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

Hello, and welcome, everyone, to Multiply Group's FY '24 Results Conference Call hosted by International Securities. My name is Asjad Hussain, Senior Research Analyst at International Securities. And today, I have the distinct pleasure of introducing the Group Business Director of Multiply Group, Mr. Omar Fayed; the Group Finance Director, Mr. Naveed Khan; and Sahar Srour from Investor Relations. Multiply Group team, I thank you all for joining the call today. Following the presentation of Multiply Group's performance by their team, the floor will be open to Q&A. [Operator Instructions] I will now give the floor to Multiply Group's team. Sahar, over to you. Please go ahead.

Thank you so much, Asjad, and good afternoon, everyone. Welcome to Multiply Group's Full Year 2024 Earnings Call. Before we begin, please note that today's call may contain forward-looking statements, which should be considered along with the disclaimer included in the presentation. As for today's agenda, Omar will be providing an update on our investment strategy and progress on the strategic priorities, followed by Naveed's financial review. We'll then open the floor for your questions. Over to you, Omar.

Good afternoon, everybody. Just for the benefit of everyone, maybe a quick recap on our investment strategy before we dive into 2024's performance. So as you all know, Multiply Group is an investment holding company deploying capital across 2 distinct arms. Our main focus remains on vertical building, which invest in profitable cash flow generative businesses in select sectors. Typically, we hold a majority stake in anchor companies each vertical, which we actively grow organically by adding new services and improve operational efficiencies as well as inorganically with global expansion and acquisitions of the complementary businesses. Our other arm and plus remain the sector agnostic of opportunistic arm, acquiring minority stakes usually in high dividend-paying targets, outstanding appreciation outlook or near-term exit visibility like in pre-IPOs. So that's in a nutshell our investment strategy. In 2024, on that strategy, we have deployed AED 1 billion within our vertical building arm, acquiring 3 businesses, one in our media and communication vertical, BackLite, which is an operator of premium digital out-of-home assets. The other acquisition is The Grooming Company, which is also a leading provider of hair and nail spas in Dubai with 62 salons across the UAE and 3 other countries as well as Excellence Driving, which is a driving institute based in Dubai, allowing our main driving institute to venture to the Dubai market. On top of that, we achieved approximately AED 50 million of efficiency extraction across our operating companies, whereby we have earmarked a AED 45 million target for the year. From a Multiply+ perspective, we've generated AED 922 million of dividend income from a public market portfolio worth AED 32 billion today, which is double the capital deployed in that arm over the last couple of years. So to recap maybe since listing, we've grown our revenues 5.4x from AED 400 million to AED 2 billion in 2024. We grew EBITDA or adjusted EBITDA by 8.8x, reaching approximately AED 1.9 billion in 2024. Our total assets reached AED 43 billion as of 31st of December with a market cap of AED 23 billion. To walk you through what were our focus for 2024, on top of what we've discussed, as we said, we have earmarked a AED 5 billion capacity to deploy over both arms. We have successfully deployed AED 1 billion, as we said, across the 3 deals, generating EBITDA of AED 211 million across the 3 portfolio companies. From an efficiency perspective, we have extracted AED 50 million of efficiency, split between revenue uplift as a result of consolidating our verticals, our portfolio companies within the verticals, as well as cost optimization of around AED 14 million coupled with integrating technology and AI tools through our operational businesses. From an integration perspective, on our media vertical, we continue to integrate the businesses, whereby we've consolidated the 3 brands under one umbrella while keeping each brand distinct in the market while keeping it ready for a potential listing whenever the market allows, which we expect it to be in the next 12 to 18 months. Our target for -- from a growth perspective on our operational EBITDA growth was double digit. We successfully did 20% growth from 2023 to 2024. To summarize the key highlights for 2024, on top of what we just discussed and on the back of what we've discussed, we've achieved AED 2 billion of revenues, which is a 56% growth year-on-year and a AED 1.8 billion EBITDA adjusted for fair value through profit and loss. Our net income -- adjusted net income is AED 1 billion with a cash -- operating cash flow of AED 1.2 billion, which is a 20% growth from last year, signaling the healthy operational capabilities of our businesses. Our cash at group level stands at AED 2 billion with a very healthy net debt to equity of 0.25. Naveed will take you now through the detailed financial performance of Multiply Group.

