Two Point Zero Group P.J.S.C (2POINTZERO) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to Multiply Group's Quarter 2 2021 Earnings Call. My name is Sahar and I oversee the Investor Relations. Joining me today are Samia Bouazza, our Group CEO; and Naveed Khan, our Group Finance Director. As for today's agenda, Samia will provide an update on our investment strategy and progress on the strategic priorities, followed by Naveed's financial review. [Operator Instructions] Before we begin, please note that the call may contain forward-looking statements, which should be considered along with the disclaimer included in the presentation. With that, I hand over to Samia.

Thank you, Sahar. Thank you, everyone, for your interest for joining, for your interest in Multiply for taking the time. We will be commenting on the Q2 results as well as sharing a few business updates. To recap on the investment strategy that we have shared in our last earnings call, within Multiply Group, we have 2 pillars: Multiply and Multiply+. Multiply is the holding that holds all our operational targets operating in 4 sectors. They are strategic and long term in nature. The sectors are, I remind you, Energy and Utilities, Mobility, Media and Beauty. Within this pillar, we have achieved double-digit growth in EBITDA and are on the way to achieve our yearly priorities. Multiply+ is the more sector-agnostic pillar or vehicle where we park transactions that are more financial dividend-based or dividend driven in nature and less strategic and more financial. What have we done within this investment strategy on the vertical building exercise in which we take our anchor companies and continue growing them organically and inorganically. We have added companies in our Media, Beauty and Mobility verticals during the first half of the year. In -- on vertical building, we have continued to consolidate EBITDA in media, especially with the acquisition of Backlite that brings a good AED 92 million per year in operational EBITDA. We have also acquired under Beauty -- under Omorfia, our Beauty anchor, the grooming company. We'll talk about it a little bit later. Giving us clear market leadership position and consolidating AED 40 million of EBITDA. Within the Mobility vertical, EDC acquired 51%. The previous 2 acquisitions were 100% acquisitions. And Excellence Driving is a 51% acquisition worth AED 153 million that our anchor company in Mobility EDC has acquired to solidify its regional growth. Excellence is a driving center in Dubai, and we'll talk about it a little bit later. On the Multiply+ front, we have consolidated AED 516 million in dividend income and our investment -- the value of our public portfolio has more than doubled. Delivering on our priorities. Clearly, our priority is to create both operational and inorganic growth for our companies. Talking about inorganic growth, we have a mandate to deploy up to AED 5 billion in new acquisitions within the near future. We have deployed AED 1 billion across 3 deals in the verticals I mentioned. Backlite under Media, the Grooming company for Beauty and Excellence Driving Center for Mobility with an aggregate EBITDA of more than AED 170 million from the 3 deals, which will be consolidated to our EBITDA. On the second priority that we talked about, which was preparing the Media vertical for the imminent listing on the Abu Dhabi Securities Exchange. We are in the process of consolidating all the media assets. We have a pro forma EBITDA of AED 271 million with 48% margin. We are integrating the businesses, and we are ongoing with our efforts in IPO readiness, which means corporate governance, lean structure and synergies and cross sales and cost efficiencies within the companies. On the efficiency front, we had during our last call, permitted to create a AED 45 million run rate EBITDA uplift from 3 angles from creating synergies in revenues within the companies that operate in the same sector, such as Beauty or Media. So revenue uplift, cost optimization, looking at where we can create efficiencies and save costs, especially in back-end operations and services. Finally, digital transformation, enhancing operational efficiency through new technology and AI tools. All this will lead to the major outcome that we wanted to achieve, we wanted our companies to achieve, which is a double-digit operational EBITDA growth. And this slide, I've already talked about the deals that takes us into a bit more details on the structure and the operations of each company. Backlite based in Dubai was a beautiful acquisition to our Multiply Media group portfolio because it has excellent digitization technologies. It's a leader in the digital out-of-home advertising space. It also commands market leadership and special partnerships with the Dubai government for some of its assets, and it allows us to add to our Media assets, 350 additional Unipole, Malls, which can all translate into more revenues. The company will bring almost AED 100 million in EBITDA and there's a lot of synergies that we can create with the digital element in Backlite and the other 2 companies that we have, and that's what the Media team is focused on. The Grooming company adds 62 new locations to our Beauty sector, again, solidifying our market leadership. In total now, we have 132 salons in the UAE and the Grooming company operates in many countries, which also helps Omorfia enfastening the regional and international expansion. Finally, Excellence Driving for the Mobility vertical is a prominent driving center based in Dubai with 20 various strategic location, EDC, our anchor company paid AED 153 million, expanding its market presence within the UAE and solidifying EDC's position as a leader and facilitating more regional growth. That was a zoom in on the deals that we have. If we talk about where we are today, some key business highlights as of Q2 2024, the strategic updates were, as we said, consolidation of Backlite, consolidation of the Grooming company, acquisition of Driving Center, and we also welcome our new Chairman, Syed Basar Shueb, who is IHC CEO as Managing Director, who we believe will bring a lot of value to Multiply. If we talk about the financial highlights for the first half of the year, our operational EBITDA has grown 35% year-on-year in Multiply Energies and Utilities. We have AED 150 million, which is double the amount that was consolidated last year. On the Mobility front, AED 125 million in EBITDA, AED 109 million within the Media sector and AED 61 million in Wellness and Beauty. We booked dividend income of almost AED 0.5 billion, AED 516 million, and the value of our public portfolio, namely Taqa, has almost doubled. The group financial highlights, revenue has increased 55% year-on-year with a gross profit margin of 47% to reach AED 883 million. Our adjusted net profit was AED 712 million, a 48% increase year-on-year. Our cash balance is AED 1.6 billion, healthy balance. Our adjusted EBITDA is AED 921 million, which is a 30% increase year-on-year. Cash from operations, almost AED 0.5 billion, AED 463 million. And our net debt stands at AED 8.3 billion, which is a 0.3 net debt to equity. With that, I conclude my opening remarks. Q2 has been a solid quarter with a robust performance from all our companies. All our companies have met their targets well on our way to register double-digit growth. And we are well on our way to deliver on the synergies that we want to create at the holding level.

