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

Thank you, everybody, who joined this call. Thank you for your interest and for following Two Point Zero's news and numbers and results. We will go through the numbers, but I would also like -- this is our first earnings call as Two Point Zero. I'd like to offer a few opening remarks on the transformative year that it was and also on what to expect on -- for 2026. 2025 was a year where the mega merger happened, where we transformed -- [indiscernible] transformative for Multiply, Two Point Zero and Ghitha as we all merged to create a AED 134 billion entity that operates, focuses and invests on 2 mega sectors, consumer and energy. Today, we are one of Abu Dhabi, if not UAE's largest investment powerhouses with a portfolio of more than 50 companies operating across 85 countries. Why consumer and energy? When we look at the 2 megatrends that are shaping today's economy, we have identified that energy or what we call the energy mega cycle, which starts from mining, exploration up until infrastructure of energy, manufacturing, up until renewables and energy distribution, this sector is going through a huge growth, huge transformation in order to deliver on the needs that the world needs from data centers, from the growth of AI, from the growth of population and the need of extra energy. We have seen critical minerals being a key element in the growth of all those countries and companies up until the renewable, the transition from ground to green energy. Across all those touch points, Two Point Zero is present, and Omar later will take us through the companies under energy. Consumer, there is a huge increase in consumer trend across the world. And we already are operating. We know the Arab consumer for the last 20 years. We have been serving the Arab consumer in food, in media, in beauty, in mobility, and we are now ready as a platform to expand regionally, but also globally, take this knowledge, identify good opportunities within consumer sector and identify the regions where consumer spend is growing the most, and I will take you through that later. As a holding company, our -- I see our main role is to support our 50 companies. How do we support them? First of all, we support, we monitor, we help that they grow double digit on both operational performance and on net income throughout the year. We also are very strict in our expectations on utilization of AI enterprise tools. We have created a proprietary investment and monitoring tool pivot that allows us to work closely with our subsidiaries in order to highlight any sort of information that we need to know ahead of time in order to see their numbers, in order to monitor operational and financial performance, but also allows our investment team at the holding company to have access to good opportunities to decrease research time by a good 70% to 80%. It allows legal team to decrease legal hours by also 80% to 70%. This is a tool that we would present to the market when it's fully functional. And this is a tool that we enforce at holdco and cascade to all our subsidiaries with AI and with the double-digit growth and with the size of our current portfolio, we have high expectations of synergies and efficiencies. In the past, our playbook has proven to generate a lot of value creation. We have seen uplift on our EBITDA from 7% to 30% depending on the vertical. What I would like to leave you with is the playbook that have generated triple-digit growth in revenues and double-digit growth in efficiencies and in synergies on an asset base of AED 54 billion. Imagine it applied -- being applied at scale at AED 134 billion, and we believe -- and we are optimistic that returns are going to be exponential. With that, we talked about holdco. We talked about our focus. Let us talk about some of the financial results that I would like to focus on before leaving our Finance Director to take you through the details. This year, we made AED 7 billion in revenues and AED 3.6 billion in net income. The AED 7 billion in revenues are a 311% increase year-on-year. Where did this increase come from? 4 places. First of all, our 4 key contributing factors led to this increase. First of all, organic growth of all companies. Second, inorganic growth, such as if we talk about mobility, we've seen EDC invest in Mwasalat. We've seen media invest in several companies in London and so on. Three, we have begun consolidation of Tendam, one of our largest companies, one of the largest platform in retail and apparel in Iberia, which we had announced earlier. The deal has closed and we began consolidation in August. With that consolidation, we had AED 2.7 billion of additional revenue, that's for August until December. Finally, we have 1 month of Ghitha and ePointZero that contributed to our 311% increase. What's more important here than the number and the increase is if you look at it on a pro forma basis in order to understand the scale and give you some sort of perspective about what's to come, had Tendam, had all Multiply companies operated the same, had Tendam been acquired in January and had the merger of Two Point Zero Ghitha and Multiply happened in January 2025, we would have closed with revenues of AED 25 billion on a pro forma basis. I say that number, as I said, because it's important to give you full visibility, a better perspective on an optimized portfolio on how the portfolio would look like. Going to the almost $1 billion, AED 3.6 billion in net income. Also on a pro forma basis, that number would have been AED 9 billion, more than AED 2 billion. The AED 3.6 billion also had a couple of elements. First of all, positive operational performance across the board, the acquisitions and a one-off element of AED 2.7 billion from our divestment of PAL Cooling, selling it to Tabreed and