Renaissance Services SAOG (RNSS) Earnings Call Transcript & Summary

A very good afternoon, everyone, and welcome to the Q1 2022 Investors and Analyst Meeting for Renaissance Services SAOG. We -- this is the opportunity that we have every quarter for our investor and analyst community to question the management of the company. Today, as usual, you have my colleague, the CFO, Vishal Goenka; and myself, Stephen Thomas, the CEO. We -- as you know, we follow a very simple Q&A format. For those of you who are regular attenders and for those who are new, welcome to you all. You'll soon get used to that format. So on that note, I open up the floor to whoever would like to ask the first question. Thank you.

Ayisha, you can ask your question.

My question is about occupancy levels. Have you seen improvement...

Hi, Ayisha, if you could just also talk about your organization.

Okay. Sorry, sorry. My name is Ayisha Zia. I'm the Acting Head of Research at Ubhar Capital. So right. So my question is about the occupancy levels at the PACs, how they are progressing, especially at Duqm. Are you seeing some projects that are being revived -- oil and gas projects given that oil and gas prices are elevated? So if you could shed some light on that.

Yes, certainly. Thank you, Ayisha. So the -- I'll start with the PACs, the Renaissance villages in the oil and gas fields. There, we have seen improvement on last year's numbers. We are talking in the Chairman's statement that was referring to, we come up to 90% there. It's around 89% at the moment. So it's fluctuating either side of the 90th percentile, which is a good level of occupancy for us. I mean, we regard 95% as really full when you take account of movements and, et cetera, shift changes and so on. So looking very positive in the oil and gas field. Specific to your question, we are seeing movement. We are hearing more project activity than there has been, of course, during the 2 years of COVID and the -- following the original oil price crash. So more activity is coming back to the oil and gas fields. And we feel that not just in our occupancy numbers of those assets that we own that we've just spoken about but in where we operate for other clients in their facilities in the oil and gas fields. So we're seeing that general trend of improvement, not quite back to pre-COVID levels but getting very close to it. In Duqm, we -- occupancy, as at today, is 12,755. It has been up around 13,000. It's dropped off a little over the Eid period and then one a smaller contract of demobilization, but there's another mobilization coming in. Essentially, what's happening in Duqm, with the major project going on, is still OQ8. That's Duqm refinery. And there, what we're seeing is if you break the project into 3 component parts, 3 EPC consortia, EPC 3 that we're doing the tank farm at the Raz Markaz and the pipelines and so on is starting to demobilize. EPC 1 and EPC 2 are starting to bring in their sort of commissioning and finishing teams. The estimates that we have as we expect our friends from EPC 2 to be with us throughout the year, and we expect our friends from EPC 1 to be with us into about halfway through next year. So what is affecting occupancy away from the project side is we're very happy to have signed a new long-term commitment from one of our anchor tenants. They've been with us from day 1. That Oman DryDock. They averaged 2,700 occupancy last year. They're up over 3,000 this year. They have forecast to go up to 4,500 and 5,000 in the coming year. And we're very pleased that they have committed to us in the long term. We have a new 5-year contract with them, with their intent for that to be 5 years that we keep renewing going forward. So occupancy doesn't just come from the project. There's also, in that case, a stable and growing permanent workforce building up there. Thank you, Ayisha. That's the occupancy.

Ayisha, if you have any other question, please ask. Otherwise, [ Sameer ], please feel free to ask your question.

Actually, I have a couple of questions. First, on your inflationary pressure. As in the last 2 years, Renaissance were able to take the hit on the inflationary pressures and given the fact that the oil and gas industry were on the lower side. So now things have improved on the oil and gas sector, are you expecting a reciprocal from the -- from your clients by increasing the -- so would you be able to pass on these additional costs to the -- your clients going forward, especially in the current scenario where we are seeing the food-related inflationary is really picking up, especially in the last 1 quarter?

