Dubai Taxi Company P.J.S.C. (DTC) Earnings Call Transcript & Summary

[Audio Gap] everyone. I'm Ashish Khetan from Citi Research. I welcome you all to Dubai Taxi Company FY '24 Earnings Conference Call. We have with us, the management and IR of the company. I will now hand it over to Rami to start the call. Thank you.

Thank you, Ashish, and thank you, everyone, for joining us today. Thank you to Citi for hosting our FY 2024 earnings call. Presenting today on today's call, we have DTC's CEO, Mansoor Alfalasi; and our CFO, Amit Khandelwal. Our COO, Ammar Al Braiki, is also with us on the call, and he'll be available to answer any relevant questions you may have during the Q&A session at the end of today's presentation. Just before we begin, I'd like to remind you of the disclaimer on Slide 2, which is relevant to our status as a publicly listed company and which we encourage you to read. A copy of this presentation is available on our website at dubaitaxi.ae. Please note that this call is being recorded and transcribed. And by attending this meeting, you consent to the transcription. We'll start the presentation with key highlights from the year, followed by a brief business overview and corporate strategy. This will be followed by a detailed financial review for the period, after which we'll open the floor for the Q&A session. I'll now hand over to our CEO, Mr. Mansoor Alfalasi.

Thank you, Rami. Good afternoon, everyone, and thank you for joining our earnings call. We achieved significant milestones in 2024. Our first full year as a publicly listed company strengthened our market position and expanding our operations. First, we grew our fleet and market shares, securing nearly 1,000 new taxi fleets during the year. This brings our operational fleet of taxis to over 5,900 vehicles and increases our market share to 47%. We also expanded our fleet across the other segments with the delivery bike segment growing by over 1,000 vehicles, driven by surging demand in the on-demand delivery market. In line with our commitment to inclusivity, we introduced a new service on the DTC App at the beginning of last year, allowing individuals with non-motor disabilities to book regular taxis, enhancing accessibility for people of determination. Our strategic partnership with Bolt saw immediate success with over 1 million limousine trips completed within just 6 weeks of its launch in December. We continue to unlock value through unique collaborations as evidenced by our partnerships with ENOC Group, Talabat and others that we announced throughout the year. Looking ahead, our newly launched corporate strategy aims at reinforcing our position as the region's leading mobility operator, driving long-term value creation. I'll touch on this in some more detail later in the presentation. In line with our dividend policy and commitment to delivering shareholder value, the Board has recommended a final dividend of AED 122.3 million for the second half of 2024, bringing the total dividend for 2024 to AED 281.6 million. In our first full year of operations since the IPO, DTC delivered a robust set of results driven by Dubai's population and tourism growth, along with urban expansion, which fueled demand for mobility services. In 2024, our revenue increased 12% to AED 2.2 billion, supported by strong performance across all segments, fleet expansion and increased trip volumes. EBITDA rose 19% to AED 584 million, reflecting our market leadership position and operational efficiency. EBITDA margins also remained attractive, expanding by 1.6 percentage points to reach 26.6%. Profit before tax increased by 6% to AED 364 million, while excluding interest as well. We witnessed an 18% year-on-year increase. In line with that increased number of trips, our fleet size increased by 26% and total number of drivers by 25% to reach over 18,000 drivers. Looking more closely at our strong operational performance, underpinned by steady and impressive fleet expansion across all vehicle segments. We expand our taxi operating fleet by 744 vehicles in 2024, taking our total taxi fleet in operations to 5,960. During the year, we doubled our airport taxi fleet to 700 and secured an additional 644 new license fleet at RTO auctions, further strengthening our market position and increasing our Dubai Taxi market share to 47%. Our limousine segment also saw healthy growth with its fleet size growing by 28% during the year. In total, DTC's taxi and limousine completed around 49 million trips during the year, reflecting a 6% year-over-year increase. Despite seasonality, we have been fortunate to witness consistent and steady growth with a minimal impact from the severe floods in April of last year. The bus segment, which benefited from new service contracts during the year, expanded its fleet while transitioning a large portion of its lease buses to owned. Meanwhile, our delivery bike segment more than doubled its size during the year to reach over 1,800 bikes. Our expansion in the rapidly growing on-demand delivery market is thanks to partnerships with major delivery aggregators. As discussed earlier in the presentation, we launched our new 5-year corporate strategy for 2025 to 2029. This strategy prioritized innovation and excellence, strengthening our position as the region's leading mobility operator, while targeting double-digit growth across DTC's portfolio and maintaining a high dividend payout ratio. At its core, the strategy redefines our vision, positioning DTC as the preferred mobility choice for everyone. This vision is supported by an enhanced mission, leading in digital and safe mobility services that means communities' needs for convenience, connectivity and sustainability. Sustainability remains a key pillar of our strategy with increased investments and environmentally friendly vehicles and cutting-edge technologies. These initiatives reflect our commitment to reducing industry emissions and advancing eco-friendly mobility solutions. We will soon be publishing our first full ESG Report for the year 2024. Our strategic objectives were identified taking our stakeholders into consideration and these objectives will define the company's direction and prioritized over the next 5 years. DTC is poised to capitalize on the Emirates' strong growth, expanding within existing segments while leveraging technology and partnerships to unlock new opportunities. In taxis, we are increasing revenue through additional plates and assessing expansion within the UAE. Meanwhile, our limousine segment presents multiple revenue streams as our fleet continues to grow, in line with the rising disposable income in the country. For our bus segment, we aim to optimize operations to ensure consistent long-term profitability with capitalizing on both new and existing contracts. Our delivery service is seeing exponential growth with plans to expand market share and explore opportunities beyond Dubai. We have already entered Abu Dhabi in this segment through our partnership with Talabat. Digital innovation underpins both existing and new ventures. The Bolt e-hailing program has already surpassed 1 million trips in just over a month and initiatives that are being considered such as a loyalty program would drive customer retention. Our partnership with Bolt is a clear example of executing on our digital ambitions as we launched its e-hailing platform in Dubai as the exclusive operator. This strategic collaboration strength DTC's position in the taxi and e-hailing sector, while supporting Dubai's goal to transition 80% of taxi trips to e-booking in the coming years. By leveraging Bolt's technology and global customer base, DTC can tap into a steady influx of international tourists and business travelers. Since its launch in December 2024, the service has been in exceptional demand with a fleet of premium limousines over -- from over 200 partners and 18,000 well-trained drivers. The platform completed 1 million trips by mid-January with strong momentum continuing. The next phase will integrate taxi services into the platform, enhancing choice, convenience and efficiency for users. We'll continue to keep the market updated on further developments in this area. We operate in a supportive expanding macroeconomic environment with DTC's organic growth across all segments, driven by strong economic fundamentals. Dubai recorded its high population increase since 2018 with projections indicating a CAGR of 2.7%, reaching 5.8 million by 2040. The Emirates' robust GDP growth, stable inflation and a record government budget of AED 272 billion for 2025 up to 2027, further reinforce this positive outlook. Notably, 46% of the 2025 budget is earmarked for infrastructure development, including the road network, directly benefiting the mobile sector. Beyond demographics and macroeconomic strength, Dubai remains a top global tourist destination with 9% year-on-year growth in 2024, welcoming 18.7 million international overnight visitors. This has solidified its status as a global business and events hub. With that, I will now hand over to our CFO, Mr. Amit, to go over the financial review.

