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

Hello, and welcome, everyone, to Multiply Group 2Q H1 '25 Results Conference Call hosted by International Securities. My name is Asjad Hussain, Senior Research Analyst at International Securities. And today, I have the pleasure of introducing the Group Business Director, Omar Fayed of Multiply Group; and the Group Finance Director, Mr. Naveed Khan. Multiply Group, I thank you all for joining the call today. Following a presentation of Multiply Group's performance by their team, the floor will then be open to a Q&A session. [Operator Instructions] I will now give the floor to Multiply Group's team. Omar, over to you. Please go ahead.

Thank you, Asjad, and good afternoon, everybody. Maybe before we go into the Q2 performance and achievements, I will walk you through the group's strategy, which really hasn't changed much since the last quarter, so I'll be very brief. As you know, Multiply Group remains focused on deploying capital across 2 verticals, Multiply and Multiply+. Multiply is our vertical building platform where we operate controlling stakes in 5 key verticals: Mobility, Media & Communication, Wellness & Beauty, Energy & Utilities and most recently, and we'll talk more about that Retail & Apparel, and whereas Multiply+ is our opportunistic investment arm focused on minority stakes with attractive dividend yields and clear monetization path. In Q2, we continued delivering on both pillars while maintaining our disciplined investment framework and efficiency-first operating culture. I'll jump directly into our Q2 performance and achievements. This quarter really was a very important quarter where we delivered notable strategic milestones as well as financial progress. In the Retail & Apparel segment, we closed the acquisition of Tendam after receiving all required approvals shortly after Q2 deadline, so in mid of July. This transaction is our entry into the Retail & Apparel with a dominant omnichannel retailer, operating 12 owned brands, more than 100 third-party brands across 1,800 point of sales in more than 80 countries, generating approximately EUR 1.3 billion of revenue. Under our Energy & Utilities sector, we signed the SPA to divest 100% stake in Pal Cooling, which was the prominent player in the industry cooling market catering to landmark residential, commercial and mixed-use development in Abu Dhabi. The sale was to a consortium made of Tabreed and CVC. The transaction is in line with our portfolio rebalancing and capital recycling approach as it will generate significant cash inflows, which will strategically be used to fuel future growth as well as improve our group's capital structure. In the Mobility front, EDC successfully signed the initial acquisition of 22.5% in Mwasalat Holding which is a public transport business operating taxis in Abu Dhabi and Sharjah, public buses in Abu Dhabi, while also operating a leasing and insurance business. This investment marks a major milestone in EDC's long-term strategy, reinforcing its position as a mobility champion, expanding its role in delivering seamless, safe and sustainable transport across the UAE. This transaction is structured in a way to give EDC the option to increase its stake into a majority position if certain milestones are achieved within the next 12 to 18 months. On the Media vertical as well, we've launched Multiply Media Group, MMG, by combining our 3 brands, Viola BackLite and Media 247 into one powerhouse platform. MMG has expanded into the U.K. via strategic partnership with Wildstone, securing exclusive rights for high-impact digital out-of-home assets in Central London. That was more on the milestones and achievements. If we go a little bit into the financial highlights, all across our core verticals, we saw very healthy top line and operational growth. In the Mobility sector, revenue grew by more than 100%, mainly from inorganic by the acquisition of Excellence last year, but also 32% organic growth at EDC, whereas EBITDA grew by 81%, driven by the margin expansion of EDC, coupled with the accretive acquisition of Excellence Driving in Q3 last year. Under the Media & Communication, we also saw a 14% growth year-on-year, all organic with a significant uplift in EBITDA margin from the successful implementation of our powerhouse strategy and integrating the businesses. Under the Wellness & Beauty, revenue rose by 26%, I would say, entirely driven by inorganic, which is the acquisition of the Grooming Company last year. And although organic revenue was flat, our value creation initiatives have yielded a margin expansion of 5 percentage points, leading to a 16% organic growth in EBITDA. On a group level, revenue closed at AED 500 million, up 39% year-on-year. Our adjusted EBITDA recorded was AED 395 million, although flat year-on-year, mainly impacted by our share of loss in the Kalyon JV as a result of the euro appreciation, leading to higher interest rate, interest costs and FX translation losses. If we exclude Kalyon, our adjusted EBITDA grew by 38% year-on-year, and that's really a testament to all the verticals growing double digit. Our adjusted net profit was AED 214 million, an 11% year-on-year growth versus last quarter of 2024, excluding the Kalyon impact. From an operating cash flow perspective, we recorded, I think, an all-time high by having AED 500 million -- approximately AED 500 million of operating cash flows, as a result, a combination of good profitability, but also a better working capital management. From a leverage position, we maintain -- we remain disciplined and monitor closely our ratios. Net debt to equity remained healthy at 0.23, giving us headroom for further growth and strategic investments. Dividend income from our public market portfolio was AED 230 million approximately this quarter with the portfolio now valued at AED 32.2 billion, which is at 2.1x our capital deployed. From a cash perspective, we maintain a relatively healthy cash balance of AED 1.85 billion. So in summary, really, we have delivered a strong progress across all our verticals, taken decisive action on capital recycling and remained well positioned for long-term value creation. I'll hand now over to Naveed to walk you through the financial performance in more details.

