Renaissance Services SAOG (RNSS) Earnings Call Transcript & Summary

Well, a very good afternoon, everyone, or good morning or good evening, wherever you're dialing in from. First of all, we'd like to say, welcome to everyone. Thank you once again for your interest in our company and in our regular quarterly updates where we have the opportunity to answer your questions. We meet in a very challenging times for everyone. And so our first good wishes are for all of you and all of your families and loved ones and friends, that we hope you are doing well and keeping well and staying safe during this COVID pandemic. We have very straightforward process. As always, we don't have speeches to make. We just are happy to take your questions and deal with the issues that you wish to discuss which can be dealt with either by you, typing in a question on the Q&A panel, or, of course, raising your hand and actually making your question verbally. So that's our introduction. Welcome, and over to you for your questions. Thank you.

So first question comes from Kanaga. Kanaga, welcome to the Renaissance investors call.

Can you hear me?

Yes, Kanaga, you are loud and clear. Go ahead, Kanaga.

Stephen and Vishal. I think it's really an unprecedented times. We saw the numbers. And we saw the Chairman's report also, always informative. We just want to have your comments in line with your Q1 business, we had the call after that, we [indiscernible] How was -- the way we are in the pandemic, we are still in the middle of the pandemic. We just want to understand what are the current operations of both your PDO PAC and Renaissance Duqm in terms of the occupancy, rack rates, what are the additional costs related to COVID-19? You mentioned last time, OMR 1 million is the monthly impact on these lockdowns. Any updates to that numbers? This was my first question. And my second question is on your overall receivable cushion. That has increased. I think that has increased on a quarter-on-quarter basis also. We can understand the market conditions on the collection side, though your balance sheet is remaining liquid with a cash of closer to OMR 25 million. We just want to understand on the receivable side, how this is panning out? How is it? Any updates on the client side? We just want to understand on those perspective.

Thank you, Kanaga. I'll start with some comments on the occupancy issues in the PACs and in Duqm and what our overall impact is. And then Vishal may comment on the same things and also can give some very specific color on how well we're doing on receivables. So throughout the operations that are still going, which include all of our PDO PACs, the Renaissance Villages and the PDO oilfields and it includes Duqm. These facilities are still fully operational. Thanks, obviously, to our clients and the way they have cooperated and how well they're taking care of things from their side and thanks also to all our colleagues throughout the company who have been able to keep the supply chain going as well as implement initiatives on the site that enable us to either provide packed meals or to provide special socially distance measures, longer operating hours for diners and so on and so forth as well as automatic temperature checks, et cetera. You saw, you mentioned the Chairman statement, there's a very high-level list of initiatives there. Now what has happened in all cases is there has been a decrease in occupancy from the following: no new initiatives and projects have started during the period. They're on hold. And similarly, where possible, where it's been possible for people to either relocate back to Muscat, or in some cases, back to UAE and other base countries of the companies concerned that are able to work from home safely and do their administrative roles from there. That has happened. Similarly, in Duqm, the lockdown of Duqm, which includes our own lockdown in full cooperation and collaboration with our clients, the refinery, the port, the dry dock, the SEZAD, the whole Duqm community, that we would keep infection numbers, whatever would happen with that, to an absolute minimum by having our own lockdown. So as people left, there was nobody coming in. Now roughly, across the oilfields, the impact has been about 5% reduction. Then similarly, in Duqm, it's gone deeper than that. We've averaged in the last month of the half year, just above 12,000. We've been as low as 11,400 is our absolute low coming from a high 16,000 start. All of it COVID related and those numbers are now starting to climb back up again, slowly. We're seeing the first start of that. We've got recalibrated bookings with all of our clients going through to the end of the year. This will be dependent on COVID and how things happen as to whether that program happens as it's now recalibrated or whether there's any slowdown in that coming forward. But -- so there have been impact. Now the overall impact on our business is a mix of things, and I think that's explained quite nicely in the Chairman statement, the mix of those contracts that have stopped all together and the mix of lower occupancies. And the efforts being made to save costs, both for ourselves and for our clients in some cases because there's been a lot of pressure on rates. The net impact is still, you can roughly say, an average of OMR 1 million a month. We've done better than that in some cases. But as a working number, I think, for you to consider, that is a valid number going forward. The rack rates in Duqm and in PDO are exactly the same as before. We went into there. And what we have done is we've taken and absorbed some additional cost to keep people safe. But the quid pro quo for that is that we've kept our business going. So -- and that, I think, is the general summary on both of those things, the PACs and Duqm. Vishal, is there anything you'd like to add to that? And also perhaps to comment on the receivables question that Kanaga has asked.