Thank you, Mr. Mansoor, and good day, everyone. I will begin with our top line performance, where we have delivered a robust growth for both the full year and quarterly periods. For full year 2024, revenue increased 12.4% to nearly AED 2.2 billion, driven by strong performance across all segments, fleet expansion and a higher number of trips. In quarter 4, revenue grew 11.1%, though it was partially impacted by negative revenue contribution from Connectech, our subsidiary operating Bolt. Due to aggressive marketing and pre-promotions, this impact is expected to taper off through 2025. Strong revenue growth translated into a 19.4% increase in EBITDA, reaching AED 584 million for the full year with a solid margin of 26.6%. In quarter 4, EBITDA grew 16.7% to AED 152 million with an improved margin. This performance was driven by strong top line growth across all segments and cost rationalization initiatives. We delivered a healthy profit before tax of AED 364 million for the year, up 5.8% and AED 92 million for quarter 4, marking a 20% increase year-on-year. Excluding tax and interest costs, profit increased by 80% for the full year period. Net CapEx increased over both periods primarily due to growing fleet and acquisition of taxi fleets. Taking a closer look at our segmental revenue for the period. Taxi services, which account for 87% of total revenue maintained strong momentum with revenue rising 12% to just over AED 1.9 billion for the full year. Growth was driven by higher trip volumes, supported by an extended fleet and slightly higher tariffs. Limousine revenue increased by 8.1% to AED 124.5 million, benefiting from fleet expansion and higher tariff. In Q4 alone, limousine revenue increased by 23.7% compared to the same period in the previous year. Bus services saw a strong full year growth supported by increased fleet size and new service contract with the Emirates Schools Establishment in Ajman. Q4 Revenue declined year-on-year due to contractual changes affecting revenue recognition. While the billing period was previously over a 12-month period, aligned with the academic year, this has now changed to 12 months. The annual contract value remains unchanged. Delivery bikes continue to be a standout performer with revenue surging 2.3x over the full year, driven by fleet expansion and new commercial agreements. These results reflect broad-based growth across all segments, reinforcing our strategic priorities and operational strength. We delivered solid gross profit during 12-month period, demonstrating the operational and financial strength at the core of DTC. Taxi segment gross profit rose 10.5% to AED 467.4 million with a healthy margin of 24.4%. While higher revenue drove growth, it was partially offset by increased staff costs, depreciation, insurance and license fees. The limousine segment gross profit was 37.7%, supported by higher revenue and improved fleet utilization. Bus segment gross profit saw significant improvement driven by top line expansion and a relatively stable cost base alongside our transition from leased to owned buses. Delivery bike segment gross profit also increased substantially, fueled by exponential revenue growth and a stable cost base, leading to higher gross profit margin for the full year period. These results reinforce DTC ability to drive profitable growth across all segments while maintaining strong operation efficiency. We maintained a disciplined approach to cost management across our operations. The staff cost continues to represent the largest expense category at 35% of total operating expenses and increased 17% year-on-year, reflecting a larger driver workforce in a new post-IPO organization structure. Plate and license fee accounted for 18% of total expenses rising 6%, driven by growing fleet. While fuel cost, which represent 13% of expenses declined 2% due to a more energy-efficient fleet despite the increased total trips. Direct depreciation rose 27%, driven by fleet expansion and vehicle replacements. Our cost management discipline ensures -- we ensure to skill efficiency while supporting growth across all segments. During the 12-month period, EBITDA grew 19.4% to AED 584 million with the EBITDA margin rising by 1.5 percentage points to 26.6%. This strong performance was driven by top line growth across all segments and our disciplined focus on cost rationalization. Net profit is AED 331 million with a 15.1% margin. Profitability was impacted by higher finance costs and the introduction of UAE corporate tax, which was not in place in 2023. However, excluding tax and finance costs, net profit increased by 18% compared to 2023. DTC maintains a healthy financial position with cash and deposit totaling AED 336 million and net debt of AED 662 million at the end of the period. This translates to a net debt-to-EBITDA ratio of 1.1x compared to 1.3x in September '24 December '23. As many of you know, in 2023, we secured AED 1 billion loan alongside our AED 200 million revolving credit line facility, both with 5-year maturities, ensuring financial flexibility to support our long-term growth ambitions. Notably, a AED 200 million revolving facility remains undrawn. Our strong balance sheet position allows well to pursue strategic investments while maintaining financial resilience. DTC's strong dividend policy reflects our commitment to delivering shareholder value through our compelling capital allocation strategy. As was mentioned at the beginning of the presentation, our Board has recommended a final dividend of AED 122.3 million for the second half of the year following the AED 159.3 million interim dividend that was paid in August 2024. This brings total dividend for the full year '24 to AED 281.6 million or AED 0.1126 per share. The final dividend is expected to be distributed by April 2025, subject to shareholder approval at the General Assembly in line with our policy of distributing at least 85% of annual net profit on a semiannual basis. This dividend reflects our confidence in strong cash flows and the long-term earnings potential for our valued shareholders. With that, I will now hand it back to the CEO for his closing remarks.

