Group economics: is the group covering its cost?

What this proves. The national address line matches the audited accounts to the riyal. The consultancy line, which is the management support fee plus the marketing fee added together, matches to within 1.4 percent. So the mapping is sound.

What it exposes. The one line that does not tie is the delivery leg, where the audited accounts show SPL buying 17,460,739 more service from Saudi Post than the product tables account for. Roughly 17.5 million riyals of intercompany purchase is not attributed to any product.

One. Contract 2022/1, Clause Three, page 7. Saudi Post pays SPL the management and operations support fee.

“The total value of this contract is forty seven million, ninety one thousand, three hundred and thirty six (47,091,336 SAR) Saudi Riyals, and it is inclusive of all taxes and governmental fees for each year, provided that the First Party bears all amounts, fees, and operational costs for all services assigned to the Second Party, namely expenses related with the performance of the services and performance payments according to First Party policies for the functions being performed by the Second Party.”

Two. Marketing and Sales Services Agreement, Article 4.1.4, page 4. Saudi Post pays SPL the 6 percent fee.

“The First Party shall be financial liable and will pay for any specialized third-party services that the Second Party is required to sub-contract to effectively provide the services and support defined under the Agreement.”

Article 2 on page 3 says the same in the scope clause: the services include “the possibility to sub-contract at the expenses of the First Party specialized services related with the sales and marketing.”

Three. Addendum 3 to the Sale of Services Agreement, Appendices 1, 2 and 3. Here SPL pays Saudi Post, and the clause still runs the same way.

“SP will perform all the activities of advertising and promotion of the services under this agreement at its own expense, with these expenses being covered within the financial consideration stipulated in this Addendum, provided that the Second Party’s approval on the content of these campaigns is obtained.”

Fixed, in every executed agreement read. Not one is cost-plus, and no markup percentage appears anywhere.

A mismatch worth recording. EY’s information request asked management: “Do we have any observations on the pricing methodology used (cost-plus)?” Management answered “Need clarification”. So the request assumed cost-plus, management did not confirm it, and no executed contract contains it.SPL - Revised IRL - 8 July.xlsx, sheet A Governance, row 5 “Pricing model”, answered copy returned by Aasem 16 July 2026

What the text supports, stated plainly. SPL’s margin is not guaranteed across the board. On four of the five services above, the performing party carries its own inefficiency, and on two of those the performing party is SPL. Management’s own numbers confirm SPL actually absorbed losses on marketing in 2025 and saw its address margin more than halve.

But on the single largest fixed flow it is different. Contract 2022/1 is the one place where a party takes a fixed fee while the other side is written as bearing the operating costs behind it. If that is how it has been applied, SPL’s return on that contract is insulated from its own efficiency.

What the text does not settle, and I will not infer. Clause Three says Saudi Post “bears” the costs. It does not say how. Two readings are open and the contract does not choose between them: either Saudi Post reimburses SPL for costs SPL incurs, or Saudi Post simply keeps those costs on its own books and never charges them onward. The financial consequence is very different and nothing in the document decides it.

Read the last two lines together. Saudi Post reports a surplus of 1.43 billion riyals. It gets there because 3.15 billion of its revenue is state funding. Set that aside and compare only what it earns from selling services against what it costs to run: the gap is roughly 2.15 billion riyals.

Against that, the 146,904,521 SPL pays is 17.1% of Saudi Post’s entire goods and services revenue. Meaningful, but nowhere near enough to change the picture.

So the all-inclusive answer is no. Saudi Post is not covering its cost on delivery, and no transfer price at any plausible level would make it do so. Its accounts also do not break the 3.01 billion of expenses down by service, so the loss cannot be attributed product by product.

On the documents. Nothing in the contracts, the addenda, PwC’s deliverables or the audited accounts states a cost per service for either side. PwC’s D3 gives a transfer price and an average customer price per product, but no cost. Saudi Post’s accounts give one combined expense line. SPL’s accounts give segment totals, not service costs.

On the request. The answer is no. The revised information request list built on PwC’s D6 templates asks for segmented profit and loss by transaction flow and by segment, and for product-level revenue. Management returned rates, units, revenue, cost and gross profit at product level for 2023 to 2025 in the answered version. But the request never asked either party for a cost-to-serve build, an allocation basis, or how indirect cost reaches a product. What came back is a cost figure with no method behind it.SPL - Revised IRL - 8 July.xlsx, sheets A to E, from Ismail Arafeh of EY, 9 July 2026, and the answered copy returned by Aasem 16 July 2026

My reading: this is the single largest hole in the engagement. Without an agreed cost-to-serve method, product-level cost figures cannot be relied on, and fairness cannot be tested at product level no matter how many prices are collected.

This section is my analysis, built only on figures verified elsewhere on this page.

First order, and it dwarfs everything else. Saudi Post’s trading gap of roughly 2.15 billion riyals is closed by a 3.15 billion government transfer. Whatever the transfer prices are, the taxpayer is funding the network. No plausible repricing of a 147 million intercompany flow changes that.

Second order, inside the group. On verified terms alone, the arrangement tilts toward SPL: Saudi Post is paid in 60 to 90 days and pays in 15 to 30; it bears the operating costs behind the management fee and the advertising behind the retail products; it gives SPL free commercial use of the national address database; and on the one product where a contract card and management’s figures can both be checked, e-P.O. Box, the card says 8 percent and the reported share is 76.

What I will not claim. I cannot say SPL is over-earning, because SPL’s own costs are not split by service either, and its marketing arm ran a 14.2 million loss in 2025. Nor can I size any subsidy, because volumes and cost-to-serve are both missing. Anyone putting a number on the subsidy today is guessing.