Thanks, Steve. So Kanaga, on receivables, if we see, same period last year, our total receivables were OMR 45 million. Now it has reduced to OMR 43 million money, though our turnover has gone up compared to the last period. And like, of course, we are representing all our colleagues here of Renaissance. Our collection team and our operations team have done exceedingly well. Because it's not about only collecting money. It's about changing the behavior of -- like everyone including us and our customers. So earlier the culture was that, no, I need a hard copy of invoice, I need to acknowledge, then only I will pay. So with all our digitalization and innovation initiatives, what we have done, we have converted almost, I will say, I won't say 100%, but more than 90% of customers in the digital form, where we are sending invoice to them in digital form, they are accepting, and we are able to get money. So just to give a context that we have built OMR 54 million in H1, and we have collected almost OMR 54 million in H1. Of course, like you have always 100 -- 90 to 108 days credit period, but I'm just saying that this is very important for us because cash preservation is the key, and you really asked the right question, Kanaga. And that's the reason you can see that we are still very liquid. Though in these numbers, we have spent almost OMR 8 million on Duqm, OMR 6 million to OMR 8 million roughly, despite that -- and when we are saying spend, I'm talking about on our expansion program, is still that cash is there. So cash is the key for us in the difficult times. And as Steve mentioned about PDO and Duqm and their occupancy was holding and their occupancy spend out as we end this half. So if collection was better, the impact of COVID was, as we end this half, in fact, with operational efficiency, bringing in, excellence bringing in by our operations team, we were able to contain that impact of COVID, and we were able to pay our salaries on time. In fact, during Eid, we paid our salaries 15 days before the end -- before even Eid. Why? Because our MO is the staff are the frontworker, which Steve will talk more about it. Our RSVD Village, we are helping our clients in case if someone gets infected. So -- and when you do those kind of services, customers pay you on time. So I'm very happy to share that we -- we've got a great collection team. We changed our strategy from hard copies invoicing to digital. And every one came together, and we are really in a good shape in terms of the collection. Steve, if I have missed anything, please add on.

No, not at all, Vishal. That's perfect, comprehensive. And I'd just like to really strengthen one of the points that you said about the goodwill that is definitely there in our client base. I'm not saying that clients favor us and we get a special position with government or anybody else there, and we know there are issues on delayed payments in the marketplace. But I think there's an element of the goodwill and appreciation for what our company and our team have delivered in helping keeping our clients' businesses going during this pandemic as well as the essential services to things like the health service and so on, that government appreciates that this is a crucial service that needs to be kept going and that needs to be sustained with payments as soon as it is possible to make them. So thank you.

So Kanaga, we will come back to you. Now we have [ Joyce ] who wants to ask questions. So [ Joyce ] over to you.

My question as a follow-up question to Sundar's question on the OMR 1 million impact -- Steve said OMR 1 million monthly impact. Steve, can you give me a split of how much of this might be the shorter term or the temporary impact and how much of this could be a medium-term or a longer-term impact? The reason why I'm asking is probably we might see that the sanitization and PPE expenditures to remain for a longer time than we might be anticipating. So can you please give us a split of how much do you see is likely to stay within the business for some more time? And how much will be -- how much we will be able to recoup at an immediate future?

Sorry, Joyce, I've been reading your question on the shared rooms. And then can you just -- how much -- I haven't fully understood the question as your voice did break.

You just mentioned that OMR 1 million of the monthly expenses. So can you give us a split of how much is likely to stay within the business for a medium to longer term? And how much of...

