2.2 Prospects: Maintaining Economic Growth and Looking Beyond Oil .....................................................36

3.2.3 Vision 2030 - The Kingdom of Saudi Arabia’s Transformation Plan..........................................................36

3.2.4 Population..................................................................................................................................................................37

3.3 Global Outdoor Advertising Market 38

3.3.1 Outdoor Advertising - A Long-Term Medium .................................................................................................38

3.3.2 Outdoor Advertising Expenditure as a Share of Global Advertising Expenditure ..............................39

3.3.3 Key Trends in the Global Outdoor Advertising Market ................................................................................40

3.4 The Outdoor Advertising Market in the Kingdom of Saudi Arabia 41

3.4.1 Market Overview......................................................................................................................................................41

3.4.2 The Recent Boom and Growth in Saudi Expenditure on Outdoor Advertising ................................... 41

3.4.3 Decrease in Outdoor Advertising Expenditures in the Kingdom of Saudi Arabia .............................. 42

3.4.4 Past Demand Drivers for Outdoor Advertising Expenditure in the Kingdom of Saudi Arabia .......42

3.4.5 Advertiser’s Perspective: Sharing Consumer Thoughts ...............................................................................42

3.4.6 Salient Features of the Kingdom of Saudi Arabia Outdoor Advertising Market..................................42

3.4.7 Current Distribution of the Kingdom of Saudi Arabia Outdoor Advertising Market by Application

Sector ..........................................................................................................................................................................43

3.4.8 Current Distribution of the Kingdom of Saudi Arabia Outdoor Advertising Market by Product

Sectors that Support Growth ...............................................................................................................................44

3.4.9 Client Expenditure - By Sector .............................................................................................................................46

3.5 Arabian Contracting Services Company 47

3.5.1 Competitive Analysis Given Revenue and Number of Billboards ...........................................................47

3.5.2 Analysis of Market Share and Revenue Growth Trends ............................................................................... 47

3.5.3 Expansion of the Number of Sites ......................................................................................................................48

3.5.4 Customer Spending (by Sector) - 2018G-2020G ............................................................................................49

3.5.5 Al Arabia’s Strengths as a Leading Service Provider ..................................................................................... 49

4- The Company 51

4.1 Overview of the Company 51

4.2 Development of the Company’s Capital and Ownership Structure 51

4.3 Subsidiaries 57

4.4 The Company’s Key Historical Events 58

4.5 Vision 59

4.6 Mission 59

4.7 Main Business Activities 59

4.7.1 Company’s Client Business Model .....................................................................................................................60

4.7.2 The Company’s Roadside Advertising Business .............................................................................................61

4.7.3 Company Activities in Indoor Advertising .......................................................................................................67

4.7.4 The Company’s Clients ...........................................................................................................................................69

4.7.5 Company Suppliers ................................................................................................................................................. 71

4.7.6 Company Print Shops .............................................................................................................................................71

4.8 Strengths and Competitive Advantages 72

4.8.1 The Company Operates in the Largest Economy in the Middle East and North Africa, in Addition to

a Developing Market Supported by Stable Macroeconomics and Kingdom of Saudi Arabia’s Vision

2030G ..........................................................................................................................................................................72

4.8.2 The Company has a Leading Position in the Outdoor Advertising Sector in Local and Regional

Markets, Ranked the World’s 14th Top Advertising Company ..................................................................73

4.8.3 The Company Operates in the Outdoor Advertising Sector, which has Unique Characteristics that

Fundamentally Distinguish it from all Other Advertising Methods ........................................................74

4.8.4 The Company’s Financial Performance and Profits Dating Back Several Decades, as well as a Strong

Financial and Profit Position ................................................................................................................................74

4.8.5 The Company Leads Major Transformations and devolpment in the Outdoor Advertising Sector

by Introducing Modern Technical Methods to Take Advantage of Information Technology in the

Outdoor Advertising Sector ................................................................................................................................. 75

4.8.6 The Company has a Management Team with Extensive Experience in Outdoor Advertising, Led by

the Founding Family ...............................................................................................................................................75

4.9 The Company’s Strategy 75

4.9.1 Maintain its Leading Position in the Market to Help the Company Stay at the Forefront of

Companies Operating in its Field .......................................................................................................................75

4.9.2 Maintain the Company’s Distinguished Financial Position and Establish Resistance to Recession

Stages in Economic Cycles through Proper Advance Planning ............................................................... 76

4.9.3 Expand the Field of Information Technology by Using Data to Grow the Company’s Business and

Provide Effective Information Solutions to Clients that Serve their Goals, Help them Scientifically

Reach their Clients and Analyse the Available Consumer Data ...............................................................77

4.9.4 Consider Profitable Alliances and Partnerships that Support Geographical Expansion Locally and

Regionally, in Order to Enhance the Company’s Position, Maintain its Leadership and Benefit from

Global Experiences in this Field ..........................................................................................................................77

4.10 Research and Development 77

4.11 Company Branches and Maintenance and Installation Centres 78

4.11.1 Company Branches .................................................................................................................................................78

4.11.2 Company Centres ....................................................................................................................................................78

4.12 Company Assets Outside the Kingdom of Saudi Arabia 79

4.13 Corporate Social Responsibility 79

4.14 Employees 79

4.14.1 Number of Employees ............................................................................................................................................80

4.14.2 Saudization ................................................................................................................................................................80

4.15 Business and Activity of the Company 82

5- The Company’s Organisational Structure and Governance 83

5.1 Overview of the Company’s Organisational Structure 83

5.2 Board of Directors 84

5.2.1 Board Members ........................................................................................................................................................ 84

5.2.2 Board Responsibilities ............................................................................................................................................85

5.2.3 Biographies of Board Members and Board Secretary .................................................................................. 87

5.3 Board Committees 90

5.3.1 Nomination and Remuneration Committee ................................................................................................... 91

5.3.2 Audit Committee .....................................................................................................................................................92

5.4 Senior Management 94

5.4.1 Senior Management Members ............................................................................................................................ 94

5.5 The Company’s Main Departments 100

5.5.1 Advertising Department .....................................................................................................................................100

5.5.2 Contracts and Tenders Department ................................................................................................................101

5.5.3 Maintenance and Operations Department ...................................................................................................101

5.5.4 Procurement Department ..................................................................................................................................103

5.5.5 Finance Department .............................................................................................................................................103

5.5.6 Administrative and Personnel Affairs Department .....................................................................................103

5.5.7 Print Shop Department .......................................................................................................................................104

5.5.8 Marketing Department ........................................................................................................................................105

5.5.9 IT Department ........................................................................................................................................................105

5.6 Employment Contracts with Senior Executives 106

5.7 Employment Contracts with Directors 106

5.8 Remuneration of Directors and Senior Executives 107

5.9 Corporate Governance 107

5.10 Conflict of Interest 108

5.11 Employees 114

6- Financial Information and Management’s Discussion and Analysis 115

6.1 Introduction 115

6.2 Board Members’ Declaration on the Financial Information 115

6.3 Overview of the Company 116

6.4 Subsidiary 117

6.5 Basis of Preparation and Summary of Significant Accounting Policies 118

6.5.1 Critical Accounting Estimates and Judgements ..........................................................................................118

6.5.2 Summary of Significant Accounting Policies ................................................................................................120

6.6 Key Factors Affecting the Company’s Business 125

6.7 Summary of Financial Information and Key Performance Indicators for the Fiscal Years

Ended 31 December 2018G, 2019G and 2020G 126

6.7.1 Statement of Income ...........................................................................................................................................126

6.7.2 Statement of Financial Position ........................................................................................................................147

6.7.3 Statement of Cash Flows .....................................................................................................................................173

6.8 Purchase option of MBC Group Holdings Ltd. 176

7- Dividend Distribution Policy 177

8- Use of Offering Proceeds 178

9- Capitalisation and Indebtedness of the Company 179

10- Expert Statements 180

11- Declarations 181

12- Legal Information 185

12.1 Declarations Related to Legal Information 185

12.2 The Company 185

12.3 Shareholder Structure 186

12.4 Company Branches and Subsidiary 186

12.5 Material Licenses and Approvals 187

12.6 Summary of the Company’s Bylaws 189

12.6.1 Company Name ......................................................................................................................................................189

12.6.2 Company Objectives ............................................................................................................................................189

12.6.3 Participation and Ownership in Companies .................................................................................................190

12.6.4 Company Head Office ..........................................................................................................................................190

12.6.5 Duration of the Company ..................................................................................................................................190

12.6.6 Share Capital ...........................................................................................................................................................190

12.6.7 Subscription to the Offer Shares .......................................................................................................................190

12.6.8 Preferred Shares .....................................................................................................................................................190

12.6.9 Sale of Non-Paid-up Shares ................................................................................................................................190

12.6.10 Issuance of Shares .................................................................................................................................................190

12.6.11 Trading of Shares ...................................................................................................................................................191

12.6.12 Shareholders Register ..........................................................................................................................................191

12.6.13 Capital Increase ......................................................................................................................................................191

12.6.14 Capital Decrease ....................................................................................................................................................191

12.6.15 Management of the Company ..........................................................................................................................192

12.6.16 Termination of Board Membership ..................................................................................................................192

12.6.17 Board Vacancies .....................................................................................................................................................192

12.6.18 Powers of the Board of Directors ......................................................................................................................192

12.6.19 Remuneration of Board Members ....................................................................................................................193

12.6.20 Powers of the Chairman, Deputy Chairman, Managing Director and Secretary ..............................193

12.6.21 Board Meetings ......................................................................................................................................................194

12.6.22 Quorum of Board Meetings ................................................................................................................................194

12.6.23 Board Deliberations ..............................................................................................................................................194

12.6.24 Assembly Attendance ..........................................................................................................................................194

12.6.25 Constituent General Assembly ..........................................................................................................................194

12.6.26 Responsibilities of the Constituent General Assembly ..............................................................................194

12.6.27 Responsibilities of the Ordinary General Assembly ...................................................................................194

12.6.28 Responsibilities of the Extraordinary General Assembly ..........................................................................194

12.6.29 Convening Assemblies ......................................................................................................................................... 195

12.6.30 Assembly Record of Attendance .......................................................................................................................195

12.6.31 Quorum of Ordinary General Assembly ........................................................................................................195

12.6.32 Quorum of Extraordinary General Assembly ................................................................................................195

12.6.33 Voting at Assemblies ............................................................................................................................................195

12.6.34 General Assembly Resolutions ..........................................................................................................................195

12.6.35 Assembly Deliberations .......................................................................................................................................195

12.6.36 Presiding Over Assemblies and Keeping Minutes.......................................................................................196

12.6.37 Audit Committee ...................................................................................................................................................196

12.6.38 Auditor ......................................................................................................................................................................196

12.6.39 Fiscal Year .................................................................................................................................................................197

12.6.40 Financial Documents ............................................................................................................................................197

12.6.41 Distribution of Profits ...........................................................................................................................................197

12.6.42 Entitlement to Profits ...........................................................................................................................................197

12.6.43 Distribution of Profits for Preferred Shares....................................................................................................197

12.6.44 Company Losses ....................................................................................................................................................198

12.6.45 Liability Action ........................................................................................................................................................198

12.6.46 Termination of the Company .............................................................................................................................198

12.6.47 Final Provisions .......................................................................................................................................................198

12.7 Material Agreements 198

12.7.1 Contracts for Outdoor Advertising Sites .......................................................................................................199

12.7.2 Contracts for Indoor Advertising Sites ............................................................................................................219

12.7.3 Share Sale and Purchase Agreement .............................................................................................................222

12.7.4 Shareholders Agreement ...................................................................................................................................222

12.7.5 Other Material Contracts ....................................................................................................................................224

12.8 Credit Facilities 224

12.8.1 Bank Facility Agreement with Saudi British Bank (SABB) .........................................................................224

12.8.2 Bank Facility Agreement Between the Company and The Saudi Investment Bank (SAIB) .............228

12.8.3 Credit Facility Agreement Between the Company and Arab National Bank (ANB) ..........................229

12.8.4 Bank Facility Agreement Between the Company and Bank Albilad ......................................................230

12.8.5 Bank Facility Agreement Between the Company and Banque Saudi Fransi .......................................231

12.8.6 Bank Facility Agreement between the Company and Riyad Bank ........................................................232

12.9 Material Contracts with Related Parties 232

12.9.1 Cooperation Contract Concluded with the National Industrial Billboard Company on 21/03/1437H

(Corresponding to 01 January 2016G): ..........................................................................................................233

12.9.2 Cooperation Contract Concluded with Al Miza Outdoor Advertising on 15/11/1437H

(Corresponding to 18 August 2016G): ...........................................................................................................233

12.9.3 Lease agreements with Related Parties ..........................................................................................................234

12.9.4 Transactions with Related Parties that are not Governed by Official Contracts ................................235

12.10 Real Estate 240

12.10.1 Title Deeds ...............................................................................................................................................................240

12.10.2 Lease Agreements .................................................................................................................................................240

12.11 Intellectual Property 243

12.12 Other Intellectual Property 244

12.13 Litigation 245

12.13.1 Lawsuits Filed by the Company Against Jeddah Municipality ................................................................245

12.14 Zakat and Tax Status of the Company 246

12.15 Insurance Policies 246

12.16 Description of Shares 247

12.16.1 Ordinary Shares ......................................................................................................................................................247

12.16.2 Repurchase of Shares ...........................................................................................................................................247

12.16.3 Shareholder Rights ................................................................................................................................................247

12.16.4 Voting Rights ...........................................................................................................................................................247

12.16.5 Amendment of Shareholder Rights .................................................................................................................247

13- Underwriting 248

13.1 Underwriters 248

13.2 Summary of the Underwriting Agreement 248

14- Underwriting Costs 249

15- Expenses 250

16- The Company’s Post-Listing Undertakings 251

17- Waivers 252

18- Subscription Terms and Conditions 253

18.1 Subscription to Offer Shares 253

18.2 Book-Building for Participating Parties 254

18.3 Subscription by Individual Investors 254

18.4 Allocation and Refunds 257

18.4.1 Allocation of Offer Shares to Participating Parties ......................................................................................257

18.4.2 Allocation of Offer Shares to Individual Investors ......................................................................................257

18.5 Circumstances Where Listing May be Suspended or Cancelled 257

18.5.1 Power to Suspend Trading or Cancel Listing ................................................................................................257

18.5.2 Voluntary Cancellation of Listing .....................................................................................................................259

18.5.3 Temporary Suspension of Trading ...................................................................................................................259

18.5.4 Lifting of Suspension ............................................................................................................................................ 259

18.6 Approvals and Decisions for Offering and Listing the Offer Shares 260

18.7 Lock-Up Period 260

18.8 Subscriber Acknowledgements 260

18.9 Share Record and Trading Arrangements 260

18.10 Saudi Tadawul Group 261

18.11 Trading Company Shares 261

18.12 Miscellaneous 261

19- Documents Available for Inspection 262

20- Financial Statements and Auditor’s Report 263

Table Index

Table (1-1): Company’s Board Members ...........................................................................................................................................................................D

Table (1-2): Substantial Shareholders and Their Shareholding Percentages in the Company Pre- and Post-Offering ......................K

Table (1-3): Projected Offering Timetable .........................................................................................................................................................................O

Table (1-4): Global Advertising Expenditure by Media (2013G-2020G) ...............................................................................................................U

Table (1-5): Global Expenditure on Outdoor Advertising and Digital Outdoor Advertising (2013G-2020G) ........................................V

Table (1-6): Advertising Expenditure and Outdoor Advertising Expenditure in the Kingdom of Saudi Arabia (2015G-2020G) .W

Table (1-7): Financial Statements for 2018G, 2019G and 2020G ............................................................................................................................. X

Table (3-1): Kingdom of Saudi Arabia - Real GDP Growth (2013G-2020G) .......................................................................................................36

Table (3-2): The Kingdom of Saudi Arabia - Estimated Population Distribution by Age Group in 2020G ............................................37

Table (3-3): Global Advertising Expenditure by Media (2013G-2020G) ............................................................................................................. 39

Table (3-4): Annual Growth - Global Advertising Expenditure Across Various Media (2013G-2020G) .................................................. 39

Table (3-5): Global Expenditure on Outdoor Advertising and Digital Outdoor Advertising (2013G-2020G) ..................................... 40

Table (3-6): Advertising Expenditure and Outdoor Advertising Expenditure in the Kingdom of Saudi Arabia (2015G-2020G) 41

Table (3-7): Distribution of Outdoor and Indoor Sites in the Kingdom of Saudi Arabia (2019G and 2020G) .................................... 43

Table (3-8): Rate of Distribution of Digital vs. Static Outdoor Sites in the Kingdom of Saudi Arabia (2019G and 2020G) ........... 43

Table (3-9): Rate of Distribution of Digital vs. Static Indoor Sites in the Kingdom of Saudi Arabia (2019G and 2020G) ............... 44

Table (3-10): Advertising Inventory Distribution by Type in the Kingdom of Saudi Arabia (2019G and 2020G) .............................. 44

Table (3-11): Distribution of Outdoor Advertising Expenditure by Major Advertisers in Saudi Arabia (2019G and 2020G) ........ 46

Table (3-12): The World’s Top 16 Outdoor Advertising Companies by Revenue (2018G and 2019G) ....................................................47

Table (3-13): Al Arabia’s Market Share and Revenue Growth in the Kingdom of Saudi Arabia Outdoor Advertising Sector

(2017G-2020G) .............................................................................................................................................................................................. 48

Table (3-14): Al Arabia’s Total Installed Outdoor Advertising Inventory (2017G- 2020G) ........................................................................... 48

Table (3-15): Contribution to Al Arabia Revenues by Customer Sector (2018G, 2019G and 2020G) .................................................... 49

Table (3-16): Al Arabia’s Roadside Advertising Inventory (No. of Faces) by Region (2019G–2020G) ......................................................50

Table (4-1): Company’s Ownership Structure upon Incorporation: ..................................................................................................................... 52

Table (4-2): The Company’s Ownership Structure as at 28/10/1406H (corresponding to 05 July 1986G) ........................................... 52

Table (4-3): The Company’s Ownership Structure as at 07/01/1420H (corresponding to 24 April 1999G) .........................................52

Table (4-4): The Company’s Ownership Structure as at 12/11/1423H (corresponding to 15 January 2003G) ................................... 52

Table (4-5): The Company’s Ownership Structure as at 02/05/1427H (corresponding to 30 May 2006G) ..........................................53

Table (4-6): The Company’s Ownership Structure as at 02/12/1429H (corresponding to 30 November 2008G) ............................. 53

Table (4-7): The Company’s Ownership Structure as at 22/06/1433H (corresponding to 13 May 2012G) .........................................54

Table (4-8): The Company’s Ownership Structure as at 21/06/1435H (corresponding to 21 April 2014G) ........................................ 54

Table (4-9): The Company’s Ownership Structure as at 27/03/1440H (corresponding to 05 December 2018G) ............................55

Table (4-10): The Company’s Ownership Structure as at 01/04/1441H (Corresponding to 28 November 2019G) .......................... 55

Table (4-11): The Company’s Ownership Structure as at 05/05/1441H (corresponding to 31 December 2019G) ...........................56

Table (4-12): The Current Ownership Structure of the Company .........................................................................................................................56

Table (4-13): The Ownership Structure of Engineer Holding Group Company............................................................................................... 57

Table (4-14): The Ownership Structure of MBC Group Holdings Ltd. ..................................................................................................................57

Table (4-15): Ownership Structure of Al Arabia Out of Home Advertising ....................................................................................................... 58

Table (4-16): The Company’s Key Historical Events .....................................................................................................................................................58

Table (4-17): Number of Billboards Owned by the Company as at 31 December 2018G, 2019G and 2020G ................................... 66

Table (4-18): Number of Panels Owned by the Company as at 31 December 2018G, 2019G and 2020G ...........................................66

Table (4-19): Number of Billboards Owned by the Company by Region as at 31 December 2018G, 2019G and 2020G .............. 67

Table (4-20): Number of Panels Owned by the Company by Region as at 31 December 2018G, 2019G and 2020G ..................... 67

Table (4-21): Number of Billboards Owned by the Company as at 31 December 2019G and 2020G ................................................... 69

Table (4-22): The Company’s Revenue Divided by Client Categories in 2018G, 2019G and 2020G (SAR’000) ................................... 69

Table (4-23): Revenues from Top 10 Roadside Advertising Clients in2018G, 2019G and 2020G (SAR’000) ........................................ 70

Table (4-24): Top 10 Indoor Advertising Clients for 2019G and 2020G ............................................................................................................. 70

Table (4-25): The Company’s Print Shops .......................................................................................................................................................................71

Table (4-26): The Company’s Print Shops and their Production Capacity ......................................................................................................... 71

Table (4-27): The Company’s Top Five Suppliers in the Printing Sector in 2018G, 2019G and 2020G ................................................... 72

Table (4-28): The World’s Top 16 Outdoor Advertising Companies by Revenue (2018G and 2019G): ...................................................73

Table (4-29): Arabian Contracting Services Company Branches ...........................................................................................................................78

Table (4-30): Company Centres as at 31 December 2020G ..................................................................................................................................... 78

Table (4-31): The Company’s Social Responsibility Activity Initiatives ...............................................................................................................79

Table (4-32): Number of Employees by Department and Saudization Rate as at 31 December 2018G, 2019G and 2020G: .......80

Table (4-33): Summary of the Classification of Establishments Operating in the Construction and Building Sector under Each

“Nitaqat” Program Category.................................................................................................................................................................... 81

Table (5-1): The Company’s Direct Ownership Structure Pre- and Post-Offering........................................................................................... 84

Table (5-2): Board Members ................................................................................................................................................................................................. 84

Table (5-3): Nomination and Remuneration Committee Members ..................................................................................................................... 91

Table (5-4): Members of the Audit Committee ............................................................................................................................................................. 93

Table (5-5): Members of the Company’s Senior Management .............................................................................................................................. 94

Table (5-6): Summary of Employment Contracts with Senior Executives .......................................................................................................106

Table (5-7): Remuneration of Board Members and the Top Five Senior Executives (SAR) ........................................................................107

Table (5-8): Direct and Indirect Interests of Senior Executives and Directors ...............................................................................................109

Table (5-9): Board Members Involved in Companies that Conduct Activities Similar to or in Competition with the Company

through Board Membership or Capital Shareholding ...............................................................................................................110

Table (5-10): Summary of Transactions Between the Company and Related Parties that are not Subject to Formal Contracts

...........................................................................................................................................................................................................................110

Table (5-11): Summary of Transactions Between the Company and Related Parties that are not Subject to Formal Contracts

Table (6-1): Branches of the Company ...........................................................................................................................................................................117

Table (6-2): Ownership Structure of Al Arabia Out of Home Advertising Company ...................................................................................117

