Makhazen (MKHZN) Earnings Call Transcript & Summary

Hello, and welcome to the Agility Public Warehousing Q3 2024 Earnings Webcast. My name is Nadia, and I'll be coordinating your call today. [Operator Instructions] I will now hand over to your host, Aly Adel from Arqaam Capital, to begin. Please go ahead.

Good morning, good afternoon, ladies and gentlemen, and thank you for joining us today. This is Aly Adel. And on behalf of Arqaam Capital, I would like to welcome you all to the Agility Public Warehousing Q3 2024 Earnings Call. With us from the management team, Khadija, the CFO; and Soriana, the IR Manager. Without any further delay, I will now turn over the call to the management team. Please go ahead.

Thank you, Aly, and welcome, everyone, to Agility's Q3 2024 Earnings Webcast. Today, we have Ms. Khadija Obla, Agility Public Warehousing Company CFO, who joined us last October. She will be presenting to you Agility's performance during the third quarter of 2024, and she will be addressing your questions towards the end. Again, if you have any questions, please write it down in the chatbox, which you can see on your screen. And I would also like to draw your attention to the disclaimer available on the second page of this presentation. If you can take a moment to read, and then I'll hand it over to Khadija.

Good afternoon, everyone. Thank you, Soriana. Thank you, Arqaam Capital, for setting up the call, and thank you to everyone joining us today for Agility K.S.C.P. Q3 2024 Financial Presentation. We appreciate your time and interest in our company. My name is Khadija Obla. I am the CFO of Agility K.S.C.P., a position I recently assumed, actually last month in October. Prior to joining Agility, I served both as the CEO and before that as the CFO of the Sultan Center K.S.C.P. Over the past 25 years, my career has spanned diverse positions and sectors, including investments, real estate, infrastructure and retail. It's a pleasure to be here today, and I look forward to presenting Agility's performance and answering your questions. So during today's call, we will walk you through a few slides outlining the financial performance for the third quarter and the 9-month period ended September 30, 2024. And following the presentation, we will open a Q&A session to address as many of your questions as possible. Agility continues to deliver strong results across its business segments for the third quarter. If you can see the graph on Slide #5, in terms of revenue for the quarter, reached KWD 411 million, an increase of KWD 50 million or approximately 14% year-over-year compared to KWD 360.8 million in Q3 2023. The net revenue for the quarter was equally strong at KWD 260 million or approximately -- sorry, at KWD 260 million, up by KWD 47 million compared to KWD 213 million in the same period this year. This represents a solid 22% growth in net revenue. In terms of EBITDA, we recorded KWD 70 million, reflecting a double-digit growth of over 19% compared to last year's figure of KWD 59 million. That's an increase of KWD 11 million. This performance was driven by a robust contribution from the main businesses entities, Agility Global mainly, in which we own 51% and which reported 27% growth in EBITDA and 46% growth in EBIT. For more insights into the performance of Agility Global, now listed on the Abu Dhabi Securities Exchange, ADX, I encourage you to review their Q3 2024 presentation and the earning details, all of which are available on their website. Now in terms of net profit for the third quarter, it stood at KWD 10 million, reflecting a decline year-over-year of 64%. This decrease is attributed to the reallocation of profit to minority interest following the in-kind distribution of 49% Agility Global plc shares earlier this year, which happened in Q2. This is an accounting adjustment rather than a reflection of operation and their performance. So if we exclude this impact, the underlying profitability of the business remains very strong. Now moving on to the 9 months financial performance, where we see a continuation of the strong trends highlighted in the quarterly results. On the revenue side, we basically recorded more than KWD 1.1 billion, that represents more than 11% increase compared to the same period in 2023, when revenue was slightly over KWD 1 billion. The net revenue for the period was close to KWD 720 million, an increase of 20% from the KWD 600 million in the same period last year. And in terms of EBITDA, it came in at KWD 204 million, growing by close to 14% year-over-year compared to KWD 180 million in 2023. Total net profit for the 9 months was close to KWD 35 million, a 40% decline year-over-year, again, due to the in-kind dividend distribution that led to an increase in minority interest. Let's take a closer look at the balance sheet for the third quarter. Agility currently holds a little over KWD 4 billion in total assets, an increase of 11% compared to September 2023. And the main reason for this increase is the appreciation of DSV shares on the back of their DB Schenker acquisition announcement, which was done recently. The carrying value for Agility's DSV stake increased by 18% in just the first 9 months of this year. Now if we take a look at the equity side, you can notice that it has decreased compared to September 2023. This decline is again due to the in-kind distribution of shares of Agility Global plc. As a result, the equity attributable to Agility K.S.C.P. shareholders now stands at KWD 977 million compared to close to KWD 1.8 billion last year, reflecting the reallocation of value. In summary, the balance sheet remains solid with no major surprises. The key takeaway is that Agility continues to maintain a strong financial foundation with a focus on long-term value creation for its shareholders. Now if we take a look at the cash flow performance of Agility for the first 9 months, the operating cash flow before changes in working capital stood at KWD 186 million, reflecting a 10% increase year-over-year. Changes in working capital resulted in an outflow of KWD 24.5 million, driven by an increased business activity and operational expansion. So after adjusting for working capital and other items, the net cash flow from operating activities totaled KWD 148 million. That's a little over 3% increase compared to last year's figure of KWD 143 million. In terms of CapEx and investments, for the first 9 months, they amounted to KWD 65 million. Of this net CapEx -- sorry, I'll just go to this section of CapEx. The net CapEx was KWD 41 million, representing a 5.6% year-on-year increase, primarily driven by investments on our controlled segments. And those include operating businesses such as Tristar, Menzies and Agility Logistics Parks, as well as the S2 projects in Kuwait. The remaining KWD 23.3 million was allocated to the Investment segment, which includes DSV, Reem Mall and other tech investments, with a significant portion of the KWD 23 million net investments directed towards the Reem Mall project in Abu Dhabi. If you take a look at the chart on the right-hand side, so we continue to track how much of the CapEx and investment is channeled to the Investment segments versus the operating entities. And for the first 9 months this year, you can see that 64% to 36% breakdown between the controlled segment, which here were called net CapEx and the Investment segment's CapEx. And compared to the same period last year, CapEx and investment decreased by 11%, primarily due to delays in the initiation of certain projects. But looking ahead, CapEx is expected to increase as these projects are progressing with the groundwork already underway on key developments. The free cash flow for the 9 months of 2024 stood at KWD 92.5 million, representing a 14.4% increase year-over-year, driven by improved cash generation from operations and investments and CapEx -- after investments in CapEx. And CapEx, as a percentage of revenue, stood at 3.7% this year, in line with last year, which stood at 3.9%. So that concludes our presentation. To summarize, Agility continues to deliver solid performance across its business segments, achieving consistent revenue growth, strong cash flow generation and disciplined investments. Our results for Q3 this year and the first 9 months reflect the strength of our diversified portfolio and strategic focus on long-term value creation. I also encourage you to review the Agility Global Q3 2024 presentation available on its website for deeper insights into their performance. Thank you for your time today. We are now happy to take your questions, but please give us a moment as we review them.

