Makhazen (MKHZN) Earnings Call Transcript & Summary

Hello, everyone, and thank you for joining us for the Makhazen Q2 2026 Earnings Webcast. My name is Drew, and I'll be the operator on the call today. [Operator Instructions] With that, it's my pleasure to hand over to Aly Adel from Arqaam to begin. Please go ahead when you're ready.

Thank you. Good morning, good afternoon, ladies and gentlemen. Thank you for joining us today. This is Aly Adel, and on behalf of Arqaam Capital, I would like to welcome you to Makhazen Q2 2026 earnings call. We have today from the management team, Khadija, the company's CFO; and Youssef, the IR Director. As usual, the management will start with the presentation for the key highlights of the second quarter, and it will be followed by a Q&A session. So without any further delay, I'll be handing over the call to Youssef. Please go ahead.

Thank you, Aly, and also welcome, everyone, to Makhazen's Q2 2026 earnings webcast. Today, we'll be presenting Makhazen's financial and operational performance for the second quarter of 2026. As mentioned earlier, Khadija will be addressing your questions at the end of today's session. So if you have any, please make sure you send them in the chat box. And before I hand it over, 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. My name is Khadija Obla, and I'm the CFO of Makhazen. Thank you for joining Makhazen's second quarter 2026 earnings webcast. Today's agenda is straightforward. We'll start with an executive summary, then we'll walk you through the Q2 2026 financial results. We'll also walk you through the income statement, the balance sheet and cash flow before opening the line for the Q&A. The second quarter of this year was a solid quarter for Makhazen with strengthened financials and continued strategic momentum. Net profit attributable to shareholders reached KWD 18.6 million for the quarter, more than double the KWD 8.7 million reported in the second quarter of 2025, with earnings per share standing at KWD 0.00728, and EBITDA increasing by 67% to reach KWD 27 million for the second quarter. In terms of strategy, our priorities remain unchanged. We continue to focus on strengthening the operating platform on optimizing the asset base and advancing projects that are aligned with Kuwait's broader economic and development ambitions. Let me take you through the Q2 stand-alone numbers in a bit more detail. Revenue for the quarter was broadly flat year-over-year, standing at KWD 36.1 million, about 1% below last year. This reflecting the site handed over to PAI during 2025. So let me just repeat that. So the revenues at KWD 35.6 million, below last year, which stood at KWD 36.1 million. And the decline -- the reflection of the site handed over to PAI during last year. EBITDA was up 75%. EBITDA increased -- was up -- EBIT was up 75%, which increased from KWD 14.2 million to KWD 24.8 million. In terms of EBIT, EBIT stood at KWD 27 million, that's an increase of 67% from last year, stood at KWD 16.2 million. The net profit attributable to shareholders stood at KWD 18.6 million for the quarter, more than double KWD 8.7 million reported in Q2 last year, and that's an increase of 114% with earnings per share, as I said earlier, KWD 0.00727. So across EBIT, EBITDA and net profit, we saw substantial improvement this quarter. That was the picture for the quarter. And now I'm going to walk you through the main lines in the financial statements in more detail for the first half of the year as well. Now if we look at the gross revenue for the first half, we came in at KWD 71.5 million, down 3% from a year ago, which was for the first half of 2025 KWD 73.9 million. And again, that's mainly the sites that were handed over, those are Sulaibiya and [ Amghara, ] which we handed during 2025. The net revenue is KWD 56.4 million, down 9% from KWD 62.3 million last year. On the EBITDA and EBIT, we're looking at losses, KWD 189.3 million on the EBITDA side and KWD 193.7 million on the EBIT side against profit of KWD 32 million and KWD 28 million last year. Net income came in at a loss of KWD 206 million versus a profit of KWD 18 million in the first half of last year. So the loss per share is KWD 0.0811-almost compared to an earnings of KWD 0.00728 last year. Now this is very important to highlight because this entire swing came from the one thing which happened in the first quarter, which is the noncash write-off we took on the litigated land plots with PAI. That was a nonrecurring item, driven by specific legal and accounting decisions, which we've covered in detail during the first quarter. If you look at the consolidated numbers, including discontinued operations, net income was also a loss of KWD 206 million and -- but that's actually also an improvement of -- by 24% from the loss last year. Again, here, it's not worth [indiscernible]. Last year's loss was bigger because it included Agility Global Remeasurement ahead of the in-kind distribution that happened. That was again a one-off in 2025, and it doesn't recur since. And Agility Global obviously now is no longer consolidated. So while the headline numbers show a large loss, that's an accounting outcome tied to specific nonrecurring events, and it is not reflection of how the business performed this half. So if you look at the balance sheet and starting with the assets. Total assets stood at KWD 829 million. The larger movement is against December, where we had total assets standing at KWD 1.077 billion, and that's a decline of KWD 247 million or 23%. And that's driven again by Q1 write-off on the litigated land plot with PAI. It's visible if you look at the financial statement that would be under investment properties line, and all of this again was covered in detail during the first quarter. Liabilities, the position is largely stable. Total liabilities stand at KWD 477 million. And we haven't recorded any borrowing during the quarter. On the equity side, equity attributable to shareholders was at KWD 339 million as of June, up KWD 10 million from March. With that, I'd like to note also in the financial statement that retained earnings for the second quarter stands at KWD 13.5 million. Please do note that retained earnings were fully absorbed in Q1 due to the write-off. So this slide represents a rebuild entirely from the profit generated during the quarter -- two quarters. Finally, noncontrolling interest came in at KWD 12.5 million. Those reflect the subsidiary dividends paid to the minority during the quarter. Now turning to cash flow. For the first half of the year, the cash generated from operating activities before working capital changes stood at KWD 45.1 million. And after working capital changes and other items, the net cash flow from operating activities is at KWD 35.3 million. Net cash used in investment activities is a positive -- sorry, stood at negative KWD 0.8 million for the half. Capital expenditures, obviously, are still there on ongoing projects, including mainly the S2 construction, but that was largely offset by dividends and other proceeds received during the period. I'd flag that the year-on-year comparison here on the operating cash flow line isn't really meaningful because last year comparative still included Agility Global, which was under full consolidation. So the prior year base isn't on the same perimeter as this year's figure. So to bring it together, Q2 2026 was profitable, cash generative quarter, and the business remained self-funded. The balance sheet has been reset into a clean and transparent footing following the adjustments we made earlier in the year. And I would like to thank you for your attention. I'm going to take a few minutes to connect the Q&A dashboard.

[Operator Instructions]