I heard it. Thank you very much, indeed. It's very difficult to call because remember, I'm giving a blend as explained in the Chairman statement of reduced revenue from lower occupancies, et cetera, and closed contracts. Now we've got a number of contracts. A private school, for example, that is a client of ours, where we've got a cleaning team in, ready for them to reopen the school as soon as permissions given to schools to go back and so on. We've got already 885 bookings coming back into Duqm during the course of the next 30 days. And that's a number that may go up. It's sort of going up each day. We have, although I can't disclose detail because it's subject to NDA, but one of the military clients that we have doing a project with us in Duqm from September to March. So we've got things happening that are going to be bringing back revenue and more business reopening and restarting. I think some of the costs, the PPE costs, the social distancing measures and longer service times and so on, will stay with us for a few more months. So it's difficult to put a split of what will stay and what will go, but we're still predicting for this coming quarter, we think the average will be about OMR 1 million a month. And we then expect the final quarter maybe to get back to towards how well we were doing in the first quarter before this. But again, part of that is guesswork. For all of us, it is pleasing to see the improvement in numbers, in hospital numbers going down, et cetera, from the government figures. And if this trend continues and the economy starts to reopen, then maybe it will be faster than I'm describing. If there's setbacks in numbers, a second wave, maybe it's slower, but we still feel that it's the right guidance to give you that whilst we're in full pandemic mode that this is the impact that it's having. I'm sorry, I can't be more explicit because it is unknown.

I perfectly appreciate it, Steve. Thank you very much for that because many of the companies won't be able to give any kind of -- more clarity to that. You put it the best way possible. Thank you very much for that. My second question...

We're not expecting it to get worse. I think I would say that. Yes.

Yes. My second question, if I might -- I may take it right now, is I wanted to congratulate you on the job that you did in Duqm from limiting the spread of the pandemic in the village. Otherwise, it would have been a very chaotic situation for strategic projects like Duqm. Congratulations on this remarkable achievement. And we saw that you made quarantine and annex and assume there would be more investments, which you might have done in the PPE and for sanitizing equipments and machinery and everything. So my question here is, are we able to pass on a part of these additional costs to the customers? Will we be able to pass on this? Because you just mentioned that the PPE sanitizing expenses all are here to stay for some more months. So will we be able to pass on some of the cost to the customers? What would be the response of the customers if you have tested it?

We have chosen not to pass on. The -- we've had conversations around it with customers in Duqm, the leading customers. But everyone is suffering his and her own pain commercially through this crisis. Where we would be legitimately able to pass on where we have existing clients in the oil and gas field, so not just our PACs, what we do in the gas fields, with BP, et cetera. Again, remember this has come at a time when the entire oil and gas community and others, even government contracts have been asking for 30% reductions in rates, in rack rates. What we've, as a general comment, as a general comment, been able to do is to maintain our rates and with voluntarily saying, we are absorbing at the moment -- unless we get to a point that we can't take it anymore, we are absorbing this effort, this investment to keep you and all your people safe. So that's been our contribution. Where we have agreed in a couple of contracts to reduced rates, it has been against a quid pro quo of an equivalent saving in operating costs. So pointing out to a client, listen, you require this at the moment. If we change that requirement, we believe the service standard, the key service standards will still be maintained, and we can share the benefit. We don't lose from our actual meaningful level of income and you save from yours. So in that environment, we've not exercised any serious effort to recover these costs. We felt it's our contribution. Similar to even on the social responsibility side, the efforts we've done in terms of the free meals for in service of the nation, decided upon and initiated very much at the Board level of Renaissance that we feel it's not just large [ S ] and pouring money away, it's saying, this is how we can help, how we can contribute to the government because we have a unique logistic platform that could provide these services at the most cost-efficient way from Khasab to Salalah and to all points in between. And if we do that, it will accelerate the end of the curve, that it will help get moving from the saving lives stage, which includes the outbreak centers and the quarantine centers into the saving livelihood stage of the economy reopening. So where -- I don't want to be giving the impression that, no, we're not bothering to back charge this, we're not bothering to do that. It's a thoughtful balance of what can we do that contributes that also means our clients' key businesses or key services like the health service keep going. As a result, our business keeps going, albeit at a cost-impacted level and that will accelerate the rebound of the economy when it comes. Because, again, we stand in a very strong position to rebound very quickly because our services are required. So as the oil and gas fields have reopened fully and everything else reopens, fully schools reopen so on and so forth, we'll be required to provide those services. As other hospital patients come back to the hospitals, those services will be required, et cetera. So that's how we viewed it, that it's a contribution, yes, but it's in the best interest, win-win interest of all our stakeholders and our own business that we do it that way.