Thank you, Amit. To conclude, I'd like to highlight the key strengths that drive our success. We operate in a highly favorable macroeconomic environment, benefiting from Dubai status as a global tourism and business hub, urban expansion and strong population growth. Dubai's supportive regulatory framework has played a crucial role in DTC's growth, cementing our position as the leading taxi operator in the Emirates. We delivered strong performance, achieving 12% revenue growth and a solid 27% EBITDA margin during the period. Looking ahead, our 2025 through 2029 strategy is designed to reinforce our leadership in regional mobility, while driving long-term value creation. We are committed to shareholder returns, and this is evident by our attractive dividend policy and the Board's final dividend recommendation. Thank you all for your time today, and we can now begin the Q&A.

[Operator Instructions] Our first question is from [indiscernible] [ Rawan Shaker at SICO ]. I'll come back to you. Our next question is from [ Mohammed Kamal at MSUIT ].

Actually, I have a couple of questions. First one, any color on the expected auctions this year for fleets? This is my first question. My second question is, are there like any drivers for us to expect higher revenue per trip during 2025 as in like inflation indexation or whatever trends that should impact the revenue per trip during 2025. Also, if you can give some color on when should we expect the rollout of taxi services on the Bolt?

For the first question regarding the auctions, as committed by RTA on yearly basis, minimum number of plates will be floated. A single tender will be 200. And we are still waiting for the auction that will be floated very soon in Dubai. So we are not sure number of plates. But as you may be noticed during 2024, we reached almost like 1,000 added number of plates to our fleet, which is, of course, beyond the set target, the minimum target set by RTA. So let us wait and see. Regarding the second question, I'll leave the floor for the COO to answer, Mr. Ammar.