Table (6-3): The Useful Life of Assets ...............................................................................................................................................................................121

Table (6-4): Comprehensive Income Statements for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated

Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G. ......................................................126

Table (6-5): Revenue by Activity and Product Nature for the Fiscal Year Ended 31 December 2018G and the Company’s

Consolidated Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G* ..........................127

Table (6-6): Outdoor Advertising Revenue for the Fiscal Year Ended 31 December 2018G, and the Company’s Consolidated

Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G. .......................................................128

Table (6-7): Outdoor Advertising Revenue by Geographical Area for the Fiscal Year Ended December 2018G and the Company’s

Consolidated Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G ...........................130

Table (6-8): Printing Revenue for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated Financial

Statements for the Fiscal Year Ended 31 December 2019G and 2020G ..............................................................................132

Table (6-9): Outdoor Advertising Revenue from Top 10 clients for the Fiscal Year Ended 31 December 2018G and the Company’s

Consolidated Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G ............................133

Table (6-10): Outdoor Advertising Revenue by Client Class for the Fiscal Year Ended 31 December 2018G and the Company’s

Consolidated Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G ............................134

Table (6-11): Revenue Inside and Outside the Kingdom of Saudi Arabia for the Fiscal Year Ended 31 December 2018G and the

Company’s Consolidated Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G ....135

Table (6-12): Cost of Revenue for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated Financial

Statements for the Fiscal Years Ended 31 December 2019G and 2020G ............................................................................136

Table (6-13): Cost of Revenue Related to Outdoor Advertising for the Fiscal Year Ended 31 December 2018G and the Company’s

Consolidated Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G ............................136

Table (6-14): Rental Costs by Geographical Area for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated

Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G ........................................................138

Table (6-15): Rental Cost by Billboard Type for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated

Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G ........................................................138

Table (6-16): Cost of Printing Revenue for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated Financial

Statements for the Fiscal Years Ended 31 December 2019G and 2020G ............................................................................139

Table (6-17): Gross Profit for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated Financial Statements

for the Fiscal Years Ended 31 December 2019G and 2020G ....................................................................................................140

Table (6-18): General and Administrative Expenses for the Fiscal Year Ended 31 December 2018G and the Company’s

Consolidated Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G ............................141

Table (6-19): Selling and Marketing Expenses for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated

Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G ........................................................143

Table (6-20): Other Expenses for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated Financial

Statements for the Fiscal Years Ended 31 December 2019G and 2020G ............................................................................144

Table (6-21): Miscellaneous Expenses for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated Financial

Statements for the Fiscal Years Ended 31 December 2019G and 2020G ............................................................................144

Table (6-22): Finance Expenses for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated Financial

Statements for the Fiscal Years Ended 31 December 2019G and 2020G ............................................................................145

Table (6-23): Other Net Income for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated Financial

Statements for the Fiscal Years Ended 31 December 2019G and 2020G ............................................................................146

Table (6-24): Statement of Financial Position for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated

Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G ........................................................147

Table (6-25): Net Book Value of Property and Equipment for the Fiscal Year Ended 31 December 2018G and the Company’s

Consolidated Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G ...........................148

Table (6-26): Useful Life of Assets .....................................................................................................................................................................................150

Table (6-27): Right-of-use Assets for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated Financial

Statements for the Fiscal Years Ended 31 December 2019G and 2020G ............................................................................150

Table (6-28): Current Assets for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated Financial

Statements for the Fiscal Years Ended on 31 December 2019G and 2020G .....................................................................151

Table (6-29): Inventory for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated Financial Statements

for the Fiscal Years Ended 31 December 2019G and 2020G ....................................................................................................152

Table (6-30): Impairment of Inventory for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated Financial

Statements for the Fiscal Years Ended 31 December 2019G and 2020G ............................................................................152

Table (6-31): Analysis of the Lives of Trade Receivables for the Fiscal Year Ended 31 December 2018G and the Company’s

Consolidated Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G ............................152

Table (6-32): Movement of the Provision for Doubtful Debts for the Fiscal Year Ended 31 December 2018G and the Company’s

Consolidated Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G ............................153

Table (6-33): Table of the Lives of the Top 10 Accounts Receivable for the Company’s Consolidated Financial Statements for the

Fiscal Year Ended 31 December 2020G ............................................................................................................................................154

Table (6-34): Due from Related Parties for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated Financial

Statements for the Fiscal Years Ended 31 December 2019G and 2020G ............................................................................155

Table (6-35): Prepaid Expenses and Other Accounts Receivable for the Fiscal Year Ended 31 December 2018G and the

Company’s Consolidated Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G ....156

Table (6-36): Prepaid Billboard Site Rent by Region for the Fiscal Year Ended 31 December 2018G and the Company’s

Consolidated Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G ............................157

Table (6-37): Cash and Cash Equivalents for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated

Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G ........................................................159

Table (6-38): Current Liabilities for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated Financial

Statements for the Fiscal Years ended 31 December 2019G and 2020G ............................................................................160

Table (6-39): Lease Liabilities for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated Financial

Statements for the Fiscal Years Ended 31 December 2019G and 2020G ............................................................................160

Table (6-40): Short-term Loans for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated Financial

Statements for the Fiscal Year Ended 31 December 2019G and 2020G ..............................................................................161

Table (6-41): Balances and Transactions with Related Parties for the Fiscal Year Ended 31 December 2018G and the Company’s

Consolidated Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G ...........................164

Table (6-42): Trade Receivables - Related Parties, for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated

Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G ........................................................166

Table (6-43): Prepaid to Suppliers - Related Parties, for the Fiscal Year Ended 31 December 2018G and the Company’s

Consolidated Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G ............................166

Table (6-44): Suppliers for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated Financial Statements for

the Fiscal Years Ended 31 December 2019G and 2020G ...........................................................................................................166

Table (6-45): Accrued Expenses and Other Accounts Payable for the Fiscal Year Ended 31 December 2018G and the Company’s

Consolidated Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G ............................167

Table (6-46): Rents Payable Under Leases with Municipalities for the Fiscal Year Ended 31 December 2018G and the Company’s

Consolidated Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G ............................167

Table (6-47): Zakat Provision for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated Financial

Statements for the Fiscal Years Ended 31 December 2019G and 2020G ............................................................................169

Table (6-48): Employee Defined Benefit Liabilities for the Fiscal Year Ended 31 December 2018G and the Company’s

Consolidated Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G ............................169

Table (6-49): Non-Current Lease Liabilities for the Fiscal Year Ended 31 December 2018G and the Consolidated Financial

Statements for the Fiscal Years Ended 31 December 2019G and 2020G ............................................................................170

Table (6-50): Equity for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated Financial Statements for

the Fiscal Years Ended 31 December 2019G and 2020G ...........................................................................................................171

Table (6-51): Share Capital .................................................................................................................................................................................................171

Table (6-52): Statutory Reserve for the Fiscal Year Ended 31 December 2018G and the Consolidated Financial Statements for

the Fiscal Years Ended 31 December 2019G and 2020G ...........................................................................................................171

Table (6-53): Retained Earnings for the Fiscal Year Ended 31 December 2018G and the Consolidated Financial Statements for

the Fiscal Years Ended 31 December 2019G and 2020G ...........................................................................................................172

Table (6-54): Contingent Liabilities and Expenses for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated

Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G ........................................................173

Table (6-55): Summary of the Cash Flow Statement for the Fiscal Year Ended 31 December 2018G and the Company’s

Consolidated Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G ............................173

Table (6-56): Cash Flow from Operating Activities ....................................................................................................................................................174

Table (6-57): Cash Flow from Investing Activities for the Financial Year Ended 31 December 2018G and the Company’s

Consolidated Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G ............................175

Table (6-58): Cash Flow from Financing Activities for the Fiscal Year Ended 31 December 2018G and the Company’s Consolidated

Financial Statements for the Fiscal Years Ended 31 December 2019G and 2020G ........................................................175

Table (7-1): Dividends Declared and Distributed by the Company for the Years Ended 31 December 2018G, 2019G and 2020G

Table (9-1): Capitalisation and Indebtedness of the Company............................................................................................................................179

Table (12-1): The Company’s Ownership Structure Pre- and Post-Offering ...................................................................................................186

Table (12-2): Details of and the Company’s Shareholding in Al Arabia Out of Home Advertising Company ..................................186

Table (12-3): Information of the Company’s Branches ............................................................................................................................................187

Table (12-4): Commercial Register Certificates Obtained by the Company and its Subsidiary .............................................................. 187

Table (12-5): Commercial Register Certificates for Company Branches ...........................................................................................................188

Table (12-6): Media Licenses Obtained by the Company .......................................................................................................................................188

Table (12-7): Company’s Certificates of Membership in Chambers of Commerce ......................................................................................188

Table (12-8): Municipal Licenses Obtained by the Company ..............................................................................................................................189

Table (12-9): Other Regulatory Licenses* .....................................................................................................................................................................189

Table (12-10): Existing Company Contracts for Advertising Sites in Riyadh as at 31 December 2020G .............................................200

Table (12-11): Existing Company Contracts for Advertising Sites in Madinah Province as at 31 December 2020G ......................202

Table (12-12): Existing Company Contracts for Advertising Sites in Mecca Province as at 31 December 2020G ...........................203

Table (12-13): Existing Company Contracts for Advertising Sites in the Eastern Province as at 31 December 2020G .................205

Table (12-14): Existing Company Contracts for Advertising Sites in Qassim Province as at 31 December 2020G .........................206

Table (12-15): Existing Company Contracts for Advertising Sites in the Southern Province as at 31 December 2020G .............208

Table (12-16): Existing Company Contracts for Advertising Sites in the Northern Province as at 31 December 2020G .............209

Table (12-17): Existing Company Contracts for Outdoor Advertising Sites which are Expired as at 31 December 2020G .........210

Table (12-18): The Company’s Existing Expired Contracts for Outdoor Advertising Sites that the Company Continues to Operate

as a Use Period as of 31 December 2020 .........................................................................................................................................212

Table (12-19): The Company’s Existing Expired Contracts for Outdoor Advertising that the Company Continues to Operate

under a Compensatory Period Granted by the Municipality as at 31 December 2020G .............................................213

Table (12-20): Existing Company Contracts for Indoor Advertising Sites as at 31 December 2020G ..................................................220

Table (12-21): Table 12.21: Financing Agreements with Commercial Banks ..................................................................................................224

Table (12-22): Terms of Bank Facility Agreement between the Company and SABB Dated 28/11/1441H (Corresponding to 29

June 2020G) .................................................................................................................................................................................................225

Table (12-23): Conditions of Banking Facilities Agreement with The Saudi Investment Bank Dated 20/12/1440H (Corresponding

to 10 August 2020G) .................................................................................................................................................................................228

Table (12-24): Terms of Credit Facility Agreement with Arab National Bank Dated 09 October 2017G .............................................229

Table (12-25): Terms of Bank Facility Agreement with Bank Albilad Dated 26/04/1441H (Corresponding to 23 December 2019G)

Table (12-26): Terms of Bank Facility Agreement with Banque Saudi Fransi dated 30/11/1438H (Corresponding to 22 August

2017G) ............................................................................................................................................................................................................231

Table (12-27): Terms of the Bank Facilities Agreement with Riyad Bank Dated 04/01/1442H (corresponding to 23 August 2020G)

Table (12-28): Lease Agreements with Related Parties ...........................................................................................................................................234

Table (12-29): Summary of Transactions Between the Company and Related Parties that are not Subject to Formal Contracts

Table (12-30): Lease Agreements with Other Parties .............................................................................................................................................. 241

Table (12-31): Main Details of Trademarks Registered by the Company .........................................................................................................244

Table (12-32): Summary of the Internet Domain Registered by the Company ............................................................................................244

Table (12-33): Industrial Model Certificates Summary ............................................................................................................................................244

Table (12-34): The Company’s Insurance Policies ......................................................................................................................................................246

Table (13-1): Underwritten Shares ...................................................................................................................................................................................248

Figure Index

The following figure summarises the model and stages of the Company’s business with its clients: .................................................. 60

The Company’s Organisational Structure ...................................................................................................................................................................... 83

1- Definitions and Abbreviations

Term Definition

3M Company

3M Gulf Limited Company LLC, with its head office in the United Arab Emirates.

Advertising Material

Advertising posters and prints to be placed on billboards, cars, walls, windows or floors of

various sizes.

Advertising Monitoring Service

A process carried out by professionals for the purpose of collecting statistical information

about advertising in terms of quality and quantity.

Advertising Stands

An advertising stand or model made of cardboard, foam, steel, wood and other materials

used for displaying consumer products.

AED or Dirham

The official currency of the United Arab Emirates.

Al Arabia Out of Home Advertising

Company

Al Arabia Out of Home Advertising Company, a wholly owned subsidiary, located in Dubai

Media City in the Emirate of Dubai, United Arab Emirates, with Commercial License No. 95928

dated 18 April 2019G.

Application Form

The application form used by Participating Parties to register their applications for the Offer

Shares during the book-building period. This term includes (depending on the case) the ap-

pended application form when the price range is changed.

Auditor

Baker Tilly MKM Chartered Accountants.

Bylaws

The Company’s Bylaws approved by the General Assembly.

Banner Material

Advertising signs suitable for front lighting.

Billboard or Board Location

Refers to the place where a billboard is located.

Board or Board of Directors

The Company’s Board of Directors.

Bookrunner

GIB Capital.

Business Day

Any day on which the Receiving Agents are open in the Kingdom of Saudi Arabia (except for

Fridays, Saturdays and public holidays).

Capital Market Institution

A person authorised by the CMA to engage in securities activities.

Chairman

The chairman of the Board of Directors.

Chapalon

A piece of silk stretched on an aluminium frame and used for silk-screen printing.

Centimetre, a unit for measuring length.

CMA

The Capital Market Authority of Saudi Arabia.

Companies Law

The Companies Law, promulgated by Royal Decree No. M/3 dated 28/01/1437H (correspond-

ing to 10 November 2015G), as amended.

Competition Law

The Competition Law, promulgated by Royal Decree No. M/25 dated 04/05/1425H (corre-

sponding to 21 June 2004G), as amended.

Control

The ability to, directly or indirectly, influence the acts or decisions of another person, individ-

ually or collectively with a relative or affiliate, through:

1- Holding 30% or more of the voting rights in the Company, or

2- The right to appoint 30% or more of the administrative staff.

The word “controller” shall be construed accordingly.

Coronavirus (COVID-19)

An infectious viral disease known as coronavirus or COVID-19, that began to spread in most

countries of the world, including Saudi Arabia, at the beginning of 2020G; as a result, the

World Health Organisation classified it as a global pandemic.

Corporate Governance Regulations

The Saudi Corporate Governance Regulations issued by the CMA Board under Resolution No.

8-16-2017 dated 16/05/1438H (corresponding to 13 February 2017G) (under the Companies

Law) as amended pursuant to Resolution No. 1-7-2021 issued on 01 June 1442H (correspond-

ing to 14 January 2021G), as amended.

Co-Underwriter

Albilad Investment Company.

Current Shareholders

All current shareholders in the Company, whose names and ownership percentages are

shown in Table 5.1 (“The Company’s Direct Ownership Structure Pre- and Post-Offering”),

as follows:

y Abdelellah Abdulrahman Alkhereiji.

y Engineer Holding Group Company.

y MBC Group Holdings Ltd.

Term Definition

Directors or Board Members

The Company’s Board of Directors appointed by the General Assembly whose names appear

in Section 5.2.1 (“Board Members”) of this Prospectus.

Extraordinary General Assembly

The Extraordinary General Assembly of Shareholders convened in accordance with the Com-

pany’s Bylaws.

Financial Advisor

GIB Capital.

Fiscal Year

The Company’s fiscal year, from 1 January to 31 December of each fiscal year.

Flex Face Material

White, translucent advertising signs suitable for back lighting.

FY 2018G

The period starting from 1 January 2018G and ending on 31 December 2018G.

FY 2019G

The period starting from 1 January 2019G and ending 31 December 2019G.

FY 2020G

The period starting from 1 January 2020G and ending 31 December 2020G.

Gregorian.

G-20

The main forum for international economic cooperation, composed of leaders from all con-

tinents representing developed and developing countries. Collectively, the G-20 member

states account for about 80% of world economic output, two-thirds of the world’s popula-

tion, and three-quarters of global trade volume.

GCC

The Cooperation Council for the Arab States of the Gulf.

General Assembly

The Extraordinary General Assembly and/or the Ordinary General Assembly, with “General

Assembly” denoting any Company General Assembly.

Government

The government of the Kingdom of Saudi Arabia; the word “governmental” shall be con-

strued accordingly.

Gross Capacity

The total number of available advertising panels on the Company’s billboards, noting that

the number of advertising panels is calculated based on the maximum advertisements dis-

played on each billboard at the same time.

Hijri.

Individual Investors

Natural Saudi persons, including any divorced or widowed Saudi woman with minor children

from a marriage to a non-Saudi, who is entitled to subscribe to the Offer Shares in their names

on her own behalf, on the condition that she provides proof that she is divorced or widowed

and the mother of her minor children. Also includes GCC investors who are natural persons

and resident foreign investors holding valid residency permits and having bank accounts.

Indoor Advertising

Advertising that includes, for example, advertising inside malls, gyms, airports, galleries and

residential and commercial complexes.

Instructions on Book Building and

Allocation of Shares in Oerings

Instructions on Book Building and Allocation of Shares in Offerings issued under CMA Board

Resolution No. 2-94-2016 dated 15/10/1437H (corresponding to 20 July 2016G), as amended

by CMA Board Resolution No. 3-102-2019 dated 18/01/1441H (corresponding to 17 Septem-

ber 2019G).

International Financial Reporting

Standards (IFRS)

The International Financial Reporting Standards (IFRS) adopted in the Kingdom of Saudi Ara-

bia and other standards and publications approved by the Saudi Organisation for Certified

Public Accountants.

Investors

Participating Parties and Individual Investors.

Jeddah Printing Press

The Company’s print shop located in Jeddah, which does business through its branch regis-

tered under the name Al Arabia Company Rawiya Printing Press – Arabian Contracting Ser-

vices Company under Commercial Register No. 4030275525 dated 30/10/1435H.

Kingdom of Saudi Arabia or Saudi

Arabia

The Kingdom of Saudi Arabia.

Labour Law

The Saudi Labour Law promulgated by Royal Decree No. M/51 dated 23/08/1426H (corre-

sponding to 27 September 2005G), as amended.

Lead Manager

GIB Capital.

Lead Underwriter

GIB Capital.

LED Screens

Electronic screens using LED technology of various sizes. This type of billboard is common

in vibrant areas.

Listing

The admission of the Company’s shares for trading on the Exchange in accordance with the

Listing Rules.

Term Definition

Listing Rules

The Listing Rules issued by the CMA Board pursuant to Resolution No. 3-123-2017 dated

09/04/1439H (corresponding to 27 December 2017G) and amended by CMA Resolution No.

1-104-2019 dated 1/2/1441H (corresponding to 30 September 2019G) and amended by Res-

olution No. 1-22-2021 dated 12/07/1442H (corresponding to 24 February 2021G).

Lock-up Period

The six-month period during which Substantial Shareholders may not dispose of any of their

shares, starting from the date the Company’s shares start to be traded in the Exchange. Sub-

stantial Shareholders may dispose of their shares after the Lock-up Period.

m or Meter

Meter, the measurement unit for lengths, equivalent to 100cm.

m2 or Square Meter

Square meter, a square with each side being one meter long.

Market Consultant

Frost & Sullivan.

MBC Group

MBC Group Holdings Ltd., incorporated in April 2011G in the British Virgin Islands, under Brit-

ish Virgin Islands Certificate of Incorporation No. 1644127.

Media Buyers (MBUs)/Agencies

Companies operating in the advertising industry that purchase available space from media

channels (such as billboards, television, newspapers and magazines) for displaying advertis-

ing materials.

Media Owner

Companies that own the media through which an advertisement is displayed and offer their

services to other parties concerned with creating the advertisement. Media Owners include,

for example, outdoor road billboard companies, press institutions and radio and TV channels.

Megacom Billboard

Internally lit double-sided billboards, with each side measuring 3m x 4m, fixed on a steel

post. This type of billboard has become common in vibrant areas of target neighbourhoods

to communicate the marketing message to residents and visitors.

Mezah Billboards

3m x 4m electronic billboards.

MHRSD

The Ministry of Human Resources and Social Development in the Kingdom of Saudi Arabia.

Ministry of Commerce

The Ministry of Commerce in the Kingdom of Saudi Arabia.

Ministry of Media

The Ministry of Media in the Kingdom of Saudi Arabia.

MOMRAH

The Ministry of Municipal, Rural Affairs and Housing in the Kingdom of Saudi Arabia.

Mupi Billboards

Internally lit double-sided billboards, with each side measuring 1.2m x 1.8m, placed at traf-

fic lights on main streets and on sidewalks. This type of billboard is distinguished by being

available on a 24-hour basis and allowing both pedestrians and drivers clear and close-up

viewing, as well as by being easily changed.

Occupancy Percentage/Rate

One of the Company’s key performance indicators, indicating the number of advertising pan-

els used as a ratio of the number of available advertising panels.

Oer Price

[•] Saudi riyals.

Oer Shares

Fifteen million (15,000,000) ordinary shares, representing 30% of the Company’s capital.

Oering

The offering of fifteen million (15,000,000) ordinary shares, representing 30% of the Compa-

ny’s capital, for subscription on Saudi Tadawul Group.

Oering Period

The Offering Period will commence on Tuesday 20/03/1443H (corresponding to 26/10/2021G)

and will remain open for a period of three days, including and up to the Offering closing date,

which occurs on Thursday 22/03/1443H (corresponding to 28/10/2021G).

Ocial Pricing Card or Pricing Card

Prices of official services offered by the service provider.

Oset

A type of printing using printing plates arranged outside the operating machine and then

installed on printing machines, used specifically for printing paper brochures and all types

of office printed publications.

Ordinary General Assembly

The Ordinary General Assembly of Shareholders convened in accordance with the Compa-

ny’s Bylaws.

OSCOs

The Rules on the Offer of Securities and Continuing Obligations issued by CMA Board Pur-

suant to Resolution No. 3-123-2017 dated 09/04/1439H (corresponding to 27 December

2017G), as amended by Resolution No. 1-7-2021 dated 01/06/1442H (corresponding to 14

January 2021G), based on the Capital Market Law.

Outdoor Advertising or Out of

Home Advertising

Out of home advertising, divided into three categories by location: (1) roadside advertising,

(2) indoor advertising, and (3) transit advertising.

Outdoor Advertising Face

The advertising space containing the advertisement to be presented. An advertising medi-

um may contain one or more advertising panels.

