This year’s Top 100 list shows some significant differences from those in previous years. That is because the criteria for listing the companies has changed (see below). Ranking used to be based on company revenue. Team One, the Riyadh-based financial consultanty which researched and compiled the figures this year, has based the positions on a combination of revenue, assets and equity.
For that reason no comparisons between this year’s and previous year’s placings are possible. A third of the companies on this year’s list did not figure last year because of this change. Another change has been Team One’s decision to exclude private companies and groups that did not provide fully audited accounts in the interests of transparency. Although such companies were happy to divulge financial highlights, they do not publish their accounts, regarding them as private.
What is apparent from the figures is extremely strong growth in the economy. Apart from a very few companies which saw income decline, earnings in 2006 were, on average, between 12 and 25 percent up on the previous year. The big exception to this was banking - which saw spectacular growth in revenue.
It is no accident that of the six top companies, six are banks. Of the top 20, 11 are banks. Growth in the sector averaged 85 percent. Even at the bottom end, Al Rajhi Bank’s showing of 30-growth and NCB’s 34 percent will have brought a smile to shareholders’ faces. But quite remarkable was the performance of Arab National Bank with 91-percent growth, Banque Saudi Fransi and Saudi Hollandi both with 100-percent growth, Bank Aljazira registering 119 percent and the Saudi Investment Bank a staggering 166-percent growth.
Apart from banking, cables and drilling also showed major growth. Riyadh Cables’ revenue was 43 percent up, Saudi Cables 37 percent, Jeddah Cable 111 percent and Arabian Drilling 85 percent. The biggest increase in revenue altogether - 269 percent - went to Etihad Etisalat, which runs the Mobily cellphone network.
Many, if not most of the companies on this year’s Top 100 list are like the authorities and smaller businesses involved in the ‘Look East’ initiative of ‘Corporate Arabia’, whether it is SABIC which tops the list or Kingdom Holdings at No 3, owned by Prince Alwaleed ibn Talal, who has just been named as the No. 1 billionaire in the Middle East by Forbes magazine.
As such, the theme of the 2007 Saudi 100 supplement is highly relevant. As Saudi Ambassador to Canada, Dr Abdulaziz Al-Sowayegh, recently reminded, “turning eastwards is the natural strategic extension of the Kingdom’s economic policy that aims to diversify both the nature of our economic activity as well as our trade partners in the coming years. It also represents a mature awareness in the Kingdom’s diplomacy at a time when this part of the world (Asia), including China, Japan, Malaysia, India and Singapore, have become giant economic powers that are imposing themselves on the economic world arena. But, turning eastwards does not necessarily mean abandoning our relationship with western countries.”
The methodology followed in preparing the Top 100 Saudi Companies 2007 list
Team One prepared the methodology for the Top 100 Saudi Companies list after looking into methodologies followed in preparing similar world lists such as the lists of Fortune Magazine, Financial Times and Forbes Magazine. It was decided to adopt the methodology of Forbes as it is based on several criteria.
The list of Top 100 Saudi companies is ranked according to
points awarded to each company for turnover, assets and equity. These points were then added to give a final position.
On the basis of this methodology, SABIC received 300 points being the largest company in terms of turnover, assets and equity. Saudi Telecom Company, for example, was given 100.8 points in accordance with the following:
* 39.1 points while assessing its turnover compared to SABIC as STC’s turnover accounts for only 39.1 percent of the total turnover of SABIC.
* 27.7 points for assets compared to that of SABIC;
* 34 points for equity compared to SABIC.
As a result the STC was placed fifth on the list.
Distinguishing Features of the Methodology:
* It took into consideration the nature of the company involved; most private companies do not show transparency while preparing their financial statements, especially profits, in addition to the inability of comparing their market value.
* It has also taken into consideration a number of criteria in arranging the list, without showing any inclination toward a particular criteria.
* It has also considered the economic growth and increase in demand for products of some participating companies as a result of business cycles and this means the unsuitability of dependence on the figures of turnovers alone, as it was the case in last year’s list.
* We have also considered the variety of sectors participating in the list and this also shows the unsuitability of depending on a single criteria like assets, for example, so that there will not be any partiality toward productive sectors disregarding other sectors such as the financial sector.
* We have depended on official information given by companies through the website of the Saudi Stock Market (Tadawul) or information collected from companies directly.
Team One