So thank you [ Sameer ], and I'll answer that in sort of general operational issues and passing on of the -- of rates to clients, and then I'll pass on to Vishal for any other financial issues that he wants to add to that. And it's quite a multifaceted answer here because, first of all, there is always inflation, granted not on the rapid scale and global impact that is happening in terms of unexpected inflationary pressure. The -- but if you look at the inflationary pressure over time, we have, for many, many years, through building volume, through innovating the length of our ethical supply chain, being able to counter inflation in many ways, if you take a very simple case in point, those of you who have been following us for years are aware that the rates we quoted before we even opened Renaissance Village Duqm, our rack rates for the rooms, et cetera, have not changed. We have managed to get through COVID. Yes, there have been cost pressures and so on and COVID where we absorbed those cost pressures. But there's been inflationary pressure. You look at consumer price index year-on-year, and there's always an impact on the consumables. So I -- Vishal and I pay real homage to our colleagues who work in our operations and our supply chain and our finance team for the way they work on these issues and make sure that we remain competitive and that our buying power, which grows all the time, really is exercised to its best of its ability. Now that brings us to this year. For example, we saw at the start of this inflationary pressure, it's probably had, in this first quarter, a modest impact, about OMR 100,000. If we don't act, it could have a significantly higher pressure in the 3 quarters going forward, but we are acting, and we can act in different ways. First of all, we are, again, this year, going through the process of a number of contracts that where we were retained, in some cases, extended for 6 months, extended for 12 months, et cetera, those contracts are again up for renewal. In 90% of cases, we are -- have either been successful in retention, or we are looking extremely successful and likely to be successful in those -- closing out those negotiations. And I've just given one example with our friends from Oman DryDock that just signed up 5 years with us, for example. So that -- in those discussions, we are able to do 2 things. One is that we're able to recalibrate the rates or work with the client on scope changes or even work with the client and the flexibility of menu changes and menu engineering, as we call it, that can direct the costs to those products that are least affected by inflation. And so that work is ongoing. Now there are other instances where we are, at the moment, taking a conscious decision to work on mitigating inflation so that we're not passing on. So at the moment, we have no intention of increasing our rates at Duqm. At the moment, we have no intention of triggering our rightful inflation clause with our clients at PDO. We're much more engaged with them. And what are the things we can do to make sure this doesn't impact our business and doesn't impact you in terms of quality of service? So it's not an easy period. [ Sameer ], you've hit on a very important question. But what I would say is that I feel that Renaissance, with our client relationships, our record for contract retention, with our excellent ethical supply chain and relationships to multiple suppliers, we have increased our local purchasing to 79% now. So our in-country value is high. That -- the more we shorten the supply chain, we take out a lot of the logistics cost of import and so on. So we're working but even with our international suppliers to get the best possible. We're buying forward. We're, perhaps, stocking more than we would normally stock. We try and keep inventories down, et cetera. In this case, we are working on mitigating this, and we are happy with the progress that we're making, both with clients and with our own internal processes. With that, Vishal, is there anything you'd like to specifically say on the financial impact?

Thanks, Steve. So [ Sameer ], inflation and these kind of unprecedented situation is a stress test. And if you are really able to handle this stress test very well because of all the things that Steve mentioned in terms of planning ahead, in terms of managing your excellence, your supply stuff, then you come out as a winner, both in terms of the competition as well as with your customers. And that's exactly what we are seeing here because we are seeing that customers are even liking you more and because they are seeing that the entire burden of this inflation is not being passed to them but how we can mitigate it. That's what Steve mentioned. So in terms of this year impact, yes, there is a pressure, both in our Oman and UAE operations. But what we -- the kind of the planning, what we are -- we have done and what we are doing now, the impact will be minimal. So there will be some impact, as we mentioned, that OMR 100,000 in this quarter. And this inflation, we are not seeing is going to last forever. There will be ups and downs, and that is the characteristics of inflation. So we are also seeing that some breather will come in during this year in some of the commodities, not in everything. So that's where you really do your menu engineering and you see that what is economically available that you'll start using it with the same nutrition value. So yes, there are some impact but manageable. That's what we are seeing. And ultimately, we are seeing that as like if this becomes permanent, then this becomes permanent for everyone. Then you basically talk to your stakeholders and then do the right adjustment in the pricing. So yes, there is an impact, but it's manageable. And despite that, we will see that profitability margins are still maintained. That's how we are seeing the situation for this year.

Yes, understood. It's very clear, indeed. My second question is on what percentage of your contracts are subject to rate tender, especially in the contract services?