Term Definition

Participating Parties

Means:

a) Public and private funds that invest in securities listed on the Saudi Tadawul Group as

permitted by the fund’s terms and conditions and in accordance with the provisions and

limitations stipulated in the Investment Fund Regulations and Book-Building Instruc-

tions.

b) Authorised persons licensed by the CMA to deal as a principal, in accordance with the

Prudential Rules when submitting the subscription application.

c) Clients of a person authorised by the CMA to conduct managing activities in accordance

with the provisions and restrictions set forth in the Book-Building Instructions.

d) Any legal persons allowed to open an investment account in the Kingdom of Saudi Ara-

bia and an account with the Depository Centre, including foreign legal persons who are

allowed to invest in the market where the shares of an issuer are to be listed, observing

the conditions on listed companies investing in listed securities set out in CMA Circular

No. 6/05158 dated 11/08/1435H (corresponding to 9 June 2014G) based on CMA Board

Resolution No. 9-28-2014 dated 20/07/1435H (corresponding to 19 May 2014G).

e) Government entities, any supranational authority recognised by the CMA, the Exchange,

or any other stock exchange recognised by the CMA, or the Depository Centre.

f) Government-owned companies, whether investing directly or through a portfolio man-

ager.

g) GCC companies and GCC funds, if allowed according to the terms and conditions of such

funds.

Person

Any natural or legal person.

Pisa Billboards (Scroller)

Internally lit double-sided 3m x 4m billboards installed on a steel side post with an electronic

system that allows four different advertisements to be displayed per panel.

Portrait Billboards

2m x 3m billboards installed on the sidewalks of major and prominent streets. This type of

billboard is considered one of the most technologically advanced billboards, with one static

side and one dynamic side.

Pre-emptive Rights

Rights granted to both MBC Group Holdings Ltd. and Engineer Holding Group Company pur-

suant to the Shareholders’ Agreement described in Section 7.4.2.2 of this Prospectus, which

grant the holder the right to purchase the share of the other person who wishes to sell their

share instead of selling it to another person.

Prospectus

This document, which was prepared by the Company regarding the Offering.

Prudential Rules

The Prudential Rules issued pursuant to CMA Board Resolution No. 1-40-2012 dated

17/02/1434H (corresponding to 20 December 2012G), as amended.

Qualied Foreign Investor

A foreign investor qualified to invest in the listed securities pursuant to the Rules for Qualified

Foreign Financial Institutions Investment in Listed Securities. The qualification application

shall be submitted to an authorised person to evaluate and accept in accordance with the

Rules for Qualified Foreign Financial Institutions Investment in Listed Securities.

Ramadan

Month of Ramadan.

Receiving Agents

The Receiving Agents whose names are stated on Page H.

Related Party or Parties

The term “Related Party” or “Related Parties” as used in this Prospectus, in accordance with

the Glossary of Defined Terms Used in the Regulations and Rules of the Capital Market Au-

thority issued by the CMA Board under Resolution No. 4-11-2004 dated 20/08/1425H (corre-

sponding to 4 October 2004G), as amended by CMA Board Resolution No. 2-22-2021 dated

12/07/1442H (corresponding to 24 February 2021G), refers to:

a) The Issuer’s affiliates.

b) The Issuer’s Substantial Shareholders.

c) Directors and senior executives of the Issuer.

d) The Directors and senior executives of the Issuer’s affiliates.

e) The Directors and senior executives of the Issuer’s Substantial Shareholders.

f) Any relatives of the persons referred to in a, b, c, d or e above, and

g) Any company controlled by any person referred to in a, b, c, d, e or f above.

In item g, “control” means the ability to, directly or indirectly, influence the acts or decisions

of another person, individually or collectively with a relative or affiliate, through any of the

following: (1) Holding 30% or more of the voting rights in the Company, and (2) The right to

appoint 30% or more of the members of the administrative staff. The word “controller” shall

be construed accordingly.

Term Definition

Relatives

Husband, wife and minor children. For the purpose of the Corporate Governance Regula-

tions:

1- Fathers, mothers, grandfathers, grandmothers and their ancestors.

2- Children and their descendants.

3- Full brothers and sisters, parental and maternal half brothers and sisters.

4- Husbands and wives.

Reserve Stock

Additional stock provided for use at peak times to meet demand.

Riyadh Printing Press

The Company’s print shop located in Riyadh, which does business through its branch regis-

tered under the name Al Arabia Company Rawiya Printing Press – Arabian Contracting Ser-

vices Company under Commercial Register No. 1010057812 dated 14/05/1405H.

Roadside Advertising

A type of outdoor advertising distinguished by its location on roadsides, pedestrian bridges

or sidewalks.

SAR or Saudi Riyal

The official currency of the Kingdom of Saudi Arabia.

Saudi Generally Accepted Account-

ing Standards (GAAP)

The Kingdom of Saudi Arabia’s generally accepted accounting standards issued by SOCPA.

Saudization

Saudization requirements applicable in the Kingdom of Saudi Arabia related to the labour

market.

Saudization ratio

The percentage of employees who contribute to the level of Saudization within any compa-

ny, including Saudi citizens and persons married to Saudis. Note that some groups, such as

Saudi employees with disabilities, represent greater weight in calculating the Saudization

rate.

Secretary

The Secretary of the Board of Directors.

Selling Advertising Spaces

Selling advertising spaces means implementing advertising campaigns agreed upon with

clients by displaying them on the Company’s billboards.

Selling Shareholders

y Abdelellah Abdulrahman Alkhereiji.

y Engineer Holding Group Company.

Senior Executives

Any natural person assigned – individually or jointly with other persons – by the Company’s

Board of Directors or by a Director to oversee and manage tasks, and who directly reports to

the Board, Director or CEO.

Senior Management

The Company managers described in Section 5.4 (“Senior Management”) of this Prospectus.

Fifty thousand (50,000,000) ordinary shares of the Company’s capital with a fully paid nomi-

nal value of ten Saudi riyals (SAR 10) per share.

Shareholders

Any owner of shares in the Company.

SignWorld

SignWorld, a limited liability company registered under Commercial Register No. 1010997845

dated 03/07/1437H. Its activities are the production of billboards, models and advertising

stands, and it is a Related Party.

Street Furniture

All pieces installed on streets and roadsides for advertising or non-advertising purposes.

These include various types of advertising billboards, benches, traffic barricades, light posts,

traffic signs, traffic signs, bus stops, public toilets, fountains and trash bins, etc.

Subscription Application Form

The subscription application form attached hereto which Subscribers should use to sub-

scribe for the Offer Shares.

Subsidiary

Al Arabia Out of Home Advertising Company, a wholly owned subsidiary, located in Dubai

Media City in the Emirate of Dubai, United Arab Emirates, with Commercial License No. 95928

dated 18 April 2019G.

Substantial Shareholders

Any person who owns 5% or more of the Issuer’s share capital.

Super Structures

Externally lit giant billboards that range in size from 75 m

to 400 m

, allowing for greater

visibility, comprehension, and impact due to their large size. In most cases, these billboards

are installed on steel supports along highways and some major city centres. This type of ad-

vertisement is printed on a high-quality heavy white vinyl background and uses images that

are creative and carry impact.

Tadawul/Exchange

Saudi Tadawul Group.

The Capital Market Law (CML)

The Capital Market Law, promulgated by Royal Decree No. M/30 dated 02/06/1424H (corre-

sponding to 31 December 2003G), as amended.

The Company/Al Arabia/Al Arabia

Company/the Issuer

The Arabian Contracting Services Company

Term Definition

“The Guide” Billboard

Billboards 2m x 3m in size which are installed on sidewalks of main and prominent city

streets. This type of billboard is considered one of the most technologically advanced bill-

boards, with one digital face and one interactive face. It is considered one of the most appro-

priate advertising means for high-impact promotional campaigns. One of its most significant

features is that it can be seen from a distance. It also contains interactive services to interact

with pedestrians and is useful for public services.

The Management

The Company’s Management.

The Ministry of Investment

The Ministry of Investment in the Kingdom of Saudi Arabia.

The Public

People other than:

a) The Issuer’s affiliates.

b) The Issuer’s Substantial Shareholders.

c) The Issuer’s Directors and senior executives.

d) The Directors and senior executives of the Issuer’s affiliates.

e) The Directors and senior executives of the Issuer’s Substantial Shareholders.

f) Any relatives of the persons referred to in a, b, c, d or e above.

g) Any company controlled by any person referred to in a, b, c, d, e or f above.

h) Persons acting together that collectively hold 5% or more of the class of shares to be

listed.

Total Spending on Outdoor Adver-

tising

The total amount spent by advertisers on outdoor advertising.

Transit Advertising

Advertising that is displayed on various means of public transportation such as taxis and

buses.

UAE

The United Arab Emirates.

Underwriters

GIB Capital and Albilad Investment Company.

Underwriting Agreement

The underwriting agreement to be entered into between the Company, the Selling Share-

holders and the Underwriter in connection with the Offering.

USD

The United States dollar, the lawful currency of the United States.

VAT

Value-added tax, also known as a goods and services tax.

Vision 2030

The National Strategic Economic Program, which aims to reduce dependence on oil and the

petrochemical industry, diversify the Saudi economy and develop public services.

Walking Bridge Billboards

Walking bridge billboards are one of the largest types of billboards and are installed on

bridges connecting the sides of highways.

Zakat Certicates

Zakat certificates issued by the Zakat, Tax and Customs Authority.

Zakat, Tax and Customs Authority

or GAZT

The Zakat, Tax and Customs Authority (previously the General Authority for Zakat and In-

come Tax (GAZT).

2- Risk Factors

Before deciding whether to invest in the Offer Shares, prospective investors are advised to carefully consider all information

contained in this Prospectus, particularly the risk factors described below. These risk factors may not include all risks that

the Company may encounter, and additional risks may exist that are not currently known by the Company or that may be

deemed immaterial but may nevertheless affect the Company’s operations.

The Company’s business, ﬁnancial position, results of operations and prospects could be adversely and materially affected

if any of the following risks or any other risks that the Directors have not identiﬁed or that are currently not considered to

be material, actually occur or become material. As a result of such risks or other factors that may affect the Company, the

forward-looking events and circumstances discussed in this Prospectus might not occur in the way the Company and/or

the Directors expect, or at all. Investors should consider all forward-looking statements in this Prospectus in light of these

explanations and should not place undue reliance on forward-looking statements (see “Forecasts and Forward-Looking

Statements” on page C, Section 11 (“Declarations”) and Section 16 (“Company Post-Listing Undertakings”)).

The Directors also acknowledge, to the best of their knowledge and belief, that there are no other material risks besides

those mentioned in this section, the non-disclosure of which would affect investors’ decisions to invest in the Offer Shares,

as at the date of this Prospectus.

Investing in the Offer Shares is only appropriate for investors who are capable of evaluating the risks and merits of such

an investment and who have sufficient resources to bear any loss that might result from this investment. A prospective

investor who has any doubts concerning the appropriate action to be taken should consult a financial advisor licensed by

the CMA for advice in connection with any investment in the Offer Shares.

The risks described below are presented in an order that does not reflect their importance or anticipated effect on the

Company. Additional unknown risks and uncertainties or those deemed immaterial now by the Company may also occur

and have the impact or consequences described in this Prospectus. Accordingly, the risks described in this section or in

any other section of this Prospectus do not purport to be: (a) a complete list of all risks which may affect the Company or

its operations, activities, assets or the markets in which it operates; and/or (b) an explanation of all the risks involved in

investing in the Offer Shares.

2.1 Risks Related to the Company’s Business

2.1.1 Risks Related to the Conclusion of Lease Agreements for New Advertising Sites

and the Renewal of Lease Agreements for Existing Sites

The Company does not own any of the advertising sites it uses in its business. It operates these sites under short-, medium,

and long-term agreements with secretariats, municipalities, government agencies, the owners of commercial centres and

other parties. Agreements with government and quasi-governmental agencies (which include secretariats, municipalities,

government agencies, the Ministry of National Guard, Riyadh Development Company, ASAS for Developing and Operating

Industrial Cities and Modon) account for the majority of the Company’s advertising site leases in terms of number and

advertising income. As at 2018G, 2019G and 2020G, lease agreements with these entities numbered 88, 76 and 68,

respectively out of 90, 83 and 78 agreements as at 2018G, 2019G and 2020G, respectively, concluded by the Company

with various parties for the lease of sites currently used by the Company as advertising sites. Revenue from these sites

accounted for approximately SAR 620 million, SAR 772 million and SAR 484 million, constituting 97%, 98% and 97% of

the Company’s total revenue of SAR 639 million, SAR 787 million and SAR 498 million. The cost of these sites was SAR 380

million, SAR 372 million and SAR 339 million, constituting 85%, 82% and 85% of the total cost of revenue of SAR 449 million,

SAR 451 million and SAR 399 million for 2018G, 2019G and 2020G, respectively (see Section 12.7 (“Material Agreements”)).

Under the lease agreements entered into with MOMRAH municipalities and secretariats, the lessor has the right to

terminate the lease agreement unilaterally if the Company breaches its obligations or violates the contract terms (which

include payment of the agreed lease amount on the set dates and installation of advertising billboards within the agreed

timeframe) or for regulatory reasons or public interest (such as the lessor terminating the agreement to use the sites

to develop road works). A lease agreement between the Company and Hafr Al Batin Municipality was terminated on

01/06/1441H (corresponding to 26 January 2020G) for matters of public interest. The Company has also previously been

late in making payments on the lease for 32 agreements. Under the provisions of these agreements, late payment of rental

amounts could lead to termination of the agreement or provision of electrical power. If a material (whether in terms of

agreement revenue or number of leased sites) lease agreement for the Company’s advertising sites is terminated, the

Company would have to stop using the relevant sites and would lose the revenues generated from such sites, which would

have a material adverse effect on the Company’s business, financial position, results of operations, and prospects.

The terms of the Company’s advertising site leases with secretariats and municipalities range from three (3) to five (5) years.

Leases concluded with companies that own commercial centres and other parties have terms ranging from one to fifteen

years (see Section 12.7 (“Material Agreements”)). As at 31 December 2020G, 32 of the Company’s advertising site leases

(out of a total 87 leases) will expire in one to two years. Revenues generated from the sites under such leases account for

about SAR 152 million, representing 31% of the Company’s total revenues of SAR 498 million in the fiscal year ended 31

December 2020G. When the current lease terms end, the lessors will issue new tenders for such agreements. The Company

may not be able to renew the leases at the end of their terms. If the leases are renewed or if new leases are entered into, the

Company may not be able to renew them under the same terms or terms favourable to the Company. Failure to renew or

be awarded material advertising leases or to renew or conclude such leases under favourable terms would have a material

adverse effect on the Company’s business, financial position, results of operations, and prospects. Indoor advertising

contracts also expire at the end of their term and are not automatically renewed. Therefore, the Company’s failure to renew

those contracts or to renew them under similar contractual terms will have an adverse effect on its business, financial

position, results of operations, and prospects.

As at 31 December 2020G, the Company operates 120 advertising sites (out of the total 6,106 advertising sites leased by

the Company) under expired leases. These are all sites for roadside advertising and none are related to indoor advertising.

The Company has continued to act in accordance with these leases under the same terms until the lessors complete the

procedures for re-leasing them (see Table 12.18 “Existing Company Contracts for Outdoor Advertising Sites that have

Expired and which the Company Continues to Operate Under as a Use Period as at 31 December 2020G” of Section 12.7

(“Material Agreements”). The rental amount due for the expired leases amounted to approximately SAR 1.0 million,

representing 0.002% of the Company’s total revenue of SAR 498 million, representing 0.003% of the cost of revenue of SAR

398 million in the period ended 31 December 2020G. Total revenue generated by the Company under the expired leases

was approximately SAR 1.3 million, accounting for 0.003% of its total revenue in the period ended 31 December 2020G.

The Company’s utilisation of advertising sites whose leases have expired is not considered a violation of the contract terms

as it is doing so after communicating with and obtaining the approval of the concerned lessors. The Company’s inability

to renew such leases would have an adverse effect on the Company’ business, financial position, results of operations and

prospects.

The Company leases the majority of its billboard sites through tenders that are offered to various companies operating in

this sector. Therefore, the Company competes with other companies operating in the same sector for these tenders. Lessors

evaluate the bids submitted by such companies based on the prices quoted thereby and their fulfilment of the tender

conditions. If the Company is unable to win any tenders or enter into new leases in the future, the costs of advertising leases

in the Kingdom of Saudi Arabia may increase significantly in the future. If the cost of advertising site leases increases in the

future and the Company is not able to raise its prices to offset such cost and/or if the number of billboards the Company

leases in the future decreases, this would have a material adverse effect on the Company’s business, financial position,

results of operations and prospects.

2.1.2 Risks Related to the Company’s Reliance on Contracts with Government and Qua-

si-governmental Entities

Agreements with government and quasi-governmental entities account for the majority of the Company’s advertising

site leases in terms of number of agreements and advertising revenue generated from those sites. As at 2018G, 2019G

and 2020G, respectively, the Company had 88, 76 and 68 lease agreements with these entities (out of a total 90, 83 and 78

lease agreements with different parties for sites currently used by the Company as advertising sites). Revenue from these

sites accounted for approximately SAR 620 million, SAR 758 million and SAR 472 million, constituting 97%, 97% and 95%

of the Company’s total revenue of SAR 639 million, SAR 787 million and SAR 498 million as at 2018G, 2019G and 2020G,

respectively. The cost of these sites was approximately SAR 380 million, SAR 396 million and SAR 333 million, accounting for

85%, 88% and 84% of the total cost of revenue of SAR 449 million, SAR 451 million and SAR 399 million in the year ended 31

December 2018G, 2019G and 2020G. Under such agreements, the lessor has the right to use the advertising space of 30% of

the number of billboards for a maximum of 5 weeks per year for social and awareness-raising purposes and for promotional

campaigns, free of charge. For example, under the agreement for the supply and operation of digital advertising screens

concluded with the Diplomatic Quarter General Authority (DQGA), the Company shall allow DQGA to use billboards valued

at SAR 3 million annually free of charge and shall give DQGA 20% of the total number of billboards in the Diplomatic

Quarter on a daily basis, for social marketing or awareness-raising purposes and promotional campaigns. Under a lease

agreement with Riyadh Front Company Ltd., the Company shall allow said company to use 20% of the total number of

billboards annually free of charge. Under a lease agreement with International Real Estate Investment Company Ltd., the

Company shall grant said company marketing ads in the amount of SAR 2 million. In addition, under a lease agreement

with Reyof Tabuk Park Company, the Company shall grant said company marketing ads in the amount of SAR 500,000

(for further information, see Section 12.7.2 (“Contracts for Indoor Advertising Sites”). The Company shall also obtain

the necessary approvals from the competent authorities, including the General Department of Traffic and the General

Directorate of Civil Defence, prior to installing the billboards and after signing the contract. (For further information, see

Section 12.7 (“Material Agreements”)).

If the Company becomes ineligible to bid on and win tenders due to its failure to meet the requirements and specifications

of the governmental and quasi-governmental entities from which the Company leases its advertising sites, this would have

a material adverse effect on the leases concluded by and between the Company and such entities or affect the Company’s

ability to participate in tenders that such entities may issue in the future. If such an event occurs, it would have a material

adverse effect on the Company’s business, financial position, results of operations and prospects.

2.1.3 Risks Related to the Concentration of the Company’s Business and Revenue in

the Outdoor Advertising Sector

The Company’s business is concentrated in the outdoor advertising sector. Revenues from this sector accounted for about

89%, 91%, and 92% of the Company’s total revenue in 2018G, 2019G and 2020G, respectively (which were calculated after

excluding printing revenue). Most of the Company’s printing operations are connected with its business in the roadside

advertising sector related to outdoor advertising. The Company uses its own presses to print all posters used in the

Company’s billboards. Printing revenues related to roadside advertising accounted for 9%, 7% and 6% of the Company’s

total revenue in 2018G, 2019G and 2020G, respectively (for further information, see Section 4.7 (“The Company’s Main

Business Activities”). If an event were to occur that adversely affected the Company’s operations in the advertising sector,

such as the Company’s failure to renew the necessary official licenses, maintain its current advertising site leases and win

new tenders for leasing additional advertising sites in the future or an event that negatively impacts the advertising sector

as a whole, this would temporarily or permanently affect the Company’s ability to continue its operations, which would

have a material adverse effect on the Company’s business, financial position, results of operations and prospects.

2.1.4 Risks Related to Reliance on Major Clients

The Company’s business in the outdoor advertising sector relies on its relationship with its major clients in this sector,

including media buyers, advertising agencies, major companies and governmental and quasi-governmental entities that

run their own advertising campaigns. The Company’s top ten clients in the outdoor advertising segment accounted for SAR

362 million, SAR 399 million and SAR 290 million (57%, 52% and 62%) of the total outdoor advertising revenue of SAR 620

million, SAR 758 million and SAR 472 million in 2018G, 2019G and 2020G, respectively. The Company’s top ten clients in

the indoor advertising segment also contributed approximately SAR 7.4 million and SAR 8.9 million (73% and 76%) of the

total revenue of the indoor advertising segment of SAR 10.1 million and SAR 11.8 million in 2019G and 2020G, respectively

(for further information, see Section 4.7.2 (“Company Clients”)). Notably, the Company started operating in the indoor

advertising sector in April 2019G. The Company does not have long-term agreements with any of its clients. Instead,

the Company works with clients based on purchase orders for Company billboards to be used in the client’s advertising

campaigns. If the Company fails to maintain its relationships with its major clients in the advertising sector or diversify its

client base to reduce its reliance on its current major clients, this would have a material adverse effect on the Company’s

business, financial position, results of operations and prospects.

2.1.5 Risks Related to the Quality of Services and Products Provided and Positive Rep-

utation

If the Company is unable to maintain the quality of the services and products it provides to its clients, including efficient

implementation of advertising campaigns, the viability and cleanliness of its billboards, the visibility of the advertisements

on such billboards, the quality of the various printing activities performed by the Company’s presses and their compliance

with client specifications (see Section 4.7 (“Main Business Activities”)), such would affect its reputation in the market

and among its clients, and lead to a reluctance among clients to do business with the Company. It could also lead to the

Company’s loss of its competitive advantages, inability to attract new clients and loss of existing clients, which in turn

would have a material adverse effect on the Company’s business, financial position, results of operations and prospects.

