Aamal Company Q.P.S.C. (AHCS) Earnings Call Transcript & Summary

Hello, everyone. This is Laura from the Corporate Communications team of Aamal Company. I hope everyone is doing well and staying safe today. I want to welcome you all to Aamal Company's 2021 6 Months Financial Results Investors Call. On this call, we have Mr. Mohammad Ramahi, the adviser to the CEO of Aamal Company and Mr. Zaid Shelleh, the risk of -- the Risk and Compliance Manager at Aamal Company. We will conduct this call with first, the management presenting the company's results followed by a Q&A session. Mr. Ramahi, please proceed.

Good afternoon, everyone, and welcome to this presentation of Aamal Company's results for the 6 months ended 30th June 2021. My name is Mohammad Ramahi, and I am the adviser to the CEO of Aamal Company. Accompanying this call is a short presentation, which can be viewed and downloaded from Aamal website. I will begin by summarizing highlights of the first half of the year, as set out on Slide 2 of the presentation. This was a strong 6 months for Aamal, reflecting the resilience of its diversified business strategy and the ability to successfully meet all the challenges. As we navigated through the pandemic, profitability was restored across all our business segments as a result of our continuing focus on potential efficiency -- on operational efficiency, production base optimization and financial discipline. We increased capital investment while maintaining a strong balance sheet and low gearing, meaning that Aamal remains well positioned to weather any future impacts of the pandemic and to benefit from the continued recovery of the wider economy. All 4 of our segments performed well and business operations began to normalize as pandemic restrictions eased. The numbers on Slide 4 demonstrates the extent of the financial recovery in the first half of 2021. Our Industrial Manufacturing, Property and Managed Services segments each delivered strong revenue, profit and margin improvement compared to the first 6 months of 2020. Turning to each of our segments on Slide 6. Industrial Manufacturing performed well with revenue increasing 79% year-on-year to QAR 173 million and net profit up 28.2% to QAR 24.4 million. In 2020, the pandemic severely impacted projects in this segment, halting operations. However, in the first half of 2021, all subsidiaries benefited from the trend towards normalization in demand levels and the return of previously deferred orders relating to infrastructure projects. As demand continues to drive the increasing flow of contracts relating to the 2022 World Cup and Qatar's pipeline of other major infrastructure projects come onstream, volumes are expected to increase. This will support gradual margin improvement over the course of the second half of 2021 and beyond. Turning to Trading and Distribution on Slide 7. 2020 saw unprecedented demand during the pandemic for medical products as health care facilities upgraded equipment to ensure they could provide the best care for their patients. The gradual return to normality, which we have thankfully seen this year, has led to a decrease in demand for such products. However, Ebn Sina and Aamal Medical continued to perform well financially and operationally, retaining a significant portion of the increased revenue and profit levels recorded in the first half of 2020 and progressing various exciting initiatives. Moving to Slide 8. Revenue and net profit in the Property segment were up 59.9% and 458.6% year-on-year to QAR 120.4 million and QAR 93.3 million, respectively. These numbers reflect the ongoing normalizing of rental revenues and the elimination of negative fair value adjustments made in the first half of 2020 at the heart of the pandemic restrictions. City Center Doha saw many new retail outlets open and work continues to develop the frontage of the City Center, further improving the customer experience. Looking at Slide 9. This first half of the year saw a slow return to normal for parts of the Managed Services segment. Revenue was up 8.5% year-on-year to QAR 27.3 million, and the net profit rose 143.1% to QAR 700,000. Although conditions remain challenging for the -- for these businesses, the government's gradual lifting of the restrictions and limitation imposed on them should see an improvement in their financial performance and liquidity. For the summary and outlook on Slide 11. The strength and resilience of Aamal's diversified business strategy has again been demonstrated over the past 6 months with significant contribution made by all subsidiaries. The initiatives undertaken to navigate the challenges of the pandemic and to target growth and operational efficiency have restored the profitability of all business segments and delivered good revenue and profit growth. This strategy is underpinned by our financial discipline across all segments of the business and by our strong balance sheet, which remains a key asset with low gearing and healthy liquidity. The momentum of these first 6 months has continued into the second half of the year, and the Board of Aamal is looking forward with confidence to the remainder of 2021 and beyond. This concludes our presentation, and I now welcome any questions you may have.

Thank you, Mr. Ramahi. Thank you, everyone. [Operator Instructions] We have a question from [ Mr. Mead ].

We can't see if there is a question.

This is [ Mead ] here. So my question is with regards to Property segment. So based on H1 '21 numbers, what I -- somehow what I understand is the rental income has still not received the boost that it should receive from the expansion of the City Center Doha. So just if you can throw some light on that. Has the company already started receiving the rents from the new -- from the expanded capacity? So that is my first question. My second question is regards to the Kahramaa contract which we have. So, so far during the year in H1 '21, was there any sort of a revenue contribution from this contract?

Okay. Just I want to clarify on the first question. You're asking about revenue from the expansion or the normal revenue, which we -- from the rental -- from the regular, the currently existing customers -- tenants?

From the expansion.

From the expansion, okay. Thank you for your question, [ Mead ]. With regards to the City Center expansion, the expansion has been completed for the back area, if you see it, and we started generating revenue. And the -- also Gold Souq was completed. We're waiting for some approvals on some of the areas, but there is a portion of the expansion, which we call it Stage 2, Phase 2. We have now started generating income. The spaces were leased out, and we started to see income from these spaces. However, we have continued development of the City Center. For example, the frontage area, where we have some concept of coffee shops and seating area in front of the center, this is still under construction, and no revenue has been generated from that project yet. For Kahramaa project with -- yes, there was contribution started in 2021. But the uptake's lower than the expected. And so we expect the better or more uptake to come in the coming months and years.

Okay. For this Kahramaa contract, if you can share any ballpark number, which in terms of your revenue generation from this contract for the first 6 months of the year, if you can give any ballpark number.

If you remember, the contract was almost QAR 700 million. It was actually QAR 694 million and in the -- yes, over a period of 3 years. And in the first 6 months, we realized almost QAR 60 million of revenues.

QAR 60 million of revenue. Okay. Okay.

Yes. 6-0, 6-0.

6-0. Okay. So should we expect a similar number in the second half of the year as well?

Yes.

Mr. Ramahi, I think we have one of the attendees here on the call. His name is [ Mr. Abdullah ]. He has a question, but he would like to speak in Arabic, if you can please answer his question.

You are most welcome.

Yes. [ Mr. Abdullah ], [Foreign Language]. [Operator Instructions] We have a question from Mr. Zohaib.

Welcome back, Mr. Ramahi. So after many years, I've heard your voice again. Could you give us some sense of how the cost is -- I mean, you know copper prices are going up, the commodity prices are generally going up. Is that -- does that impact your cost structure for this contract that you have with Kahramaa?

Zohaib, first of all, thank you. And I think we have met several times in the past.

Yes, we have.