So the -- there's a significant volume this year. The -- in terms of its total percentage, I'm going to guess, and then Vishal might be able to [indiscernible]. It's something high. Around 75% is that being recycled this year because we once again have 100% of our MOH tender, BP, Al Mouj. Daleel and Occi are already, we're very happy to say, signed up with us again for a new contract period, so we're happy about that. The Royal Guard. Whilst we never take for granted that we will always retain everything, we'll also make some contract gains in some areas as well. But I would say that we are very we're cautiously optimistic that the vast majority of that is going to stay with us. It's going to stay with us at enhanced prices that reflect not enhanced prices that change our profitability, but the deal with the inflationary pressures that we've had, which are not just in the consumables. There's been -- in the course of some of these contracts, we've seen cost of doing business in country going up for different reasons. And so we've got clients who have understood that. We've got tender processes where we have come out as the low bidder by tight margins. And when it's tight, there's always pressure from competition. But nevertheless, we are ahead as low bidder and, therefore, in a good position to win most, if not all, of that business.

Yes. One follow-up question on that. In the Chairman's report, it's mentioned that your current backlog is around OMR 59 million or OMR 60 million. How was it in the last year same period? What was your, I mean, contract backlog?

Vishal, do you recall what we were this time last year?

Yes. Sure. So basically, [ Sameer ], last year, if you see that there is a combination of extension and renewals. So immediately post-COVID period, many of the clients decided not to really go for renewals but go for extension. So if I consider extension, that basically, we retain 100% of our contracts. But let me give you the exit number of like contracts, how much we had last year. Almost, let's say, by the year-end of the -- like last year, 2021, we had almost OMR 70 million contract backlog. And our annual revenue is around OMR 55 million, yes. [indiscernible] correctly mentioned that if you see the 75% ballpark, it comes to that this year, and MOH is a one major one. Because a lot of extensions happened, otherwise, this 75% situation would have come last year. But clients believe in us that we can really manage it. So they extend it for 1 year. And now they are coming out for the -- our tendering process, yes. Thanks, [ Sameer ]. So now goes to [ Vishal ].

My question is with regards to something mentioned in the Chairman's report. It mentions that there is a pipeline sort of -- contracts in the pipeline are worth OMR 90 million. I know they are at various stages of negotiation. If you could just throw some light on those and then I can probably ask some further questions.

So that is referring to those contracts that we've just mentioned. So the Ministry of Health tender, the BP tender and so on. So those things, which I mustn't speak prematurely, but the Ministry of Health tender, it's in the public domain that we are in lowest bid position. We've been called into the tender board and discussed and explained the changes in our pricing to them. And so we're expecting an outcome very soon on those things. So we are working on other contracts that are in our sales pipeline that we don't include in that number. Some are short term. I can give an example. We are competing for provision of catering services for the FIFA World Cup in Qatar. And if we were successful, that's something that would have a short term but important impact towards the end of the year as well as reputational one in terms of the prestige of doing such a job. But the OMR 90 million is the bread and butter of those cyclical contracts that are coming around this year.

What would be the expected sort of success rate or the conversion rate on these projects given your track record and experience?

I would say 95%.

Okay. So 95% worth of OMR 90 million is what you expect to convert?

Yes.

And any updates on the PDO Manazil project? I know we've discussed it multiple times. If you could just -- if there's any update for us at all?

There is a small update. So we all know that the full DBOOM, as it was called, the design, build, own, operate and maintain project, across the 30,000 beds has been halted as a -- those holistic projects. And with that, the very good news for companies like us where we are the dominant player in the PAC market, that the PACs are confirmed as part of the accommodation solution for the PDO oil and gas fields through to 2044. Only why there's a cut off at that point is because that's when the concession period ends. It doesn't mean that they wouldn't have a role after that. So we have another 22 years confirmed sort of PACs. And the delta -- because if you remember the PACs have some 15,000 beds, of which we have some 8,900 of those. And the balance, 15,000 beds, still require a solution. So the Manazil team within PDO have reached out to the tenderers and asked again for expression of interest to reengage around those 15,000 beds using what we've put in so far but then recalibrating it with the changes that come with that. So that process is to be -- the response goes in for early June, and the process will start soon after that.

Okay. Noted. That's good to hear. My last question is in regards to the waste management services space. You mentioned it was a very exciting space that you wanted to be a part of, and the company has started off with a small step in that direction. What are your aspirations for this year and the next year?