CVC. I will stop at those numbers for now. Naveed will take you through the details. Those were the results for 2025. Let's talk about the balance sheet and see where we stand as we begin 2026. Talking about the balance sheet, we have guarded, strengthened and kept our balance sheet healthy. We are well capitalized. We have good indicators on debt to equity of 0.24x. I won't speak of debt-to-EBITDA today because we are -- clearly, it's still too early to talk about 1 month of EBITDA versus the debt that we consolidated. So I talk about debt to equity. At holdco and portco, we have AED 9.2 billion of cash. Other companies generate AED 2.8 billion of operational cash every year. And what does this AED 9.2 billion tell us? It tells us, one, that we are ready as a holding company to support our existing subsidiaries. We are ready to launch a new vertical. In fact, we are very close in final stages of due diligence in order to launch a new vertical and enter into new subsector of consumer and energy. And finally, it also tells us that when we decide to start to announce our dividend policy, we have the cash to upstream from our companies in order to pay dividends to our shareholders. Our investment strategy for 2026 remains the same. We keep the same discipline in capital deployment. We keep the same focus on double-digit IRRs on high cash conversion. We like majority shareholding in order to consolidate. What changes, however, is the geographies that we are looking at. At the scale we operate at today and also given the sectors that are contributing the most to our portfolio, we look at mining. Mining already we are in Africa. Mining takes us to Africa. We're looking at more African countries. We're looking at Latin American countries and of course, in Asia and really several parts of the world, but these are 3 geographies of focus for mining. Talking about energy, we already have announced the plans on renewable energies in India, and we are very actively looking at renewable energy and data center opportunities across the world. On energy infrastructure, we have one of the largest energy manufacturing bits El Sewedy in Egypt, and we are looking at growing within the infra, the energy infra. Moving to consumer, we follow the demand and we look at where the money is being spent. Today, there's a $2.4 trillion additional consumer spend each year. The bulk of the growth comes from Asia. When I say Asia, it's India, China, Vietnam, these are countries that are contributing the most to the consumer spend, and this is where we are actively looking at sectors in food, in packaging and in various other consumer sectors. Also, we cannot forget the U.S. although growth of the middle class and growth of the demand comes from Asia, the U.S. today remains a very large contributor to global consumption. And therefore, we are also actively looking at deals in that part of the world. Very soon, we will close in Europe, the deal that we announced in packaging ISEM. And with that, we will have our second European deal between Tendam, between ISEM in Italy and in Spain. And that also -- we're looking at Europe, especially as it starts to ease on the regulations, it starts easing up and welcoming investors, especially now that we are a group that already got an FSR approval that makes our entry to Europe easier from a compliance and governance standpoint. This is what we're looking at for 2026. These are the regions. Of course, locally, the UAE is always a place that where we look to bring new ideas, launch new companies as we are blessed to be in a market that registers around 5% growth, such as an emerging market, but also we have the setup and the legalities, and we have developed market conditions with emerging market growth. So we are also looking at bringing a couple of new ideas, greenfield projects from our companies in the UAE. That was all I wanted to share with you. I wanted to leave you with our priorities and give the floor to Naveed. The first priority is delivering on the bottom line results, double-digit growth that we have promised our shareholders several times. and we are optimistic that we will deliver. Second priority is particular focus on mining as we have noticed that critical minerals, especially copper, tin, lithium, gold are essential minerals for the electrification that the world is witnessing, but also for all energy-related projects. Third, just as we are eager to invest and grow our portfolio, we are also looking at what are the assets that we should divest or exit from. We follow a very specific methodology. We see the strategic value that the company brings to our portfolio and to our shareholders. We look at it from philosophically, the strategy, but also more importantly, every company has to pass the test of our returns, the test of our cash conversion, especially as we became so much bigger, we need numbers and returns that move the needle. And any assets that do not make it, we look at -- or that we don't plan to focus active management on, we look at divesting. Another priority is unlock more funding. As I said, we have a good balance sheet, but we also have a lot of assets where we can unlock more funding. We have excellent relations in banks around the world, of course, in the UAE, but also in Europe and in the States. AI, I spoke about pivot. We have expectations of direct uplift of our EBITDA up to 35% this year with a focus and the ambition of having 100% of our EBITDA AI-enabled in 5 years. Finally, from a regional angle, we are very actively -- I'm personally putting a lot of time on finding the right partners and building long-term partnerships in Asia because it's important when we look at this geography to know that we have the right partners to enter with. I leave you with this. Thank you for joining, and I give the floor to Omar now.

