Kingdom Holding Company | Annual Report 2024 - Independent Auditor’s Report

Independent auditor’s report to the shareholders of Kingdom Holding Company

Report on the audit of the consolidated financial statements

Our opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Kingdom Holding Company (the “Company”) and its subsidiaries (together the “Group”) as at 31 December 2024, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards, that are endorsed in the Kingdom of Saudi Arabia, and other standards and pronouncements issued by the Saudi Organization for Chartered and Professional Accountants (SOCPA).

What we have audited

The Group’s consolidated financial statements comprise:

the consolidated statement of financial position as at 31 December 2024;
the consolidated statement of income for the year then ended;
the consolidated statement of comprehensive income for the year then ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of cash flows for the year then ended; and
the notes to the consolidated financial statements, comprising material accounting policy information and other explanatory information.
Basis for opinion

We conducted our audit in accordance with International Standards on Auditing, that are endorsed in the Kingdom of Saudi Arabia. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Group in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards), endorsed in the Kingdom of Saudi Arabia (the “Code”), that is relevant to our audit of the consolidated financial statements and we have fulfilled our other ethical responsibilities in accordance with the Code’s requirements.

Our audit approach

Overview

Key audit matter

Impairment assessment of indefinite life intangible assets

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated financial statements.
In particular, we considered where management made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates.

Key audit matters

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

Key audit matter	How our audit addressed the key audit matter
Impairment assessment of indefinite life intangible assets At 31 December 2024, the Group had indefinite life intangible assets, comprising goodwill and brand, which arose on past business combinations amounting to Saudi Riyals 1.1 billion and Saudi Riyals 681 million, respectively. In accordance with the International Accounting Standard (“IAS”) 36 “Impairment of assets”, that is endorsed in the Kingdom of Saudi Arabia, an entity is required to test indefinite life intangible assets acquired in a business combination for impairment at least annually irrespective of whether there is any indication of impairment. These intangible assets are monitored by management at the level of cash-generating units (“CGUs”) which are the relevant operating activities of the Group. Management carried out an impairment assessment in respect of indefinite life intangible assets by determining a recoverable amount based on fair value less costs of disposals using discounted cash flow model, which utilized the most recent business plan prepared by the management. The outcome of this assessment as at 31 December 2024 did not result in any impairment loss to be recognized. We considered impairment testing of indefinite life intangible assets performed by management as a key audit matter since the assessment of the recoverable amount under the fair value less costs of disposal basis requires considerable judgment around use of estimates by management. The critical judgmental elements of management’s assessment were: revenue growth and EBITDA margin assumptions; and discount rates and terminal capitalization rates used in the cash flow models. Refer to Note 4.9 and Note 4.16 for the accounting policies, Note 3.1 for the significant estimate and Note 14 for the related disclosures in the accompanying consolidated financial statements.	We assessed management’s impairment assessment of indefinite life intangible assets by performing the following procedures: Assessed the methodology used by management to determine the recoverable amount and compared it to that required by IAS 36; We tested the arithmetical accuracy of the models used and of the underlying calculations; Tested the reasonableness of the cash flow projections by comparison to the CGU’s historical results and underlying assumptions (revenue growth and EBITDA margin) supporting the growth in forecasted cash flows; Engaged our internal valuation experts to assist in the review of the valuation models and use of certain assumptions including discount rates and terminal capitalization rates; and Tested management’s sensitivity analyses over key assumptions as disclosed in Note 14 to the accompanying consolidated financial statements in order to assess the potential impact of a range of possible outcomes. We also reviewed the adequacy of the disclosures included in the notes to the accompanying consolidated financial statements.

Key audit matter

How our audit addressed the key audit matter

Impairment assessment of indefinite life intangible assets

At 31 December 2024, the Group had indefinite life intangible assets, comprising goodwill and brand, which arose on past business combinations amounting to Saudi Riyals 1.1 billion and Saudi Riyals 681 million, respectively.

In accordance with the International Accounting Standard (“IAS”) 36 “Impairment of assets”, that is endorsed in the Kingdom of Saudi Arabia, an entity is required to test indefinite life intangible assets acquired in a business combination for impairment at least annually irrespective of whether there is any indication of impairment.

These intangible assets are monitored by management at the level of cash-generating units (“CGUs”) which are the relevant operating activities of the Group. Management carried out an impairment assessment in respect of indefinite life intangible assets by determining a recoverable amount based on fair value less costs of disposals using discounted cash flow model, which utilized the most recent business plan prepared by the management. The outcome of this assessment as at 31 December 2024 did not result in any impairment loss to be recognized.

We considered impairment testing of indefinite life intangible assets performed by management as a key audit matter since the assessment of the recoverable amount under the fair value less costs of disposal basis requires considerable judgment around use of estimates by management. The critical judgmental elements of management’s assessment were:

revenue growth and EBITDA margin assumptions; and
discount rates and terminal capitalization rates used in the cash flow models.

Refer to Note 4.9 and Note 4.16 for the accounting policies, Note 3.1 for the significant estimate and Note 14 for the related disclosures in the accompanying consolidated financial statements.

We assessed management’s impairment assessment of indefinite life intangible assets by performing the following procedures:

Assessed the methodology used by management to determine the recoverable amount and compared it to that required by IAS 36;
We tested the arithmetical accuracy of the models used and of the underlying calculations;
Tested the reasonableness of the cash flow projections by comparison to the CGU’s historical results and underlying assumptions (revenue growth and EBITDA margin) supporting the growth in forecasted cash flows;
Engaged our internal valuation experts to assist in the review of the valuation models and use of certain assumptions including discount rates and terminal capitalization rates; and
Tested management’s sensitivity analyses over key assumptions as disclosed in Note 14 to the accompanying consolidated financial statements in order to assess the potential impact of a range of possible outcomes.

We also reviewed the adequacy of the disclosures included in the notes to the accompanying consolidated financial statements.

Other information

Management is responsible for the other information. The other information comprises the information included in the Annual Report of the Group, but does not include the consolidated financial statements and our auditor’s report thereon, which is expected to be made available to us after the date of this auditor’s report.

Our opinion on the consolidated financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

When we read the Annual Report of the Group, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Responsibilities of management and those charged with governance for the consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards, that are endorsed in the Kingdom of Saudi Arabia and other standards and pronouncements issued by SOCPA, and the applicable requirements of the Regulations for Companies and the Company’s By-laws, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, i.e. the Board of Directors, are responsible for overseeing the Group’s financial reporting process.

Auditor’s responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing, that are endorsed in the Kingdom of Saudi Arabia, will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with International Standards on Auditing, that are endorsed in the Kingdom of Saudi Arabia, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business units within the Group as a basis for forming an opinion on the consolidated financial statements. We are responsible for the direction, supervision and review of the audit work performed for purposes of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

PricewaterhouseCoopers

Khalid A. Mahdhar
License Number 368
17 March 2025

My Report

Consolidated Financial Statements

Independent Auditor’s Report