And Joyce, one more point to add here, which you very nicely put in that how we were able to reduce the number of cases and help our clients and government in Duqm because of the standard, what we have been maintaining in RSVD Duqm. Now seeing that and seeing what we do in our other facilities like PDO PAC, we are seeing that many constituencies in the country are coming and starting a discussion with us about the more such accommodation facilities in the country. It is too early, but the future is indicating towards that. So what is Steve correctly mentioned that back charging is always an option, but actually, this is a -- will give us so much more business for us in the future, many more accommodation facilities could come because 16 in a room in an apartment somewhere in Muttrah is not going to be allowed now. So this opens up a whole lot of new opportunities for companies like us. Thank you, Joyce, for your good question. Now next question comes from [ Raghav ]

Yes, Raghav, we can see your written question. Did you want to...

Raghav wants to...

Can you hear me now?

Yes, we can.

Yes.

Well, I would just that point that Vishal just mentioned hit the nail on the head with regards to the question that I was trying to ask. In that surely, this is a good opportunity now for you guys to pitch to your customers like PDO, for example, that shared accommodation facilities are no longer going to be an acceptable norm, primarily because of the fact you have quite a lot of COVID-19 positive cases that are asymptomatic. There is no way that you are going to be able to identify someone who is COVID-19 positive, unless they voluntarily take a test. So you could -- I mean shared accommodations may lead to a further spread, which nobody at this point in time wants. This is possibly a good opportunity for you to go in and get an expansion of existing facilities.

So Raghav, this is a great question. As you rightly say, Vishal sort of part answered that in a preemptive way just before you spoke. On the issue of shared accommodation, I don't think that necessarily, all clients will migrate to a pure single room status in the sense of -- unless that was happening globally because those same clients have to compete globally if you're running a refinery or whatever, you still got to get your output products into the international market. What I think will be the case, and Vishal alluded to it there, is that the International Labour Organization standards, which look at worker welfare, it's a United Nations agency that sets the standard for workforce welfare, including accommodation, including getting paid properly, including good connections with home and all the things that should be normal for us. And that includes some very specific related to occupational health standards, related to other health-related standards, ratios proportionate of what -- how many ablution facilities you have per person in a shared accommodation scenario, relating to the cubic meter space around a person in a shared room, the distance between beds. Now I know your point, which is very correct, but COVID-19 doesn't have special rules for ILO standards, sharing means sharing. Essentially, the same workforces, if we're keeping in a COVID-secure way, will be sharing buses to get to work, they'll be sharing workspace when they're there. So I don't think the whole concept of sharing will go. That would have to happen on a global scale of the ILO or someone saying and U.N. agreeing that yes, sharing accommodation is not allowed at all. But what -- the beauty of what we provide is that we've been providing ILO standards or higher for more than 20 years. In sort of footballing terms, we've been playing where the ball is going to be, where the ball is going to be passed, not running around after the ball copying what others do. And Vishal's point is that sadly, and one doesn't wish it to know and hope most people came through it okay, but the major outbreaks at the beginning of this pandemic, where the numbers were spiraling in this country, the major outbreak started in labor accommodation, temporary camps as well as the type of facilities that Vishal was describing, multiple people crammed into small apartments, et cetera. That has to be a thing of the past. And in the PDOs and the example that you've given, I think there will be a look at what are the maximum? How can we spread people out more, et cetera? But it may not be as straightforward as stopping sharing, but it will be about creating safe bubbles around who lives in what accommodation, how they're transported, who works with who, et cetera, all of which as part of the solution we've been working at. Thank you for the nice comments we have had about what we did to turn the curve quickly down at Duqm, but we give our clients a lot of credit as well. They really worked with us. They listened to what we were suggesting and have really helped us turn that curve down. So I hope that describes it. It means your point that there is more business opportunity for us is absolutely correct. It won't necessarily mean no sharing accommodation, but it will mean safe internationally compliant to ILO standards accommodation, and we're already there by a country mile. And we know how to deliver that affordably to people. So thank you.