[Operator Instructions]

So I'm going to read the question. It's a little bit long. So 3 observations that I wanted to understand and how the company is planning to proceed. I understand the company has a qualified opinion with support, first being uncertainty related to group investments and loan to Korek Telecom. Second, the dispute regarding the investment priority list from PIA. And lastly, regarding the GSC, as management still had a pending settlement negotiation. Any update on the progress on the observation, which could potentially remove -- and then the question is not completed, but I can give a general answer. So for Korek. So as you know, Agility holds 23.7 indirect stake in Korek Telecom. The investment is carried at KWD 110 million. The related loan stands at KWD 35.4 million, which is also reflected in our books. There are legal disputes. As you know, they are ongoing, and further updates can be found in our financial statements. In terms of the GSC compensation case, we have a compensation award of KWD 54.4 million plus interest against GSC. However, we have not recognized this amount in our financials, and all the updates are disclosed in our reports. And in terms of the leases or the investment properties leased from Kuwait Public Authority. So we have investment in property primarily used for warehousing for around KWD 256 million. And as you know, these investments are reported under investment properties. And for more details again on this, you have a full note on our financial reports that goes into the details. Okay. Just checking for other questions.

[Operator Instructions]

I think it's the same question repeated twice. Just bear with me, please. So there is a question again similar to the question before. Agility booking revenue for the Kuwait warehouses and received in payment cash for them. Are you able to pay for the leases to the government? Again, as I mentioned, these leases are reflected in our books. And there is a full note on that in our financials, if you can take a look at them. Okay. We have a question. Currently, what is the revenue and EBITDA guidance for the full year 2024 or the trailing last 12 months historic for revenue of Kuwait warehouses? So we don't give guidance on EBITDA performance for the full year. So just checking if there are any more questions. No more questions at this stage. So thank you so much for your attention. So this concludes our presentation. Thank you.

This now concludes today's call. Thank you for joining. You may now disconnect your lines.