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

Hello, everyone, and welcome to Multiply Group's Conference Call Hosted by International Securities. My name is Afaq Nathani, Senior Research Analyst at International Securities. And today, I have the pleasure of introducing the Group CEO and Managing Director of Multiply Group, Samia Bouazza; Group Business Director, Omar Fayed; and the Group Finance Director, Mr. Naveed Khan. Multiply Group team, I thank you all for joining the call today. Today's call will be split between 2 sessions. We first pass the floor to Multiply Group's, Group CEO and Managing Director, Samia Bouazza, to take us through the recent proposal by Multiply Group to acquire 2PointZero and Ghitha Holdings. This will be followed by a Q&A session. Once the Q&A on the recent proposed transaction is completed, Multiply Group's team will present the third quarter ' 25 and 9 months '25 results as well as the 3Q milestones, followed by another set of Q&A for the results and future outlook. [Operator Instructions] Without further ado, I now pass the floor to Multiply Group's, Group CEO and Managing Director. Samia, please go ahead.

Thank you. Thank you, everyone, as well for joining us today. It's not one of our normal earnings call. We've had great results that the team will be sharing with you in a few. But also I wanted to give more context and more insights on the proposed acquisition that Multiply has made for to acquire 2PointZero and Ghitha. So let's start with the most important question, why? Why is this acquisition a good thing for the shareholders of these 3 companies? This acquisition is really both -- a move that is both strategic and very pragmatic. Strategically, because when you bring together assets operating in the same sectors with this asset reorganization, when you take all of Multiply's energy assets and add them to 2PointZero energy assets. When you take Multiply's consumer assets and add to them the consumer businesses of 2PointZero, what happens? You create a platform, you create a really unique platform, one of the most interesting that focuses on 2 sectors, a platform born from Abu Dhabi that is way bigger at scale and also very focused on energy and consumer. The energy and consumer call them sectors, call them mega themes, megatrends are really shaping our world today. They're the foundation of the modern economy. We -- you have this platform now. Let me talk about the pragmatism of how these assets will be reorganized and then talk a little bit more about the shareholders. The assets will be, as I said, today, I start with Multiply Group. We operate in 6 verticals, 5 of them are consumer-focused and 1 of them is energy. Moving to 2PointZero, most of their assets and businesses are in the energy super cycle and a few of their businesses tackle consumer. Finally, Ghitha is a fully focused farm-to-fork company that is listed on the Abu Dhabi Stock Exchange that focuses on agriculture, food production and distribution of foods, poultry, protein, eggs, dairy and distribution within the country. What happens? I want you to picture a platform where you end up taking all energy businesses of Multiply adding them to 2PointZero. So we take our AED 28 billion investment in Taqa that you're all well aware of. We take our renewable energy plant that is in Turkey that you also all know from previous communication with you, and we bring them under 2PointZero. What happens to 2PointZero? It becomes one of the most scalable, one of the most dynamic and one of the most comprehensive energy players as it has businesses and services within each touch point of the value chain. They start from mining, 2PointZero has mining businesses in Zambia for copper, in Congo for tin, they are into energy infrastructure as they own a large part of Elsewedy factory in Egypt, which produces cables and electrical components necessary and transformers really necessary for each power plant construction. And then they move to mineral trading or critical minerals trading. And to that, they add Kalyon Enerji, which is one of the largest renewable energy plants in Turkey with almost 2 gigawatts produced by solar and wind, and they have our Taqa portfolio. The CEO of 2PointZero ends up empowered overseeing a huge balance sheet of assets in energy and accountable to create synergies, create efficiencies within the value chain around energy. Let's stay on energy a little bit. And let me give you context when I say this is a mega theme. Last year alone, $600 billion were spent on power grids alone. Talking about mining, there's around $6 trillion of mining deals and contracts that are expected to be flooding the markets within the next 10 years. Look at energy consumption growth. Look at the consumption growth that is coming from -- as the world continues to evolve, but also from the data centers. We all know that data centers have -- half of the cost of a data center is from energy. So when you look at these big trends, shaping the energy cycle today, we believe that being in 2PointZero, a large energy company, a large energy really platform operating, as I said, from the mining -- from critical mining to the lights lining up our offices today via Taqa, you have a very clear proposition with a clear path to growing organically and inorganically. This is our first sector, the merged entities first sector. The second entity, second sector is consumer. Multiply today has, as I said, 5 consumer-driven verticals, the biggest is apparel with our latest acquisition in Spain of Tendam, 68% of Tendam in Spain. Tendam is a huge apparel company, omnichannel platform for fashion, one of the largest in Europe and with presence in more than 80 countries with more than 1,700 point of sales. So this is our largest consumer sector within Multiply. Moving to the second sector, Mobility. Multiply owns a couple of driving schools. We have also partnership to operate driving schools around the region. And recently, with the acquisition from EDC of Mwasalat, the company or the Mobility vertical is transforming itself into a key mobility player as mobility needs keep changing with the evolution of electric vehicles and ultimately driverless cars. Moving to media, which you all know we are market leaders in, which was our bread and butter when we started. Today, we have market leadership within Abu Dhabi and Dubai with our partnership with the