Thank you, Omar. Good afternoon, everyone. Group posted strong results for FY 2024. Our group revenue reached to AED 2 billion, up by 56% compared to the same period last year on account of positive contribution from our core verticals. Organic growth accounts for 10% and inorganic growth resulted from full year consolidation of Media 247, acquisition of BackLite in March '24, TGC in June '24 and Excellence in July '24. We posted EBITDA of AED 1.8 billion, which increased double digit compared to the same period last year on account of strong operational performance from our core verticals, coupled with positive dividend contribution from our investments which was countered by lower contribution from our Kalyon JV, which would be explained later as we go into -- deep into the verticals. Our net adjusted net profit stood at AED 1 billion, which was slightly impacted by lower contribution from Kalyon. It will be explained later in the vertical. As we go deep into the verticals, if we exclude impact of Kalyon, net profit year-on-year was up by 11%. We reported net profit of AED 189 million as of December 31, 2024, after accounting for unrealized and unfavorable fair value changes. Our operating free cash flow stood at AED 1.2 billion on account of positive contribution from operating businesses and a result of prudent working capital management and -- which resulted in healthy OCF ratio of 59% as of 31st December. And as we are recalibrating our balance towards vertical building strategy, so our operating EBITDA as a percentage of group EBITDA increased to 44% and our vertical assets as a percentage of group assets increased to 21%. And as Omar mentioned earlier, our public equity portfolio stands at AED 32 billion, which is double the amount of invested capital. We have built a solid and robust balance sheet, which supports our investment and growth strategy. Multiply Group closed the year with a cash and bank balance of AED 2 billion. And our funding cost of 4.6% is relatively low amid high interest rate environment. And our leverage is reasonably low with a net debt-to-equity ratio of 0.25. And just as a reminder, till date, we have deployed AED 21 billion capital. Going deeper into vertical building strategy, all verticals contributed positively towards the growth -- year-on-year growth. Our major vertical with respect to revenue is media, followed by beauty and mobility and utilities. And we maintained our healthy GP ratio of 47% for the year. Going deeper into the verticals, media, which accounts for 32% of the group revenue is an excellent story of growth through acquisition and consolidation and through achievement of synergies by innovation, consolidation, removing duplicated sources and cost saving. Revenue grew in 2024 to AED 650 million approximately as a result of full year consolidation of Media 247 and acquisition of BackLite from March onward. Organically, vertical witnessed growth of 19%, specifically on increased contribution from third-party sales during the year. Profitability increased mainly as a result of consolidation of Media 247 and BackLite and margin expansion in Viola as we strategically focused on high-growth out-of-home advertising. Key highlights in media vertical is, as we mentioned earlier. We completed 100% acquisition of BackLite in digital out-of-home asset base and consolidated our country-wide position in media space. We added 20 strategic digital asset location in Abu Dhabi, and we expanded our programmatic portfolio to 300 digital screens in the country. And our media -- Multiply Media Innovation Lab is developing new ways to amplify our digital out-of-home engagement, namely 3D content, AR and gamification. Going into the mobility, which accounts for 26% of the group revenue, is highly profitable and cash-generative business vertical. Revenue grew to AED 522 million, mainly as a result of acquisition of Excellence Driving Centre from July 2024. And EDC organically grew by 12% year-on-year as a result of increased student enrollment, slight tuition fee adjustments and effective utilization of resources. Again, the major contributor towards increase in profitability is the consolidation of Excellence Driving school. And on stand-alone EDC level, we witnessed EBITDA margin expansion by 185 bps as a result of effective cost management and efficient resources utilization. Key achievements in this particular vertical is ESG score 9.7 out of 10 from MSCI. We successfully completed a 51% acquisition of Excellence, and we expanded our footprint to other UAE Emirates. And we have successfully upgraded our online registration portal for streamlining the students registration, and we witnessed 3x increase in registration through online app. Wellness & Beauty, which accounts for 26% of the group revenue, has solidified its position as a major player in beauty service industries in UAE as revenue increased by 39%, largely driven by full year consolidation of Juice Spa and acquisition of TGC from July onward. Profitability remained consistent, slightly lower because of one-off transaction-related cost, which is mainly acquisition of TGC and finance cost, which was acquired to fund the transaction. The main highlights in this particular vertical is this Mobility has solidified its position through acquisition of TGC and it has also opened 2 new branches in Abu Dhabi, one in opened inside of International Airport and one was opened by Tips & Toes. And Omorfia has successfully launched its mobile app, reinforcing the digital innovation, offering seamless booking and personalized promotion and loyalty programs. Energy & Utilities is more stable business vertical with long-term concession contracts and includes 2 assets mainly on PAL district cooling, which is 100% owned by Multiply Group and Kalyon for which we do the equity accounting. Kalyon as of today has 1.8 gigawatt of renewable energy under its domain and one project, which is 290-megawatt solar wind power plant is under development. So our revenue increased by 6% year-on-year, mainly as a result of new connections and tariff changes. EBITDA -- Kalyon EBITDA contribution reduced to AED 56 million compared to AED 229 million last year, mainly as a result of hyperinflation, which is unwinding in 2024. It was one-off, which was recorded in 2023, and now it's -- the contribution from Kalyon is mainly decreasing mainly due to hyperinflation and IRS hedge. PAL posted EBITDA of AED 180 million, which is 4% lower compared to the last year, mainly as a result of one-off provision of AED 7 million. PAL have completed Danat Development Cooling district plant, which added 22,000 RT capacity. And Kalyon, as we mentioned earlier, has completed its Anka power plant and wind power plant is under development.

Thank you all for your interest in Multiply Group. Please do reach out if you have any follow-up questions. Thank you.