So Raghav, just to add on what Steve mentioned that there are many standards that are going to change like ILO, WHO, and those will be complied with. So people are again going to fly and then you won't find that 1 guy in 777, many people will fly together, but a lot of precautions, a lot of testing, all will be done. So as Steve correctly mentioned, that cramping won't happen, but sharing will happen. And sharing is allowed even in hospitals, when like 3, 4 patients can be in 1 ward. So those things will be allowed, but in a very, very measured manner. Thank you, Raghav, for a very good question. [ Hemant ] has asked the question. Hemant, you are on mute. If you want to unmute, please go ahead and you can ask the question. Otherwise, I can read out your question and answer that. Yes, Hemant, you can go ahead and answer now. Hemant, we are not able to hear you. Okay. So we will read out Hemant's question. Basically, he is asking what are the future plans of treasury shares. So Steve, I will take up this question directly. Treasury shares are a very good reserve for us. And we are going to use the shares only for extraordinary value accretion opportunity. So whether we are going for a huge expansion, bringing new opportunities where we need equity, so whether we can like use this with our new strategic partners, with any new equity holders, even when we -- our existing shareholders. So this we are going to do only when there are exceptional opportunities to expand the business. And you have seen that these treasury shares we didn't touch even in the most difficult period of last 5 years because these will only be used for the future growth of the company. So that is a point to your treasury shares, Hemant. Now we have another question coming from [ Philip ].

I just have 2 basic questions. Could you just provide your revenue breakdown between your 3 major businesses, say, in terms of percentage between PACs, soft FM and hard FM? And my second question is that, could you just provide some color on your expansion, Phase 1 expansion? And what is the status? And when do you expect to commence it as well?

Sure. Well, on the first question, we don't really break it down into PACs, soft FM and hard FM. I'd like to explain that in a little while. It's -- but you can look at it roughly into the income we enjoy from the Renaissance Village brand. That's the PDO PACs, that's the Duqm and then the pure services, which will include a mix of soft and hard FM. So similarly, the PACs have soft and hard FM within them because we provide all our services there. We do the maintenance and the waste management and everything and also all the soft services, the catering, the laundry, the housekeeping and so on. And it's a general rule, it's just done, the 50% is coming of -- revenue you're asking is coming from the PACs. Obviously, there's -- because of the investment there, there are different margins in that. So it's a larger share of the profit. And in the pure services side, it's a little over 50% of the overall revenue. In terms of if you were to break all that into soft and hard FM, the majority today is on the soft FM side, where we've got some pure catering contracts and so on that play a lot of our retail operations, where we provide cafeterias and other services, not only in the PAC, is soft FM related. But our hard FM is growing all the time and particularly since we've added this new business in the last couple of years of the waste management, et cetera, which we count as part of our hard FM side. Some of the IFM contracts that we do at Al Mouj and for BP at the Khazzan field includes a large and very sophisticated element of hard FM. So hard FM is growing, but it's in the minority of a mix between soft and hard. And the overall business is reasonably equitable mix between PAC related or Renaissance Village related and pure services. And the second question, I've -- yes.

I just want to know the status of your Phase 1 expansion on the Duqm. I think for the last call, you said it is -- there was some delay because of the COVID, but is there any update on that front? And can you just put some color on it?

Yes, it has started. We are able to go a little slower because what has happened with COVID is the downturn in occupancy, not because the project isn't happening because the project is slowing against that requirement to keep numbers to a minimum at the site. And we've now got the revised trajectory. So there was some delay in needing to get people to site with lockdown issues and so on. But the project started, and we aim to, first, additional rooms will be coming on by October. Even that we can go a little slower on in terms of as suits us, but it's happening. And so, too, is the demand to fill it. Then the demand to fill it is there, only that will start coming back and higher by December and now running into 2021, whereas we were expecting that to have all happened during 2020, but this thing called COVID came along. But so expansion is going ahead. Vishal took some time out to really look at the cost issues in the current economic environment, worked very well with our contractors to look at the optimum way that we can deliver this, and that worked very well. So the time has been used very well, but the project is very much ongoing. And there are teams on site. The actual building methodology we've used is a rapid wall build. So that has carried on in the sort of factory space and ship to site. So that didn't have to delay at all. So that's the story on the expansion. It's going ahead, but slowed up purely to coincide with what's happened in reality on the ground.

