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 today. I want to welcome you all to Aamal Company's 2024, 6 Months Financial Results Investors Call. On this call, we have Mr. Mohammad Arif, the Accounts Manager of Aamal Company; and Mr. Zaid Shelleh, the Investor Relations Manager at Aamal Company. We will conduct this call with first Mr. Zaid presenting the company's results on behalf of the management in English, and then Arabic report will follow. Subsequently, a question-and-answer session will be answered by Mr. Mohammad Arif. Mr. Zaid, please proceed.

Good afternoon, everyone, and welcome to this presentation of Aamal Company results for the 6 months ended 30 June 2024. My name is Zaid Shelleh, Investor Relations Manager at Aamal, and I will be delivering this presentation along with Aamal's Accounts Manager, Mr. Mohammad Arif. We will be both available to answer your questions in a few minutes' time. Accompanying this call is a short presentation, which can be viewed and downloaded from the Aamal website. I will begin by summarizing the highlights of the first half of this year as set out in Slide 2 of this presentation. These were strong set of results with total net profit up 12.1%, while total revenue was down slightly by 2.1%, largely as a result of completion of Aamal Cables' contract. However, we achieved revenue growth across 3 of our 4 business segments with particularly strong performance by our Managed Services segment. It's performance which underlines the resilience and agility of our diversified business model. Throughout the 6 months, we successfully navigated challenging market dynamics and steadily advanced our strategic growth plans, both organically through our existing businesses and through investment avenues. This year, we have already secured some major new contract wins and signed several new agreements and partnerships. And our business model and strong balance sheet means that Aamal is well-positioned to capitalize on the wide spectrum of opportunities across the key sectors. The summary financial results set out in Slide 4 shows positive momentum across our key metrics other than the total revenue, which is as previously mentioned, so a marginal decrease. There were notable contributions to our financial performance from across the businesses and from Ebn Sina Medical and Aamal Readymix in particular. The acquisition of Maintenance and Management Solutions contributed to the significant revenue and profit increase in our Managed Services segment, while reduction in Head Office costs also had a positive impact on the results. Gearing fell further to reach almost 0.7% compared to 1.7% at the half year stage of 2023. The increase in CapEx was primarily due to the continued renovation work at City Center Doha, which, as I will come to later, is readily having a positive impact. Turning now to each of our segments, starting at Slide 6. In the Industrial Manufacturing segment, revenues declined 60.6% year-on-year, primarily due to the impact of Aamal Cables having completed the major contract. Total net profit, on the other hand, rose to about 44%. Aamal Readymix secured several new contracts for major construction projects. Aamal Cement also secured new contracts and is expected to perform well now in the second half of this year, despite being impacted during the first half by delays in construction-related projects. Following our recent acquisition, Aamal now fully owns Ci-San Trading, including its subsidiaries, Gulf Rock and Aamal Maritime Transportation Services. Our full control over these businesses means that we can further enhance Ci-San's market-leading position, expand its operations, and increase its competitiveness. Overall, the outlook for Industrial Manufacturing is positive thanks to the securing of major new contracts, notably the most recent QAR 1 billion El Sewedy Cables project with Kahramaa, as well as the potential for new Aamal Readymix contracts that we are foreseeing. Turning to Slide 7. In our Trading and Distribution segment, revenue increased about 11% year-on-year to almost QAR 749.2 million, while net profit fell by 8.3% to QAR 56.3 million. This fall was largely due to a subdued performance by Aamal Medical resulting from delay in contract renewals and new contract awards. However, Ebn Sina Medical performed particularly strongly, including signing 3 new distribution agreements and registering 26 new pharmaceutical drugs. Aamal Trading and Distribution also performed well, driven by successful promotion and price adjustments and secured some major 1 to 3 year contracts to supply different tires. Looking forward, demand is expected to pick up at the Aamal Medical for the third quarter onwards. And it has signed several strategic partnerships, including Austco, Health O Meter, and Gleamer to help modernize potential care in Qatar and extend its market-leading position. We continue to develop our healthcare offering to further capitalize on the significant opportunities across the sector. Moving to Slide 8 and the performance of our Property segment. We are pleased to report marginally improved performance for the period with revenue increasing by 2.3% to almost QAR 157.8 million, and net profit up slightly by 1.1%. This was as a result of stable occupancy and tenancy rate as well as rental adjustments to offset the cost increases. City Center Doha continued to see strong leasing with over 85% of space leased and new shops open such as Gold Souq in general. Aesthetic and customer experience enhancements at the mall continue to be implemented and we are seeing strong interest from leading brands with further new openings anticipated. Aamal has high-quality property portfolio in prime locations, which continually generate high demand. We will continue to invest in our assets to maintain their quality, market value, and market attractiveness. Turning to Slide 9 and the fourth segment, Managed Services. This segment delivered particularly strong performance with revenue up 86.3% year-on-year and net profit up 31.6%, largely due to the acquisition of Maintenance and Management Solutions or what we say MMS. Aamal Services secured some high-profile contract renewals and added new clients to its portfolio, while both ECCO Gulf and Family Entertainment Center also enjoyed successful first halves. The addition of MMS is already showing positive results and mean that we can now provide full range of solutions and services across this segment. To summarize, Aamal has seen strong first half of 2024. We have good reason to be optimistic that this momentum will be maintained and we are well-positioned to explore the clear growth opportunities available to us in 2024 and beyond. In particular, we are exploring new sectors such as Energy and IT through our recently announced subsidiaries, Aamal Energy and Aamal Information Technology. Total economic growth forecast for 2024 and 2025 remain strong, as do the significant growth opportunities offered to us by the Qatar National Vision 2030. All in all, the outlook for Aamal Company is highly encouraging. Thank you. This concludes our presentation, and we now welcome any questions you may have. I will start with my Arabic presentation. [Foreign Language] Thank you for your patience.

