Agility Public Warehousing Company K.S.C.P. (MKHZN.KW) Earnings Call Transcript & Summary

Hello, everyone, and thank you for joining us on today's Agility Public Warehousing Q2 2025 Earnings Webcast. My name is Drew, and I'll be the operator on today's call. [Operator Instructions] With that, it's my pleasure to hand over to Aly Adel to begin. Please go ahead when you're ready.

Good morning, good afternoon, everyone. Thank you for joining us today. This is Aly Adel. And on behalf of Arqaam Capital, I would like to welcome you all to Agility Public Warehousing Q2 earnings call. So without any further delay, I will now turn over the call to the management team to start the presentation. Please go ahead.

Thank you, Aly, and welcome, everyone, to Agility's Q2 2025 earnings webcast. Today, we will be presenting to you Agility's financial and operational performance during Q2 of 2025, and Khadija will also be addressing your questions towards the end of the session, as was previously mentioned. [Operator Instructions] And before I hand it over to Khadija, I would like to draw your attention to the disclaimer on the second page. And with that, I'll hand it over to Khadija to start the presentation. Thank you.

Thank you, Youssef. Good afternoon, everyone. My name is Khadija Obla, and I am the CFO of Agility KSCP. Today, I'll take you through 2025 second quarter results. We will cover the new strategic direction, the distribution of Agility Global shares and the performance of our continuing operations as well as we'll cover the accounting impact from the structural transition this quarter. After that, we'll open the line for your questions. Q2 was a transitional quarter for the company. On June 17, as you know, the Board approved a new strategic direction that repositions the company in line with Kuwait Vision 2035. This plan builds on Agility's original mission to develop warehousing and logistics in Kuwait and also a plan to commit over KWD 100 million in investments by 2030 in priority sectors. The Board also approved an in-kind dividend distribution of 20%, 20.09% precisely of Agility Global shares. The objective is to give shareholders a direct stake in high-growth international platform while improving Agility Global's free float liquidity and visibility in global markets. This is a continuation of the road map that started last year. From continuing operations, revenue was KWD 36.1 million, EBITDA at KWD 16.2 million, up 36% year-on-year and net profit KWD 8.7 million, up 196% year-on-year. This quarter also reflects the accounting reclassification of Agility Global. Under applicable accounting standards, IFRS 5, assets held for distribution must be remeasured at fair value on the reporting date. Given that Agility Global is a listed company in Abu Dhabi, the closing market price as of June 30, 2025, was used as the fair value of remeasurement. As Agility Global was trading below its book value, the difference between the book value and the market value was recognized as a loss in KSCP Q2 2025 income statement. The result is a noncash loss of KWD 292 million, purely an accounting movement. It's a one-off adjustment of the consolidated results. And the fair value will be remeasured again on the July 14, 2025, and that's the date where the shares were transferred and distributed to the shareholders. So again, it's important to emphasize that this is a technical accounting adjustment, does not reflect cash flow and does not reflect KSCP's fundamentals and its underlying performance. So as mentioned earlier, with the Board's new strategic direction that's aligned with the Vision 2035, which is a commitment to invest over KWD 100 million through 2030 in priority infrastructure sectors, sectors that Agility KSCP has built a very solid track record over the years. The key elements include aligning operations with national priorities, fostering Kuwait talent and rebranding to reflect the company's renewed vision on Kuwait. Following the July distribution, Agility KSCP will retain 25% stake in Agility Global. And from Q3 onwards, Agility Global will be deconsolidated and reported as an associate. This simplified our financial reporting and sharpens KSCP role as a Kuwait-focused infrastructure operator and investor while still giving our shareholders exposure to a global logistics and infrastructure platform. Now moving on to the income statement. So as mentioned, revenue stood at KWD 36 million, pretty much flat with what was reported last year in the same quarter. reflecting stable performance across our continuing operations. So please just -- this slide only reflects the continuing operations of Agility KSCP and does not consolidate the performance of Agility Global. In terms of net revenue, it grew at 11% to KWD 30 million and EBITDA grew at 33%, reaching KWD 16 million. The uplift reflects both operational improvements and some one-off items. Net profit grew 196%, supported by a lighter financial load because Agility Global-related debt now resides in Agility Global and they're not reflected in Agility KSCP. And also the results reflect improved operational results. Now in terms of the first half of 2025, revenue grew to KWD 74 million, slightly higher than the same period last year. And again, the numbers here are reflecting performance of continuing operations. The net revenue reached KWD 62 million, reflecting stronger core performance compared to last year. And EBITDA reached KWD 31 million, showing solid growth, though part of the increase includes one-off items as mentioned earlier. Net profit was at KWD 18 million versus KWD 12 million last year, an increase of 100 -- sorry, of 45%, supported