Well, if you remember, [ Vishal ], the -- what is -- so the government has decided that be'ah will take over the waste management and journey for the whole country as a state-owned enterprise. And the first thing that they have addressed is waste collection. And there was a circuit of 6-, 7-year tenders for that, and the aggregate total of that whole market is OMR 234 million. And of that, we picked up 8% because we got the last one at Al Wusta and SEZAD, and that was a OMR 19.4 million contract win. Now the -- since then, we have picked up and been awarded the important role with PDO. So this is with be'ah but to perform services for PDO. And that's slightly more interesting because it makes us of the private sector doing this. The only one that -- yes, it's got a solid waste collection. That's the same as the other OMR 234 million I referred to. But this then also has the clearing of dump sites, dealing with a lot of old waste that's there, removing it. And we've started this project, and we've got competitors and the team. We're doing a lot of work with them, also allowing a big piece of that to be with local community contractors and SMEs working with that. And it then also includes the operation and management of the waste sites. So that, which is a OMR 12.2 million contract of those 3 component parts, is our sort of new piece of the action. Why is it exciting in the future is because ultimately, the collection of waste and the sending of it to landfill is not sustainable. And more and more, there will be solutions as there are some solutions for a circular economy that we recycle our cooking oil. We try and do the best we can with our PET bottles and cardboard and so on. But this really needs a step-up in waste treatment and where waste is sent to. And that would be the next phase of be'ah's call to the market. And so our job is to be ready to respond. And whilst we ended up with a small piece of the market, as I described before, we have to be happy that having broken into the market because we -- who won the other pieces were all the international players. And whilst we have a very good international partner with us, Sharjah environmental services, we are absolutely joint venture with them, self-performing those projects. And I'm happy to say that be'ah is very happy with us. I mean, of course, I would say that, wouldn't I? Please go and ask our clients and check that they're saying the same thing as me, but that's what they tell us. They are genuinely happy with what we're doing. And again, I believe we will be a serious contender as the new opportunities arise. What I can't confirm is when those opportunities. I know that be'ah is working on them and that when they come, they will be like the waste collection volume. But I think maybe late this year or during 2023, we should see some opportunity coming down the track. Thank you.

[ Vikram ], you can ask your question.

Yes. So my first question is on RSVD, okay. So in just current report is concerned, like 65% of the occupancy still is there. And so is there any update like whether this occupancy rate, going forward, it will improve and when it will improve? If you can provide any update on this. So this is my first question, and I will ask for one further follow-up question on this RSVD.

So [ Vikram ], there are 2 pieces to this or 3, actually. The first piece is what visibility we see during the year. So we've averaged about 12,500 so far at the time of the report. We're about [ 12,750 ] today. We have visibility, and this can change. It's a volatile thing. But we have visibility that we will average north of 13,000 for the year. Now that's the first piece of it. The second piece is that the -- it really could be more. And the Chairman refers to that because -- and all the authorities and everyone agree with us that we were asked to put the International Labour Organization standard in, which is the minimum standard of worker welfare required to attract foreign financiers and foreign investors of mastic projects like the refinery and other things at Duqm. And unfortunately, there are still some contractors who are finding ways around their obligation to look after their people in that fashion by keeping them at Renaissance Village Duqm. And it's -- so everyone is supportive of us on this, but sometimes, if someone is just outside the zone or whatever solution -- innovative solution they have for this, it's not a light switch that can be turned on and off. And so what the government is doing is they're conducting a major inspection of all those, so they're commissioning an independent third party and getting reports so that they then have the tools that they need, independently assess to be able to at least shut down the worst of those. And so as these things happen, then we will see those numbers moving in towards us, but we can't factor those in yet because what has proven the case so far is people have found innovative ways to stay outside the fence from the time that COVID hit when they started doing this. The good news is the third piece is that the authorities and the major project owners, et cetera, have learned from this and as we have and are really committed to making sure this does not happen again for future projects that there are no loopholes that people could find a way that they think is justifiable to look after their people in that fashion. And so I think that's a positive thing going forward and so that we expect the situation to improve in the future. Quick summary, I think we'll average about 13,000. There is prospect that if this exercise is successful that, that could go up by some decent numbers. We estimate there's about 5,000 people living outside the fence in conditions they shouldn't be. Thank you.