The Company’s reputation might also deteriorate significantly due to several factors such as falling into disputes with clients,

IT security breaches, deficiencies in internal control or penalisation of the Company as a result of its non-compliance with

applicable laws. The Company’s reputation could also be damaged by actions or statements of current or former clients,

employees, competitors, suppliers, legal adversaries, government regulatory authorities and members of the investment

community or media. Negative information about the Company, even if based on rumours or misunderstandings, could

have an adverse effect on its business. Damage to the Company’s reputation might be severe and costly and require time

to rectify, which may in turn affect potential or existing clients’ choices and lead to a reluctance to choose the Company for

new contracts. This could lead to the loss of clients and have an adverse effect on the Company’s business. Damage to the

Company’s reputation might also harm the Company’s image and reduce investor confidence therein, which would have

an adverse effect on the Company’s business, financial position, results of operations and prospects.

2.1.6 Risks Related to Protecting Intellectual Property Rights

As at the date of this Prospectus, the Company owns four business-related trademarks registered with the Ministry of

Commerce. The Company considers these trademarks among the factors that support its business. The Company’s

competitive position relies on several factors including the ability to use its trademarks to provide its services in the sectors

in which it operates and protect such trademarks against infringement and illegal use (see Section 12.11 (“Intellectual

Property”)). The unauthorised use of trademarks and other violations of the Company’s intellectual property rights may

be difficult to control. If the Company fails to successfully protect its intellectual property rights, or if any other parties

steal, breach or violate the Company’s intellectual property, the value of the Company’s trademark may be damaged. Any

damage to the Company’s reputation could cause revenue to decrease or make it more difficult to attract new clients,

which would adversely affect its business, financial position, results of operations and prospects.

From time to time, the Company may have to file a lawsuit to recover rights related to its trademarks and other intellectual

property rights. Other parties may allege that the Company is in violation of their intellectual property rights, which may

lead to a lawsuit being filed against the Company. The outcome of litigation may not be in favour of the Company, and

legal proceedings can distract the attention of the Company’s Management, resulting in significant costs and dispersion

of resources. This could have an adverse effect on the Company’s revenue and profits, regardless of whether the Company

is able to successfully maintain or defend intellectual property rights. Moreover, such disputes may result in the Company

obtaining licensing agreements to use the disputed intellectual property, which may not be available at all or available

under commercially unfavourable terms to the Company. This would have an adverse effect on the Company’s business,

financial position, results of operations and prospects.

2.1.7 Risks Related to Damage or Destruction of Company Billboards

Most of the Company’s billboards and advertising structures are located in open places near streets and roads. Therefore,

they are vulnerable to damage from sandstorms, thunderstorms, and other severe climate conditions during certain

periods of the year. They are also vulnerable to damage as a result of traffic accidents and vehicle collisions (for further

information, see Section 4.7.2 (“The Company’s Roadside Advertising Business”). If a large number of the Company’s

billboards or advertising structures are damaged as a result of any of the aforementioned incidents, this would lead to the

Company’s loss of a large portion of its assets and a resulting decrease in revenue. This would have a material adverse effect

on the Company’s business, financial position, results of operations and prospects.

2.1.8 Risks Related to the Company’s Reliance on Proper Maintenance of its Assets

The Company’s success depends on its ability to maintain and keep all its assets intact, in particular its advertising billboards

and structures, electronic components of digital billboards and equipment and machinery used in its presses. Maintenance

costs for these assets amounted to SAR 7.7 million, SAR 6.9 million and SAR 4.6 million in 2018G, 2019G and 2020G,

respectively. The Company’s failure to maintain these assets would lead to a deterioration in the condition and efficiency

of these assets and reduce the quality of the Company’s services and products, including a large portion of the Company’s

billboards becoming non-operational and/or a decline in the quality of the Company’s various printing activities and failure

to comply with client specifications (see Section 4.7 (“The Company’s Main Activities”)). This could lead to a reluctance

among clients to do business with the Company, which would in turn lead to a decrease in Company revenue, which would

have a material adverse effect on the Company’s business, financial position, results of operations and prospects.

2.1.9 Risks Related to Transactions and Contracts with Related Parties.

The Company has entered into eight contracts with Related Parties, which are SignWorld, Al Miza Outdoor Advertising

Company, House of Skill Real Estate Company and Abdelellah Abdulrahman Alkhereiji. As at the date of this Prospectus, 6

of the Company’s 27 lease agreements are with Related Parties (for more information about lease agreements with Related

Parties, see Section 12.9.3 (“Lease Agreements with Related Parties”)). The Company has also concluded two cooperation

agreements with Related Parties (see Section 12.9 (“Material Contracts with Related Parties”)).

The total value of the contracts concluded with these parties amounted to SAR 71,916,194, SAR 61,651,620 and SAR 15,347,019

accounting for 16%, 14% and 4% of the Company’s total costs (including revenue costs, general and administrative expenses

and advertising and marketing expenses for the same fiscal year and fiscal period) in the fiscal years ended 31 December

2018G, 2019G and 2020G, respectively.

There are 26 transactions that are not governed by official contracts between the Company and Related Parties; the House

of Skill Trading and Contracting Company, High-End Hotels Company, Engineer Holding Group Company, Saudi Media

Company, Advanced Digital Systems Company, MBC Group Holdings Ltd., Al Arabia Out of Home Advertising Company, Al-

Zad Forum Travel Company, and High-End Restaurants Company. These transactions include the distribution of shareholder

dividends through Related Parties, expenses paid by the Company on behalf of Related Parties, such as salaries, insurance

and other salary-related costs, and expenses related to the purchase of billboards or the execution of works. These include

expenses for manufacturing and importing billboards, drilling costs and the installation of such billboards by Related Parties

together with sales and collections. The total value of transactions not governed by official contracts was SAR 225,079,240,

SAR 128,107,692 and SAR 41,568,274, for the years 2018G, 2019G and 2020G, respectively. All amounts pertaining to these

transactions have been settled (please see Section 12.9 (“Material Contracts with Related Parties”) for more information).

The total value of transactions with Related Parties (which includes transactions with Related Parties that are governed by

formal contracts and transactions with Related Parties that are not governed by formal contracts) for the year 2018G, 2019G

and 2020G, amounted to SAR 377,087,083, SAR 180,185,787.5, and SAR 56,915,293 respectively. They constitute 59%, 23%

and 11% of the Company’s total revenues for 2018G, 2019G and 2020G, respectively. The Company does not analyse the

ages of accounts receivable and accounts payable with Related Parties, which may affect the Company’s collection of these

receivables. Consequently, this would have an adverse and material effect on its business, results of operations, financial

position, and prospects.

The Company’s conclusion of any transactions with Related Parties is subject to the relevant Saudi laws and regulations.

The Company and the Related Parties had previously agreed to conclude a number of contractual conditions that are

not on an arm’s length basis and without concluding formal contracts for these transactions or obtaining the approval

of the General Assembly. The Company allowed its shareholders to use the Company’s unoccupied advertising space for

advertisements related to their business without concluding formal contracts and not on an arm’s length basis. This applied

to five companies: High-End Hotels Company, Al-Zad Forum Travel Company, Saudi Media Company, SignWorld and High-

End Restaurants Company. The Company has also previously paid expenses on behalf of Related Parties, financed Related

Parties. The Company identifies all such amounts and deducts them from the shareholders’ dividends prior to distribution

(for further information, see Section 12.9 (“Material Contracts with Related Parties”).

Total financing for Related Parties was SAR 289 million and SAR 111 million for the years 2018G and 2019G, respectively. No

financing transactions took place between the Company and Related Parties in 2020G. The total charge to Related Parties’

accounts for dividends amounted to SAR 59 million, SAR 46 million and SAR 24 million for the years 2018G, 2019G and

2020G, respectively. The total amount paid on behalf of Related Parties for expenses was SAR 29 million, SAR 23 million and

SAR 1 million for the years 2018G, 2019G and 2020G, respectively. The amount paid on behalf of Related Parties for capital

expenditures was nil, nil and SAR 15 million for the years 2018G, 2019G and 2020G, respectively. Total sales and collections

were nil, nil and SAR 4 million for the years 2018G, 2019G and 2020G, respectively. For more details on the above amounts,

please refer to Table 6.41 in Section 6 (“Financial Information and Management’s Discussion and Analysis”).

As at the date of this Prospectus, all Company dealings with current Related Parties have been carried out on a strictly

commercial basis. If the Company enters into contracts with any Related Party on a non-commercial basis and/or if such

transactions entail transfer of undue benefits to the Company’s Related Parties, this may negatively affect the Company’s

costs and revenue, which in turn would have a material adverse effect on the Company’s business, results of operations,

financial position and prospects.

If contracts with Related Parties are not renewed in the future at the end of their terms, if the Company’s Board of Directors

or General Assembly does not agree to renew such contracts or if the Related Parties do not agree to renew them in

accordance with the current terms or under terms favourable to the Company, the Company will not be able conclude

alternative lease agreements on the same terms or conditions acceptable to the Company, and if the Company continues

not to analyse the useful lives of Related Party receivables, this would have a material adverse effect on the Company’s

business, results of operations, financial position and prospects.

2.1.10 Risks Related to the Availability and Price Fluctuation of Raw Materials and Spare

Parts

The Company’s revenues and profits are based on the prevailing prices of the raw materials used by the Company in its

operations, which mainly include ink, paper, flex face material and banners for the printing sector (for further information,

see Section 5.5.7 (“Print Shop Department”). The Company imports these materials from foreign and local suppliers. There

are no supply contracts for these materials, and purchases are made through purchase orders or documentary letters of

credit. Imported raw materials accounted for 70%, 58% and 31% for 2018G, 2019G and 2020G, respectively. Local materials

accounted for 30%, 42% and 69% for 2018G, 2019G and 2020G, respectively (for further information, see Section 4.7.5

(“Company Suppliers”). The cost of raw materials accounted for approximately 4%, 3% and 3% of the total operating costs

of the Company in 2018G, 2019G and 2020G, respectively. The prices of these raw materials depend on global markets,

which are subject to rapid and wide fluctuations. Changes in the prices of raw materials in the international markets are

affected by a number of factors beyond the Company’s control, such as supply and demand factors, market concerns,

speculation by market dealers and international economic and political factors.

In the event that the prices of raw materials significantly increase, the Company cannot pass on the entire increase to

clients, which would lead to higher operational costs and lower profits for the Company, which would have a material

adverse effect on the Company’s business, financial position, results of operations and prospects.

The Company does not enter into long-term purchase agreements with its suppliers. Consequently, if there is any

interruption or delay in the supply of raw materials, the Company will need to secure such materials from alternative

sources. However, the Company may not be able to find a suitable alternative supplier with the capacity or willingness to

provide raw materials at the required quantities for a reasonable price. Any delay in finding a suitable alternative supplier

would lead to an interruption in the Company’s operations, which would have a material adverse effect on the Company’s

business, financial position, results of operations and prospects.

2.1.11 Risks Related to the Realisation of Expansion Plans

The Company’s ability to increase its revenue and improve its profitability depends on the effective implementation of its

business plans and the successful implementation of its strategy, including, but not limited to, improving the current areas in

which the Company operates or entering into new areas. The Company’s ability to expand its business in the future depends

on its ability to continue to implement and improve the operational, financial and administrative information systems in

an efficient and timely manner, as well as its ability to expand, train, motivate and maintain its workforce. In addition, any

business expansion plans that the Company intends to undertake in the future will be subject to their estimated costs and

implementation schedule and the estimated costs of the project. In the event that the desired profitability of these projects

is not achieved due to various reasons at the time of project implementation, including flaws in the feasibility study, this

would adversely affect the Company’s competitive position, and consequently its results of operations and profitability.

The Company’s ability to implement its current strategy is subject to different factors, and any flaws, failures or sudden

interruptions in the expansion process may occur. The Company cannot be certain that the employees appointed by

the Company and its Subsidiary and its systems, procedures and controls will be sufficient to support growth and future

expansion and successfully achieve its strategy. If the Company fails to implement any part of its strategy for any reason,

this would have a material adverse effect on the Company’s business, results of operations, financial position and prospects.

2.1.12 Risks Related to Potential Zakat Assessments

The Company has submitted Zakat returns and obtained Zakat certificates from the Zakat, Tax and Customs Authority for all

the years up to 2020G and it has paid the Zakat amounts due by the specified date. The Company has obtained the final Zakat

returns up to 2016G, and therefore there is a risk that the Zakat, Tax and Customs Authority may object to the returns submitted

by the Company for 2017G, 2018G, 2019G and 2020G, which are under review, and request the Company to pay additional

Zakat amounts. The Selling Shareholders will incur, on a pro rata basis, any additional liabilities that may arise from the Zakat,

Tax and Customs Authority for the previous years until the Company is listed on the Saudi Exchange. The Company made a

Zakat provision of about SAR 9.2 million, SAR 8.8 million and SAR 6.9 million as of 31 December 2018G, 2019G and 2020G,

respectively. As of the date of this Prospectus, the Company has not obtained the final assessments for the years 2017G, 2018G

and 2019G. The final amount of the Company’s potential Zakat liabilities for these years remains uncertain. Any additional

liabilities imposed on the Company by the Zakat, Tax and Customs Authority would have an adverse and material effect

on its business, financial position, results of operations, and prospects. Note that the Company received a final assessment

notice from the Zakat, Tax and Customs Authority regarding the VAT returns filed for the year 2018G (the assessment was on

zero-rated supplies provided to clients abroad). The Zakat, Tax and Customs Authority also imposed fines of SAR 3.4 million

on the Company for providing inaccurate information and delaying the payment of VAT for the year 2018G. The Company

paid the amount in full in 2019G. Therefore, it objected to these fines, and the Zakat, Tax and Customs Authority approved a

final settlement and issued a credit note (a document stating the Company’s entitlement to such amount) to the Company

in the amount of SAR 1.4 million in 2021G. The Company also received a final Zakat assessment for FY 2018G with total Zakat

differences of (SAR 3.5 million). It objected to these Zakat differences, but the Zakat, Tax and Customs Authority issued a notice

dismissing the objection on 28 January 2021G. The objection related to the Zakat assessment made by the Authority was then

filed with the General Secretariat of Tax Committees under No. 37401- 2021 dated 14 February 2021G. Note that the existing

Zakat provision does not cover this additional Zakat difference. If the objection is not accepted by the General Secretariat of

Tax Committees, the Company will then make an additional Zakat provision to cover the value thereof.

(For more information, please see Section 12.14 (“Zakat and Tax Status of the Company”)).

2.1.13 Risks Related to Credit

Credit risk pertains to trade receivables arising from the failure of the Company’s clients to meet their obligations towards

the Company. The Company has accounts receivable (not secured under formal agreements) exceeding the credit period.

Accounts receivable with 180 days past due constitute approximately 25%, 14% and 13% of the total accounts receivable

amounting to SAR 72.5 million, SAR 49.7 million and SAR 44.6 million for 2018G, 2019G and 2020G, respectively. The

accounts receivable of the Company’s top ten clients accounted for 49%, 44% and 66% of the Company’s total accounts

receivable as at 31 December 2018G, 2019G and 2020G, respectively (for further information, see Section 6.7.2 (“Statement

of Financial Position”). With regard to the application of the lower receivables model standard (ECL), as required by IRFS,

the Company did not apply this standard in 2018G and 2019G. The Company started applying it in 2020G, but the effects

of the coronavirus pandemic and the consequent total closure for about three months have negatively affected the level

of collection. Thus, it has only been applied in full from the beginning of July 2020G. As at 31 December 2020G, balances

that exceed 180 days past due include government balances such as from Riyadh Municipality and the General Authority

of Sports. In addition, there are some delays from media buyers who have dealings with government agencies, such as

Marwan Advertising Agency.

The number of collection days increased due to late payment by some clients and, most significantly, dealing with

government agencies, which usually require a longer period for payment, sometimes up to two years. Transactions with

government agencies included Al Janadriyah Festival sales in the fourth quarter of 2018G, Riyadh Season sales in the fourth

quarter of 2019G and 2020 G20 Riyadh Summit sales in the fourth quarter of 2020G.

In the event that any or all of these clients fail to pay their accounts receivable to the Company, this could materially and

adversely affect the Company’s cash flows, which in turn would have a material adverse effect on its business, financial

position, results of operations and prospects.

A number of the Company’s clients may deal with poor financial performance, and the Company may also fail to adequately

analyse the credit risk for these parties. Accordingly, the Company’s inability to collect any of the financial amounts owed by

any of its clients would have a material adverse effect on its business, prospects, financial position and results of operations.

2.1.14 Risks Related to Keeping Pace with Developments in the Advertising Sector

The Company’s ability to maintain its market share and attract new clients largely depends on keeping pace with

developments related to its business activities, particularly developments in the form and type of technologies used in

digital and non-digital advertising billboards, and the methods and styles for printing and displaying advertising posters.

Therefore, the Company’s failure to keep pace with developments related to its business activities would adversely affect

the Company’s competitive advantage and could reduce its market share or lead to an inability to attract new clients. This

would have a material adverse effect on the Company’s business, prospects, financial position and results of operations.

2.1.15 Risks Related to Adequacy of Insurance Coverage

As at 30 June 2020G, the Company has not procured any insurance for its 6,533, 6,385, and 4,942 billboards and advertising

structures as at 31 December 2018G, 2019G and 2020G, respectively (with the exception of 130, 230 and 324 digital

billboards for the years ended 31 December 2018G, 2019G and 2020G, respectively, due to their large size and high value

because they are operated by a digital technology system). The net book value of all advertising billboards and structures

insured and owned by the Company was SAR 97 million, accounting for about 63% of the Company’s net assets of SAR 155

million as at 31 December 2020G. The Company’s revenues from uninsured billboards accounted for about 58%, 58% and

43% of the Company’s total revenue in 2018G, 2019G and 2020G, respectively. The Company also has medical, vehicle and

fire insurance (for further information, see Section 12.15 (“Insurance Policies”)).

If the insurance policies obtained by the Company are not sufficient at all times and in all circumstances, or if the insurance

coverage is not sufficient in all cases or covers all risks the Company may be subject to, this would have a material adverse

effect on the Company’s business, financial position, results of operations and prospects. For example, there may be future

events for which the insurance coverage is not sufficient, or that cannot be insured or may not be covered under any of the

Company’s insurance policies. The Company might not be able to successfully substantiate its claims with regard to any

damages covered under any of the insurance policies even if such claim is properly submitted. The occurrence of any of

the foregoing risks could materially and adversely affect the Company’s business, financial position, results of operations

and prospects.

In addition, the Company might not be capable of procuring insurance against risks which it deems necessary or proper

to insure against or might not be capable of obtaining adequate insurance coverage relating to such risks in the future.

In the event of an accident for which the Company does not have adequate or proper insurance, or if one or more

considerable claims cannot be substantiated under any of the present insurance policies, or if changes are made to present

insurance policies upon their renewal (such as higher insurance premiums, imposition or increase of insurance deductibles

paid by the insured, or special requirements imposed by insurers), such would have a material adverse effect on the

Company’s business, financial position and results of operations.

The Company’s current insurance policies contain some exclusions and limitations, and they do not provide complete

coverage against all potential risks. If the Company is subject to such exclusions, limitations or liabilities for which it is

not adequately insured against or at all, this would lead to higher costs and thus have a material adverse effect on the

Company’s business, financial position and results of operations.

2.1.16 Risks Related to Financing

The Company has entered into six short-term banking facility agreements with six local banks (considering Alawwal Bank and

SABB as one), namely the Saudi Investment Bank, Banque Saudi Fransi, Arab National Bank, Saudi British Bank (SABB), Bank

Albilad and Riyad Bank, to finance its working capital requirements and contractual activities. This includes financing leases

concluded with secretariats and municipalities through short-term loans, providing the pertinent guarantees and issuing

documentary letters of credit. The Company’s liabilities to assets ratio was about 60% as at 31 December 2020G, while the ratio

of current liabilities to current assets (the current ratio) was 99% as at 31 December 2020G. The total facilities provided under

the bank facility agreement with the Saudi British Bank were worth SAR 280 million, of which around SAR 60.4 million were

used by the Company under such agreement as at the date of this Prospectus. The total facilities provided under the bank

facility agreement concluded with Banque Saudi Fransi were worth SAR 160 million, of which SAR 455 thousand were used by

the Company under such agreement. The total facilities provided under the bank facility agreement concluded with the Arab

National Bank were worth SAR 70 million, of which SAR 55 million were used by the Company under such agreement. The total

facilities provided under the bank facility agreement concluded with the Saudi Investment Bank were worth SAR 100 million,

of which SAR 30 million were used by the Company under such agreement. The total facilities provided under the bank facility

agreement with Bank Albilad were worth SAR 195 million, of which SAR 128.1 million were used by Company under such

agreement. The total facilities provided under the bank facilities agreement concluded with Riyad Bank were worth SAR 60

million, of which SAR 53.9 million were used by the Company under this agreement as at the date of this Prospectus.

Each facility agreement includes specific general and financial commitments, terms and obligations that the Company

must abide by. They also grant the relevant bank the right to accelerate the payment of amounts due, amend the terms

or conditions of the facilities or take any other actions to preserve the rights of the relevant bank (including cashing any

guarantees or loans provided by the Company or cancelling these facilities). In the past, the Company did not deposit

25% of sales annually as agreed with Saudi Investment Bank (SAIB), and deposited only 15.6%. On the other hand, the

Company also did not maintain leverage below 1.2, with leverage of 1.5 as of 31 December 2020G. The Company did not

deposit 30% of the annual revenues as agreed with Al Bilad Bank, and deposited 20%. On the other hand, the Company

did not maintain leverage below 1.1, with leverage of 1.5 as in December 2020G. The Company also failed to deposit 10%

of its annual revenues with Arab National Bank (ANB), depositing 3%. The Company also did not maintain leverage below

1.1 as at December 2020G (for further information, please see Section 12.8 (“Credit Facilities”)). In the event that any of

these liabilities are not fulfilled, the banks will have the right to take the necessary measures to preserve their rights, such

as declaring all the Company’s liabilities due and payable immediately.

If any of these banks declares the Company to be in breach of a facility agreement and decides to exercise its rights, there is

no guarantee that the Company will be able to obtain an adequate financing alternative to repay these debts, which would

have a material adverse effect on the Company’s business, financial position, results of operations and prospects.

Several sister companies and the subsidiary of Al-Arabia also benefited from the facilities granted to the Company in the past,

which affected the Company’s liquidity and reduced the use of the facility balances available to the Company for its main

activities. If this happens in the future, it will put more pressure on the Company. If the Company fails to find alternatives to

increase the facilities available to it, this will have an adverse and material effect on its business and financial position.

Since all bank loans secured are short-term loans, the Company may need additional financing if it decides to expand its

operations in the future. If the Company fails to secure such financing in the future or if such financing is available but

under unfavourable terms, this would lead to the Company’s inability to expand its operations. In addition, if the Company

has access to and fully utilises additional financing it may not be able to repay its debts when due. Any such event, were

it to occur, would have a material adverse effect on the Company’s business, financial position, results of operations and

prospects, since all loans are short-term loans.

