Al Jazeira Services Company SAOG (AJSS) Earnings Call Transcript & Summary

Good afternoon. Welcome to the discussion session on the financial statement for 6 months ended 30th June 2026. We have posted the financials on 5th of August on MSX website. For the ease of reference, we are going to share the income statement. We have shared the income statement for the discussion on financial performance of the company. As you can see, the revenue for the period grew by 21% to OMR 6.7 million in first half of 2026 compared to OMR 5.5 million in first half of 2025. However, the company reported operating loss of OMR 97,000 against operating profit of OMR 335,000 for first half in 2025. This was mainly due to competitive pressure and effects of geopolitical situation [indiscernible]. Coming down profit from the investments OMR 418,000 against OMR 121,000 in the first half of 2025. With regard to the company investment in associate Al Anwar Ceramic Tiles SAOG as disclosed earlier, the company has sold 8.3% stake and realized a profit of OMR 1,010 million. The share of profit from the associate was OMR 190,000 for this period. For associate company shareholders approved in AGM on 21st May, the sale of remaining 28.53% stake. As of now, there is no further reportable development in this matter. The net profit for the period is OMR 1,454 million against [indiscernible] for the 6 months in 2025. The shareholders' equity as on 30 June 2026 was OMR 15.1 million against OMR 14.8 million as on 30 June 2025. I mean, the asset per share was [indiscernible]. Now the floor is open for discussion. Please go ahead with your questions.

Yes, there is one question that there is first operation loss in [indiscernible] half year since 2009. Can you explain what happened? What do we expect in the half year -- second half of 2026? As I have said in my briefing that there is effect of geopolitical situation due to inflation in food items, we have reported operating losses this year due to extraordinary situation. We expect this to normalize with the ease in the issues getting resolved geopolitical, then we can see some resolution in our fall in prices of inputs. The inputs for our catering business, especially the food and [indiscernible] and other things and the insurance cost, those are -- there is a general inflation reported by media also. And for operators like us, we are facing a lot of challenges in procuring those items. And -- but our operation is not effected. Hope I have [indiscernible]. Any other questions?

I don't know if you can see the hands. I raised my hand. I've got a couple of questions, if you could help me with. With regard to your Al Anwar exit and capital allocation. So do you have any update on the remaining Al Anwar shares disposal process? And once completed, what's your -- what's the Board view on the capital allocation priority for the revenue?

Mr. Rashid, your voice is not clear. Can you please repeat your question?

Okay. Can you hear me better now?

Yes, yes. Now, very clear.

Okay. My question is regarding Al Anwar exit and the capital allocation. So do you have any update on the remaining shares of Al Anwar disposal process? Where are you with it? And once completed, because you've been given the green light to exit. So what's the vision for the capital allocation? And what's your priority for the revenue from the exit?

Yes. Your question is what is the update on Al Anwar Ceramics and realizations where we are going to allocate, correct?

Yes, that's right.

Yes. So as I have mentioned, we had AGM on 21st and shareholders approved the remaining stake of 28.6% in Al Anwar Ceramics. And as I have mentioned till now, there is no reportable development on this matter. Practically, if you see the Al Anwar share prices, et cetera, and the market condition due to geopolitical and other reasons. So the practicality of it [indiscernible] to be looked into. And this is [indiscernible]. And till now, there is no reportable matter in this regard. Once we reach to a decision, we will report it to Muscat Securities Exchange.

Okay. So there is not yet any decision from you or the Board with regard to the -- whether there would be some special dividends or is there a reinvestment opportunity which you are -- because you mentioned that you might be looking for a strategic buyer. So you have no update this far.

Yes. Mr. Rashid, as I have mentioned, the majority of the stake is still not sold. We have sold only 8.3%, and we have disclosed it to market. Now coming for majority, as of date, there is no material development. And the capital allocation, et cetera, once that is done, then Board will decide and we will come back to shareholders.

Okay. Good. Fine. My second question is your operating cash, if that's okay. So I mean, I could see that your operating cash has deteriorated actually to negative, despite that you guys have earned OMR 1.4 million as a net profit. Could you please -- I mean, could you please explain what's happening there?

Actually, if you are referring to our -- I'm sure you're referring to my cash flow. So my cash flow, if you see operating profit is coming from -- mostly coming from our catering business. The investment is coming down the line, investing activities, another segment being my cash flow statement, okay? So operating, if you see, as we have asked earlier also, one question was that why we have reported operating losses. So this time, we have reported operating losses and the impact is around OMR 400,000 just like if you compare from 6 months in 2025 with 6 months of 2024. The cash impact is around OMR 400,000. And you see there is a business increase of OMR 21,000 and there is a small trade receivable increase due to a 21% increase in business. So that is impacting our operating cash flow. That is the reason we are showing it negative. Other things, OMR 1.4 million, what you are referring is that is mostly from investment income, I said [indiscernible] investment and 1 million of investment income from sale of Al Anwar Ceramic 8.3%. So that is coming below the line.

Yes. So do you expect -- I know there are some positive signs, but do you expect the working capital to build to something like to reverse it during the second half? What are your expectations?

Our expectation actually, there are a lot of things always positive and we try to work hard to see that, yes, we are trying to minimize the working capital cycle. I know you are referring to this situation, and that is we are all trying, but a lot of things are situational or the geopolitical and other things, which we all know. There is one other question. Can you improve your inventory to avoid war effects keep going for a long time? Actually, we are having a relationship, good relationship with our suppliers, and those are long-term suppliers. And we are -- till now, we are comfortable with the allocations they have met for us. And having all these sort of geopolitical issues till now, our operation is not affected. And just like if we feel that, yes, this is required because doing this additional working capital will be required to have the extra inventory and the storage and logistics and all those things are required, which at this point of time, we feel that is not required. So we are trying to do the way we were doing business because till now, it is not affecting our operations. There is a question I think operation profit of OMR 10,000 [indiscernible]. Yes. What you are saying is -- see, the operating profit if you see from first quarter, the second quarter is better. And the reason is there are certain businesses, the new contracts which are getting stabilized. So our realizations and the margins in the contracts initially while we go, it takes time to stabilize. So that is slowly getting stabilized and you can see the improvement in our operating profit versus first half of 2026. Another question is for addition. This is a normal question, not normal business of our subsidiary to the clients coming clients just like contracts are fixed for 2 years, 3 years, new contracts coming and other contracts just like once we are completed, then these contracts are going. So those things are normal processes. And as I have said that our revenue has increased by 21% to OMR 6.7 million. So that is an indication that our business is [indiscernible]. There is another question from Mr. Rashid regarding [indiscernible], but I want to say that this is all the [indiscernible]. Each shareholders authorized Board to decide about [indiscernible] Al Anwar Ceramics and for management we look at price from our side but it is [indiscernible].

I mean if I may ask once again, I'm sorry, I do ask a lot, but I mean I just want to go once again with regard to your vision of second half. I mean, if we put the Al Anwar revenues or the earnings through the exit on one side, your operating profit, I mean, I could hear that you are not very positive about the growth in your operating profit. There seems to be kind of a deep impact on your operation. I mean, should we expect the operating profit to go down? Sorry for a direct question.