Okay. So my next question is on this follow-up question related to RSVD. The 5-year contract with Oman DryDock, you mentioned that more than 3,000 of these residents are currently in RSVD and is expected to rise more than 4,500. So is there any time line by which they will be moving to RSVD?

Yes. The -- there's not a specific date. There's a gradual increase happening. The -- there are certain things, perhaps. So for example, there, if you -- [indiscernible] Duqm came back yesterday. There were 28 vessels in there. I remember it was designed for 10 originally. And so they're doing really well. I think we have to commend them, not from our point of view as Renaissance Village Duqm. As Oman, it's important for Oman and for Duqm that, that is a successful project, and it is. So they've got some new floating docks coming in. They've got their fabrication yard expanding and so on. And those things are scheduled to all happen in the course of this year. And when they do, we'll start to see that moving up. So when I say we expect to see them up at 4,500 to 5,000 in the course of the year, I think over the next 12 months, we will see that happening.

Okay. So my last question is on MOH fund, which, in last year, they have extended for 12 months, if I'm not wrong. So is there any update on this MOH contract?

Well, good memory, [ Vikram ], the -- exactly 12 months. And your timing couldn't be more perfect, because those 12 months expire at the end of this month. So we are operational. We are fully mobilized there. They -- we are the lowest bidder across the board again, so -- but we have to wait for the final decision of the tender board. The -- we believe the recommendation is to go with the lowest bidder, and I believe we're regarded as the technically competent bidder as well. They're very happy with our services. So the fact is we're waiting for news of that aboard, and I leave it to you to work out what might happen in the next 2 weeks. I believe it would be something of the following: either there would be -- that we should be a serious contender to be awarded that. If for any administrative reason there's any delay, then I think we might be asked to do a short extension while they administer whatever needs to be done now, but that's the situation. So we are -- given that scenario of facts that I presented to, cautiously optimistic that we may be successful in retaining our Ministry of Health work.

[ Vikram ], whether you have any further questions?

No, I don't have any other.

Thank you so much. So we have a question from [ Vishal ].

This is [ Abbas ].

Hi, [ Abbas ], please go ahead.

I had a couple of questions. So if [indiscernible] Renaissance business into the village business, which is Duqm village and the PDO village, and then if I have to look at the pure contract services, what sort of revenue contribution are you looking at for the pure contract services business to the top line? I think last year, you guys made OMR 110 million in revenue. Is the number close to 45% for the contract services business?

That's right, [ Abbas ].

Okay. So just -- so now that I have that confirmation, and I think in the Chairman's report in the first quarter, we noticed that if you guys are successful in most of the tendering, you're looking at an order backlog of OMR 150-odd million. Now what's the book-to-bill ratio? What's the sort of -- how many years will it take you to [ extinct ] this backlog?

This will be our annual revenue from contract services: between OMR 55 million to OMR 60 million, yes, on an average. So you can see this would be around 2 -- over 2 years, around 2-year kind of the billing.

Okay. So your run rate for -- so you expect your run rate for the contract services business to go up in '22 and '23. Is that a fair conclusion compared to '21?

As simple as that, the inflation is going up, correct? So the point is that like the same contract value for the same number of meals, the price has gone up. And what Steve mentioned is still after that we are the lowest bidder because of maintaining the supply chain efficiency and all. So yes, we are expecting at least to bill OMR 55 million or more.

And in terms of operating profit on the bottom line impact, do you feel the numbers will be more or less consistent with '21 as per your expectations?

Slightly better because 2021 still we had some COVID. And for example, [indiscernible] -- still, I'm not seeing handholding, but still, we were supporting our clients, in a sense, it's not that your COVID is done. So suddenly, you take out all those supporting things. We were still serving in the packaged meals. So 2022, we are expecting slightly better margins than 2021 in our contract services.

Okay. And when it comes to the village business, it's clear. I mean, Steve, on the call, you mentioned the challenges with Duqm that's been going on for a year. So as things stand, you've guided to the 13,000 beds, which it seems like a reasonable number. And when it comes to the PDO village business, the current occupancy rate is close to 90%. Do you see any upside in that? And I'm going to come to the delta that Steve spoke about when it came to Manazil's new form. So just on the current business alone, do you see any upside to the 90% occupancy as we speak?