largest Saudi media company, we can safely say that we are one of the largest players in the Arab world. This is a company that has grown organically and inorganically on its path to become a $1 billion company. So that's our third vertical. Moving to Beauty. Today, Multiply has around 135 salons giving beauty services or offering beauty services to customers in the UAE, all across the UAE in Saudi, in London. Finally, we move to packaging. This is our recent acquisition in Italy, where we plan to continue to acquire. We've acquired an Italian factory of luxury packaging, secondary packaging, and we continue to continue investing in that sector as we see double-digit growth in it. So these are our 5 consumer sectors today. As you can see, they're mainly discretionary. Mobility aside, should another COVID happen or should another recession happen, we -- these sectors could be affected. When you add to them Ghitha and when we bought IHC shares in Ghitha, what are you doing? You turn your consumer sector into a balanced sector that provides both discretionary and stable consumer goods. And that defines our consumer sector today, defensive sectors, very well balanced. So not only well balanced, economically resilient, but also financially from a recurrent cash flow resilient or recurrent cash flow balance to high-growth opportunity. And I could go on. Just like I gave you a little bit of context around energy, I do want to say the consumer trends are really shaping our economy and our societies today. We've seen particular trends such as a $2.4 trillion increased demand year-on-year, yearly increasing by $2.4 trillion, which is allowing more consumers to be able to spend money. And via this platform, via our consumer sector under 2PointZero or 2PointZero group, we want to ensure that we bring our shareholders the most we can from those $2.4 trillion and bring the most of that pool of money added to the economy every year to our companies. Also from a macro trend that is really pushing consumers to spend more, you see 100 million people moving to the middle class every year with bigger purchasing power. That's 1 billion people for the next 10 years. Most of them are in Asia. 80% of that demand data tells us comes from Asia, which means that this is -- we have very little exposure to Asia in terms of consumer, and this is an area of great interest for us where we want to start growing regionally and also acquiring companies. So going back to this platform that will be renamed, platform made up of the 3 companies, Multiply Group, 2PointZero, and Ghitha renamed 2PointZero Group, you end up with a unique platform, one of the most interesting platforms in the region, focused on these 2 sectors, energy and consumer, both of them are foundations of the new economy. And if you are -- if you're a shareholder of this 2PointZero, when you own 1 share of 2PointZero Group, you are simultaneously exposed to 2 multitrillion megatrends shaping the world today. So this is what I wanted to give you. This was the thought process, some of the megatrends, some of the macros that are behind this merger. I do want to add that within IHC and also the 3 companies, we do not see this merger as a merger of balance sheets. This is a merger of vision. This is a merger of complementary assets and strength, capital and most importantly, AI tools. Reorganizing these assets under the right expertise, creating synergies accordingly, allow CEOs to be more empowered to deepen their expertise and their operational focus and really to be accountable to grow each sector in double-digit numbers. Finally, I think Multiply has this really good track record of creating synergies and growing organically and really creating measurable efficiencies. This is what we've been doing since we listed in 2021. When we went for the IPO on December 5, 2021, we promised our shareholders that we will grow their capital, that we will grow the returns on their capital. And today, I'm very proud to say that we have delivered. Today, Multiply's market cap is 3x bigger than it was when we listed. We have 5x revenue growth in the last 4 years. We started with AED 300 million. Today, we stand at AED 2 billion in revenues, 8x EBITDA growth, and this is a combination really of disciplined investment mandate, and obsession with creating efficiencies via digital transformation and AI, and the mindset of scaling big. I think this transaction will allow us to do that -- to do exactly that and really achieve global scale for Abu Dhabi for the 2PointZero shareholder, for the new merged entities shareholders and for Abu Dhabi. This is what I wanted to share. Before we open the floor for questions, I also wanted to shed some light on the structure of the swap of the deal. The deal did not -- so it's via swap, the deal happened via swapping shares. Multiply Group is to issue 23 billion in new shares to acquire from IHC-related entities, 21.6 billion shares of 2PointZero, which is 100% of IHC's ownership in 2PointZero and 1.77 billion shares of Ghitha Holding, which is almost 84% of IHC stake. These are numbers that have been made public by IHC. And with this, our share capital will increase from AED 2.8 billion to AED 8.6 billion. And post completion, the entity will have 34.5 billion shares outstanding as opposed to EUR 11.2 billion today. Now we've taken you through the math. Again, let me put some color around that or some context. First of all, this means that we did not have to use our liquidity to buy those extra assets. Rather, we will -- as a merged entity, we will benefit from the capital that Multiply Group has today, especially after our recent exit from PAL Cooling and the profits that we made on that deal from the capital that 2PointZero has and Ghitha. Together, we plan to create a healthy balance sheet. We are well leveraged. We have very healthy capacity to grow. And we have -- we will continue to grow in the way -- in the same investment mandate that we have followed in the past 4 years, but also looking at this merger Multiply for those of you who know especially the IS team, Multiply as a stock is one of the most traded stocks on the Abu Dhabi Stock Exchange with around 30 million shares traded last month. And this is really a strength. And with that, I close my remarks. Thank you, everyone, for attending. I now leave the floor to Omar and Naveed to take you through the results.