Yes. So the second question is regarding the growth in the number of trips. So as you are aware that DTC is linked to the success story of Dubai. And Dubai is booming and tourism is booming. And as you are aware, the airport just announced their 92 million trips, and this shows a growth in the number of visitors to Dubai. Plus the regulator is always revising their fares, so they go with the inflation and it's considered and every 2 years they are revised. So, hopefully, there will be a revisit to the formula very soon and the outcome will appear. And definitely, it will encounter all the inflations in the tariff as well. And in terms of the rollout of taxis on the Bolt, it's coming very soon, and there will be an announcement in [Foreign Language] regarding this subject.

[Operator Instructions] I'm going to try Rawan again.

So my question is regarding the margins. If you can shed light on the -- our guidance on the margins in 2025? And what's the new structure that is causing an increase in the staff cost? This is my first question. And the second question, if you can shed light on the new strategy or the 5 years strategy, how the taxi segment will grow by double-digits. Is it more auctions that are expected or how it's going to be?

So firstly, if you look at net profit, our net profit less of interest cost and tax has actually increased. But if I look at GP, yes, there are certain elements. The comparison is 2023 versus '24 is not an apple-to-apple comparison, because you are comparing a company which was unlisted to a company which is listed. So, obviously, when you get listed, there are a lot of compliance required in the company. You hire a CFO, Company Secretary, Board meeting. So those are the costs which has been incurred and which should rationalize over a period. Having said that -- like risk department, so we will have to look at those elements. Secondly, last year was a year where you see, we have to grow now. How do we grow now? Either we are very silent and only wait for taxi bids auction. But that is not the way management and Board will be sitting. So for example, we have a strategy. So we have a strategic consultant. Since we are listed now, so internal control on financial reporting is a key for DFM. So this is a regulatory requirement. We ended up hiring a consultant. So there is an increase in consultancy cost, especially with Board also coming into picture, we need a set of consultant legal counsels. So all these costs were incurred. As Listco, we need to be ready for these costs. But when we compare with -- to previous year, obviously, this is a higher cost. But then again, I will say it is difference between a non-listed company to a listed company. So when you will see in '25, obviously, the quantum increase will not be to the extent what it was in previous year. That is one. Coming on the guidance, we normally look at the EBITDA multiple. So anything which are heavy manpower driven and CapEx-driven company like us, anything if we can keep 25% in our EBITDA, it's a very healthy number. But we need to be very cautious. It's a heavy CapEx company and we need to grow. Like as you said, in other Emirates we have to grow. Maybe margin will not be like the margin we have over here. So one thing is we look at margin or we need to look at the cash generation might that happen so that my earnings per share increases. So Dubai is fine. We can have 25% EBITDA. But suppose if I go to some other Emirates, I may not get 20% EBITDA. So the option is whether should I go or not, because Dubai is a different market. So yes, our whole focus is to meet 25% EBITDA and 15% net profit. But going forward, we cannot miss the opportunity just because of these 2 numbers, even though there's a positive cash comes into the company.

Question regarding the strategic plan. Of course, it has a very ambitious -- it's actually a very ambitious plan. We are leveraging on different things that we do have like the technology part, the asset part. So all of these are incorporated through the strategic plan, where we'll focus more on the growth within the Emirates of Dubai and also beyond Dubai and maybe also in the regional side. Of course, in the coming 5 years, it's not going to happen in one day. And also, focus more on other things related to mobility when it comes to the inorganic side. And also, of course, the most important topic about M&A part and also may be doing setup for new subsidiaries, new JVs, all of this it has been taken into consideration in the new strategic plan.

Our next question comes from Ilya Ogorodnikov of Bank of America.

Congratulations on a good set of results. I have a more technical question related to the staff bonus line. I see it grew towards 6% of pretax pre-bonus profit. So how should we think about this line going forward? And does it reflect the new approach to remuneration in the company?

Regarding 6%, see it's -- you will see double-digit will always be a struggle net profit growth because the kind of industry we work in. It's a highly competitive market. CapEx will come. So if we get -- suppose, for example, we get 100 plates more, there is the CapEx per vehicle cost is rising, insurance cost is rising. So expecting this heavy company double-digit growth each year in profit. That is an ambition, yes, but we should not be overcommitted towards it. So there will be ups and downs, there will be years, but looking at Dubai long-term growth story with the population reaching government target of 5.8 million by 2040 and the tourism growth, yes, we are very hopeful that we'll be creating enough value creation for shareholders by increasing the profits and going in other non-core -- core businesses itself like the way CEO said about this strategy.

Sorry, but my question was really about the staff bonus line in your financial statements. So it grew...

Okay. Staff bonus. So, staff bonus is comprised of 6%, which is 5% for the company employees and 1% for Board members.

But does it reflect the new approach? Because historically, it was always at 5%, I mean, the total payment. So shall we assume 6% going forward and that will be the new approach? Or was it just a one-off?