2.1.17 Risks Related to Bank Guarantees Provided on the Company’s Behalf by Two

Shareholders

The Company’s obligations under the bank facility agreements are secured by personal guarantees provided by (direct

and indirect) shareholders Abdelellah Abdulrahman Alkhereiji (a Selling Shareholder, a shareholder in Engineer Holding

Group Company and Chairman of the Company Board) and Muhammad Abdelellah Alkhereiji (a current shareholder in

Engineer Holding Group Company and the Company’s CEO). A personal guarantee of SAR 204,000,000 has been provided

by Abdelellah Abdulrahman Alkhereiji. A personal guarantee and a promissory note of SAR 310,000,000 have been

provided by Abdelellah Abdulrahman Alkhereiji in connection with the facility agreement with SABB (Saudi British Bank). A

personal guarantee and a promissory note of SAR 100,000,000 have been provided by Abdelellah Abdulrahman Alkhereiji

and Muhammad Abdelellah Alkhereiji, in addition to joint and several irrevocable continuing performance bonds/

guarantees provided and duly signed by both of them in relation to the facilities agreement with Saudi Investment Bank.

A joint performance bond/guarantee and a promissory note have been provided by Abdelellah Abdulrahman Alkhereiji

and Muhammad Abdelellah Alkhereiji in connection with the SAR 70,000,000 facility agreement with Arab National Bank

(ANB). A joint performance bond/guarantee has been provided by Abdelellah Abdul Rahman Alkhereiji and Muhammad

Abdelellah Alkhereiji for total facilities of SAR 195,000,000 related to Al Bilad Bank. A promissory note of SAR 200,980,000 has

been provided by Abdelellah Abdulrahman Alkhereijii and Muhammad Abdelellah Alkhereiji in connection with the facility

agreement with Al Bilad Bank. A joint and several guarantee of SAR 160,000,000 to cover the total amount of the facilities/

financing related to Banque Saudi Fransi (BSF) has been provided by Abdelellah bin Abdulrahman bin Saleh Alkhereiji

and Muhammad bin Abdelellah bin Abdulrahman Alkhereiji. A joint performance bond/guarantee has been provided by

Abdelellah Abdul Rahman Alkhereiji and Muhammad Abdelellah Alkhereiji for the total facilities of SAR 60,000,000 related

to Riyad Bank. Such personal guarantees represent the signature of promissory notes (for further information, see Section

12.8 (“Credit Facilities”)). The bank facility agreements state cases which constitute the Company’s breach of its obligations

under those agreements, including situations related to these two shareholders and their continued agreement to provide

these guarantees, concealment of information that the bank deems important and crucial, the guarantors’ approval

being found to be incorrect or inaccurate, seizure of a guarantor’s assets and money or the adoption of any precautionary

procedure with regard thereto, or insolvency of the guarantors. This includes a situation where these guarantees cease to

be effective or become worthless or where there is a change in the guarantors’ financial position. The Company intends to

approach banks to cancel the personal guarantees and replace them with guarantees to be provided by the Company. As

at the date of this Prospectus, none of the banks have waived the personal guarantees provided by these two shareholders.

If, after the Offering, the Company is unable to cancel the guarantees provided by these two shareholders, then they will

remain in force and the breaches related to the shareholders will continue to apply. In the event that one or both of the

shareholders withdraws the guarantees provided or fails to renew them, or if these guarantees become ineffective for any

reason and the banks do not agree to allow the Company to provide alternative guarantees (such as mortgaging assets or

other guarantees banks typically accept from listed joint-stock companies in lieu of the founding shareholders’ guarantees),

this will constitute the Company’s breach of its obligations under the relevant bank facility agreements. Accordingly, the

banks will be entitled to request that the Company immediately repay the entire balance of the relevant facilities. In such

case, the Company may be unable to obtain adequate alternative sources of financing to repay the debt. Any of these

factors would have an adverse effect on the Company’s business, results of operations, financial position and prospects.

2.1.18 Risks Related to Higher Rental Costs for Advertising Sites as a ratio to Total Oper-

ating Revenue Costs

The Company’s operating revenue costs for 2018G, 2019G and 2020G amounted to approximately SAR 449 million, SAR

451 million and SAR 399 million respectively, representing 70%, 57% and 80% respectively of the total revenue in these

same periods. The lease costs under the Company’s operating leases for advertising sites concluded with secretariats,

municipalities and other entities in the same period accounted for 85%, 82% and 85%, respectively, of the operating

revenue costs, representing 59%, 47% and 68% of the total revenue, respectively (for further information, see Section

12.7.1 (“Contracts for Outdoor Advertising Sites”) and Section 12.7.2 (“Contracts for Indoor Advertising Sites”). The

Company’s potential liabilities related to these contracts and distributed over the next five years as at 31 December 2020G

were SAR 995 million, SAR 493 million and SAR 532 million as at 31 December 2018G, 2019G and 2020G, respectively. Since

the leasing costs for advertising sites do not change over the contract terms, any decrease in revenue during such periods

or any increase in cost of revenue would have an adverse effect on the Company’s net profits, which would adversely and

materially affect its business, financial position, results of operations and prospects.

2.1.19 Risks Related to Regulatory Licenses and Permits

The Company is required to obtain and maintain the necessary regulatory licenses, permits and approvals in relation to

its activities. These licenses include, but are not limited to, media licenses, industrial licenses, foreign investment licenses,

registration certificates for the Company and its subsidiaries issued by the Ministry of Commerce, media licenses issued

by the Ministry of Media, and Saudization, social insurance and Zakat certificates. These licenses and permits have validity

periods and expiration dates and are renewed periodically (see Section 12.5 (“Material Licenses and Approvals”)).

Most of the Company’s licenses are subject to conditions under which the relevant licenses may be suspended or withdrawn

(terminated) if the Company is unable to fulfil and observe such conditions. Moreover, the relevant authority issuing the

license may not renew the license at the end of its term, or that, should the relevant authority agree to renew it, it will not

impose additional conditions that are unfavourable to the Company or cause the Company to incur additional expenses

to comply with those conditions.

If the Company fails to renew any of its licenses or obtain any of the licenses necessary for its business, if any of its licenses

are suspended or terminated, if any of its licenses are renewed under unfavourable conditions or if the Company is unable

to obtain any licenses that it may need to obtain in the future, the Company will have to suspend its business related to

the licenses in question, which would result in the suspension of the Company’s operations (fully or partially) and incursion

of additional costs. This would have a material adverse effect on the Company’s business, financial position, results of

operations and prospects.

2.1.20 Risks Related to Reliance on Key Personnel, Job Performance and the Ability to

Recruit Qualified Persons

The Company’s success depends on the continued service and performance of Senior Management and other key

personnel, as well as its ability to identify, recruit, develop, motivate and retain qualified personnel in the future. In

particular, the Company relies on a number of key employees with extensive experience in the advertising sector who have

made significant contributions to the development of the Company’s business and sales. The Company may not be able to

retain its employees or attract new qualified employees. Moreover, some of the Company’s relationships with a number of

key clients may depend on the continued performance and efficiency of Senior Management and/or other key personnel.

The multi-year experience of these employees with such customers enables them to identify the customers’ exact needs

and provide a distinctive service that meets their requirements and directly contributes to the growth of the Company’s

business. Loss of these employees may harm the Company’s relationships with such clients.

The Company may need to invest significant financial and human resources to attract and retain new employees. The loss of

members of the Company’s Senior Management or key personnel could hinder or delay the implementation and achievement

of its strategic objectives, divert management’s attention to seeking certain qualified replacements or adversely affect its

ability to manage its business effectively. In addition, a member of Senior Management or a key employee may resign at any

time. If the Company is unable to hire and retain senior executives and personnel who are highly skilled in the appropriate

domains, this would adversely affect its business, financial position, results of operations and prospects.

2.1.21 Risks Related to Employee Mistakes or Misconduct

The Company may not be able to prevent its employees from engaging in misconduct, such as fraud, intentional errors,

misappropriation, deceit, theft, forgery, misuse of information or systems, disclosure of confidential information, spreading

misleading information, failure to comply with internal regulations, or misuse of property and acting on the Company’s

behalf without obtaining the required administrative authorisations. Accordingly, such acts may result in the Company

incurring consequences and liabilities, regulatory sanctions or financial liability, which would adversely affect the Company’s

reputation. Therefore, its employees’ misconduct or mistakes would have a material adverse effect on its financial position,

results of operations and prospects.

2.1.22 Risks Related to the Composition of the Board of Directors

The Company’s current Board of Directors consists of six (6) members, three (3) of whom belong to one family (Alkhereiji

family) (for further information, see Section 5.2 (“Board of Directors”). Muhammad Abdelellah Alkhereiji also holds an

executive position in the Company. Any change in the Company’s Board of Directors or the exit of any of its current Directors

for any reason whatsoever and the Company’s inability to replace them with directors who have the same competence and

experience will have a material adverse effect on its business. Furthermore, the fact that half of the Directors are from the

same family may affect the effectiveness of the Board’s procedures and its discussion of important issues. The likelihood of

these Directors favouring a certain opinion is greater, which may affect the conduct of the Board’s work. This could have a

material adverse effect on the Company’s business, financial position, results of operations and prospects.

2.1.23 Risks Related to Possessing Confidential Information on the Company’s Clients,

Employees and Business

The Company obtains confidential information related to its clients while doing business with them, such as information

related to new products, discounts and offers that have not been disclosed and the budget for companies that may be

competing with each other. It also keeps personal information related to employees and data and information on the

company’s performance. The Company may face lawsuits from its clients as a result of its failure to keep this information

confidential. The Company’s reputation and its current and future performance would be materially and adversely affected

if it fails to maintain the confidentiality of such information and data.

2.1.24 Risks Related to Saudization and the Labour Law Requirements

Compliance with Saudization requirements is mandatory under Saudi law, which requires that all companies active in Saudi

Arabia, including the Company, employ and maintain a certain ratio of Saudi personnel among their staff. The Saudization

ratio varies based on a company’s activities.

The percentage of Saudi employees in the Company was about 21.9% as at 31 December 2020G (for further information, see

Section 4.14.1 (“Number of Employees”). Under the Nitaqat program, the Company is subject to Saudization requirements

that determine the percentage of Saudi citizens in its workforce compared to the average rate of Saudization in companies

operating in the same sector. According to the Nitaqat program issued by the Ministry of Human Resources and Social

Development (MHRSD), the Company has been classified among the medium-sized companies in the construction sector

based on the fact that some of the Company’s activities involve constructing billboard sites and the installation and

maintenance thereof.

The Company was classified in the High Green category due to the current percentage of Saudi citizens working for the

Company. The Company achieved a Saudization rate of about 21.9% compared to the required rate of 12% (according to

the number of employees as at 31 December 2020G), but it may be difficult for the Company to maintain and retain the

same percentage of Saudi citizens in the future. If Saudization requirements are not met, the Company will face penalties

imposed by government agencies, such as suspending applications for work visas and transfer of sponsorship for non-

Saudi workers. In addition, the Company may not be able to provide the required manpower or employ the required

number of Saudi and foreign workers without incurring additional costs, or at all. This would have a material adverse effect

on the Company’s business and results of operations, financial position and prospects.

Since the Company’s activities include outdoor advertising and printing, MHRSD may reclassify the Company as a company

operating in printing, publishing and media, which under the Nitaqat program has a minimum Saudization percentage of

8% for the Company to fall under the Green category. If it does not attain this percentage, the Company will be classified in

the Red category, which would expose it to some or all of the penalties mentioned above.

As the majority of the Company’s employees are non-Saudis, any change in residency-related laws may result in higher

costs related to employing expatriate employees or issuing or renewing their residency permits. This would have a material

adverse effect on the Company’s business, financial position and results of operations.

The Ministry of Human Resources and Social Development in the Kingdom of Saudi Arabia has launched an initiative to

improve the contractual relationship. The initiative involves several policies and controls including the approval of the

Law Governing Employment Contracts between Employers and Expatriate Workers and Cancellation of the Sponsorship

System. The initiative also includes granting expatriates the freedom to change jobs and leave the Kingdom without the

employer’s consent. This initiative will enter into force as of 14 March 2021G.

The Company also faces challenges retaining its Saudi employees. Consequently, the Company is subject to risks of being

classified in the Red category. In the event that any or all of the aforementioned incidents occur, this would have a material

adverse effect on the Company’s business, prospects, financial position and results of operations.

Pursuant to the Saudi Labour Law, all companies are obligated to develop an internal work policy consistent with the

provisions of the Labour Law. The Company’s previous internal work policy did not comply with some provisions of

the Labour Law, including Article 53 thereof, which stipulates that if a worker is subject to a probationary period, such

probationary period shall be clearly determined and may not be more than 90 days. The probationary period may be

extended, provided that it does not exceed one hundred eighty (180) days. The previous internal labour policy stipulated

that the probationary period must not exceed six months. The Company has amended its internal labour policy to comply

with the provisions of the Labour Law. On 21/06/1441H (corresponding to 15 February 2020G), the Ministry of Human

Resources and Social Development approved the Company’s internal labour policy.

2.1.25 Risks Related to Litigation

The Company, Directors and/or Senior Executives may be subject to lawsuits lodged by the parties it deals with, including

clients, lessors, suppliers, employees or regulatory bodies (such as secretariats and municipalities). Furthermore, other

entities may file malicious groundless lawsuits to disrupt the Company’s business and distract Management. The Company

may also be a plaintiff in proceedings and lawsuits (for further information, see Section 12.13 (“Litigation”).

The Company cannot determine the outcome of any future lawsuit that may be lodged by any of the parties it deals with

or by third parties. Moreover, the Company cannot determine the litigation costs it may incur for such lawsuits or fines that

may be imposed on it by the relevant regulatory authorities. The Company’s exposure to lawsuits or heavy fines might

have a material adverse effect on the Company’s results and financial positions, and malicious lawsuits might distract the

Company’s attention from its main business and affect its reputation to the detriment of its interests. This would have a

material adverse effect on the Company’s business, results of operations, financial position and prospects.

The Company signed an exclusive concession contract (Contract No. 001/C/32 dated 23/01/1432H) with Jeddah Governorate

Municipality to invest in Megacom advertising billboard sites. This contract expired on 22/01/1442H. Jeddah Governorate

Municipality issued Letter No. 4100079395 dated 01/04/1441H, extending the expiration period of the contract for seven

(7) months and twenty-seven (27) days. Jeddah Governorate Municipality then issued Letter No. 4000217352 dated

13/01/1442H, in which it retracted its approval to extend the contract, confirming the date of 22/01/1442H as the date the

contract term expires. The Company, in its capacity as plaintiff, filed Lawsuit No. 2632 of 1442H with the Jeddah Sixteenth

Administrative Circuit against the Jeddah Governorate Municipality, in its capacity as defendant, requesting that Jeddah

Governorate Municipality abide by its Letter No. 4100079395 dated 01/04/1441H, which extended the term of the contract

for seven (7) months and twenty-seven (27) days, or to oblige the Jeddah Governorate Municipality to pay seventy-five

million, eight hundred ninety-one thousand, three hundred twenty-eight Saudi riyals (SAR 75,891,328) to the Company

to recover the lease amounts were paid to Jeddah Governorate Municipality for sites that were not handed over to the

Company. Moreover, the Company requested the Circuit to order Jeddah Governorate Municipality to pay eighty million,

seven hundred thirty-five thousand Saudi riyals (SAR 80,735,000) to the Company for the financial losses incurred thereby

when Jeddah Governorate Municipality removed the billboards. The Company also requested the Circuit to order Jeddah

Governorate Municipality to pay attorney fees of one million Saudi riyals (SAR 1,000,000) incurred by the Company to

file this lawsuit. A first instance judgement was issued by the Sixteenth Administrative Circuit on 29/08/1442H, obliging

Jeddah Governorate Municipality to extend Contract No. 001/C/32 dated 23/01/1432H for seven (7) months and twenty-

seven (27) days and pay attorneys’ fees of one million Saudi riyals (SAR 1,000,000). The Circuit ordered the Company to pay

four million, four hundred seventy-six thousand, one hundred fifty-four Saudi riyals (SAR 4,476,154) for rent for the tenth

year of the Contract that is the subject of the lawsuit. This was based on the request of Jeddah Governorate Municipality

during the hearing. However, the Company appealed this Judgement on 29/08/1442H, and no final ruling has been issued

as at the date of this Prospectus.

The Company signed an exclusive concession contract (Contract No. 002/C/32 dated 23/01/1432H) with Jeddah

Governorate Municipality to invest in Mupi advertising billboard sites. This contract expired on 22/01/1442H. Jeddah

Governorate Municipality issued Letter No. 4100079395 dated 01/04/1441H, extending the expiration period of the

Contract for five (5) months and three (3) days. Jeddah Governorate Municipality then issued Letter No. 4000217352 dated

13/01/1442H, in which it retracted its approval to extend the contract, confirming the date of 22/01/1442H as the date

the contract term expires. The Company, in its capacity as plaintiff, filed Lawsuit No. 3603 of 1442H with Jeddah Sixteenth

Administrative Circuit against Jeddah Governorate Municipality, in its capacity as defendant, requesting that Jeddah

Governorate Municipality abide by its Letter No. 4100079395 dated 01/04/1441H, which extended the expiration period

of the contract for five (5) months and three (3) days, or to oblige Jeddah Governorate Municipality to pay sixteen million,

six hundred twenty-one thousand, seven hundred eighty-two Saudi riyals (SAR 16,621,782) to the Company to recover the

lease amounts paid to Jeddah Governorate Municipality for sites that were not handed over to the Company. Moreover,

the Company requested the Circuit to order Jeddah Governorate Municipality to pay sixteen million, seven hundred

thirty-seven thousand, and three hundred sixty-nine Saudi riyals (SAR 16,737,369) to the Company for the financial losses

incurred thereby when Jeddah Governorate Municipality removed the billboards. The Company also requested the Circuit

to order Jeddah Governorate Municipality to pay attorney fees of one million Saudi riyals (SAR 1,000,000) incurred by the

Company to file this lawsuit. A first instance judgement was issued by the Sixteenth Administrative Circuit on 13/09/1442H,

obliging Jeddah Governorate Municipality to extend Contract No. 002/C/32 dated 23/01/1432H for five (5) months and

three (3) days, and dismissing the Company’s request for attorney fees. In addition, the Circuit ordered the Company to pay

one million, fifty-four thousand, six hundred ninety-two Saudi riyals (SAR 1,054,692) for the rent for the tenth year of the

contract that is the subject of the lawsuit. This was based on the request of Jeddah Governorate Municipality during the

hearing. However, the Company appealed this Judgement on 13/10/1442H, and no final ruling has been issued as at the

date of this Prospectus (for further information, please see Section 12.13 (“Litigation”)).

If the rulings issued in these lawsuits are not in favour of the Company, this will have an adverse and material effect on its

business, results of operations, financial position, and prospects. In addition, regardless of the outcome of these lawsuits, the

Company may incur heavy expenses and be forced to allocate significant resources to reply to these claims and defend itself,

which would have an adverse and material effect on its business, results of operations, financial position, and prospects.

2.1.26 Risks Related to the Company’s Implementation of Recently Adopted Corporate

Governance Regulations

The Company’s Board of Directors approved the Internal Corporate Governance Regulations on 10/07/1441H (corresponding

to 5 March 2020G), which were also approved by the Company’s Extraordinary General Assembly on 23/07/1441H

(corresponding to 18 March 2020G). The Regulations include rules and procedures related to corporate governance

derived from the Corporate Governance Regulations issued by the CMA. The Company’s success in proper implementation

of the corporate governance rules and procedures will depend on the extent to which such rules and procedures are

comprehended, understood and properly executed by the Board, its Committees and Senior Executives, especially with

regard to the formation of the Board of Directors and Board Committees, independence requirements, rules related to

conflict of interests and Related Party transactions. Failure to adhere to the governance rules, in particular the mandatory

rules drawn from the CMA Corporate Governance Regulations, would expose the Company to statutory sanctions. This

would materially and adversely affect the Company’s business, results of operations, financial position and prospects.

On 23/07/1441H (corresponding to 18 March 2020G), the Company’s Extraordinary General Assembly formed an audit

committee composed of three non-executive members. On 23/07/1441H (corresponding to 18 March 2020G), the Board

of Directors formed the Nomination and Remuneration Committee. Each committee was to perform the tasks assigned

thereto in accordance with the Internal Corporate Governance Regulations (for more information, see Section 5.3 (“Board

Committees”). The failure of committee members to perform their duties and adopt a positions that protect the interests

of the Company and its Shareholders may affect corporate governance compliance, continuous disclosure requirements

and the Board’s ability to monitor the Company’s business through these committees, which would have a material adverse

effect on the Company’s business and financial position, and results of operations.

Given the recent formation of these committees and their infrequent meeting, the recent establishment of the Company’s

internal governance system, the recent formation of the Internal Audit Department and Risk Department, and the recent

appointment of independent members, any future inability of such committee members and independent members to

carry out the tasks assigned thereto and follow a work methodology that protects the interests of the Company and its

Shareholders, may affect the implementation of the governance regulations and the efficiency of the Company’s Board

of Directors control over the management of its business through such committees. This might expose the Company to

potential non-compliance with continuous disclosure requirements after listing on the one hand, and to operational,

administrative and financial risks on the other hand. Accordingly, this would have a material adverse effect on the

Company’s business, results of operations, financial position and prospects.

2.1.27 Risks Related to Recent Conversion into a Joint Stock Company Listed on Saudi

Tadawul Group

Since its incorporation, the Company has been managed as a family company and Senior Management have limited

experience in managing public joint-stock companies. Specialised experience in such a field is required to manage a public

joint stock company. Upon the admission of the Company’s shares to Saudi Tadawul Group (Tadawul), the Company and its

Board of Directors and Senior Management shall be required to meet continuous disclosure requirements and obligations

and prepare various reports applicable to all listed joint stock companies in accordance with the OSCOs and the Corporate

Governance Regulations issued by the CMA. Consequently, Senior Management in particular must exert greater effort and

obtain internal or external training in the management of a listed joint stock company, which may reduce the time that

Senior Management devote to managing the daily business of the Company, to ensure that the Company adheres to these

laws, regulations and rules on an ongoing basis.

The recent formation of the Company’s Board and its committees and the recent application of CMA’s Corporate Governance

Regulations may have an adverse effect on the Company’s performance in the event that Board Members are unable to

understand the disclosure requirements and/or obtain administrative mastery of the obligations on the Company and

the Board in the post-listing phase, which would lead to financial fines being imposed on the Company. Moreover, the

introduction of new independent Board members from outside the Company may have an adverse effect if the current

Directors are unable to cooperate and agree with them on a clear policy to effectively manage the joint stock company. If

the Company fails to comply with these requirements, such failure would have a material adverse effect on the Company’s

business, results of operations, financial position and prospects.

