Ezdan Holding Group Q.P.S.C. (ERES) Q4 FY2025 Earnings Call Transcript & Summary

Hello, and welcome to Ezdan Holding Group Conference Call. Please note that this call is being recorded. [Operator Instructions] Now I would like to hand the call over to Phibion Makuwerere, you may begin.

Thank you. Good afternoon to you all, and I would like to welcome you to the Ezdan Holding Group 4Q and FY 2025 earnings conference call. On today's call from Ezdan's management team, we have Tamer Fouad who is the Group's Chief Financial Officer and Taha Moursi who is the Financial Controller in the IR office. As of on the call today, the management team will first go over the numbers. And then after that, we have a Q&A session. Let me turn over the call to Taha to take over. Please go ahead, sir.

Thanks. Good afternoon, everyone. Thank you for joining us today in Ezdan Holding Group conference call to discuss the financial performance and position of the company for 2025. We have made the investors presentation for this conference call available on our website www.ezdanholding.qa, under Investor Relations section. Before proceeding, we would like to provide a disclaimer that some of the information that will be discussed here might contain projections or other forward-looking statements regarding future events or future financial performance of Ezdan Holding Group. Such forward-looking statements include those that are not historical facts and speak 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. The conference call will include 3 parts. First part will be about comparing financial performance of '25 to '24. Second part would be about financial position compared between '25 and December '24. Third part would be a brief of the cash flow in '25 compared to '24. Regarding the first part, which is related to financial performance, Ezdan achieved a net profit for its owners of around QAR 114 million compared to QAR 105 million. The profit loss statement contains many changes in the following factors: Finance cost has decreased by approximately QAR 277 million compared to last year. The group recognized a gain on sale of investment properties and assets held for sale of around QAR 121 million. Rental income increased by around QAR 58 million. The group recorded a loss on revaluation of investment properties of approximately QAR 660 million compared to QAR 198 million in previous year. Main ratios for financial performance were as follows: operating gross margin improved from 81% to 82%. Net profit margin remained stable at 6% in line with last year. In terms of the components of profit or loss statement is then recognized a rental income of QAR 1.8 billion compared to QAR 1.75 billion in the previous year reflecting an increase of approximately QAR 58 million, representing around 3.3% as a growth. The increase in rental revenue was mainly driven by growth across key operating segments, including increase in residential segment by 3%, increase in hotel segment by 30% and increase in mall segments by 14%. The main statistics for residential segment showed an average occupancy rate of around 89.4% compared to 89.2% in previous year. While the average revenue per unit remained stable at QAR 424,000 for both '25 and '24 and the average total units available for rent were approximately 33,000 units. The main statistics for hotel segments were an average occupancy rate of around 86%, compared to 79% with an average daily rate for Ezdan [ West ] of QAR 432 per day compared to QAR 439 per day. And for Ezdan Hotel West Bay of QAR 173 per day compared to QAR 177 per day. The main statistics for mall segments where average occupancy rate was around 91% for '25 and '24. Concerning operating expenses, Operating expenses decreased by around QAR 10 million from QAR 363 million to QAR 343 million, which represents a decrease by a percentage of 3%. On a component basis, the decrease was mainly in sewage expenses was around QAR 11 million on a segment basis, the decrease was mainly a residential segment of QAR 10 million. Operating profit from main operations increased from QAR 1.48 billion in '24 to QAR 1.55 billion in '25. Rent increase of around QAR 66 million, representing 4.5%. On a segment basis, operating profit for residential segments increased from QAR 1.28 billion to QAR 1.32 billion, with a gross margin of 85% compared to 84% in '24. For hotel segment, operating profit increased from QAR 139 million to QAR 146 million with a gross margin improving from 65% to 67%. Operating profit for mall segments increased from QAR 64 million to QAR 75 million with gross margin improving from 67% to 70%. For gain on sale of investment property and assets held for sale during the year, the group sold Ezdan Compound 40 and the specific residential units for around QAR 607 million, which had a carrying value of QAR 486 million, resulting in a recognized gain on sale of QAR 121 million. For gains from foreign currency exchange, the group recognized a ForEx gain of QAR 17 million compared to a loss of QAR 8 million in '24 mainly from changes in the exchange rates of the British pound sterling. Regarding finance costs, financial costs decreased by QAR 277 million from QAR 1 billion to QAR 778 million, representing 26%, mainly due to decreasing of borrowing rates and the profit margin. Now we are going to the second part, which is related to the financial position. The group has a total assets of around QAR 45.6 billion compared to QAR 46.3 billion. Cash and bank balances were QAR 511 million compared to QAR 113 million with an increase of around QAR 398 million. Investment properties decreased by QAR 1.3 billion from QAR 45.5 billion to QAR 44.1 billion, mainly due to disbursing of Ezdan Compound 40 with a book value of QAR 299 million and reclassifying investment to properties of QAR 420 million as asset sales for sale, in addition to revaluation loss of QAR 660 million. Total liabilities were QAR 12 billion compared to QAR 12.9 billion. Trade and other payables have decreased by around QAR 20 million due to related parties have fully settled by QAR 1.4 billion. Islamic borrowings have increased by a net amount of QAR 546 million. That increase from obtaining the new facilities of around QAR 4.5 billion, related finance costs of around QAR 673 million and the repayment of around QAR 4.6 billion during the year. Total equity, including the noncontrolling interest increased from QAR 33.4 billion to QAR 33.5 billion, with an increase of around QAR 104 million. Share capital of Ezdan is QAR 26.5 billion. Regarding retained earnings, retained earnings have increased by QAR 56 million representing net profit for the year of QAR 114 million transferring a portion of retained earnings to a legal reserve of QAR 11 million and the transfer of a cumulative share of noncontrolling interest of QAR 155 million. Regarding the last part, which is the cash flow statement. Net cash flows from operating activities were QAR 1.43 billion compared to QAR 1.36 billion. Net cash flows from investing activities was QAR 585 million compared to net cash flow used in investing activities of QAR 63 million. Net cash flow used in financing activities were QAR 1.6 billion compared to QAR 1.56 billion. Thank you, and we are open for any questions you may have.