And Philip, just to add on, on expansion, what Steve mentioned, we are seeing great support from our shareholders. So we are adding some more rooms to our -- like our earlier expansion program. And because of that, like you needed some 10% more or 15% more, like quantum in terms of the entire expansion. And when we reached out to our shareholders for a small equity, I think we got good feedback, good response and equity is already in place now. And why we are doing this? Even for a small increment in CapEx amount, we'd want to adhere to right equity take mix or not to take any chances not to become aggressive, but to have the strong balance sheet because cash preservation is the key and right equity coming in is important. And if you really see our overall Renaissance balance sheet and net of cash, our gearing is less than 1 now, which used to be 3 or almost that kind of gearing like a year ago. So expansion, as Steve correctly mentioned, moving in the right space; money, we are getting all support from our equityholders and the banks. So expansion is progressing in the right direction. Next question is coming from [ Bishan ]. Bishan is not able to unmute. So we will -- Steve, would you like to take those questions?

Yes. Well, let me take the first one. I'll read it out for the benefit of everyone to hear it. Could you kindly let us know when do you estimate the Duqm Renaissance Village to reach pre-COVID occupancy levels? I believe it was around 16,700. Absolutely right. If we take the current bookings and projections of coming back, this -- we will cross this in the fourth quarter of this year. It will come back to those levels. Of course, we have to put a caveat on that. If there's anything, that's how the contractors and the EPC contractors, refinery and other clients see their workforces moving. So that we'll actually get to over 17,000 by the year-end. It will depend that nothing sets back further in terms of COVID, et cetera, but that's what their current plans are. And there are other economic issues that are dictating that. The steel arriving from China and so forth, et cetera, that they need the workforce to be here to receive and implement. So we have -- before the end of the year, certainly during the fourth quarter. In terms of developments that we're excited about in Q4 and in 2021, and you asked specifically what's happening with waste management. Now one of the things that has been delayed for us in waste management is the major -- I think I'll have to let you use your imaginations on this, but I'm sure you'll get there. Major client in the oilfields has reached agreement with be'ah to have their waste management collected by be'ah. And be'ah as you know, contract out to service providers as they did to us for Al Wusta and Duqm regions. So we have won that contract. It's meant to have started. There is a delay because there are issues of incorporating some of the local community contractors into the solution and so on. But that's one of the exciting things happening in relation to waste management. And so we expect that to start during the fourth quarter. I do think that there are other things, some important contracts that we have that are up for renewal and re-tender in the course of the year. And we're not always allowed to announce due to confidentiality reasons, et cetera, but we have been retaining in this environment. Yes, some of them, it's about reducing scope or how do we find savings that we can pass on to the client that doesn't affect our performance, but those things are happening as well. I think what is very exciting for us is what PDO are doing as Manazil. And this is where PDO is looking at the entire PDO concession area. Instead of the 15,000 or so who live in permanent accommodations, such as ours at the moment, that the entire 33,000 should be living in permanent accommodation. So we are currently participating in that, of course, we're just 1 competitor, but we expect to be a serious contender for that, and we're working very hard to see that we will win a share of that. So that's something that's very important and exciting to us. I do think that the government move on PPP and in that, I include privatization and outsourcing, not just public-private partnerships. Of course, everything has been held up by COVID. But what COVID has brought into sharp relief is that the need to outsource, the need to have efficient services, the need -- there is an absolute compelling need to solve the problem of many, many thousands of workers who are not living in safe accommodation, particularly safe in relation to if there was this pandemic or any other coming back. And so the drive to find solutions for that, Vishal hinted at it earlier on, is again something that we are being consulted on and that, of course -- one will have to compete in a transparent and proper fashion for these opportunities. But we've always been a serious contender with this, and we've got the know-how for it. All of those are very exciting things that are happening in our lives at the moment. And we say specifically on the sort of privatization and outsourcing, there's an awful lot of services that not just government but institutions and corporations self-perform. And I think in the oil price crisis, and yes, thank goodness, it's come back up into the 40s, but that's still down over 33% from where it was at the start of the year. So the compelling need to maintain high standards but to drive down cost is there. So whilst movement is slow because of COVID, I think the scale of opportunity is only going to grow. And we should expect to be a serious competitor for -- we're a market leader on the services side, we're a clear market leader on the accommodation solutions side. We should expect to take that leadership position without being complacent or assume that we have a right to any of that and compete to bring some great solutions to a larger client base going forward. So we do see it in spite of the worries and concern that the whole world is happening around COVID, that there are exciting times ahead for us. And I think that's the comment the Chairman made in his thing about, we expect to really bounce back fairly quickly. On EBITDA margins for '21 on Duqm and PACs, I'm going to ask Vishal. It's something we don't normally give out, if you like, partial EBITDA, where the EBITDA is coming from different ways, unless you feel that that's something that's okay to talk about. Because the PACs are -- in a sense, they're part of a big competition at the moment on Manazil and so on. Vishal, do you feel that that's something we can discuss or just EBITDA in general?