2.1.28 Risks Related to Changes in the Regulatory Environment

The Company’s business is subject to many laws and regulations in the Kingdom, including the regulations of the Ministry of

Commerce, the Ministry of Investment, the Ministry of Human Resources and Social Development, the Ministry of Municipal

and Rural Affairs and Housing, Civil Defence and the Ministry of Media. In the event that any of these laws or regulations are

changed, breached, or improperly implemented by the Company’s Management or employees, the Company’s operational

costs will increase and it may also be subject to fines or penalties or may suffer damage to its reputation, which reduces the

Company’s competitive position and demand for its services. This in turn would have an adverse effect on the Company’s

business, financial position, results of operations, and prospects.

The Company’s leases with secretariats and municipalities to rent various outdoor advertising sites also impose certain

obligations on the Company to observe the religious principles, customs and traditions of the Kingdom of Saudi Arabia in

terms of the advertising panels and content thereof. All of these contracts are subject to the Rules Organising Advertising

and Publicity Boards issued under Council of Ministers Resolution No. 177 dated 04/11/1410H and ratified by Royal Decree

No. M/53 dated 28/11/1412H, and the Municipal Real Estate Disposal Regulations issued under Royal Decree No. 3/b/38313

dated 24/09/1423H. Nevertheless, it is possible that certain government agencies, including secretariats and municipalities,

will in the future impose regulations similar to those in other markets that, for example, restrict the locations of roadside

billboards to some commercial and industrial areas, require that billboards not exceed certain sizes or require specific

distances between billboards.

Non-compliance with applicable laws or regulations and the enactment of new laws or regulations regarding outdoor

advertising may impose further compliance requirements on the Company, which the Company may not be able to fulfil

at all, or without incurring significant additional costs or other obligations. This would have a material adverse effect on the

Company’s business, financial position, results of operations and prospects.

In addition, the Company cannot foresee changes in the regulatory environment, and the Company’s regulatory environment

may be subject to many changes due to changes to the tax law and the adoption of tougher antitrust, pricing, corporate

governance and other regulations. Failure by the Company to comply with some or all of the requirements of laws and

regulations applicable to the Company, or to which it is subject, will cause the Company to incur fines or penalties, which

would have a material adverse effect on the Company’s business, results of operations, financial position and prospects.

Furthermore, the Company cannot foresee future government decisions that may affect the Company’s business, including,

but not limited to, government decisions to close roads or streets on which the Company’s outdoor billboards are located.

This would have a material adverse effect on its business, results of operations, financial position and prospects. It is also

worth noting that some billboards have already been removed due to road development projects in Riyadh and Jeddah.

These relate to three existing contracts for the Company’s outdoor advertising sites, as it entered into a contract with Jeddah

Governorate Municipality for Pisa/Mezah, Tower, Megacom and electronic billboards. The Company has been granted a

compensatory period of seven (7) months and twenty-seven (27) days after the end of the contract term. The Company also

entered into a Contract with Jeddah Governorate Municipality for Mupi billboards and was granted a compensatory period

of five (5) months and three (3) days after the end of the contract term. In addition, the Company entered into a contract

with Riyadh Municipality for Pisa/Mezah billboards and was granted a one-year compensatory period after the end of the

contract term (for further information, please see Section 12.19 (“Existing Company Contracts for Outdoor Advertising

Sites that have Expired and the Company Continues to Operate According Thereto under a Compensatory Period

Granted by the Municipality as at 31 December 2020G”)).

2.1.29 Risks Related to Current Shareholders and Some Board Members Conducting

Business Competing with Company Business

Some of the Company’s Current Shareholders and Directors own companies licensed to operate in the field of advertising.

The activities of these companies may be similar to or compete with the Company’s business, directly or indirectly, which

may lead to a conflict of interest between the business of a Substantial Shareholder or Director and the Company’s business.

Currently, Muhammed Abdelellah Alkhereiji is an indirect partner of Saudi Media Company. (This company’s activities are

limited to various fields related to media, publishing, radio and electronic application sites. It is currently the exclusive

agent of the Saudi Broadcasting Authority and is also involved in the management of the King Saud University Stadium

and marketing activity.) Moreover, he is the owner of National Alwasail Company (which has not yet started its activities).

Both companies have businesses similar to or competing with the Company. On 18 March 2020G, corresponding to

23/07/1441H, Muhammed Abdelellah Alkhereiji obtained permission from the Company’s General Assembly to engage in

activity that competes with the Company’s activity. Directors’ participation in competing business is subject to the approval

of the Ordinary General Assembly in accordance with Article 46 of the Corporate Governance Regulations and Article 72 of

the Companies Law. Any Director participating in a business competing with the Company may not vote on any relevant

resolutions. Due to restrictions on shareholders regarding voting in the General Assembly in accordance with Article 46 of

the Corporate Governance Regulations, no Current Shareholder has the right to vote on a resolution related thereto in the

General Assembly. Potential risks include the fact that the Board of Directors or the General Assembly may not approve the

participation of a Director in a business competing with the Company. In such case, the Director who has an interest in such

transaction must resign or take measures to ensure that they no longer have any interest (for example, termination of the

contract in question or assignment of rights arising from said interest) (for more details on the participation of the Board

Directors in business competing with the Company, see Section 5.9 (“Conflict of Interest”)).

These shareholders and Directors influence Company decisions, and sometimes their interests may not be compatible with

the interests of other Company shareholders. There are no contractual arrangements between Current Shareholders and

the Company to ensure that Current Shareholders will not engage in any activity that may result in a conflict of interest,

or that may compete with the Company’s business. As at the date of this Prospectus, no Director, Senior Executive, or

Shareholder is a party to any agreement, arrangement or understanding under which they are subject to any obligation

that prevents them from competing with the Company’s business, or any similar obligation in relation thereto. In the

event that these Shareholders or Directors do not comply with the continuous disclosure requirements, this would have a

material adverse effect on the Company’s business, results of operations, financial position and prospects.

2.1.30 Risks Related to the Company’s Inability to Use its Leased Advertising Sites

As at 31 December 2018G, 2019G and 2020G, the Company has entered into 88, 76 and 68 lease agreements, respectively,

out of 90, 83, and 78 lease agreements as of 2018G, 2019G and 2020G, respectively, with various parties to rent sites that

the Company currently uses as advertising sites. Under these contracts, the Company leases 7,640, 6,786 and 6,106 sites for

its billboards for the years ended 31 December 2018G, 2019G and 2020G, respectively, throughout the Kingdom of Saudi

Arabia (for more information, see Section 12.7.1 (“Contracts for Outdoor Advertising Sites”), Section 12.7.2 (“Contracts

for Indoor Advertising Sites”) and Section 12.10 (“Real Estate”)). The occupancy rate of the total number of leased sites on

which advertising campaigns were carried out on to the available advertising spaces was equivalent to 54%, 60% and 42%

for the years 2018G, 2019G and 2020G, respectively. The Company might not be able to use all the leased sites due to reasons

such as the existence of projects in such sites that prevent the Company from using them, in addition to the lack of sufficient

demand to occupy the available sites. If the Company is unable to use the sites leased thereby for any reason mentioned in

this section including the economic and seasonal factors, rental costs of the unused sites will be deducted from the contract

value, or the Company will have the option to choose alternative sites. The size of unused sites did not exceed 4.8%, 6.7%

and 7.8% in 2018G, 2019G and 2020G, respectively. If it is not able to use the leased sites or if the occupancy rate decreases,

the Company will lose the revenues generated from renting the billboards to be installed on such sites. Such loss would have

a material adverse effect on the Company’s business, financial position, results of operations and prospects.

2.1.31 Risks Related to Operational and IT Systems

The Company relies on IT systems to manage its business and facilities, including displaying client advertisements on the

Company’s digital billboards. It has no control over potential failure by third parties (such as the electricity company and

communications companies) to provide uninterrupted, high-quality service for IT systems. The Company’s IT systems may

sustain damage caused by computer viruses, natural disasters, intruders or hackers, hardware or software failures, power

surges, e-terrorism and other similar disturbances. In the event that the Company’s IT systems fail to work as expected for

any reason or if any major breach of security occurs, this would disrupt a key part of the Company’s business related to

digital billboards connected to digital systems, which account for 17%, 31% and 52% of the Company’s total revenue as at 31

December 2018G, 2019G and 2020G. This would in turn have an adverse effect on the Company’s business, financial position,

results of operations and prospects. In addition, the Company’s increased use and reliance on web-hosted applications and

systems (such as cloud computing) to store, process and transmit information could expose the Company and its employees

and clients to risk related to loss or misuse of such information. This may result in the Company incurring costs to provide

protection from damages resulting from these disruptions or security breaches in the future. Business activities may be

substantially disrupted if any of the Company’s information technology or communication networks are totally or partially

disrupted, which would in turn adversely affect its business, financial position, results of operations and prospects.

2.1.32 Risks Related to the Company’s Implementation of International Financial Reporting

Standards (IFRS)

The Company’s financial statements for the fiscal year ended 31 December 2018G were prepared in accordance with IFRS,

in line with the SOCPA Board of Directors resolution requiring companies listed on Saudi Tadawul Group to apply IFRS as

at 2017G and other establishments as at the beginning of 2018G. The Company also amended the comparative numbers

for the fiscal year ended 31 December 2017G in order to conform with IFRS. However, these financial statements may not

be precisely comparable with the financial statements for the fiscal year ended 31 December 2018G, as they have been

prepared in accordance with a number of policies, provisions, estimates and accounting assumptions that may not be

completely identical to the IFRS requirements.

There are a number of fundamental differences between IFRS and the accounting standards issued by SOCPA. These

differences resulted in a change in the accounting treatments for a number of items in the Company’s consolidated financial

statements for the fiscal year ended 31 December 2018G. They are the first consolidated financial statements prepared in

accordance with IFRS adopted in the Kingdom of Saudi Arabia and IFRS 1 (First-time Adoption of International Financial

Reporting Standards). These changes include, but are not limited to, the revenue recognition policy due to adoption of

IFRS 15, the classification method for loans provided by the Ministry of Finance due to adoption of IAS 20 (Accounting

for Government Grants and Disclosure of Government Assistance), the classification and measurement method for

financial instruments, specifically the recognition policy for ECLs on trade receivables due to adoption of IFRS 9 (Financial

Instruments), and the actuarial cost method for some employee benefits. In addition, the Company applied IFRS 16 (Leases)

as at 2019G.

According to the Company’s financial statements, the impact of applying IFRS 16 on balance sheet items on 1 January 2019,

is as follows:

 Recognition and presentation of right-of-use assets and lease liabilities of SAR 1,113,285,660 separately on initial

application.

 Reclassification of the amount of SAR 255,455,192 for operational leases previously classified as advance payments to

right-of-use assets.

 The impact of the application of IFRS on the items of the comprehensive consolidated income statement for the year

ended 31 December 2019G:

− An increase of SAR 374,414,718 in amortisation expenses related to the amortisation of the recognised right-of-

use assets.

− An increase of SAR 6,747,804 in lease expenses related to previous operational lease contracts as a result of

settling contracts when transitioning to the international standard.

− An increase of SAR 23,471,481 in financing costs related to interest expenses for additional recognised lease

liabilities.

IFRS implementation has resulted in the update of some accounting policies such as the revenue and asset recognition

policy. In accordance with the new standard, the Company substantiates revenues upon the client’s receipt and consumption

of services provided over a period of time equal to the number of days of service provision. For more information, see the

financial statements for the period ended 31 December 2018G (Important Accounting Policies). The Company’s preparation

and stipulation of additional provisions may have an adverse effect on its net profits and total assets.

Based on the above, the Company’s application of IFRS has led to changes to its consolidated financial position, consolidated

financial performance, and consolidated cash flows for the years ended 31 December 2018G and 31 December 2019G.

Such application will also lead to similar changes in the subsequent fiscal years or other material changes with impacts that

are not currently apparent or of which the Company may not be aware. In addition, the recent application of IFRS may lead

to errors or inaccuracy in their application, which would result in the Company’s consolidated financial statements being

inaccurate. In addition, the regulatory authorities may require the application of a new or amended standard due to the

development of the application of IFRS adopted in the Kingdom of Saudi Arabia during the coming years. This may result in

material changes to the Company’s consolidated financial statements. Occurrence of any of the above events would have a

material adverse effect on the Company’s business, results of operations, financial position and prospects.

There were some errors in the presentation and classification of some figures in the year 2018G with regard to Related

Parties (Note No. 9 in the financial statements) and the Company did not amend them because they are not material. They

are as follows:

 An amount of SAR 0.4 million was spent on Mezah software, which appeared in the financial statements for the year

2018G by mistake as part of general and administrative expenses while it should have been classified within operational

expenses as it pertains to Mezah billboards.

 Dividends of SAR 58.5 million paid by Al Miza Company appeared in the financial statements for the year 2018G, while

the Company confirmed that the amount of dividends paid was SAR 33.9 million, and the remaining amount of SAR

24.6 million was collections and sales made through Al Miza Dubai Company. Note that the amount of SAR 58.5 million

regarding Al Miza Outdoor Advertising Company appeared in the financial statements for the year 2019G as sales

and cash transfers, while in the financial statements for the year 2018G, it appeared as sales commissions for Senior

Management.

 Capital expenditure purchases of SAR 36.4 million from SignWorld and SAR 4.1 million from House of Skill Maintenance

Company respectively, were not included in the notes on the financial statements.

 Management recorded the full depreciation of the right-of-use asset in FY 2019G instead of allocating a portion of SAR

1.5 million to FY 2020G.

 The balance for House of Skill Contracting Company in 2019G includes a total of SAR 2.7 million pertaining to House

of Skill Maintenance Company, as the two accounts are merged under the House of Skill Contracting Company, which

is the main Commercial Register, and the House of Skill Maintenance Company is an internal accounting classification

only. The balance appeared under the name House of Skill Maintenance Company in the financial statements for the

year 2019G separately, yet the statements for the year 2019G were not modified.

 An amount of SAR 2 million belonging to Al-Hadaf Al-Mumayaz Holding Company, which is the former name of

Engineer Holding Group Company, appeared in the financial statements for the year 2018G.

 Al Miza Outdoor Advertising Company appeared in the financial statements under the name Al Miza Company.

In the event that this happens in the future, it may materially affect the accuracy of the presentation of the financial

statements, which may require amendment. This may result in material changes in the presentation method that adversely

affect the Company’s decisions, its business and financial position accordingly.

2.1.33 Risks Related to Acquisitions and Joint Ventures

The Company may expand its business by investing in joint ventures or acquiring companies, businesses or assets related to

the advertising sector. Such expansion depends on the Company’s ability to identify suitable investments and acquisitions

and successfully execute them. In some circumstances, suitable investments or businesses may not be available for

acquisition. Acquisitions involve a number of risks, such as: (1) the difficulty of integrating the acquired assets into the

Company’s existing business (2) the impact on the Company’s existing business due to the Company’s Management being

distracted from conducting daily business; (3) the difficulty of maintaining quality of services regarding the acquired

assets; (4) potential legal and financial obligations arising from acquisitions; (5) failure to realise expected benefits from the

acquisitions; (6) increase in expenditures associated with the completion of the acquisition and depreciation of any acquired

intangible assets; (7) challenges in implementing consolidated standards, accounting policies, controls, procedures and

policies in all acquired business; (8) inability to maintain, incentivise, and integrate on-boarding key management and

other employees of the acquired business; (9) loss of clients.

Moreover, in the event that the Company needs to obtain financing for an acquisition, this may limit its ability to borrow

additional amounts and lead to the allocation of a greater amount of its cash flow from its operations to repay its debts.

This would lead to decreased cash resources available to the Company to finance capital expenditure, make acquisitions

or other investments in new business initiatives and meet the Company’s needs and working capital requirements. This

increase in indebtedness may also reduce the Company’s flexibility to plan for and address potential changes to its business

or field or related challenges.

The potential risks associated with future acquisitions may lead to a disruption of the Company’s business, which could

lead to loss of clients or key employees and higher expenses. This would have an adverse effect on the Company’s business,

financial position, results of operations and prospects.

2.1.34 Risks Related to Depreciation of the Book Value of Certain Assets

Depreciation of a portion of the Company’s assets was SAR 120 million as at 31 December 2020G, or 44% of the Company’s

SAR 275 million in assets. The fully depreciated Company assets were worth SAR 32 million as at 31 December 2020G. Note

that the depreciation rate of billboards approved by the Company is estimated at 15%, which is a high depreciation rate

for the Company’s assets. Total depreciation of billboards amounted to SAR 77 million as at 31 December 2020G out of the

billboard value of SAR 174 million. The value of fully depreciated billboards is SAR 14 million, or 44% of the Company’s total

fully depreciated assets as at 31 December 2020G, which may require the Company to replace such assets in the future,

especially billboards, to maintain the quality of service provided to clients. This would increase the Company’s capital

expenditure, which would have an adverse effect on the Company’s financial position and prospects (for more information

see Subsection 6.5.2.5 (“Property and Equipment”)).

2.1.35 Risks Related to Infectious Disease Outbreaks or Other Public Health Concerns,

Including the Ongoing Global Coronavirus (COVID-19) Pandemic

The outbreak of an infectious disease – such as Middle East Respiratory Syndrome (MERS), Influenza A (H1N1), Severe

Acute Respiratory Syndrome (SARS), and the novel coronavirus (COVID-19) – in the Middle East and/or any other region

would have a material adverse effect on the Kingdom of Saudi Arabia’s economy and the Company’s operations. Since

late December 2019G, COVID-19 has spread from China across the world. COVID-19 is an infectious disease caused by a

highly contagious virus that causes respiratory inflammation and other symptoms such as fever, coughing, and shortness

of breath.

Following the outbreak of COVID-19, the governments of many countries imposed travel restrictions and/or mandatory

quarantine measures for international travellers, in addition to imposing restrictions, in some cases, on residents of certain

regions, governorates or provinces in some countries. As at the date of this Prospectus, the Saudi government has imposed

a set of containment measures in response to the outbreak, including:

 imposing curfews in major cities;

 preventing entry to or exit from one governorate to another;

 closing several public entertainment locations;

 restricting the hours wholesale and retail shops and commercial centres (malls) are permitted to conduct their

commercial activities;

 suspending attendance at workplaces in all government entities except for the health, security, and military sectors

and the Electronic Security Centre;

 reducing the number of employees and workers attending the workplace for private companies and institutions and

charities, and

 temporarily suspending all schools and universities in the Kingdom of Saudi Arabia.

There is no guarantee that the above containment measures will succeed in stopping or limiting the spread of coronavirus

(COVID-19) in the Kingdom of Saudi Arabia. These measures would also have material adverse effects on the Saudi economy

and investor and business confidence for an unpredictable period, which in turn would have a material adverse effect the

Company’s business, results of operations, financial position and prospects.

Since the outbreak of the coronavirus (COVID-19), the Company has cooperated with the concerned government agencies,

using its billboards to display messages directed to citizens with precautionary measures to address COVID-19. This is

consistent with the supporting efforts made by the competent and relevant health authorities to address COVID-19 and

the continuous efforts made by all government agencies in the Kingdom of Saudi Arabia to take the necessary preventive

measures to prevent its spread. The Company incurred losses of SAR 84 million during the second quarter of 2020G, due to

the closure and curfew imposed during the second quarter and the accompanying absence of revenues recorded in such

period.

The Company generates a large portion of its revenue through the advertising services it provides to its clients. Therefore,

a curfew in major cities would materially and adversely affect the Company’s revenue.

As a result of the COVID-19 outbreak in the Kingdom of Saudi Arabia and other countries, the Company will be exposed to

the risk of business interruption. In particular, the import of certain international products the Company purchases from

suppliers located in highly affected countries, such as China and several European countries, will be suspended, delayed

or adversely affected. In addition, if a Director, Manager or other employee of the Company is infected with COVID-19, the

Company will have to temporarily suspend its operations and/or the affected individuals will be subject to quarantine,

which would disrupt the ordinary course of the Company’s business. If COVID-19 lasts for a long time it may, in extreme

cases, result in suspension or shut-down of the Company’s operations.

The above cases also apply in the event of a future outbreak of other infectious diseases or any other public health concerns

in the Kingdom of Saudi Arabia. Any of the factors stated above would have a material adverse effect on the Company’s

business, results of operations, financial position and prospects.

2.1.36 Risks Related to Housing Company Staff during the COVID-19 Pandemic

In response to the COVID-19 global pandemic described in Section 2.1.35 (“Risks Related Infectious Disease Outbreaks or

Other Public Health Concerns, Including the Ongoing Global Coronavirus (COVID-19) Pandemic”), the Company has

taken some preventive measures with regard to the housing it provides to employees of the Company and its subsidiary,

including:

 securing additional rented buildings to accommodate employees in order to reduce the number of employees in each

room and ensure social distancing;

 setting up temperature checkpoints for employees at entrances and exits of housing facilities to check the temperature

of every employee entering and leaving said facilities; and

 taking enhanced sterilisation measures in every room, which include disinfectants, masks and gloves.

Governmental agencies may require the Company to take additional preventive measures, which may be more stringent

than those mentioned above, with regard to housing Company employees, which may lead to the Company incurring

additional labour costs, fuel, water and electricity consumption costs, repair and maintenance costs, sterilisation costs,

employee thermometers and personal protective equipment (such as masks and gloves), insurance premiums and rental

costs for properties that the Company leases, which would have a material adverse effect on the Company’s business,

results of operations, financial position and prospects.

In addition, there can be no assurance that said measures or any other measures adopted in the future to prevent the

spread of coronavirus among the Company’s employees will be effective. The virus can spread quickly among Company

employees in their places of residence, despite all the mentioned measures taken. If such infections occurred, they would

lead to a shortage of employees, which in turn would affect the Company’s financial performance, including a possible

decrease in revenue. This would have a material adverse effect on the Company’s business, results of operations, financial

position and prospects.

2.1.37 Risks Related to Assessment of ECL on Accounts Receivables

In its policies of sales and receivable aging (clients), the Company relies on the budget approved at the beginning of

2019G. The lower receivables model (ECL) has not been applied, as the standard was recently introduced and applied at the

beginning of 2020G. The Company did not apply the lower receivables model (ECL) standard according to IFRS requirements

for the years 2018G and 2019G. As a result of the application of the lower receivables model (ECL), the Company recorded

additional expenses of SAR 8 million for 2020G related to the Company’s expected credit losses. Trade receivables bear

interest and are due after a period of 30 to 90 days from the issuance of the invoice. The fair value of receivables equals the

book value of those receivables as at 31 December 2019G because they are due within a period of less than 12 months from

the date of the balance sheet. The Company has guarantees for receivables, and the number of clients with receivables

older than one year as of 31 December 2020G was five. The Company adopts the simplified approach to calculate expected

credit losses as stipulated in the IFRS 9, which allows the use of lifetime expected loss provision for all accounts receivable.