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

Could you give us some color on what was this downgrade of all these provisions on investment properties, revaluation of investment properties, which properties were these? And what was the rationale to revalue them lower?

Thanks for your questions. Regarding investment properties of Ezdan, we are talking QAR 45 billion. And if you go back to the sensitivity analysis of the financial statements, you'll find that any 50 basis points, for example, the changes in WACC or terminal growth rate, it will affect a huge amount of investment to properties. During this year, the terminal growth rate that has been used by valuator has been decreased from 2.2% last year to 2.185% this year. That mainly the main reason behind this decrease in the valuation of investment properties.

Sorry, what was decreased?

We are talking about the full portfolio. It is not specifically.

A bit confused. So you said that the loss is because of the decline in WACC. Is that correct?

No. Decline in terminal growth rate.

Terminal yield, basically. Terminal income.

Yes. Terminal growth rate because terminal yield...

Terminal growth rate, okay.

Terminal growth rate last year was 2.2%. This year 2.185%. So this little decrease affect this amount because we are talking about QAR 46 billion as investment properties. So any basis points, for example, 10 basis points to decrease or increase in the terminal growth rate affect significantly on the valuation of investment properties. And if you return back to the sensitivity analysis, you will find that the changes in -- by 50 basis points in terminal growth rate will affect the valuation of investment properties by around from QAR 3 billion to QAR 4 billion.

So this terminal growth rate, this was changed by your valuation company, the company that does the valuation?

Exactly. Because there's -- that's coming from their side. And based also on the, I think based on the average 5 years of the market growth rate and the inflation rates, all these factors.

So they changed this because of the market -- 5-year average of the market growth rate?

Yes, exactly.

[Operator Instructions] It seems that we have no further questions. That concludes our Q&A session and today's conference call. We would like to thank you for your participation. You may now disconnect your lines. Have a pleasant day.