So I think we will have a few more months at this kind of level, either side of 90%, so let's take 90% the average. And then we believe that we would see more occupancy coming in towards the latter end of the year. And there will also be some issues in the Manazil conversation that may require us to expand or to consider expansion of some of our existing PACs, so -- because we see the occupancy will go beyond the 100% mark at the moment in terms of capacity. So that's the situation.

Right. And just, Steve, just to -- I mean because you mentioned there was a small update at Manazil, and I know I got what you said. But just if I could ask you to give a little more color on what your understanding of the situation is, it's a no-brainer. It's not negotiable that PDO needs those extra beds. So it would be in the form of what you said, DBOOM, or it could be in another form, which is more in line with what's happening right now. But this is nonnegotiable that they need those extra beds.

Yes. I think that, [ Abbas ], is spot on. They absolutely need them in 2 ways. One is whilst they're for smaller numbers, it's, nevertheless -- a high-level requirement is the PDO camps themselves. Whilst there are some assets in those camps that can be retained as part of a new footprint, so there's some newer accommodation blocks and so on but not many, they do need to replace the aged infrastructure of the original PDO accounts. And so that has to happen. The other thing that they're absolutely committed to happening is that where there are no PACs at the moment that they remain what we call TACs, temporary accommodation for contractors. Even where there are PACs whilst they're not competing TACs, there have been overflow TACs, where if a project -- if the PAC is full because 2 projects come along at the same time, then another TAC has been allowed to come up for that or an old TAC for use. They have -- Manazil is about shutting all of that down. And that's why we talk about 15,000 beds that have to be rebuild. And so that is coming. Now will PDO decide to do that on their own balance sheet and let out services? Will they decide to do their own camps on their own balance sheet and do the contractor accommodation as extensions to existing PACs and new PACs on the PAC formula? So these are 2 options that are being considered. Whatever happens -- as I've said from the beginning, whatever happens with Manazil because of the absolute commitment or need to either replace old facilities that are going to end up being unsafe by not replacing them and replacing with TACs, because of that, it is bound to be an opportunity for us that's seeing a doubling of potential growth for us in the oil fields from our current position. If we do what we have a traditional track record of doing, which is winning the maximum awardable, which has been 50% of each PAC tender.

Okay. But in terms of time lines, you don't have any clarity because, I mean, you said this conversation has been going on from their side for at least a few years now.

Absolutely, [ Abbas ]. So what's happened was there was a suspension of the previous position. And my last update to you is that our information is they're saying, no, Manazil's not gone away. We're coming back with the different solution. Now the bit we're clear on is the role of the PACs in that solution. So that's good for us, for a start. So the bit that needs clarification, they've literally just put out the request for interest to the same group of tenders and said, "Listen, are you prepared to resubmit along these lines?" Now those lines -- so at the moment, that's the 15,000 beds, whether those lines are we'll build, you operate, et cetera, is not clear yet. It may be a combination of those things. And we'll keep you posted as the information comes up.

Okay. Has there been -- I mean, okay, there was speculation. You guys never went ahead and said anything about this, but there was some speculation of a shifting of U.K. military base from Canada to Oman. Has there been any update on that? I mean have you heard any -- are you talking to them to build something out? Or you can't comment on that right now?