by operational improvements and lower financing costs. The results overall show healthy growth over revenue, EBITDA and net profit, but this should also be seen in the context that this is a transition year for KSCP, where the underlying resilience is clear, there are also structural changes that took place. Before we move to this slide, I also want to just give an update on our operations and continuing operations in Kuwait. So our businesses are focused on growth and value creation. Global Clearinghouse, GCS, continues to perform well and becoming more efficient. MRC has won a bid to build a metal reclamation facility in collaboration with KSCP. And our logistics parks are moving ahead with the S2 industrial project of Sabah Al-Ahmad City, which covers 1.3 million square meters and designed to basically be one of the major projects in infrastructure, commercial logistics and services hub. Phase 1 is pretty much on track, and we're pretty much broadly on schedule across all the components, and we see this as a major development for projects of KSCP in Kuwait. Now let's move on to see the impact of IFRS 5. So as mentioned earlier, under IFRS 5, Agility Global was classified as held for distribution to shareholders. The remeasurement led to a noncash loss of KWD 292 million, which, as mentioned, was the difference between the market price value of Agility Global shares at the end of June 2025 and the book value. As a result, the consolidated net figures showed a reported loss of KWD 292 million, which is KWD 291 million minus the net profit from the continuing operations of [indiscernible]. And that's basically equivalent to KWD 113 per share. Again, this is an accounting-driven only and Agility Global's operations continue to perform well. Now moving on to the balance sheet. Total assets contracted to KWD 3.8 billion from KWD 4.2 billion at the end of last year. This was largely due to the reclassification of Agility Global related assets and the loss due to the remeasurement mentioned earlier. In terms of reported total liabilities, it increased to KWD 2.5 billion from KWD 2.2 billion. We're also reflecting here the reclassification of KWD 1.9 billion of liabilities linked to assets held for distribution to shareholders, and that's the line that we've separated them, so they're very clear in the balance sheet. And the increase in liabilities is due to a number of factors, including the in-kind dividends, the increase in the debt of Agility Global, which will be eliminated once the consolidation takes place and reflects in Q3 results. On the equity side, the shareholders' equity decreased to KWD 540 million from KWD 1 billion. This reflects the in-kind distribution of Agility Global shares, KWD 25 million cash dividends as well as the related IFRS 5 adjustments. Overall, these changes are structural and reflect distributions and reclassifications, not underlying weakness. The balance sheet remains solid and aligned with the company's new strategic direction. So despite the reclassification, the balance sheet remains solid and aligned with our new strategic direction to focus on Kuwait for Agility KSCP while giving our shareholders access to international growth and exposure through their agility global shares. Agility KSCP also continues to rank among the highest companies on Boursa, Kuwait's premier market, both in terms of assets as well as equity. Now taking a look at the cash flow. I mean, cash flow remains healthy. Net cash from operating activities stood at KWD 78 million compared to KWD 80 million in the same period last year. But please note here that the cash flow figures reflect both continuing and discontinuing operations. In terms of net cash from investing activities was a negative KWD 25 million compared to a negative KWD 36 million last year. Free cash flow stood at KWD 53 million, up KWD 44 million from the same period last year. And so the cash flow position still reflects strong liquidity and disciplined capital management, which provides flexibility to execute on our Kuwait-focused strategy moving forward. So to close, I mean, looking ahead, our priorities are very clear for Kuwait KSCP. Our company will support Kuwait economic diversification and infrastructure modernization, would like to drive efficiency and value creation across all our continuing operations. We're planning to deliver on the KWD 100 million investment program by 2030 and maintain, obviously, exposure to international growth through the 25% stake in Agility Global. And to summarize, as I mentioned as well, Q2 was quite a transitional quarter shaped by structural changes, the adoption of the new strategic direction, also the movement due to the accounting treatment. The reported consolidated loss reflects an accounting adjustment, not the fundamentals of the business. And our continuing operations are executing well with healthy financial performance and a solid balance sheet and strong cash generation. With a sharper focus on Kuwait and continued exposure to Agility Global, Agility KSCP is positioned for long-term sustainable value creation. So that was the close of my presentation. Thank you for your time and attention. With that, just give a few minutes as we connect to the platform for your questions. Thank you.

[Operator Instructions].

So the first question that we have is, when will you distribute the remaining Agility Global shares? At this stage, there is no plan to distribute the remaining 25% of Agility Global shares. We're progressing by holding the 25% shares. And if in the future, there is a change in the strategy of capital allocation, that would be a decision by the Board.

[Operator Instructions].