Agility Public Warehousing Company K.S.C.P. ($MKHZN)

Hello, everyone, and welcome to the Makhazen FY 2025 Earnings Call Webcast. My name is Carla, and I will be coordinating your call today. [Operator Instructions] I will now hand you over to Shaden Nomeir with Arqaam Capital to begin. Please go ahead when you're ready.

Thank you. Good morning and good afternoon, ladies and gentlemen, and thank you for joining us today. This is Shaden Nomeir. And on behalf of Arqaam Capital, I would like to welcome you to Makhazen's Full Year 2025 Earnings Call. We have today from the management team, Mr. Khadija Obla, the company's CFO; Mr. Youssef Elyas, the IR Manager. As usual, the management will start with the presentation for the key highlights for the full year and the fourth quarter, and then it will be followed by a Q&A session. So without further delay, I will now hand over the call to the management team. Please go ahead.

Thank you, Shaden, and welcome, everyone, to Makhazen's Full Year 2025 Earnings Webcast. Today, we'll be presenting Makhazen's financial and operational performance for the full year of 2025. As mentioned earlier, Khadija will be addressing your questions at the end of the session today. If you have any questions, please make sure to type them in the chat box. And before I hand it over to Khadija, I'd like to bring your attention to the disclaimer on the second page of the presentation. Please take a moment to review it. With that, I'll now hand it over to Khadija to begin the presentation. Thank you.