Steve, you are right. We generally discuss EBITDA in general, and I would like to add that, especially on PAC and Duqm that despite COVID situation, our operating team, our people at site, our operational excellence team and entire company, whatever initiatives they have taken, we were able to maintain almost the EBITDA margins which we had budgeted for pre-COVID. So EBITDA margins, what we had budgeted that without COVID, we are almost getting there. It's only the volume has come down. So despite volume coming down, revenue coming down, even at a lower level, we are able to maintain the margin despite water situation in Duqm. Duqm is attracting more and more rains than what Duqm needs, like rest of the country needs also more rain, but Duqm is really taking more share of it. So there are some water issues come up. But despite all that, we, as a management team, want to assure that we are still able to maintain the EBITDA margins what we had envisaged pre-COVID. That we can say.

Yes. Vishal, why don't you keep going on UAE?

So on UAE operations, I'm very happy to share that we have 300-odd team members there, and COVID also impacted that business. But the way the entire team handled the situation, like how we handled our own people, our customers, that was really a proven as a Renaissance culture in the UAE. That was taken very nicely by our customers. So compared to last year H1, where we had recorded OMR 400,000 loss in terms of EBITDA, we are almost breakeven in first 6 months of 2020 despite all the COVID impacts, despite impact in revenue. So we feel the direction is okay. But because of COVID, new contracts are not coming for renewal. People just would like to carry on with their existing service provider. But we feel that we are in the right direction. And also, it is important to note here that after a real intense 1 year here, we have more knowledge about that business in the UAE, more insight about that market. So that will also help us. So it is moving in the right direction. But in case if it doesn't turn around and it doesn't become another Renaissance and we don't see that light, then we will not shy away to take hard decision. We don't want to carry on with a small money. We will see that it makes really big money, it moves in the right direction. If not, then we will take the right decision. But at present, UAE business is almost self-sustaining in terms of their own cash flow.

Yes. No, absolutely. And just by -- you've also expanded your question on the government PPP program -- privatization program, as mentioned in the Chairman's report. I really covered that partly in this, but I would add to that, that, again, when you look at a post-COVID world and a post oil price crashed world, there are 2 things. One is where we have all of us, fellow experts and working in a lot of the sort of tough jobs out in the open, whether it's in construction, whether it's in some of the municipal services, et cetera, there's clearly going to be a requirement that they're properly housed and cared for, either by their employers or by a unified economy of scale solutions, such as we do at Duqm. Similarly, the compelling need existed before COVID and before the oil price fell, the compelling need to have more and more of our Omani colleagues in the workplace in productive jobs. And so a lot of the privatization and outsourcing won't just be about replacing low skilled as important as those low skills are. It's not to denigrate those skills at all. They're very much needed. Low-skilled manual effort needs to be replaced by more interesting jobs that have more mechanical or AI or digital-related solutions around them that require fewer people, but a more interesting, higher paid job to run it that lends itself to increasing Omanization and so on. So we feel that some of the things that government will look to outsource won't be just replacing what is happening at the moment. It will be how can -- what is done at the moment be done in a more intelligent way, but where it needs to be done by expat colleagues, they'll be properly taken care of at an affordable way because they don't want costs to go up or can be done by Omanis in a more interesting technology or mechanical energy way or automated way. So that's -- these are all areas that we're looking at. And our -- we have a very strong record on self-performance, things that we can do ourselves already, like the accommodation solutions. Similarly, where there is new technology, new relationships. If you'd like the technology we've brought into the waste management in Al Wusta and SEZAD, we're very open to partnering with international players who have proven record and capability, bringing in and bringing in that knowledge transfer into Oman and into the Oman market. So we look to be the service provider of choice from the government on the one hand, where those -- the skill sets or the technology needs to come from elsewhere, we look to be the partner of choice for major foreign companies who will also need to be looking in a post-COVID era for markets because every market out there has been really hit very badly. So we think those are -- I know I'm not being specific, but generalized areas that we're looking at a number of specifics around that. Thank you.