Well, I'm delighted to know what you've heard, [ Abbas ], but we'll talk offline. No, the reality is -- let's take what's in the public domain. The British Defence Secretary, Ben Wallace, came to Duqm and announced that this is their intention, is to move the Canada operation to Duqm. Now that, of course, then needs Is dotting and Ts crossing to become a permanent reality. So what I can tell you is that -- and let me tell you what that means, that the exercise that was carried out in Canada would be 2 exercises requiring accommodation for about 800 to 900 people for 2 sets of 4 months, so 8 months' worth of exercises with that kind of volume of people. So what I can tell you is that, that is coming this year, if we take it a year from between now and a year from now, and the following 2 years, and that this year, they are committed. They're coming to stay with us. And they see that as a solution for the next few years. So effectively, it requires our flexibility because that's sort of 66% occupancy of that requirement, although when they are here with us, it does result in a lot of other spend. There's a lot of other services and things that we're able to do just as when the Navy ships come in. We are part of their solution, any sort of services that are needed from the ground while they're in the port. So this is good news for us that the British military are definitely part of our forecast for this year and into next year. The long-term issue, what I understand, and this is -- now I'm going out of the public domain, is that, that intention to bring that here permanently is now under serious discussion between the Omani Ministry of Defence and the British Ministry of Defence. So they're already committed to 3 years making that permanent and then on a larger scale because what I must say is that these 2 exercises a year, 2 times, 4 months, 900 people, on top of existing exercises planned, so the next safe scenario is still to go ahead as planned and, of course, that we get much higher numbers and so on. So the British military presence is going to be substantial for us and an important part of what we do. And it's a very good thing, like the Brits send around a big fire safety team and other safety. It has been about the 14 people, expats, [ condo ] facility for nearly a week, et cetera. And their standards have gone up and have sadly, in the post-rental world, necessarily. So -- and we've passed with flying colors, and they say, your facility is better than many of our own facilities back in the U.K. in our barracks there and so on. So we've got a great relationship. They love staying with us. We are part of the solution for Oman to be a more cost-effective training ground than elsewhere in the world. And I think that's -- the second point will need to be sorted out in the negotiations between the 2 governments that those negotiations keep it that way. Not just the accommodation that is part of it of making it the cheapest because what I understand strategically, it is a fantastic because of proximity to sea, the ability to have naval and the land, amphibious landings, et cetera, not just for the U.K. military. If this goes ahead, then the other friendly forces, U.S., India, others are all standing by expressing great interest of using the same space. So that's what I can tell you about it, [ Abbas ].

I appreciate that. I'm just wondering, my only question is, is Renaissance the only serious player that the U.K. military would consider? Or are the competitors in Duqm who could provide a similar service?

Yes. There is nothing else available right now. The alternative is to set up their own accommodation. And the other alternative is to do temporary solutions. Before we built our PAC, we did attempt to get solutions for the U.S. Marine Corps. We've done portacabin temporary solutions for the U.K. military at Manah and Shafa during the last stage they're here. So it wasn't just in Duqm that we were serving them. And so there are alternatives. None of them is as good a quality of service because of it's a permanent building and the nature of our facilities, and none of them can compete with it. When we provided those temporary facilities and removed them at the end of the exercise, cost those clients far more than it costs for them to stay and happily probably for us because it's a win-win contract, as it should be, with us in Renaissance Village Duqm. So there are alternatives, but I don't see competitive alternatives at the moment.

I appreciate that. That's very good. My last question is for Vishal. I mean, Steve, you can jump in as well. I remember when Renaissance sold Topaz and you guys went ahead and did the restructuring of capital. There was a commitment that the company is going to become a consistent dividend player who -- whatever money is available after CapEx needs is going to go back to your shareholders. Now in light of that sort of commitment from Renaissance in the past, how do you see dividends in this year, next year and especially after you related to your CapEx and refinancing needs? Vishal, what's your -- I mean are you still looking at paying out 100% dividends post any necessary CapEx? Or you're going to save some money to try and get into new businesses?

So basically, like as we had committed at that time, we have been following that guide. Immediately, after sale of Topaz, we have been paying dividends. Despite COVID, any ups or downs, we have been paying the same dividend. Now Duqm occupancy goes up and situation further improves, which we are expecting, then of course, dividend goes up. But based on the current business, we are expecting to maintain the same dividend at least for this year and next year. And of course, we are always looking at all those opportunities. In ESG, in our line of business as we have put in Renaissance 2.0 as well, that something backward and forward integration relating to our business, we are always keep looking at it. So if anything comes around considering our leverage ratio, considering our balance sheet, considering the headroom available to borrow our equity, I think dividend will still be paid out in addition to capital commitments to projects like Manazil, if Manazil will have those similar projects.

And what's your guidance on CapEx for this year, Vishal?

So if Manazil happens, then, of course, you will start building up over a 2-year period, 3-year, 2.5 period. Otherwise, the CapEx is primarily going into our -- like this contract renewals and primarily this risk management contract with be'ah but not a significant number. It could be not more than OMR 1 million.

Is there another question lined up, Vishal? Otherwise, I would like to expand on that. Let [ Sameer ] come back, sorry.

