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

Hello, everyone. This is Laura Aqel 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 Year-end Financial Results Investors Call. On this call, we have Mr. Mohammad Al Ramahi, the adviser to the CEO of Aamal Company; and Mr. Zaid Shelleh, 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 year ended 31st December 2021. My name 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 the highlights of the year, as set out on Slide 2 of the presentation. This was a strong set of financial results for Aamal, reflecting the company's clear and successful strategy, its diversified and resilient business model and its sustained financial strength as well as the improved operating environment. The momentum of growth and profitability established in the first half year continued through the full year with strong operational performances across all 4 business segments. Industrial Manufacturing, Managed Services and Property all delivered significant increases in revenues and net profits as we continue to focus on operational excellence, product innovation and financial discipline. We continued to further integrate ESG into Aamal's day-to-day operations and achieved a number of important milestones during the year, including the launch of a new fully accessible website and a partnership to support Qatar's Olympic team. We remain focused on pursuing growth opportunities across all our business segments while maintaining a strong balance sheet and low gearing, ensuring that Aamal is well positioned to benefit from the continued recovery of the wider economy. The numbers on Slide 4 demonstrate the extent of the strong performance in the year ended 31st December 2021. Revenue increased by 22% and total net profit increased by 156.3%. Our Industrial Manufacturing, Property and Managed Services segments each delivered strong revenue, profit and margin improvement compared to the full year of 2020 as they benefited from the easing of lockdown-related restrictions. Our balance sheet remain strong, and we have low levels of gearing at 4.5%. As a result of Aamal's robust performance and continued financial strength, we are pleased to announce a proposed cash dividend of 5%. Turning now to each of our segments. Industrial Manufacturing performed well with revenue increasing 113% year-on-year to QAR 431.7 million, and total net profit up 74.7% to QAR 56.6 million. 2021 saw a normalization in demand levels and increased project activity, and Aamal was able to capitalize on these trends with new product launches, increased production capacity and client base development. Across the segment, new products included Doha Cable's new lead-free cables, which replaced more dangerous and expensive lead cables, while Aamal Maritime benefited from strong demand for shipping services. Although the segment is experiencing increased competition and rising costs, the outlook remains positive. The Qatari government has allocated QAR 74 billion for major infrastructure projects in 2022, which, coupled with the increasing number of contracts related to the World Cup, is expected to increase demand for the Industrial Manufacturing. Turning to Trading and Distribution. 2020 saw unprecedented demand during the pandemic for medical products. The gradual return to normality, which we have thankfully seen this year, has surely led to a decrease in demand for such products. However, Ebn Sina and Aamal Medical continued to perform well both financially and operationally, driven by contract wins and new technology development. Revenue and profits are up 10% and 6%, respectively, compared to the pre-pandemic levels of 2019. Aamal Trading and Distribution continues to face strong competition and sustained pandemic-related challenges. But it is -- but is focused on growing the client base and expanding its product offering to mitigate the impact. Revenue and net profit in the Property segment were up 38.8% and 945.9% year-on-year to QAR 262.6 million and QAR 197.6 million, respectively. These numbers reflect the ongoing normalization of rental revenues and occupancy levels compared to 2020. There were no fair value adjustments to improve -- to investment properties in this period. City Center Doha celebrated its 20th anniversary in the fourth quarter and has seen over 50 new retail outlets opened this year. Work to develop the frontage of City Center is almost complete, and work will soon begin on the new bridge connecting them all to the metro, further improving the customer experience. The slow return to normality continues for much of our Managed Services segment. Revenue was up 45% year-on-year to QAR 67.7 million, and net profit rose 458.8% to QAR 6.1 million. The majority of our Managed Services businesses performed well, reflecting the positive impact of the easing of restrictions. We expect to see a further improvement in their financial performance as the economy recovers and restrictions ease further with the FIFA World Cup expected to drive significant demand for these services. Concluding with Slide 10, summary and outlook. The strength and resilience of Aamal's diversified business strategy has again been demonstrated over the past year with solid contributions made by all segments. As pandemic restrictions eased towards the later part of the year, our businesses were able to benefit from this improved operating environment and returned to growth mode. The initiatives undertaken to navigate the challenges of the pandemic and target growth and operational efficiencies delivered strong year-on-year 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 adequate liquidity. Although some uncertainty from the pandemic remains, there are clear growth opportunities. Recent developments and its economic growth makes Qatar an attractive destination to investors and Aamal remains well positioned to benefit. The Board is confident that the outlook for Aamal looks positive in 2022 and beyond. This concludes our presentation, and I now welcome any questions you may have.

