Tihama announces updates on use of rights issue proceeds

Tihama Advertising, Public Relations and Marketing Co. announced today, Feb. 10, an update on the use of proceeds from its rights issue, which took place during the period from Nov. 16, 2020 to Feb. 10, 2021, according to a bourse statement.

The company indicated that the actual use of the proceeds until the end of Feb. 10, compared to what was disclosed in the prospectus for the rights issue shares, is as follows:

a- The total proceeds from the capital increase amounted to SAR 100 million.

b- The total direct and indirect expenses amounted to SAR 3.62 million.

c- Net proceeds stood at SAR 96.38 million.

d- The amount was used as follows:

1- Expanding the advertising network by adding 15 new billboards at a total investment cost of SAR 1.86 million.

2- An investment in partnerships in the production sector, for a total of SAR 2 million.

3- Production contracts for the Integrated Production Company for Audiovisual Media Production were financed by SAR 7.72 million.

4- An investment deposit of SAR 20 million was made in a local bank. Tihama also secured a credit facility of SAR 20 million against the pledge of that deposit.

5- An amount of SAR 303,735 was used as part of the company's plans to upgrade the automated systems and applications.

6- An amount of SAR 15.68 million was invested as part of the company's plan in the travel retail sector branches.

7- An amount of SAR 1.69 million was used for supplying and installing five LED advertising screens.

h- The remaining amount is SAR 47.13 million.

i- The used percentage of capital proceeds stood at 52.87%

The company attributed the 5% difference in the actual use of the proceeds compared to the original prospectus to:

- An amount of SAR 377,966 was saved in the expenses relating to the capital increase issuance as the forecasted cost of the expenses related to the capital increase was SAR 4 million as stated in the prospectus. Actual expenses were lower than the initial forecast.

- Expanding the network of advertising sites during Q3 2020, where an amount of SAR 1.64 million was allocated, and an amount of SAR 1.86 million was invested due to the increase in the actual rental cost of the advertising sites.

- Actual investment in partnerships in the production sector amounted to SAR 2 million against an amount SAR 3.09 million according to the plan for use of proceeds until Q4 2020.

- The company's strategy for growth and expansion identified the large and accelerating growth in the media production sector. Tihama also used SAR 7.72 million to fund production contracts for the Integrated Production Company for Audiovisual Media Production.

b The actual use of converting part of the current billboard portfolio into digital advertising screens amounted to SAR 1.69 million, against an amount of SAR 5 million, according to the planned use of proceeds until Q4 2020.

- An investment deposit of SAR 20 million from the capital raise proceeds was made in a local bank and a credit facility of SAR 20 million was obtained against the mortgage on the investment deposit, which is a temporary transfer for the expected use of the proceeds. Part of this financing were used in the restructuring of the financial obligations of the company within the framework of the company's strategy towards converting a portion of short-term liabilities into medium-term liabilities, in a way that contributes to improving the company's cash flow operations. Part of the facility will be used to replace the existing financing, which was repaid in quarterly payments ending on December 15, 2021, to medium-term financing over two years.

This investment will reduce the financial costs of the company during the coming financial periods, due to the decrease in the profit rate of the new financing that the company has obtained versus the profit rates of the existing Murabaha loans, according to the company.

Tihama also said that the amount that was transferred was not scheduled to begin to be used during the current period, as the plan for the expected use of the proceeds, per the prospectus, extended into Q1 2022. This is not an actual use of the proceeds as the proceeds are still in the form of a deposit that yields a return to shareholders pledged against the loan financing.

An amount of SAR 303,735 has been invested in upgrading the financial systems in retail sector to improve the progress of procedures related to sales reports. It was expected to start developing plans for automated systems and applications starting from the first quarter of 2021.

- An amount of SAR 15.68 million was invested as part of the company's investment in travel retail branches, and an amount of SAR 20.02 million was allocated until Q4 2020., The reason for the deviation in spend is due to the delay in signing contracts and allocating sites due to the COVID-19 pandemic.

- An amount of SAR 2.38 million has been allocated to open new branches in the retail sector and an amount of SAR 2.75 million to open new branches at King Khalid International Airport during Q3 2020. No amount of proceeds has been invested due to the delay of plans to implement these projects due to COVID-19 pandemic.

Tihama also clarified that if the investment deposit that was provided as a guarantee against the financing is excluded then the total amount remaining from the proceeds will reach SAR 67.13 million and the percentage of the amount used from the proceeds of the capital increase becomes 32.87%.

The company will review the plans for the use of the proceeds in considering future projects so that the surplus proceeds that are not currently required per the plan are invested to achieve an additional return for the company.