Thank you, Omar. Good afternoon, everyone, and thank you for joining us today. So I will walk you through quickly group's financial performance for the second quarter of 2025. The number reflects, as Omar mentioned, continued operational strength, our disciplined capital allocation and a robust balance sheet. Starting with revenue and profitability, our top line grew by 39% compared to the same period last year. We saw positive top line growth from all our verticals. Both the growth accounts for organic performance and strategy acquisition. Mobility was up by 112% year-on-year, supported by the acquisition of Excellence and 32% organic uplift. Wellness rose 26% following mainly integration of PGC in Q2 2024. Media delivered almost approximately 14% growth, benefiting from ongoing execution of our powerhouse strategy, which Omar mentioned earlier. At EBITDA level, we reported AED 395 million in adjusted EBITDA, supported by our healthy GP margin of 52% across the portfolio and AED 227 million in dividend income from our investment portfolio. However, there was some adjustments in the EBITDA, which is mainly a share of loss from Kalyon of AED 54 million. We do equity pickup for that JV. The loss is mainly due to hyperinflation accounting, currency hedge adjustments and FX translation losses due to appreciation of the euros. On a normalized basis, our net profit came in AED 214 million versus AED 319 million in Q2. The delta, as we mentioned earlier, mainly reflects 2 items, AED 63 million one-off deferred tax gain recognized in Q2 2024 and the reversal in contribution from Kalyon, which was a gain last year. If we adjust these 2 nonrecurring items, underlying earnings grew by 51% year-over-year. Reported net profit was AED 532 million, which includes fair value movements across our financial assets. Going into the cash flow. We delivered AED 490 million, almost AED 500 million in net operating cash flow, a material improvement compared to Q2 2024. This equates to OCF margin of 97%, demonstrating solid cash conversion and efficient working capital management. Contribution from vertical as we are recalibrating balance towards vertical building strategy, vertical EBITDA as a percentage of group EBITDA stands at 56% and vertical assets as a percentage of group assets stands at 24%. While EBITDA -- vertical EBITDA as a share of group EBITDA declined slightly, mainly because of one-off from Kalyon. Multiply+, our listed equity platform saw its fair value increase from AED 15.2 billion to AED 32.2 billion, which is a strong validation for our strategic investment thesis. Going further into balance sheet. As of 30th June 2025, our capital structure remains healthy and flexible. Cash and cash equivalents stand at AED 1.8 billion. Gross debt is AED 8.9 billion with net debt at AED 7.1 billion, resulting in a conservative net debt-to-equity ratio of 0.23x. On average funding cost is 4.9%, which is well managed in the context of today's interest rate environment. Total capital deployed today amount to AED 21 billion, reflecting our continuous focus on value accretive investments, both in operating assets and liquid financial assets. We'll go deeper into the verticals. As evident from the pie chart that we have built a diversified and well-balanced portfolio across our core verticals, and we witnessed almost equal contribution -- equal revenue contribution from each vertical with blended EBITDA margin of 31% from operating businesses, reflecting high profitability of the business. Mobility represents 37% of the group revenue, followed by Media and Mobility -- and Beauty. Let me touch on each vertical very briefly. Media & Communication, which represents 31% of our group revenue, revenue came in at AED 164 million, growing by 14% organically. EBITDA margin jumped to 56% following operational synergies from MMG consolidation. The main deliverables from this particular media is the high-impact digital assets that we acquired in London and we appointed new CEO in Viola Agency. On Mobility, which represents 37% of Group's revenue, revenue doubled to AED 186 million, while the EDC's margin declined due to integration of low-margin excellence. However, EDC stand-alone margin improved, thanks to cost control and digital transformation. And it's pertinent to mention EDC has signed SPA to acquire 22.5% stake in Mwasalat Holding, strengthening our strategic foothold. Wellness & Beauty, which represents 32% of group revenue, revenue came in at AED 116 million, up 26% with improved margin across board. Omorfia is continuing to expand, now rating 135 salons across UAE and KSA. Just to sum up the numbers, our core verticals are growing steadily. Portfolio income remains strong and diversified. Cash generation is robust, and our balance sheet provides flexibility to execute our future investments. And we remain focused on performance discipline and capital efficiency as we look ahead to the second half of the year.

Thank you, Multiply Group management team for a comprehensive review of 2Q H1 '25 results.