Ezdan Holding Group Q.P.S.C. (ERES) Earnings Call Transcript & Summary

Hello, and welcome to the Ezdan Holding Group Third Quarter Results Financial Call. I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Roy Thomas to begin the conference. Roy, over to you.

Thanks, Kevin. Hello, everyone. This is Roy Thomas from QNB Financial Services. I want to welcome everyone to Ezdan Holding Group's third quarter financial results conference call. On this call from Ezdan Holding Group, we have Tamer Fouad, the Group Chief Financial Officer; and Taha Moursi, the Financial Controller and IR Officer. We will conduct this conference call with management first reviewing the company's results, followed by a Q&A. I will turn the call now over to Taha Moursi. Go ahead, Taha.

Good afternoon, everyone. Thanks, Roy, for your introduction. First, we'll start with the disclaimer. Part of the information discussed here might contain projections or other forward-looking statements regarding future events or future financial performance of Ezdan Holding Group. These forward-looking statements include all matters that are not historical facts. Any forward-looking statement speaks only as of when it is made. Ezdan undertakes no obligation to publicly update or publicly revise any forward-looking statements, whether because of new information, future events or otherwise. Today, we will discuss the financial performance and the position for Ezdan for third quarter '23. Investor presentation for this conference call is now available at Ezdan website, www.ezdanholding.qa, under Investor Relations section. Regarding the financial performance of the group for the third quarter, Ezdan achieved a net profit to its owners with around QAR 220 million compared to QAR 321 million. The major changes in profit or loss statements contain rental income increase by around QAR 176 million, operating expense increased by around QAR 24 million, finance costs increased by around QAR 283 million and the net positive change in foreign currency transactions by around QAR 42 million. For third quarter '23, the main ratios of financial performance, whereas following percent of operating expenses when compared to rental income was around 20%, the same as third quarter in '22. Operating gross margin was 80%, also the same as third quarter '22. Net profit margin was 15% compared to 17%. Earnings per share was QAR 0.8 compared to QAR 1.2. Regarding components of profit or loss statements, Ezdan recognized the rental income of around QAR 1.4 billion for third quarter '23 compared to QAR 1.2 billion for third quarter '22, with an increase of around QAR 0.2 billion, representing around 15%. Rental revenue from residential segment, representing about 88% from total rental revenue increased by around 14% with QAR 142 million compared to QAR 22 million. Considering that the average occupancy rate was around 89% compared to 91% and the total units available for rent increased from 27,800 to around 30,500 during third quarter '23 and average unit revenue of 4,900 compared to 4,700, rental revenue from hotel segment, representing around 9% from total rental revenue increased by around 35% with QAR 30 million compared to third quarter '22. Considering that average occupancy rate increased from around 36% during third quarter '22 to around 69% during the third quarter '23 with average daily rates of around QAR 184 per night during the third quarter '23 compared to QAR 155 per night during third quarter '22. Rental revenue from mall segments, which represent 4% of total rental revenue increased by around 7.5% with around QAR 3.5 million considering that average occupancy rate was 91% compared to 82%. Other operating revenue for third quarter was around QAR 68 million compared to QAR 77 million with a decrease of around QAR 8 million, representing around 11% compared to the third quarter '22. Other operating revenue from residential segment decreased by around QAR 20 million and other operating revenue from hotel segment decreased by around QAR 4 million. Regarding operating expenses. Operating expenses incurred during third quarter '23 were QAR 278 million compared to QAR 264 million, with an increase of QAR 24 million, representing around 9%. The main components of operating expenses were staff expenses of QAR 67 million compared to QAR 62 million, utility charges was QAR 63 million compared to QAR 77 million, sewage QAR 51 million compared to QAR 28 million, maintenance expenses was around QAR 35 million compared to QAR 29 million. Operating expenses for residential segment increased by QAR 114 million, for hotels increased by around QAR 25 million and for malls increased by around QAR 4 million. Operating profit from main operations was around QAR 1.1 billion for third quarter' 23 compared to QAR 999 million for third quarter '22, with a gross margin from main operations of 80% as the same as third quarter '22. Operating profit from residential and commercial segment was QAR 1 billion compared to QAR 894 million with a gross margin of 83% in '23 and '22. Operating profit from hotel segment was QAR 86 million compared to QAR 61 million with a gross margin of 62% compared to 58%. Operating profit from mall segments was QAR 48 million compared to QAR 44 million with a gross margin of 68% compared to 66%. During '22, the group recognized its equity accounting investees and the equity investments throughout its burden of 7 operating subsidiaries, which will own such investments with new investment income during third quarter '23 compared to around QAR 645 million during the third quarter '22. General and admin expense have increased by around QAR 15 million, which was mainly due to increase in professional fees expenses. Regarding finance costs. Finance costs was around QAR 845 million compared to QAR 562 million during the third quarter '22 with an increase of QAR 283 million, mainly due to increased different rate of borrowings. During the third quarter '23, the group recognized the revaluation loss of investment to properties of around QAR 6 billion. During the third quarter '23, the group recognized a gain from foreign currency exchange of around QAR 1.5 million compared to a loss of QAR 40 million during the third quarter '22 mainly due to changes in sterling pound rate against Qatari riyal. Now we will move to the financial position of the group. As of 30 September '23, the group has total assets of around QAR 47 billion. Total liability was around QAR 13.6 billion. Total equity, including noncontrolling interest was around QAR 33.5 billion. Cash and banking balances was QAR 448 million compared to QAR 463 million as of December '22. Investment to properties of QAR 45.8 billion with an increase of around QAR 90 million, representing capitalized expenditures during the period. Borrowings have decreased by around QAR 119 million, which results from movement in borrowings from finance costs and repayment during the period. Retail revenues have increased by QAR 220 million, which represents a net profit for third quarter '23. The share capital was QAR 26.5 billion as at 30 September '23. Regarding cash flows, net cash flows from operating activities were QAR 1.1 billion for third quarter '23 compared to QAR 879 million for third quarter '22. And the net cash flows used in financing activities for third quarter '23 was around QAR 1 billion compared to QAR 1.7 billion for third quarter '22. Thanks. Operator, you can start the session of questions.

[Operator Instructions] And your first question comes from the line of Ejayan Al-ahbabi from Al Rayan Investments.

My question is regarding the segmental revenue. First of all, I'd like to ask about the units currently and the change and about the occupancy for each segment, residential, hotel and the malls, please.

Okay. As we already -- thanks for your questions. We really question one regarding the units. I repeat again, now the available units to the market now, we are talking about residential units. We are talking around 31,000. The occupancy rate for residential segment, we are talking about 90%. For hotels, we are talking about 68% or 70%. And for malls, we are talking about a range of 90%.

Okay. My follow-up question is regarding the professional legal expenses. Could you please clarify as to why the jump?

Because now the professional fees, now that has as projected, there's sourcing of units. For example, if we have a building, this building has, for example, 20 units. For the time being, this building has only one type of lease. So we are in the process of splitting this type and did 20 units, for example. That's the results and increasing the provisional fees.

Okay. And is this going to continue? Or is it a one-off?