Thank you, Ms. Samia. Thank you very much and welcome, everyone, again, Q2 earnings call. So Multiply Group to put a strong performance in Q2 across all angels revenue, adjusted EBITDA, adjusted net profit, we reported 60% increase in our revenue, and it comes from organic growth as well as inorganic front. It's a -- we registered 8% growth, and we consolidated and we get 247 backed by and NPGC. This quarter, our adjusted EBITDA grew by 33%, driven by strong operational performance of core verticals with blended gross margin of 43.5%. And our adjusted net profit growth was ahead of EBITDA by 49%. And as of 30th June 2024, we reported net profit of AED 992 million. It's accounting for unrealized fair changes in the investments. And we also witnessed strong operating cash flows because of contribution from operating assets and prudent working capital management. And as of 30th June, our OCF ratio is 56%. And we witnessed increased contribution from asset -- from vertical assets as we are recalibrating the balance towards investment -- and our investment towards operating assets. So as of 30th June, our EBITDA contribution increased from 36% to 47%. And our net assets increased from 14% to 21% as we are getting more towards operating assets. On the M+ front, we almost double our investments in public equity portfolio. And as of 30th June, our portfolio stood at AED 28.8 billion. Our robust balance sheet help us to support our investment and growth strategy. And as of 30th June, we reported healthy cash balance of AED 1.6 billion with a reasonable leverage. Our net debt to equity ratio is 0.31. As of 30th June, we have successfully deployed AED 20 billion so far. And our interest cost is relatively lower at 4.6%, especially amidst the high interest rate environment that we have as of today. Growing deeper into the verticals. Vertical building strategy is helping us to grow our revenue and gross profit contribution from cash generative assets, and we registered growth, 60% growth in revenue and 35% growth in GP. Our EP ratio, again, as a reminder, stood at 45.3%. And the biggest contributor in the revenue is the Media and Communications followed by Beauty and Wellness and then Mobility and lastly, Energy and Utility. So Energy and Utility is our sustainable vertical, especially we have long-term concessions and healthy growth pipeline within that sector. Revenue increased 9% year-on-year because of the new connection in PAL and expansion of Tamouh district cooling plant. Our EBITDA grew -- we reported EBITDA for AED 114 million. That includes AED 78 million contribution from Kalyon. Kalyon is our front bencher in [indiscernible], biggest asset of [indiscernible] Karapinar. It was settled utilization, and we also started construction and operations of Anka solar power plant. And PAL contributed AED 44 million contribution in this quarter. Mobility is our cash-generative assets and with a healthy growth pipeline, again, we registered a 6% increase in revenue and profitability as the sector EBITDA grew, and we stood at 120 bps margin improvement and which was off setted by 6 million unrealized fair value changes. And on key highlights in EDC, EDC achieved ESG score, 9.7 out of 10; and EDC completed acquisition of Excellence and expanding its footprints in Dubai. Media and Communication is our most mature vertical. And as you heard, Ms. Samia is ready for the IPO, and we are assessing that readiness. So as of Q2 2024, reported revenue of AED 145 million and GP of AED 49 million, which is -- because contribution came from inorganic acquisition because of consolidation of Media 247 and Backlite. Wellness and Beauty registered a 31% growth in revenue and underlying EBITDA grew by an impact of inorganic acquisition, The Juice Spa & Salon and TGCH. So a key highlight in this sector is we have completed 100% acquisition of the Grooming company starting from June and Tips & Toes, as usual, they are extending their number of branches. So as of June 30, we have 43 branches in this venture.

Thank you, Naveed. We would like to thank everyone for taking the time and joining us today.