Thank you, Mr. Zaid. Thank you, everyone. [Operator Instructions] So we'll take the first question from Zohaib.

Thank you, Zaid, for the presentation. So during the presentation, I heard many times that the prospects for business are very strong for Aamal and you see a lot of opportunities. Our discussion with some of the other businesses do not give us that confidence. So what is driving this confidence that your business should improve going forward, and you see some bright opportunities? Could you talk a little bit about them also?

Thank you, Mr. Zohaib, for your question. Well, that's a good question that you have asked. We can go for this particular answer if we say sector-wise even. First of all, I would like to say, under the patronage of our CEO, Mr. Rashid Mansoori, throughout the year, we have been very, very busy in finding out synergies inside the group as well as more investment opportunities that we are looking ahead, and we are trying to boost into several sectors. Like our target is there to get inside the energy sector as well as the introduction of new IT sector. So some potential talks are going on. Still the studies are being conducted, so just to take it to the next level, but still he is having good high hopes into the new sectors. As well as when we say about the existing sectors, I can say, property segment, you see the results, we are performing better. And I would say even when I say top 25 anchor tenants, we have lease commitments until the year 2028 itself for the top 25, plus new tenants also joined us during this particular half year, like the new space given to McDonald's, then [ Texas ] came, Sephora came. We are working -- around 9 new tenants have come particularly in the half year. And we are seeing some more projects are going on with the new tenants. And we are expected to conclude even in the second half. In terms of Trading division, we are having a very good year. I would say, Ebn Sina is doing really great. As we mentioned that we signed new contracts with the new agencies, like 26 new pharmaceutical companies that we have signed with them. And plus, we are having our central position when we are saying Aamal Medical, yes, there has been a little bit delay, but yes, in H2, we are expecting -- some deliverables were delayed, so we are expecting that these deliveries will happen, [Foreign Language]. So coming down to the -- in the Trading division, more or less even from the tire part also, we have signed -- even we've brought even the new brands. So we are targeting and the numbers are also reaching to our expectations. When we are coming down to our third division, which is the Industrial segment. In the Industrial segment, we are having a very good performance that is coming even from our Aamal Readymix. This during this H1 reported into the positive numbers, and we are having some new good contracts that have been signed, particularly like Wakra Wastage Treatment Plant project. Plus in Aamal Cement also we are having -- some delivery delays here, but in the next half year of the plan, yes, deliveries might get cleared, and we are going to report good numbers even from the Aamal Cement side as well. Our JV partners mainly from the Senyar Group that we had signed a good contract this year, plus we are having performance when we say the increased performance is there from them. And plus a jump in our net profit from JV partners, particularly Senyar, is like 32%, reportedly higher when compared to the previous year. So we are having good deliveries because of -- now they are having different type of segments, which they are able to cater, because in this product mix from the Kahramaa, they are having low voltage cable, high voltage cable, plus they started -- we have a good export also. This year also, we are doing the export from them, particularly in UAE, Emirates and Iraq mainly. But this year, one more initiative has been done that they started supplying even to the Kuwait sector also, which is a good sign for us. Like they are spreading their wings across the Middle East from Qatar. So our product is getting accepted from there. Coming down to our Service division. Service division has done really well. The good decision happened towards the last year when we acquired MMS. That has positively resulted into our business. And MMS did a good performance this year compared with the last year even. And coming down to Service division also, they are also performing better, even though -- they have won a couple of orders also. As well as the family entertainment center also are promising for us. They also reported a good profit during the H1, because we did some renovation on the site. We bring new rides, new games, that is also increasing the footfall in our facility. This is the way we can say we are currently going into the positive directions only.

If I look at your different segments, the growth for the first half, it seems like, has come primarily from the JVs in your Industrial segment. I mean, the Property segment is down, Trading is down -- Property is flat. Trading profitability is down. Managed services is up 31%, but then it's very small -- so it's too small to make a big impact on the group. So it's Industrial Manufacturing and the JV segment. So which part of the JVs, which JVs performed well that brought about this 31% growth? Was it the...

It is the Senyar Group, under the Senyar Group mainly, it's coming from Senyar Group only, because they are having deliveries for Kahramaa project plus the [ North Field ]. So these deliverables have been increasingly like -- growth is coming majorly from there only. Because of the deliveries, and the sites were ready, so they were able to do more sales over there.

Okay. And these contracts that the Senyar Group has, where in the cycle are they? Are they complete? Are they midway?

No, no. It's still going on. This is going on. The projects are still going on. The first project was for the 3 years plan was there. And these are having a different cycle. Now we also got another QAR 1.2 billion this year even, which is also going to take 3 years. The delivery started from July onwards.

This is the Kahramaa contract, right?

Yes. Yes, Kahramaa contract.

So this year, you won 2 Kahramaa contracts?

Yes. One was already carrying on, the old one, and we won this year another 2. So we are totally on top of like -- yes.