Yes. [ Sameer ] has a question, and [ Joyce ] has a question.

Sure. And just one clarification or like -- so you mentioned that the Manazil project, the previous tender has canceled so -- and they recontinued. But that's the list of it, right?

Actually, that's not the wording they would use. I mean, I think, you could use it. You could look at it that way, [ Sameer ]. But they are not awarding the full amount on the basis that it was bid, which was -- it had greenfield and brownfield options, and it's greenfield with all new and brownfield, including PACs and so on. That is not going to be awarded in that way, where they would be awarding to successful bidders with an occupancy guarantee that was creating a major contingent liability on their own balance sheet because of the longevity of the project up to 2044. And so that's what's being rethought. And that's why I'm saying that they may be looking at this in terms of self-investing on some of it because if it's going to be on their balance sheet, they can have it on their balance sheet at cost that they're in control of and so on. And so there will be an element of their building, an element of the contractor building, an element of -- and the rest is pure services. So they don't regard it as canceled. What they do regard it is says that's not being awarded that way. The project isn't canceled. They're coming back to the same group of bidders to see where they can leverage off what's been quoted and get recalibrated rates, if you like, around any changes because there's bound to be changed in that when you're moving to the 15,000 numbers. So it's not as simple as canceled. It's changed, I would say. One of the things that we'll be seeing larger CapEx on in next year, partly to follow on from Vishal, will be maybe some reinvestment in our existing PACs and expansion of those, et cetera. But that will come. We can't talk about that yet until we see the full Manazil rollout. But that is certainly being talked about as part of the solution. So they -- why I'm being careful is they don't regard Manazil as canceled. They regard Manazil as changed.

Got you. One more question from my side. So could you give some color on your UAE business, where it stands?

Sure, [ Sameer ]. So when we had acquired this business, we had 200 people. And now today, we have over 500 people. Basically, the way it looks like that we should be crossing over a OMR 7 million to OMR 8 million of [indiscernible] turnover despite inflationary pressure. And the new market generally takes 6 to 7 years to become profitable. We feel that we should be avoiding losses this year. And then, of course, based on that, we will continue to build on. So UAE looks okay. The revenue is growing. Revenue has grown compared to the last year. So as I mentioned, that's OMR 7 million to 8 OMR million kind of the turnover we are looking at it. And if inflation things are okay, a little bigger, I think we should be positive on UAE bottom line.

Could you again come on the revenue you expected this year?

OMR 7 million to OMR 8 million. So we have a question from [ Joyce ].

Just a quick follow-up on this MOH conduct. We had done all the merge tendering process -- gone through the tendering process last year. So is it a new tendering process which we are working on? Or is it on the same bits which we did last year and we are still negotiating on that?

So [ Joyce ], it's the same bid as the May 2021. So it's definitely a year ago bid that went in. So that was extended because the time had run out at that point, and they felt they'd need 12 months to do that. As I remember, Vishal briefing you at the time that we had got an uplift to secure -- negotiated an uplift for that to reflect the changes in costs, and we've really absorbed a lot of cost in COVID, et cetera, during that period. And so our client was understanding of that, and we agreed an extension with a percentage uplift. This new tender is that tender that was put in then. And that is the basis that will be awarded on. Now of course, tender board tenders are a matter in the public domain. And so it is very easy to see that we are in the low bidder position across the board. And we just have to wait and see. There have been a lot of negotiations because it is tough. I do understand it is tough for -- government clients ideally want to price freeze, or they ideally want prices to go down. And the reality is that times have changed and everyone. So it's proven by the other bidders as well because their prices have gone above us. And so we are hopeful of getting it awarded on that basis of the bid we put in a year ago. That is what is on the table and has been thoroughly discussed with both the ministry, who are happy with it, and the tender board, who we're waiting on the final decision.

Thank you, [ Joyce ]. We are almost -- we are at the end of the session, Steve.

So once again, thank you very much, everyone. We always enjoy this time we spend with you. And you never let us down at your variety of questions, the old googly and -- that comes in, which is always fun. And we look forward to seeing you again next quarter when we'll be talking about our half year results. Thank you very much for your continued interest in Renaissance, and have a very good rest of the day. Thank you.

Thank you very much.