[ Ashish Kumar ], if you would like to -- yes, Ashish, if you would like to speak?

Yes. Just want to know on the targeted gearing level. I understand that we have about OMR 80 million debt. So what's the target gearing level you're looking at?

Thanks, Ashish. So as you know, that currently, our gearing is well under control, our debt-to-EBITDA is around 3x. So we are in a very strong position. Gearing level is important parameter, but what is important for us is basically if we borrow new money, it should generate right EBITDA. That is the case, then we are not shying a way to borrow, correct? So for example, in Duqm expansion, we got 40% equity, 60% debt. EBITDA is happening. Last year, our EBITDA was around OMR 21-odd million. So you can see the current debt, even I'm talking about last year EBITDA with the current debt, and if you reduce the cash balance, it is less than 3x, yes? So we are comfortable, but we feel that ratios are important to look at it, but we need to look at it overall cash flow in perspective. So if we borrow some money today, gearing goes up. But if the future cash flow is good and can support that gearing, we won't shy away. Thank you, Ashish. [ Joyce ], you want to ask a question?

See, in the second quarter earnings report, I'm seeing a very strange line item, which made an entry that is the investment income. This was never a part of Renaissance financial statements. Just a little curious as to, is it a shift in strategy that we should expect more allocations? Or just treasury management because of the elevated cash levels? I'm also a little curious as to -- looking at the returns, more than 20% returns in second quarter. We'll appreciate if we can explain it a little bit in more detail.

So Joyce, on treasury management, we heard you loud, but the second question, if you can repeat, please?

It's on -- is it a shift in strategy, the increased cash allocations to investments? Is it a shift in strategy? Or should we expect more allocations in this? And the second part of the same question is, I'm a little curious on the returns that you have generated in the second quarter, which is up 20% in 1 quarter. So we'll appreciate if you can give us some more explanation to that.

Sure, Joyce. Good question. So some of my colleagues are also there as part of the team, and I just want to give credit to them. Because when we were entering into COVID period and we were liquid, we put a strategy that at present, the expansion, the new opportunities might take 6 months, 9 months, and you don't need this money immediately. So how we can use our liquidity in such a manner, so that it is really being utilized as well as making the best return for us. And I don't think we are the super intelligent investors. But I think with the right strategy, planning, it worked very well. We invested in some of the good bonds, including Oman government bonds, including some of the listed bonds, when real beating happened. So we analyzed all those, we put some money in equity, but our strategy is very clear that this is just a part of the treasury management to maximize our yield and reduce the finance cost. But ultimately, money will find the place for more Duqm expansion or more Manazil, more PACs. But over the years, this is like -- with all the inputs from various analysts like yourself, we also learned how to do some treasury management. And I'm very happy to share that we made 40% IRR on our investment, yes? So that is a good outcome, good thing happen. And we will continue to pick and choose. We will not do any risky venture here, and we are not going to do a big allocation. So it's more about treasury management. You are right, Joyce.

Yes. And just add to it. I think you really answered the question yourself, Joyce, and Vishal has clarified that. It's about short-term treasury management that's prudent. There's no change in strategy. The strategy is to find opportunities to invest in, to grow the business, and we've got a number of those coming up. Obviously, it's been slower than we expected even on what we'd already planned because of the COVID. And so a prudent initiative has been taken that will continue, while we have those surplus funds, but we won't be allocating huge new funds to it or any change of strategy that this is a new business line.

Yes. And congratulations on the good returns that you have generated. It's an amazing return. Thank you very much. Thanks for the clarification.

Thanks, Joyce. Well, we don't have any other questions coming in, and we do try hard to respect your time on this as well. So I'm taking that as you also being very disciplined as I and support us to come along to these meetings. We've done the hour. As always, a great pleasure listening to your questions. They're always very pertinent from all of you. And we hope it's been useful to you in understanding. As always, thank you very much for your interest in Renaissance. And we look forward to talking to you again at the end of the next quarter. Thank you very much indeed.

Thank you, everyone. Bye for now.