Thank you, everybody, for joining, and good afternoon. Let's go directly to the financial performance and milestones. It was a very busy quarter other than what Samia has discussed, we've had a very busy quarter as well. So let's start with revenues. I think this quarter started a change in our financial structure with the acquisition of Tendam. So revenue grew by 200% approximately from last year, obviously, on the back of the acquisition of Tendam, which we started consolidating only in August. But coupled with that also organic growth across all verticals. From a margin perspective, we grew from 43% to 58% year-on-year, also a testament to the margin accretion nature of the acquisition. From an adjusted EBITDA perspective, we reached AED 600 million, a 56% growth with Tendam contributing AED 130 million, but also a double-digit growth across all our other verticals. Adjusted net profit reached AED 250 million, a 22% jump over last year. But reported net profit, as we mentioned, is AED 1.9 billion on the back of the exit of PAL. As you know, we have completed the sale and recorded a AED 2.7 billion capital gain on the transaction. This was a sale to, as we said, to Tabreed and CVC, a strategic exit, while we are reallocating basically capital, enabling the group to focus on and strengthening our platform in energy and then consumer. From a balance sheet perspective, we remain -- we maintain a very healthy balance sheet with net debt to equity of 0.3, a net debt of AED 10 billion, which increased basically with the consolidation of Tendam. From a cash flow perspective, again, we have good operating cash flows with around AED 170 million of operating cash flow per quarter. We go a little bit deeper by vertical. So if we move to the media, MMG's EBITDA grew by 56% -- 58% quarter-on-quarter, given a favorable momentum, especially in Dubai and Abu Dhabi, particularly with active summer period. As you know, I mean, the outdoor business is usually cyclical with a high concentration on Q4, but our management team made very concerted efforts to make sure utilization remained high in the summer period, leveraging our leadership position in the market. On the Mobility front, we achieved 20% year-on-year. I think that's an excellent achievement given the maturity of our platform as student enrollment rates keep on growing even in Abu Dhabi and Dubai, coupled with a lot of digital transformation and efficiency initiatives. As for Beauty, I mean, despite a flat, I would say, revenue, we recorded a 16% growth in EBITDA. We launched multiple initiatives. We launched the Omorfia shared service as a separate business unit. We centralized procurement, and we were able to improve unit economics by optimizing staff across each outlet. On the energy front, which today comprises of Kalyon Enerji, basically, the JV in Kalyon after the exit of PAL, we generated AED 81 million of share of profit in Q3, which is a major increase versus last year, driven by an operational improvement by installing around 400 megawatts of additional capacity. Having said that, I mean, we keep on experiencing volatility, to be honest, in our share of profit given the euro-denominated loans, the hyperinflationary accounting, which had a significant impact in Q1 and Q2. But in this quarter, obviously, with the euro rates were almost flat against the dollar. Finally, again, our fashion and apparel sector, which I'll walk you through in more details in a bit. We recorded EUR 130 million of EBITDA in 2 months only with a margin of 18%. Online sales keep on growing 10% year-on-year. And from a brand perspective, I think Women'secret and Cortefiel remain the more resilient and growing segment in this space. Maybe we move on. Naveed will take you further in the financial performance line by line, but maybe we'll first go through the key milestones of the quarter. I want to touch again on Tendam. But before that, I think the milestones, obviously, we talked about PAL, we talked about the potential transaction, which is still subject to shareholder approval, some of which had a recent and direct impact on our Q3 numbers, but also some will guide our group's future performance. Let's start with Tendam. I want to give you a little bit more color. We discussed it in the last earnings call as well. I think now it's time to maybe give you a little bit more details on the business. So the