Thank you, Mr. Ramahi. Thank you, everyone. [Operator Instructions] Yes. We have a question from Mr. Zohaib Pervez from Al Rayan Investment.

With regards to the industrial segment, again, you had a very strong year. Of this 113% revenue growth and 300% bottom line growth, how much contribution do you think is from the Maritime segment?

So thank you, Zohaib, for your question. In the industrial segment, the Maritime services contributed around QAR 42 million in the revenues, and there was significant also portion in this in the income.

And how much was this in 2020?

2020 was much less. It was -- and Maritime in 2020, it was a loss. And in 2021, we had the...

COVID and the dry dock.

Yes. In 2020, it was in the service and the dry dock.

And -- okay. And sir, you said QAR 42 million was the revenue in '21. And the bottom line, how much was it?

QAR 27 million.

QAR 27 million?

Yes.

Okay. And with regards to the Property segment, now you have opened the City Center, new portion has also opened. Could you give us some idea of what is the current occupancy? And only another 8,000 GLA will be added this year? Or do you have any other plans?

Yes. For City Center, what we are doing, as you know and everybody knows, we have continuous development in the mall -- of the mall. We have the frontage, and we have completed from inside all the renovation, and we are adding a lot of outlets in the mall. As we mentioned, we have opened more than 50 outlets during the year 2021. And the occupancy, I tell you confidently, it is in the high percentage. As you know, I cannot -- I will not be able to comment on the exact occupancy rate because of commercial sensitive information, but I can assure you, it is in a very high percentage, and we expect this to continue in 2022. And I mentioned this in other occasions for you to know the total leasable area of the mall is 140,000 square meters.

Okay. So this is my last question. So you've had a very strong year. Profits have now been -- revenues were actually higher, I think higher in the last 3 years or something, if I'm not wrong. And what do you -- where do you see the areas of growth?

That's a good question. Areas of growth, one of them is the Property, where we continue the development. And the Industrial Manufacturing, it is one of the main pillars of the company.

Okay. Sorry, for Property, I understand it's the expansion of the GLA. For Industrial Manufacturing, what's the growth story?

That we're doing it. And there is 1 more thing also in the Medical cluster, we're focusing more now in the technology. So with the industrial, to go back to your question, we are reviewing some of the projects that we will go for expansion as well and improving the existing plans that we have. Also we will -- I think we will benefit from the project that will be announced, hopefully, beyond the World Cup next year. So we need to be well prepared for these things as well.

[Operator Instructions] Zohaib, if you have other questions?

Yes, please. So Mr. Ramahi, your -- in '21, your revenue was the highest like since 2017, but your gross profit was lower, and that's primarily because your margins contracted. Could you tell us, are these margins a fair representation of going forward? Or is there any strategies or any extra cost savings, et cetera, that you're doing that will improve these margins, gross profit margins?

Well, this is an excellent question, and I really appreciate your questions all the time. Generally speaking, the margins are within this level. However, we are working on certain areas where we are trying to renegotiate the contracts to improve and enhance the margins. And the most important thing we are trying, because we are a conglomerate group, to leverage on our debt diversification and save the costing internally, like one of the things that we will save a lot the maintenance, and we're trying to do this internally. So there is a plan to benefit from these things and do a saving in these expenses.

Thank you, Zohaib. [Operator Instructions] Okay. Thank you, everyone. And I think there are no further questions. This concludes our conference call for today, and you may now disconnect.

Thank you.

Thank you, Mr. Ramahi.

Thank you, everyone. Thank you, Laura.