Good afternoon, everyone, and thank you for joining us today. We start today with an overview of 2025 and the strategic context, then we'll move to the key financial highlights, the income statement, the balance sheet and the cash flow. And we also close with where we are headed. And after that, we'll open up for Q&A. Before I take you through the numbers, I want to set the context of what kind of year 2025 was because the headline figure don't necessarily tell the full story. In 2025, there was a deliberate structural transformation. We made the decisions that were necessary for the long-term position of Makhazen. And some of these decisions created some accounting notes that we would like to clarify in detail in the next few slides. So let me start with that. So as I said, the defining moment of 2025 was the consolidation of Agility Global. If you remember, in July last year, we completed the distribution of our 20.09% of Agility Global shareholding to Makhazen's shareholders. Agility shares for every 100 Makhazen shares. Shareholders who were indirectly exposed to Agility Global in the past through the Makhazen Holding now hold direct shares in Agility Group. Makhazen has been positioned as a quite focused infrastructure and industrial platform with strengthened role in supporting great economic development. As a result of that distribution, our ownership in Agility Global reduced from 51% to an effective 26.58% and is now classified as an associate on our balance sheet rather than a subsidiary in the past. The carrying value of that stake as of December 31st December 2025, it's close to KWD 490 million. Agility Global itself had a stronger year, KWD 240 million net earnings and KWD 5.1 billion in revenue. Now moving on to the main, I guess, number that's probably on everyone's list. We reported a consolidated net loss attributable to the Makhazen shareholders of KWD 294 million for last year. The loss has 2 components. First, the Agility Global deconsolidation accounting, when the subsidiaries distributed to shareholders IFRS requires to recognize the difference between the carrying value and the fair value as of the distribution needs. And as we explained in the last quarter, that is a technical accounting entry. It is noncash and it does not reflect the deterioration of our business. The second element that impacted or built the KWD 294 million loss was that we took KWD 214 million. It's again, noncash, nonrecurring impairments, primarily for the Korek Telecom investments and then also for certain investment properties. This was a deliberate decision taken in consultation with our auditors to address long-standing valuation considerations. These are done now, but that does not mean that we have stopped our legal proceedings, specifically for the correct case. They're still ongoing, and we continue to pursue our recovery. Together, these 2 elements, the impact of the deconsolidation and the write-off that we took for Korek and for certain assets or properties, constitute the majority of the reported loss that we've announced for 2025. Now moving on to the operational business. The business is performing well. S2, which is our -- one of our largest projects in the development is more than 80% leased on Phase 1. That's supposed to be done within the end of this year. MRC is progressing also well, and GCS continues to perform and grow. And based on that, the Board has recommended a $0.0245 per share dividend subject to General Assembly approval. So I'm going to move now to give you more details on the financial performance. Starting with some highlights on the income statements. Everything on this slide is for continuing operations. In terms of revenue, we reported KWD 151.5 million, up 1% last year. And the top line was essentially stable as the business was in transition during 2025. EBITA came in at KWD 83 million, up 38% year-on-year. That's a meaningful jump on a flat top line and reflects appropriate improvements across the business segments. EBIT stood at KWD 75 million, up 43%. And at the bottom line, net profit from continuing operations recorded KWD 49.3 million, up 13%. And and that basically translated to $0.1921 per share. Now if we move to the balance sheet. But before that, just to summarize a little bit this slide. So EBITDA, we have an EBITDA growth of 38% and EBIT growth of 43%, net profit growth of 13%. But I want to be very clear that these are continuing operations figures. The reported consolidated loss mentioned in the previous slide of $294 million, sits separately and is driven entirely by the nonrecurring items we covered. So let me move on to the balance sheet. When you look at this table, the numbers are quite significant. Total assets are down 74%, equity is down 44%. But let me walk you to what's driving that. So obviously, the primary driver across every movement you see here is the deconsolidation of Agility Global in the income distribution. We removed Agility Global's entire balance sheet from Makhazen's. That accounts to KWD 3.1 billion of the asset reduction, KWD 1.7 billion of liability reduction and virtually KWD 1 billion minority interest movements. These are all the direct results of accounting that was planned and also approved by the shareholders. The value was not lost. It was transferred to shareholders in the form of Agility Global shares. So what remains in the Makhazen's stand-alone balance sheet today, is $1.1 billion of assets, 484 million -- sorry, KWD 1.1 billion of assets, KWD 484 million of liability and KWD 570 million in equity. If you look at the first line, the noncurrent assets within the KWD 891 million of noncurrent asset sits, our retained 26.58% stake in Agility Global, which we're valuing at KWD 490 million. That's backed by a business that generates $240 million in net earnings this year. On the equity side, the KWD 447 million reduction reflects 3 items: the incurred distribution to shareholders. The KWD 214 million nonrecurring impairment that we've mentioned earlier and the Agility Global deconsolidation accounting adjustment. So despite the reported loss, retained earnings still stand at KWD 9 million, reflecting the significant distribution made to shareholders during this year. So let's turn now to cash flow. And before we start reading the various on this table, I want to flag something that's important, which is the year-on-year comparison, which is not like-for-like. In the full year of 2024, Agility Global was fully consolidated for the 12 months. In 2025, Agility Global was consolidated for roughly the first 6 months of the year, then did the consolidation followed -- that followed and the distribution to shareholders. So when you compare these 2 columns, you're not necessarily comparing like-for-like because they are different perimeters. And definitely, the variances are not a reflection of the underlying performance. With that context, let me walk you briefly through the numbers. Operating cash flow came in at KWD 111 million, that is down KWD 238 million from last year. But as I said, last year included all of Agility Global operating cash flow generation because it was consolidated. The continuing Makhazen business is generating healthy operating cash. On the investment activities, we have a KWD 290 million outflow which includes KWD 227 million related to the net cash that's left in the balance sheet when Agility Global was deconsolidated. There is a note on that on this slide. Again, that is not capital expenditure. It's accounting consequence of the distribution. If we strip out this noise, the underlying investing outflow was approximately KWD 63 million, primarily covering our CapEx investment in a [indiscernible] H2 project. On the free cash flow, the reported negative figure of $179 million also does not reflect the cash generation of the continuing Makhazen operations. It is also dominated by the deconsolidation outflow. Again, this was a transition year for cash. And in 2026, it will basically be the first year our full year of Makhazen on a stand-alone basis. So the numbers -- expect the numbers to be much clearer. So when I'll close with where we're headed. Three things that I want to leave you with. Number 1 is Makhazen today is a Kuwait-focused platform. It's a pure play in the Kuwait infrastructure, industrial service business. It has 3 core pillars, the South Village, S2 projects, MRC, a metal recycling company and GCS, which is the Global Clearing Securities. S2 is advancing and Phase 1 is nearly complete. As mentioned earlier, we are more than 80% produced already and the handing over is expected to be towards the end of the year, with revenue starting to be generated starting 2027. MRC progressing well, and GCS continues to deliver. Second, in terms of the balance sheet, we did a full reset. We took KWD 214 million of nonrecurring impairment this year to address long-standing valuation considerations that were raised for a period of start by our auditors. So the balance sheet is cleaner and much more also clear. Third, Agility Global, we do retain and continue to retain our 26.58% effective stake in Agility Global, which we carry at KWD 490 million value. Our share of their annual earnings flows directly into our P&L going forward, that is a meaningful ongoing earnings contributor to Makhazen. So we enter 2026 with a clear strategy, a focused balance sheet and a business that delivered growth through 3 income streams that don't necessarily move together. So this was a brief presentation on the 2026 performance. With that, I will connect to the other platform, and I'll be happy to answer your questions.

[Operator Instructions]

We have one question. I think it's quite accounting focused. Question is elaboration of the methodology behind the $183.8 million fair value adjustment for the associated Agility Global. So this is part of the deconsolidation and also in line with IAS 28. And it relates to the purchase price allocation adjustments. Agility Global is treated the new investments in the associate despite it was diluted from being a subsidiary, and accordingly, the IAS 28 is applied in this case, and that's where the number is derived.

[Operator Instructions] And as we have no further questions in the queue, I will hand back over to the team for any final comments.

Well, thank you all for joining us today. We'd be happy to answer any follow-up questions off-line. Please connect with us through our website. In case you have any further questions to be addressed. Thank you so much for joining us.

Thank you. This does conclude today's call. Thank you for joining. You may now disconnect.