Tendam transaction really marked the launch of our fourth consumer vertical, establishing a leading presence in the premium mass segment. It is in line with our strategy to back successful businesses, but helping them unlock further potential through capital, infusion, tech and strategic leadership to deliver sustained growth. The group is more than 100 years old, operating 12 brands, more than 100 third-party brands or 12 owned brands and 100 third-party brands across a clear omnichannel strategy. The group has approximately, as Samia mentioned, 1,800 points of sales across 80, 85 countries, but most importantly, 28 loyal club members. As we can see on the right, the business is segmented into the adult segment, the young adults and the specialty segments with multiple brands targeting each of those segments. From a size perspective, over the last month, the group generated around EUR 1.4 billion of sales with a leading industry margin of around 25%. As for the next phase, we really look forward to the next phase as we identified key areas we want to focus on together with management and obviously, the incumbent shareholders. Mainly, I would say they are centered around international expansion, specifically towards LatAm and towards the Middle East. U.S. maybe will come in the next stage of growth, infusing AI, obviously, across all aspects of the business from the sourcing to the interaction with the customers. Moreover, we will assist the management team in identifying and executing M&A transactions to introduce new brands, new segments, new categories and potentially new markets as well. Maybe it's also worth highlighting that following the announcement, I mean, 1 week following the announcement, S&P upgraded Tendam to BB+, which helped the company's refinancing efforts and reduce its interest cost by around EUR 5 million. So in summary, we're very excited about this transaction with the leading margins and a scaled omnichannel strategy, a large and data-rich loyalty base with operating leverage where capital -- our capital and tech and M&A expertise can really make a difference. So that was one of the key milestone of the quarter. We move on to the next or the fifth consumer vertical that we launched with the acquisition of ISEM, still under regulatory approval, but we've signed the final documentation. ISEM obviously is a leading European secondary packaging, operating in a very niche segment, which is the premium end, offering iconic design innovations, unique co-packing models and best-in-class industrial footprint. The business -- the main products of the business are, I would say, categorized into 3 rigid boxes, folding cartons and dust bags, offering or catering to multiple sectors, but mostly focused on perfumes, fashion and cosmetics. And this constitutes around 90% of the business, but we also have exposure to the food and specifically the pharmaceutical industry, which we expect to grow in the next few years. So from a size perspective, I think the business serves clients across close to 30 countries. We can see the names between L'Oreal, Dolce & Gabbana and Gucci. So one of the most premium blue-chip clients, and they have achieved around EUR 130 million of revenue during the last year with also industry-leading margins of 25% plus. We move maybe to the next one, which also Samia touched upon. EDC acquired a 22.5% stake in Mwasalat Holdings, which gives them a foot in the mobility infrastructure of the public transport, strengthening its position in the region and mobility sector. So Mwasalat's businesses are split into 5 segments. One is public transport through public buses in Abu Dhabi. The second one, I would consider it under the taxi businesses, both in Abu Dhabi and in Sharjah. In both those sectors, I think they are leading players with 1,350 player, so 1,300 taxis in Abu Dhabi and around the same number in Sharjah. They are supported by a car rental business and the maintenance business and the insurance business, so complementing the integration -- integrated offering of the group. Last year, they generated around AED 780 million of revenue with also a similar level of EBITDA margin of 27%. So those are the main milestones for the quarter. And with that, I'll hand over to Naveed to walk you through the detailed financial performance and the drivers of the business. I'll rejoin you later for the Q&A session.