For calculation of expected credit losses, accounts receivable are grouped based on common credit risk characteristics and

days overdue.

The Company assesses the provision for expected credit losses in accordance with IFRS 9 (Financial Instruments). The

Company reviews its accounts receivable at each reporting date if a provision for expected credit losses is to be recognised

in the consolidated statement of profit or loss. Judgement by Management is required in the estimation of the amount

and timing of future cash flows when determining the ECL loss. These estimates are based on assumptions of some factors,

such as an aging analysis of accounts receivable, materiality, profiles of accounts receivable, existence of guarantees or

related securities, the current and expected state of the economy and credit ratings of debtors. Under IFRS 9, accounting

treatment of financial instruments is different from IAS 39 requirements. IFRS 9 applies new requirements for impairment,

reclassifies the original measurement categories and applies new measurement classes for each of the Company’s financial

instrument categories.

Consequently, in the event that IFRS 9 is applied, the amounts due from its suppliers will be settled out of the outstanding

balances and deducted in a timely manner when they are generated. Any change in estimates, assumptions or decisions

upon assessment of the expected credit losses of the Company’s accounts receivable will have a material adverse effect on

the Company’s business, results of operations, financial position, and prospects.

2.1.38 Risks Related to Recording Discounts and Extending Advertising Campaign Periods

The Company does not use an automated system to record discounts granted to clients or to extend advertising campaign

periods free of charge. The Company’s employees register these discounts by recording them in internal books, which

increases the possibility of errors, namely granting additional discounts to clients or increasing the extension of advertising

campaigns other than as agreed upon with clients. If any error is committed by the employees in recording discounts or

extending the advertising campaign period, this will lead to disputes with clients and the Company will incur financial

losses, which would have an adverse effect on the Company’s business, financial position, results of operations, and

prospects.

2.1.39 Risks Related to the Companies Law

The Companies Law issued under Royal Decree No. (M/3) dated 28/01/1437H (corresponding to 10 November 2015G)

imposes certain regulatory requirements that the Company must abide by. To comply with such requirements, the

Company must adopt specific procedures such as amending its Bylaws to comply with the Companies Law and adhere to

the periods stipulated for holding General Assembly meetings. In the past, the Company did not adhere to the specified

period for holding the Ordinary General Assembly set out in Article 91 of the Companies Law and has voted on issues that

were not included in the agenda of the General Assembly meeting.

Article 71 of the Companies Law provides that no member of the Board of Directors shall have any interest, directly or

indirectly, in the transactions or contracts made for the Company, except with the authorisation of the Ordinary General

Assembly and according to the controls imposed by the competent authority. Board members shall inform the Board of

Directors of any interest, direct or indirect, in the transactions or contracts made for the Company and such disclosure shall

be recorded in the minutes of the Board meeting. Such board member may not participate in voting on the resolution to be

issued in this regard by the Board of Directors and shareholders’ assemblies. On 18 March 2020G, a meeting of the General

Assembly was held. The Company’s shareholders were Abdelellah Alkhereiji and Engineer Holding Company, which was

represented in the meeting by Muhammad Abdelellah Alkhereiji. Engineer Holding Company is owned by: Abdelellah

Abdulrahman Alkhereiji, Muhammad Abdelellah Alkhereiji, Abdulrahman Abdelellah Alkhereiji, Amal Abdullah Aljaawaini,

Fatima Abdelellah Alkhereiji, Adwaa Abdelellah Alkhereiji, Anoud Abdelellah Alkhereiji and Yara Abdelellah Alkhereiji. All

shareholders voted on some items related to approving transactions with Related Parties. At that time all shareholders

had interests (whether direct or indirect) in those transactions, which conflicts with the first paragraph of Article 71 of the

Companies Law. If the Company applies the first paragraph of Article 71 of the Companies Law, none of the shareholders

will be able to vote on the clause approving transactions with Related Parties, as each one of them will have interests

that prevent them from voting. The Company held an Extraordinary General Assembly on 22 June 2021G, where MBC

Holding Group approved all transactions with Related Parties in which Engineer Holding Company, Abdelellah Alkhereiji,

Muhammad Alkhereiji have an interest. Engineer Holding Company, and Abdelellah Alkhereiji, approved transactions with

Related Parties in which Samuel Barnett has an interest.

The current Companies Law imposes stricter penalties for violation of its mandatory provisions and rules. Fines for violating

some of the provisions may reach SAR 500,000. Therefore, if the Company is subjected to a penalty due to non-compliance

with these provisions, or if it does not comply with the provisions of its Bylaws, this will have a material adverse effect on

the Company’s business, financial position and results of operations.

2.1.40 Risks Related to the Shareholders Agreement and Rights Granted to MBC Group

Holdings

Based on the 24 April 2020G share sale and purchase agreement concluded between Abdelellah Abdulrahman Alkhereiji

and MBC Group Holdings Ltd., Abdelellah Abdulrahman Alkhereiji sold 5% of the Company’s capital to MBC Group Holdings

Ltd. The Current Shareholders agreed to the terms and conditions of the shareholders’ agreement signed on 28 July 2020G.

This agreement includes terms and conditions that give MBC Group Holdings Company Ltd. some rights, including the

right to purchase 15% of the Company’s shares. The agreement also stipulates the pre-emptive rights granted to both MBC

Group Holdings Company Ltd. and Engineer Holding Group Company. These rights shall continue after admission. (For

more information on the Shareholder Agreement, see Section 12.7.4 (“Shareholders Agreement”)).

Any of the Current Shareholders’ interests may conflict with the interests of other Company Shareholders, and the Current

Shareholders may prevent the Company from making certain decisions or actions that might protect the interests of

other Company Shareholders. This may also result in postponement, delay or prevention of any change in the control or

distribution of proceeds, which would have a material adverse effect on the Company’s business, results of operations,

financial position and prospects.

2.1.41 Risks Related to Working Capital Management

Currently, the Company finances working capital (especially leases) through six local banks, which amounted to SAR 139

million, SAR 239 million and SAR 132 million in 2018G, 2019G and 2020G (for further information, see Section 12.8 (“Credit

Facilities”)). If the Company fails to obtain loans to finance the deficit in working capital, this will have an adverse and

material effect on its business, financial position, results of operations, and prospects.

2.1.42 Risks Related to the Use of Short-term Financing to Pay Rent

The Company is currently using short-term financing to pay rent amounts due to secretariats and municipalities

through local banks. If the Company fails to obtain short term financing to pay the rent amounts due to secretariats and

municipalities, this will have an adverse and material effect on its business, financial position, results of operations, and

prospects (for further information, please see Section 2.1.16 (“Risks Related to Financing Based on Short -term Loans”)).

In the event that any of these banks deems the Company in violation of the facilities agreement and decides to exercise its

established rights, no guarantees can be given that the Company will be able to obtain sufficient alternative financing to

pay the rent amounts, which would have a material adverse effect on its business, financial position, results of operations,

and prospects.

Since all bank facilities are made through short-term loans, the Company may need additional financing if it decides

to expand its operations in the future. If the Company fails to secure such financing in the future or if such financing is

available but under unfavourable terms, this would lead to the Company’s inability to expand its operations. In addition,

there is no guarantee that, if the Company has access to additional financing and uses it fully, it will be able to repay its

rents when due. If any of these events occur, it will have a material adverse effect on its business, financial position, results

of operations, and prospects, given that all loans are short-term.

2.1.43 Risks Related to the Company’s Capital Investments

For its activities, the Company relies on the development of its fixed assets used in operational activities (especially billboards)

with high costs that require periodic investments to keep pace with digital transformation and to replace some screens with

LED screens, which have a proportionally higher cost that exceeds their capital expenditures. Additions and conversions to

fixed assets (billboards) were SAR 27.5 million, SAR 34.2 million and SAR 41.9 million for 2018G, 2019G and 2020G.

The Company’s ability to recover its costs, achieve an adequate return on its investments, manage its financial position,

and maintain a high level of capital investment depends on the level of market demand for the services provided by the

Company and the pricing of these services. If demand for these services is less than expected, or if the Company is unable

to provide such services based on a competitive pricing strategy, the Company may be unable to recover its costs or

benefit from its capital expenditures, which would have a material and adverse effect on the Company’s business, financial

position and results of operations. The value and timing of the Company’s future capital requirements may differ from its

current expectations due to various factors that are beyond the Company’s control. In the future, the Company may need

to make larger capital investments in shorter than expected timeframes, and it may not have the necessary resources to

make such investments. If demand is lower than anticipated, or if the Company is unable to provide its services based on

a competitive pricing strategy or is unable to make larger capital investments in a shorter time period than expected or is

unable to provide periodic investments to keep pace with digital transformation including replacing some screens with

LED screens which have a proportionally higher cost, this could have a material adverse effect on the Company’s business,

financial position and results of operations.

2.1.44 Risks Related to Commissions Earned by Sales Personnel

In accordance with its internal policy, the Company grants sales commissions to motivate employees to achieve sales

goals. These commissions amounted to SAR 7 million and SAR 21 million for 2018G and 2019G, respectively. The Company

did not recognise any employee sales commissions for 2020G. If the Company amends its internal policy on granting

such commissions and suspends or cancels employee commissions, this may have a material adverse effect on employee

performance, which could have a material adverse effect on the Company’s business, results of operations, financial

position and prospects.

2.1.45 Risks Related to the Company’s Exposure to Unforeseen Operational Risks and

Commercial Obstacles

The Company’s success depends to a large extent on the continuous operation of its billboards without being subject

to difficulties, such as bad weather, power outages, malfunctions, billboard failure, deliberate sabotage of billboards or

natural disasters.

Accordingly, the Company will not be able to carry out maintenance work and install and operate its billboards if it is

unable to reach billboard sites as the result of traffic jams. This could lead to delays that would have a material adverse

effect on the Company’s business, profitability and reputation. If any such obstacle occurs, the Company’s revenues would

decrease as a result of any losses or cancellation of important reservations by clients.

If the Company’s business is subject to interruption and the Company is unable to install, maintain and operate its

billboards, this may affect the Company’s revenues and profitability, which in turn could have a material adverse effect on

the Company’s business, results of operations, financial position and prospects.

2.2 Risks Related to the Market, Industry and Regulatory Environment

2.2.1 Risks Related to the Impact of Economic Risks in the Kingdom of Saudi Arabia on

the Company’s Operations

The Company’s operations are all concentrated and its assets are all located in the Kingdom of Saudi Arabia, which is

considered an emerging market. The subsidiary has no material assets or operations. While the Kingdom of Saudi Arabia

continues to implement an economic diversification policy to increase the contributions of non-oil sectors, it still depends

on its income from the oil sector to implement and develop its economic plans. Consequently, any decrease in oil prices

may lead to an economic slowdown or significantly reduce government spending, which would adversely affect the

Kingdom of Saudi Arabia’s economy, including all sectors and businesses, and, in turn, have a material adverse effect on the

Company’s business, financial position, results of operations and prospects.

2.2.2 Risks Related to Political Instability and Security Concerns in MENA

The Middle East and North Africa are subject to a number of political and security risks (such as wars and political instability)

that may affect the Kingdom of Saudi Arabia. In addition, the political, economic and social environment in the region

remains subject to continuous developments, which result in a great degree of uncertainty with regard to investments. As

the Company’s assets, operations and client base are currently located in the Kingdom of Saudi Arabia, any unexpected

changes in the political, economic, social, security or other conditions of the MENA region may have an adverse effect on

the Kingdom of Saudi Arabia’s market, which would have a material adverse effect on the Company’s business, financial

position, results of operations and prospects.

2.2.3 Risks Related to Competition

The Company operates in a competitive environment and competes with current and new rivals in the Saudi market.

Companies operating in outdoor advertising (including the Company) compete with companies that rely on other

advertising mediums such as television, newspapers and other media.

The Company also competes with a variety of outdoor advertising mediums such as stands and billboards in shopping

centres, commercial centres, economic centres, airports, stadiums, supermarkets and universities which, due to their

display locations, target specific segments of the population (such as advertisements in universities and sports clubs that

target youth). Moreover, the Company expects that special projects relating to public transport within and between the

Kingdom of Saudi Arabia’s main cities (such as the Riyadh Metro project, the bus transport network development project

in Riyadh and public transport projects in Jeddah, Mecca and Madinah like the Haramain High Speed Rail Project) will

bring with them new forms of outdoor advertising. This will lead to more outdoor advertising spaces in the Kingdom of

Saudi Arabia and stronger competition in outdoor advertising, as well as a decrease in the percentage of total outdoor

advertising panels owned by the Company in the Kingdom of Saudi Arabia. Technologies used in the advertising sector

may develop in a manner that gives rise to new advertising media that adversely affect advertisers’ appetite for outdoor

advertising. Outdoor advertising media provided by the Company may not be able to compete with other advertising

media that currently exist or that may be introduced to the market in the future. If clients allocate a larger portion of their

advertising spending to other advertising media, this could have a material adverse effect on the Company’s business,

prospects, results of operations and financial position.

Some of the Company’s competitors in the future may be of a larger size and have more capital and resources than the

Company. There can be no guarantee that the Company will be able to win tenders to lease advertising sites in the future,

or that the Company will be able to compete either in the outdoor advertising market or with other advertising media.

If the Company loses its ability to compete with its competitors in any of the foregoing aspects, this will have a material

adverse effect on the Company’s business, financial position, results of operations and prospects. In order to keep its client

base and market share, the Company will need to develop new products that meet its clients’ needs. If competitors are able

to provide similar or better products than those offered by the Company at a lower cost, the Company’s market share will

decrease, which would have a material adverse effect on the Company’s business, financial position, results of operations

and prospects.

Competition may lead to a significant reduction in advertising prices. The Company’s ability to compete against regional

and international companies depends on its ability to provide better products than those of its competitors by providing

high-quality products at reasonable prices that satisfy the tastes and objectives of all consumers.

In addition, there is a significant increase in demand for online advertising. If the preferences of the Company’s clients’

change to advertising online or on highly popular social networks like Facebook and Twitter over outdoor advertising.

This would lead to a decrease in the Company’s revenues, which would have a material adverse effect on the Company’s

business, financial position, results of operations and prospects.

2.2.4 Risks Related to the Competition Law and its Implementing Regulations

If the Company attains a dominant position in the market or is classified as a dominant company by the General Authority

for Competition, the Company will be subject to the conditions and controls of the Competition Law, which is intended to

ensure fair competition in Saudi markets and encourage and establish market rules and freedom and transparency of prices.

Article 6 of the Competition Law and Article 10 of the Implementing Regulations of the Competition Law state that a

company with a dominant position in the market may not abuse said position to prejudice or limit competition, including

refusing to deal with another entity without an objective reason in order to limit its entry into the market. Note that the

following agreements contain exclusivity provisions that may violate the Competition Law:

 An exclusive agency agreement with Al-Manakhah Urban Project Company, which stipulates the Company’s appointment

as an exclusive agent for marketing and selling commercial advertisements in Al-Manakhah Project in Madinah.

 Lease agreement with Riyadh Front Company Ltd., which grants the Company the exclusive right to conduct and

manage marketing activities within the Shopping Front Project.

 Lease agreement with Istithmar International Real Estate Company Ltd., which grants the Company the exclusive right

to market and sell commercial advertisements in Riyadh Park.

 Lease agreement with Reyof Tabuk Company, which grants the Company the exclusive right to market and sell

commercial advertisements in Tabuk Park.

Under the lease agreement with Istithmar International Real Estate Company Ltd. and the lease agreement with Reyof Tabuk

Park, the Company is restricted from displaying advertising campaigns for shopping centres, cinemas or supermarkets that

are in competition with the those located in the lessor’s shopping centres (for more information on the above contracts,

see Section 12.7.2 (“Contracts for Indoor Advertising Sites”)).

In the event that the Company violates the provisions of the Competition Law and a judgement is issued against it for such

violation, the Company may be subject to a fine of no more than 10% of the annual sales value (return) of the agreement

in question or, if unable to calculate the annual return, ten million Saudi riyals. In addition, the General Authority for

Competition has the right to request the partial or full suspension of the Company’s activities temporarily or permanently if

the Company repeats the violation. Moreover, claim filing proceedings may be prolonged and costly to the Company, which

would have a material adverse effect on the Company’s business, financial position, results of operations and prospects.

2.2.5 Risks Related to Seasonal Factors

The Company faces seasonal cycles affecting its operations and sales activity. Revenues in the advertising sector usually

decline in the summer season, affected by a decrease in advertisers’ spending on marketing campaigns inside the Kingdom

of Saudi Arabia due to the summer holiday. Revenues also increase significantly during the period before and during

Ramadan. Revenues in that period were SAR 149 million and SAR 172 million in 2018G and 2019G, respectively. The Company

did not benefit from the Ramadan season in 2020G, as it did not generate any revenue in that season for the months of

April and May, which is mainly attributable to outbreak of the coronavirus pandemic (please see Risk Factor 2.1.35 “Risks

related to the outbreak of infectious diseases or other concerns that pose a threat to public health, including the

ongoing global spread of COVID-19”). At the beginning of the Gregorian year, the Company faces a decrease in business

volume since advertisers set advertising budgets for the new year during that period. Such seasonal cycles may have a

material and adverse effect on the Company’s business, prospects, financial position and results of operations.

2.2.6 Risks Related to Reliance on Favourable Economic Conditions and Advertis-

ing Trends

The Company’s revenues and operating profits depend on expenditure levels in the advertising market, which may be

materially affected (directly or indirectly) by any change in governmental, economic, financial or monetary policies or any

other factors in the Kingdom of Saudi Arabia. Advertisers may often cut their advertising budgets drastically, especially in

periods of low economic activity, such as the global economic recession in recent years. Unlike in 2019G, which did not

see large declines, in 2018G spending on advertising from the telecommunications segment decreased substantially by

30% compared to 2017G. There was also a significant decrease in the volume of spending in 2020G due to the coronavirus

pandemic, by approximately SAR 290 million of the Company’s revenues, at a percentage of 37% for the year 2019G (please

see the Risk Factor 2.1.35 “Risks related to the outbreak of infectious diseases or other concerns that pose a threat to

public health, including the ongoing global spread of COVID-19”).

An economic recession in the Kingdom of Saudi Arabia could cause Saudi-based companies to significantly reduce their

advertising budgets, which would result in a significant decrease in the Company’s revenues. This would have a material

adverse effect on the Company’s business, financial position, results of operations and prospects.

2.2.7 Risks Related to Currency Exchange and Interest Rate Fluctuation

The Company imports some products from foreign suppliers in foreign currencies (USD and Euro). Therefore, any decrease

in the local currency against other foreign currencies (fluctuation of currency exchange rates) will lead to an increase in the

costs incurred by the Company. In the event that the Company is unable to reflect such increase on sale prices, this would

have a material adverse effect on the Company’s business, financial position, results of operations and prospects. Moreover,

the Company’s obligations under bank facilities may be subject to interest rate fluctuations, causing a potential increase

in the Company’s obligations under these facilities, which in turn would have an adverse effect on the Company’s financial

position and cash flows. This would have a material adverse effect on the Company’s business, results of operations,

financial position and prospects.

2.2.8 Risks Related to Imports

The Company imports certain types of billboards and spare parts from foreign suppliers. The Company also imports some

raw materials such as ink, paper, flex face material and banners used in the printing sector from countries such as China,

France, the USA and Germany (for further information, see Section 5.7.4 (“Company Suppliers”). The procurement costs

of these materials were SAR 13.3 million, SAR 8.8 million and SAR 3.2 million, accounting for 70%, 58% and 31% of the total

procurement cost of SAR 18.9 million, SAR 15.2 million and SAR 10.6 million in 2018G, 2019G and 2020G. Consequently,

the introduction of any new legal or regulatory requirements such as anti-dumping duties or customs tariffs and other

measures, whether adopted by countries or regional trade blocs, may affect the prices of the products and goods it

imports. This would adversely affect the Company’s profitability, which in turn would have a material adverse effect on the

Company’s business, financial position, results of operations and prospects.

2.2.9 Risks Related to Higher Government Fees Imposed on Non-Saudi Employees

The Government approved a number of decisions to implement comprehensive reform of the labour market in the

Kingdom of Saudi Arabia. Such decisions imposed additional fees for every non-Saudi employee working for a Saudi

entity on 14/04/1439H (corresponding to 1 January 2018G), in addition to additional fees for issuing residence permits

and renewal fees for non-Saudi employees (which came into effect on 07/10/1438H (corresponding to 1 July 2017G)).

These fees gradually increased from four thousand, eight hundred Saudi riyals (SAR 4,800) per year for each employee in

2018G to nine thousand, six hundred Saudi riyals (SAR 9,600) per year for each employee in 2020G. Since these decisions

and increases entered into force, the government fees that the Company pays for its non-Saudi employees in general

have increased. Government fees were SAR 2.1 million, SAR 2.3 million and SAR 3.4 million for the years 2018G, 2019G and

2020G, respectively.

Consequently, these government fees may lead to an increase in the prices of services provided to the Company’s clients.

In addition, the increase in fees incurred by non-Saudi employees and labourers for their families in connection with

obtaining and renewing residence permits will lead to higher living costs. This may lead to the Company’s employees and

labourers looking for job opportunities in other countries with lower costs of living. In this case, it will be difficult for the

Company to retain its expatriate employees. The Company may have to incur additional government fees related to issuing

and renewing residence permits for non-Saudi employees and their family members. This would lead to the Company

incurring more financial obligations, which in turn would have a material adverse effect on the Company’s business,

financial position, results of operations and prospects.

2.2.10 Risks Related to Implementing the Value-Added Tax Law and the Violations Re-

lated Thereto

The Kingdom of Saudi Arabia issued a Value-Added Tax Law, which became effective on 14/04/1439H (corresponding to

01 January 2018G). This Law imposes a value-added tax of 5% on a number of products and services, as stipulated in

the Law. The VAT rate increased from 5% to 15% on 1 July 2020G. Consequently, the relevant entities should be aware

of the added value and how it is applied and calculated. They will also have to submit their own reports to the relevant

government entities. Accordingly, the Company has to adapt to the changes resulting from the application of VAT, including

the collection and delivery thereof. Since this Law was issued, any breach or misuse, calculation mistake or failure to submit

supporting documents required by the Zakat, Tax and Customs Authority on the part of the Company’s Management

or employees may result in the Company incurring additional operating costs and expenses, being subject to fines or

penalties or result in damage to its reputation. This would weaken the Company’s ability to compete and reduce the

demand for its services, which in turn would have an adverse effect on the Company’s business, financial position, results

of operations and prospects.