Thank you, Omar. Good afternoon, everyone, and welcome to our Q3 earnings call. We'll go through an overview of our consolidated financial performance, and then we'll go deeper into the verticals. And then we'll closely look at the balance sheet and give you future outlook for the rest of the year. Starting with the year-to-date performance. Our revenue year-to-date for 2025 reached AED 2.24 billion, an increase of 102% year-on-year, driven by strong growth across all our verticals as well as impact of consolidating Tendam starting from 1st of August 2025. Our Q3 stand-alone revenue stood at AED 1.2 billion, up approximately 191% versus Q3 2024. Our EBITDA for the 9 months rose to AED 1.52 billion, representing 24% growth year-on-year, while Q3 EBITDA stands at AED 597 million, up 56% compared to the same period last year. Our adjusted net profit after tax came in at AED 809 million for 9 months 2025, while Q3 profit after tax was AED 253 million, 22% up compared to the same period last year. As Omar was mentioning due to margin accretive nature of Tendam, our gross profit improved to 53% year-on-year, while it improved 58% for this quarter, which reflects the higher contribution from our consumer-related businesses and consolidation impact of Tendam. Moving forward to our portfolio. As you can see, our portfolio is well diversified, which demonstrates a balanced portfolio, representing 61% revenue from retail and other vertical, 17% from Mobility, 12% from Beauty & Wellness, and 12% from Media and Communication. Similarly, EBITDA contribution is well diversified within each vertical, maintaining double-digit EBITDA margins, which reflects structural profitability of our businesses. We go deeper, we'll start with Media and Communication, which represents 10% of our group revenue. The vertical delivered AED 129 million revenue in Q3, which is 4% up compared to last period and EBITDA expanded by 57% almost to AED 63 million and net profit doubled to AED 7 million for the quarter. The growth is mainly driven by strong demands for our premium out-of-home assets while being in summer season and new contracts in out-of-home and digital media in UAE and U.K. as well. And we improved our margins due to the impact of operational efficiencies across all 3 brands within this vertical. Going forward to Mobility, which is 17% of our group revenue, revenue rose 28% year-on-year and reached to AED 209 million, which is, as Omar was mentioned, it's a mature business, but we are impressed by the growth, which was supported by higher activities at Emirates Driving Company and higher speed utilization at the company level. And EBITDA increased by 19% to AED 1,811 million with net profit reaching AED 86 million. And a key milestone within this particular vertical, we have successfully integrated our driving school in Dubai and driving center. And we also expanded our training capacity within EDC. And we launched holistic AI program within EDC, which is delivering us long-term efficiencies and creating our AI-enabled EBITDA uplift. EDC's signed 22.5% acquisition of Mwasalat, which is actually subsequent to this quarter, but we have an option to increase ownership to 50.6%. It also expanded EV charging infrastructure management and operations. We recently launched this particular company within EDC. Going forward to Wellness & Beauty, which represent 12% of the group revenue. Segment posted flat revenue of AED 143 million despite revenue being flat. We witnessed significant uplift in EBITDA, which came in at INR 48 million, 17% up compared to the same period last year and net profit improvement of 73%, which came in at AED 90 million for this period. The main factor contributing to EBITDA and revenue uplift are operational synergies and the launch of new shared service model, which optimize our procurement and logistics support across this particular portfolio. And we are also leveraging on centralized data warehousing capabilities that we have recently built within this particular portfolio. Going further, our largest vertical now, which is retail and apparel represents 61% of our group's revenue. It's mainly consolidation of Tendam out of Spain, which reported revenue of AED 740 million approximately in Q3 and EBITDA of AED 103 million. Be mindful, we started consolidating this particular company effective from 1st of August. So the results are for only 2 months. Gross profit -- reported gross profit is AED 475 million with a margin of 64%. We are witnessing solid consumer demand and strong operational performance in our physical and online channels in this particular business. While we are working on integrating Tendam further, so at the moment, the integration is progressing well, and we are witnessing realizing scale and efficiencies and procurement synergies. Going into the balance sheet. Multiply Group continues to maintain a robust balance sheet. Cash -- we reported cash of AED 2.5 million. It's pertinent to mention here, the cash balance doesn't include cash realized from sale of PAL. It will be reflected in Q4 2025. Successfully till date, we have deployed capital of AED 23 billion. Our net debt-to-equity ratio stands at 0.31, which demonstrate conservative leverage as of 30th September. Our average funding cost is approximately 5%, which is lowest among current interest rate environment. Our flexibility and solid balance sheet allows us and enables us to do selective acquisitions and expand within our growing verticals and generate value for the shareholders. Looking forward, as we are expecting this momentum to continue in Q4 as we will be consolidating Tendam moving forward for a full quarter, and we will be utilizing scalability of our Media, Mobility and Beauty platform, and we are controlling costs within each platform and achieving synergies, as was mentioned earlier by Omar. I will close like again, this is another quarter of strong and profitable growth, mainly driven by disciplined execution and our solid balance sheet. And we are confident for the rest of the year. And with this, I will hand over to Afaq.

Omer, thank you so much, Omer, Naveed and Samia and the rest of the Multiply team. Thank you so much for doing this today. It was an informative session and very helpful for the investors, I'm sure. I'll give it back -- I'll pass it back to you again if you have any closing remarks before we conclude the call.

Thank you. Thank you, Afaq and thank you, everybody, for attending. We can't promise every quarter to be this busy, but we hope we always deliver good results.

Absolutely. Thank you, participants, for joining the call today.