Notably, the Company received a final assessment notice from the Zakat, Tax and Customs Authority regarding the VAT

returns filed for the year 2018G (the assessment was on zero-rated supplies provided to clients abroad). The Zakat, Tax

and Customs Authority also imposed fines of SAR 3.4 million on the Company for providing inaccurate information and

delaying payment of VAT. The Company paid the amount in full in 2019G. Therefore, it objected to these fines, and the

Zakat, Tax and Customs Authority approved a final settlement and issued a credit note (a document stating the Company’s

entitlement to such amount) to the Company in the amount of SAR 1.4 million in 2021G (for further information, please see

Section 12.14 (“Zakat and Tax Status of the Company”)).

2.2.11 Risks Related to Imposing Additional Fees or New Taxes

The Company is currently subject to only Zakat, value-added tax, and withholding tax (given that some of the Company’s

dealings are with third parties not registered in the Kingdom). However, the Government may impose other fees or

additional taxes on companies in the future. In the event that new taxes or fees are imposed on companies other than

those currently in force, this would have a material adverse effect on the Company’s business, financial position, results of

operations and prospects.

2.2.12 Risks Related to Change in the Zakat and Income Tax Calculation Mechanism

On 05/03/1438H (corresponding to 05 December 2016G), the Zakat, Tax and Customs Authority issued Circular No.

6768/16/1438 requiring Tadawul-listed Saudi companies to calculate income and Zakat based on the shareholders’

nationality and the actual ownership of Saudi, GCC and non-Saudi nationals as indicated in the Tadawulaty system at the

end of the year. Prior to this Circular, companies listed on the Exchange were generally subject to Zakat or tax based on the

ownership of the company’s founders in its Bylaws. The effect of the listed shares was not taken into account in determining

the Zakat base. The Circular was scheduled to enter into force in the year ended 31 December 2016G and subsequent years.

However, due to uncertainties surrounding the Circular’s mechanisms of application, the Zakat, Tax and Customs Authority

issued Letter No. 1438/16/12097 dated 19/04/1438H (corresponding to 17 January 2017G) postponing the Circular’s

implementation to the fiscal year ended 31 December 2017G and subsequent years. Pending the issue of Zakat, Tax and

Customs Authority directives for the Circular’s implementation mechanisms and procedures, the implementation of this

Circular including the final requirements to be met is still pending, as are the rules imposing income tax on all non-GCC

residents who hold shares in Saudi listed companies and the rules imposing withholding tax on dividends for non-resident

shareholders regardless of their nationalities. The Company has not yet assessed the financial impact of this Circular, nor

has it taken adequate steps to ensure compliance therewith, given that the Company is a closed joint stock company.

Since the Company has foreign shareholders, if the financial impact of the Circular is significant or if the Company incurs

additional costs to take the necessary steps to ensure compliance therewith, this would have an adverse effect on the

Company’s business, financial position, results of operations and prospects.

2.2.13 Risks Related to Changes in the Prices of Energy, Electricity, Water and Services

Related to the Company’s Operating Expenses

The Saudi Council of Ministers issued Resolution No. 95 dated 17/03/1437H (corresponding to 28 December 2015G), raising

energy prices (including fuel) and electricity and water and sanitation tariffs for residential, commercial and industrial sectors,

in line with Kingdom of Saudi Arabia policies aimed at rationalising the Government subsidy program. The Ministry of Energy

and Industry issued a statement dated 24/03/1439H (corresponding to 12 December 2017G) on the Fiscal Balance Program

Plan to adjust prices of energy products. This led to an increase in the prices of gasoline 91, gasoline 95, diesel fuel for industry

and facilities, diesel fuel for transportation, and kerosene as at 14/04/1439H (corresponding to 01 January 2018G).

The Company’s water and electricity (operating) expenses were SAR 1,050,000, (0.002% of revenue and 0.002% of total

operating expenses), SAR 1,233,000 (0.002% of revenue and 0.003% of total operating expenses) and SAR 1,920,000 (0.004%

of revenue and 0.005% of total operating expenses) in the fiscal years ended 31 December 2018G, 2019G and 2020G.

The price increases shown above, as well as any other potential increases, could reduce clients’ disposable income in general.

Accordingly, the volume of sales in the Company may be adversely affected, and its operating expenses may increase, which

would have a material adverse effect on the Company’s business, results of operations, financial position and prospects.

2.3 Risks Related to the Shares

2.3.1 Risks Related to the Absence of a Prior Market for the Company’s Shares

There is currently no public market for trading the Company’s shares on the Saudi Tadawul Group. No assurance can be

given that there will be an active and liquid market for trading the Company’s shares after the end of the Offering. If an

active and liquid market is not developed or maintained, the trading price of the shares would be adversely affected.

Moreover, the Offer Price was determined based on a number of factors including the Company’s performance and

results, future business projections, the sector in which it competes, its Senior Management’s assessment, its operational

activities, its financial results and other factors. Any discrepancy in the projections for these factors could cause significant

fluctuations and great variability in the price of the Company’s shares and the ability to sell them.

2.3.2 Risks Related to Existing Shareholders’ Actual Control Post-Offering

After the Offering is completed, the Current Shareholders (direct or indirect) will own 70% of the Company. Therefore, the

controlling shareholders will be able to influence all matters and decisions that require Shareholders’ approval, including

the election of Board Members, approval of contracts, the Company’s important activities and dividend distributions and

potential amendments to the Company’s capital and its Bylaws.

Prior to the Offering, Abdelellah Abdulrahman Alkhereiji (a Selling Shareholder, a shareholder in Engineer Holding Group

Company, and the Chairman of the Company’s Board of Directors) will hold a 32.5% indirect ownership of the Company’s

shares (through his shareholding in Engineer Holding Group Company). As a result, he will individually be able to influence

all matters that require the Shareholders’ approval, including the election of the Board Members, capital adjustments and

other influential decisions (for further information, see Section 12.7.4 (“Shareholders Agreement”).

The interests of any of the Current Shareholders may conflict with those of other Company Shareholders, and the Current

Shareholders may prevent the Company from adopting certain decisions or actions that might protect the interests of other

Company Shareholders. This could also result in the postponement, delay, or prevention of any change in the control over

dividends or their distribution and could reduce the demand for shares, which would have an adverse effect on share value.

2.3.3 Risks Related to Potential Volatility of Share Price in the Market

The Offer Price may not be indicative of the price at which the shares will be traded following completion of the Offering.

Underwriters may not be able to resell their shares at the same or higher Offer Price, or at all, as the market price of the

Offer Shares may be adversely affected after the Offering by factors beyond the Company’s control. Such factors include:

 negative fluctuations in the Company’s operating performance and improved performance of its competitors;

 actual or anticipated fluctuations in its quarterly or annual operating results;

 publication of research reports on the Company, its competitors or the advertising sector by securities analysts;

 public reaction to the Company’s press releases and other public announcements;

 contradiction of analysts’ expectations by the Company or its competitors;

 resignation of key employees;

 adoption of important and strategic decisions or changes in business strategy by the Company or its competitors;

 changes in the regulatory environment that affect the Company or the advertising sector;

 changes in accounting policies and regulations adopted;

 terrorist events, wars or periods of civil unrest;

 emergence of natural and other disasters; and

 changes in the general market and economic conditions.

Accordingly, the occurrence of any of the above risks or other factors may lead to a significant decrease in share price on

the financial market.

In general, the financial market is subject to fluctuations in prices and supply volume from time to time. Market fluctuations

may lead to severe fluctuations in share prices, which in turn lead to a decrease in the value of shares, as well as greater

price fluctuation due to a decrease in the volume of share trading in the Subscribers’ investments in the Company’s shares.

2.3.4 Risks Related to the Sale of a Large Number of Shares in the Market Post-Offering

The sale of a large number of the Company’s shares on the Exchange following the Offering’s completion, or the possibility

that such sale will occur, could adversely affect the market price of the shares. Following completion of the Offering,

Engineer Holding Group Company and MBC Group Holdings Ltd. will be subject to a lock-up period of six (6) months as

at the date on which the shares begin to be traded on the Saudi Tadawul Group. During the lock-up period, they may not

dispose of their shares in any way. If Engineer Holding Group Company or MBC Group Holdings Ltd. sell a large number of

their shares after the end of the lock-up period, such sale will have an adverse effect on the Company’s share market and

thus reduce its market price.

The Company does not currently intend to issue additional shares after completion of the Offering. In the event that the

Company decides to increase its capital by issuing new shares, such issuance may negatively affect the share price on the

financial market and may reduce the ownership percentage of the actual shareholders if they do not subscribe for the new

shares at that time.

2.3.5 Risks Related to Dividend Distributions

Future share dividend distributions will depend on a number of factors, including financial position, future profits, capital

requirements, liquidity, reserves distributable by the Company, general economic conditions, and any other related factors

that the Board of Directors deem important from time to time. The Company may not be able to pay dividends, the Directors

may not recommend paying dividends, and the Shareholders may not approve paying such dividends. In addition, the

Company may not be entitled to do so according to provisions of the financing and credit facility agreements concluded

with financing entities, some of which require that the Company obtain the financing entity’s written approval before

distributing any dividends to the shareholders. The financing agreement between the Company and Saudi Investment

Bank stipulates that the Company shall not be entitled to distribute profits if it fails to comply with the terms and conditions

of the agreement. The financing agreement concluded between Saudi British Bank (SABB) and the Company stipulates

that the distribution of dividends shall be conditional on the absence of any breach of any obligation stipulated in the

agreement unless written approval is obtained from the bank. The Company may incur expenses or obligations that may

compel it to reduce or cancel the amount available for dividend distribution. If the Company does not pay dividends on the

shares, Shareholders may not receive any return on investment in the shares unless they sell the shares at a price higher

than the price at the time of purchase, which would have a material adverse effect on shareholders’ anticipated returns. For

more details, see Section 7 (“Dividend Distribution Policy”).

Moreover, under some of the Company’s facility agreements, the Company is required to retain a portion of its net profits

and/or revenues (between 25% and 50%) in the Company’s business, which may limit the Company’s ability to distribute

dividends to its Shareholders. None of the relevant banks have waived profit/revenue retention requirements as at the date

of this Prospectus (for more information, see Section 12.8 (“Credit Facilities”)).

2.3.6 Risks Related to the Future Offering of New Shares

The Company does not currently intend to issue additional shares after the end of the Offering. If the Company decides

to increase its capital by issuing new shares (six months after the Listing date), these newly issued shares may adversely

affect the market value of the shares, and moreover there may be a decrease in the ownership percentage of the actual

Shareholders if they do not subscribe to the newly issued shares.

3- Market and Industry Data

3.1 Introduction to the Market Consultant

The information contained in this Section is derived from a report prepared by the Market Consultant (Frost & Sullivan), a

company established in 1961G that has more than 1,200 employees in over 40 offices worldwide working exclusively for it

as at March 2020G. For further information, please visit the Market Consultant’s website: ww2.frost.com.

The Market Consultant does not, nor do any of its subsidiaries, associates, partners, shareholders, directors, managers or

relatives thereof, own any shares or interest of any kind in the Company or its subsidiary. As at the date of this Prospectus,

the Market Consultant has given and not withdrawn its written consent for the use of its name and logo and the disclosures,

market information and statements supplied by it to the Company in the manner and format set out in this Prospectus.

The Company and Board Members believe that the information and data provided in this Prospectus that was obtained

or derived from other sources, including the information those provided by the Market Consultant, are reliable. However,

this information and data has not been independently verified by the Company, the Directors, the Current Shareholders or

other advisors. Therefore, none of them assume any liability for such information.

All data in this Section pertaining to 2020G has been obtained from the Market Consultant’s report in addition to other

sources, including studies in online publications, reports by global advertising agencies, government websites and

statistical portals, and initial research interviews with foreign advertising companies located in the Kingdom of Saudi

Arabia. Also note that all data and statistics contained in this section are based on the latest available information about

the market and the sector in which the Company operates. However, in cases where there are no relevant statistics or data,

such as data related to outdoor advertising revenue in the Kingdom of Saudi Arabia, such information has been projected

based on previous growth data. These projections were formed and confirmed by cross-referencing information obtained

from secondary sources and research interviews with major players in the outdoor advertising sector. In addition, the

information in this section does not include future projects expected to commence operation in the coming years.

3.2 Overview of the Saudi Economy

3.2.1 Kingdom of Saudi Arabia: A Promising New Chapter in Economic Growth

The Kingdom of Saudi Arabia’s economy is one of the fastest growing economies in the world. It is an active G20 member

and the largest economy in the Arab world and the Middle East.

The petroleum sector accounts for 42%, 87% and 90% of the Kingdom of Saudi Arabia’s GDP, budget revenues, and export

revenues, respectively. After several decades of reliance on oil and gas revenues as its main economic driver, the Saudi

government is making concerted efforts to change the country’s basic economic structure and diversify revenue sources

through comprehensive economic reforms at all levels, as exemplified in Vision 2030.

The Kingdom of Saudi Arabia, like other countries, was affected by the drop in global oil prices in 2017G and 2018G.

Accordingly, the government adopted pioneering initiatives to establish a broader economic foundation for the country by

encouraging the development of local industries. This positive change is expected to lead to substantial tangible benefits

in the near future. With the decline of oil revenues in 2020G, Saudi Arabia’s global ranking on ease of doing business by

World Bank slipped to the 63rd spot as compared to the 62nd spot in 2019G. The Kingdom of Saudi Arabia witnessed a

sharp decline in international oil prices, with a historic collapse to $18.4 per barrel in April 2020G due to weak demand and

production cuts agreed upon by the OPEC Plus countries. This took its toll on real GDP growth, which declined dramatically

to (4.1%) in 2020G.

The following table illustrates the Kingdom of Saudi Arabia’s real GDP growth between 2013G–2020G.

Table (3-1): Kingdom of Saudi Arabia - Real GDP Growth (2013G-2020G)

Gregorian Year GDP Growth (%)*

2013G 2.7%

2014G 3.7%

2015G 4.1%

2016G 1.7%

2017G (0.7%)

2018G 2.4%

2019G 0.3%

2020G (4.1%)

Source: Frost & Sullivan

*All real GDP growth percentage figures have been rounded-up.

The Kingdom of Saudi Arabia’s economy experienced a decline of -0.7% in real GDP in 2017G and a marginal recovery of

2.2% in 2018G. It further improved in 2019G with a GDP growth of 1.9%. In the first quarter of 2019G, the Kingdom of Saudi

Arabia achieved a budget surplus of about SAR 39 billion. This surplus growth is due to the total revenues generated from

oil and non-oil sources. GDP growth declined in 2020G, given the setback of the global pandemic, when economic activity

was severely restricted and a lockdown was imposed to contain the spread of COVID-19.

The International Monetary Fund (IMF) stressed Kingdom of Saudi Arabia’s economic potential and expected growth of

3.1% in 2021G, against the background of the upward movement in global oil prices with the resumption of economic

activities globally.

3.2.2 Prospects: Maintaining Economic Growth and Looking Beyond Oil

In 2016G, the Government set out its plans in line with Vision 2030, a document that elaborates a blueprint for the Kingdom

of Saudi Arabia’s future growth with specific objectives that include, but are not limited to, new job opportunities in the

retail field, higher expenditure on tourism (by foreigners and citizens) and new cultural and entertainment initiatives.

The Kingdom of Saudi Arabia has set an ambitious future objective to increase its total non-oil revenues from 16%

(since 2016G) to about 50% by 2030G.

According to the Kingdom of Saudi Arabia’s plan, the objective is to raise the SME share of the GDP from 20% to 35% by

2030G. At the same time, the private sector’s contribution to the GDP will increase from 40% to 65%. Focus will be placed

on strengthening local industries in untapped fields, creating new job opportunities for local residents, enhancing local

tourism and developing the culture and entertainment fields. All of these increases will be reflected in the country’s wealth

through higher expenditure by Saudi citizens inside the country rather than abroad.

If the current wave of changes is taken into account, the Saudi economy will shift to a more diverse and dynamic composition

shielded from price fluctuations in the global oil and gas markets. In general, the overall effect of all measures being taken

will lead to an increase in consumer expenditure. This is expected to be followed by a surge in advertising expenditure,

paving the way for additional growth in outdoor advertising revenue. Vision 2030 will result in, among other things, growth

of the increasing market share of outdoor advertising in general as an indispensable medium for all major campaigns. In

addition, a large part of outdoor advertising will be transformed into digital outdoor advertising to achieve a higher return

on available advertising spaces and attract more demand for outdoor advertising by all segments of advertisers.

3.2.3 Vision 2030 - The Kingdom of Saudi Arabia’s Transformation Plan

3-2-3-1 Main Pillars

Vision 2030 is the Kingdom of Saudi Arabia’s ambitious plan to reduce its dependence on oil. Vision 2030 is based on three

pillars: a vibrant society, a thriving economy and an ambitious nation. The country’s economic conditions have improved

since 2019G due to new investments and the Government’s reform efforts to increase domestic expenditure in the

country and the growing volume of foreign investments. The most important drivers of economic growth and consumer

expenditure include:

3-2-3-1-1 The Booming Retail Sector

Over the past decade, the retail sector in the Kingdom of Saudi Arabia has achieved an annual growth rate of more than

10%. This sector has about 1.5 million workers currently, over two-thirds of whom are expatriate workers. Therefore, the

Government aims to provide job opportunities to employ one million Saudi nationals in this sector by 2020G. In addition,

traditional retail trade still accounts for 50% of the market in the Kingdom of Saudi Arabia, as the retail market is limited in

terms of modern trade methods and e-commerce. The goal is to increase modern commerce and e-commerce contributions

to 80% of the retail sector by 2030G. This will be achieved by attracting regional and international investors and easing

restrictions on ownership and foreign investment.

3-2-3-1-2 A Sophisticated Digital Infrastructure

A sophisticated digital infrastructure is integral to today’s advanced industrial activities. The Government plans to partner

with the private sector to develop telecommunications and information technology infrastructure, especially high-speed

broadband, expand its coverage and capacity within and around cities, and improve its quality. The goal is to develop

construction standards to facilitate the expansion of broadband networks, strengthen digital transformation management

through a national council, improve regulations and establish an effective partnership with telecom operators to better

develop this vital infrastructure. The goal is to support local investments in the telecommunications and information

technology sectors.

3-2-3-1-3 Culture and Entertainment Initiatives

There will be significant investments in cultural and entertainment centres. A plan is in place to open 450 new centres for

culture and entertainment. The country has recently held many events under the banner of several seasons across the

Kingdom of Saudi Arabia’s cities, such as the Riyadh Season and Jeddah Season, which include concerts, plays, and many

other multicultural events. In addition, the Kingdom of Saudi Arabia has opened cinemas in the country after many decades

of prohibition, creating a new influx of entertainment revenue and advertising opportunities. Cinemas are permanent

users of outdoor advertising. The increase in other entertainment activities has also led to higher expenditure on outdoor

advertising.

3-2-3-1-4 Booming Tourism

Tourism is undoubtedly a major element of any country’s economic growth and revenue diversification. The Kingdom of

Saudi Arabia introduced tourist visas to encourage this vital sector, which includes activities such as visiting cultural and

archaeological sites in the Kingdom of Saudi Arabia and other vital aspects in line with visitors’ expectations. A major goal

is undoubtedly to have locals spend their money in the country rather than abroad.

3.2.4 Population

The Kingdom of Saudi Arabia is considered a young society, where 20% of the total population is between the ages of 30

and 39 and 35% of is between the ages of 20 and 39. This age group usually accounts for most consumer expenditure,

especially expenditure on recreational activities as well as activities that are promoted on the Internet and electronic

channels in general.

The following table illustrates the relative distribution of the Kingdom of Saudi Arabia’s population by age group.

Table (3-2): The Kingdom of Saudi Arabia - Estimated Population Distribution by Age Group in 2020G

Age Group % of the Total Population

0-9 years 17.1%

10-19 years 14.0%

20-29 years 15.4%

30-39 years 20.1%

40-49 years 18.4%

50-59 years 9.2%

60-69 years 3.9%

70+ years 1.9%

Source: Frost & Sullivan

3-2-4-1 Challenges

The Kingdom’s population in 2020G is estimated to be about 34.81 million people, according to World Bank data. This is a

jump of 1.97% compared to an estimated population of 34.14 million in 2019G.

However, there is a large gap between the skills required by the private sector and the skills of Saudi graduates. This gap

will remain a challenge to the Saudi economy in the short term until educational outputs are developed to align with

labour needs. Many Saudis in the labour market are either unemployed or their qualifications are not suitable for market

requirements. This gap and the Kingdom of Saudi Arabia’s decisions regarding the cost of employing non-Saudis in various

jobs currently pose a challenge to economic growth.

3-2-4-2 Opportunities

Given that the Kingdom of Saudi Arabia’s demographic composition largely consists of a young population, there will

likely be a new generation of consumers that is knowledgeable about consumption trends at the international level and

items marketed via the Internet. This segment also prefers to travel, use digital media, make purchases online and use

social media. They are the largest consumers of indoor entertainment (such as cinemas and digital viewing platforms) and

outdoor activities (concerts, events, and parks).

3.3 Global Outdoor Advertising Market

Outdoor advertising is an important and essential method for advertising agencies and their clients. A large billboard

with an eye-catching appearance will attract consumers’ attention better than other mediums. The importance of outdoor

advertising is mainly due to it being located in an outdoor environment and the ease of displaying it to a very large number

of passers-by.

While an advertisement in a newspaper or magazine can be skipped or ignored, or a commercial break on the TV or Internet

can be avoided by switching channels (or even fast-forwarding through DVRs), a large billboard or even a series of Mupi

advertisements in malls or Megacom billboards cannot be ignored when people are travelling, walking or shopping.

The unique nature of this advertising method makes it an indispensable choice for all major marketing campaigns and a

means for brand-building. It is often the preferred choice for publicising the launch of major campaigns and new ads. This

method has managed to survive and compete with other methods because it encompasses several features that are not

provided by other advertising mediums.

The year 2020G was fraught with challenges for the outdoor advertising market. The decrease in outdoor advertising

expenditure in 2020G is attributed to lower consumer mobility and traffic together with limited international transportation.

The sectors that witnessed a significant decrease in advertising expenditure were automotive trade, retail trade, travel and

tourism. In 2020G, the global market share for outdoor advertising decreased to 4.75% of the total advertising expenditure.

However, it is estimated that it will grow to 5% in 2021G and will continue to grow thereafter.

While advertising expenditure will increase proportionally to the economic recovery, improved business conditions,

increased mobility and consumer high morale in 2021G, outdoor advertising, especially digital advertising, will continue to

push the advertising market ecosystem forward.

3.3.1 Outdoor Advertising - A Long-Term Medium

With the advent of the Internet, digital media and social media sites (Facebook, Instagram and Twitter) introducing new