So people, I know this is our first earnings call together. I think this will be more of a yearly review rather than a quarterly review. Samia covered the main outlook and our next phase of growth and our 2026 focus. But for the benefit of everyone, I will quickly walk you through how we got here first and what's our portfolio looking like today. Then we will highlight key information on our stock, our 2025 key achievements, some financial highlights. And then I will hand over to Naveed for a quick performance review by vertical, and then we'll open for Q&A. I know we're limited on time, so I'll try to be either quick or I skip some information that you can go through later on your own. So as you can see, what started as a single business more than 20 years ago is now a multi vertical [indiscernible]. The group went through a multiyear build with a combination of organic growth, some targeted acquisition and strategic support once IHC acquired a majority stake in 2020, culminating in the transformative merger that happened a few months ago, forming basically Two Point Zero Group as we know it today. Following the series of events, maybe let's take a closer look at how the group is currently structured across our pillars, consumer and energy. We tend to think about the group in simple terms, right? We will try to build scalable platforms with strong cash generation capability and apply a very consistent value creation playbook across all of them. Under the Consumer sector, we currently operate 6 verticals. We start with mobility. We start with mobility. Under mobility, we own a controlling stake in EDC, a market leader in Abu Dhabi, mainly for driver education, but also ventured into Dubai with the acquisition of Excellence in 2024. Moreover, they recently acquired 22.5% of Mwasalat, transforming the group into a broader mobility platform with public transport, tax-free and fleet rental as part of the services with the option to acquire a majority stake during 2026. Under Media, we are the out-of-home market leader in the UAE. MMG provides a wide network of small format assets under the Viola brand as well as large-format static holdings under the Media 247 brand in premium locations mainly on Sheikh Zayed Road in addition to high-end iconic landmarks under our BackLite brand. Under Wellness & Beauty, we are also the UAE's champion with a leading platform of beauty services with more than 135 salons offering some hair and nail services under a wide range of brands, serving different customer segments and demographics. You might be familiar with some like 1847, Tips & Toes and Bedashing. If we move to Retail & Apparel, we have recently acquired a 68% stake in Tendam, an omnichannel global retailer with 12 owned brands and more than 200 third-party brands with operations, as Samia mentioned, more than 80 countries with 1,800 point of sales. Our Food vertical is a fully integrated F&B platform operating across the value chain from farming and production to processing and trading and distribution. Ghitha focuses mainly on dairy and protein, where they are the clear market leaders as well as fresh chicken and table eggs, fruits and vegetables, where also they are the market leader in the UAE and concentrated juices. They have also minor activities in other segments, but these are the main focus of the platform. On the Packaging, it's our most recent announcement. So we recently announced the signing of the SPA to acquire a majority stake in ISEM, and we expect to close it in this quarter. ISEM is a leading luxury secondary packaging group operating in the premium end of the market with clients like Gucci, LV and L'Oreal. Under our Energy sector, we have a leading mining platform focused on investing in upstream resources that produce essential commodities for the energy transition and electrification. That's IRH. IRH targets high-demand metals such as copper, tin, zinc and nickel as well as critical inputs for steel production, including high-grade iron ore, some alloys like manganese and chrome. On the other hand, we also have a significant minority stakes in multiple energy plays, as Samia mentioned, across also the value chain from energy infrastructure to distribution and trading as well. So we have Kalyon within the generation side. We have Sewedy on the infra solutions side as well as EHC and obviously, our strategic stake in Taqa from the distribution side. So over the last 4 years, really, we've grown revenue 17x, obviously, through a series of transformational events. But today, our revenue stands at AED 7 billion. Our EBITDA, as we said, AED 3 billion, 15x since our listing date with a total asset base of AED 135 billion (sic) [ AED 133.7 billion ]. So really, scale has changed -- we changed our scale, and now we are targeting much bigger steps going forward. Our market cap as of the end of the year was AED 90 billion with a healthy liquidity for our stock of around AED 28 million per day. I won't go through the elements of our strategy. I think Samia covered most. So for the benefit of time, I will skip. I mean, we know where we're focusing, where we want to play from a geography perspective. Samia went through all of that, applying probably our playbook, which is, I would say, with a significant track record of creating value. So really, we want to follow that playbook on the new portfolio, whereby we have a very disciplined, let's say, capital allocation process as well as entering building, looking at each vertical and assessing when a vertical is prime for either monetization or double down on its growth. So from that perspective, I think Samia went through enough details, but happy to take any questions later. And then we move to financials. Again, I mean, from a high-level perspective, Samia went through most, but I would want to maybe differentiate how we're looking at our financials this year because this year is a special year. So first, you have the reported numbers, which include the acquisitions at a certain period of time. So our tab acquisition happened in July, so consolidation started in the 1st of August for 5 months, whereas the bigger merger happened towards the end of November. So you see only 1 month consolidation. So all those numbers from a reported number includes 5-month consolidation of Tendam and only 1 month of the Two Point Zero assets. Having said that, as we said, we grew revenue by 300% (sic) [ 311% ]. All of our existing businesses grew by double digit, supported by the Tandem acquisition, which is fairly a sizable one generating today. 40% of our revenue in 2025. From an EBITDA perspective, I would say it's the same. All our existing vertical grew by 30%, at least, which are Mobility, Beauty as well as Media, coupled with the acquisition of Ghitha and Tendam growing that to AED 3 billion mark. Maybe we go to the next slide. Again, I mean, Naveed will go into the details in each vertical, but I would say all our verticals are very well positioned for the next phase of growth. Within Media, as we said, we are the market leader. We are starting to really bear the effort of what we've done over the last 2 years with our new powerhouse strategy. Our margins are improving, industry-leading against all benchmarks. So we have very good margins and capabilities on the Media side. On the Beauty & Wellness as well, again, we've generated, I think, around 40% growth on EBITDA. Some is for inorganic purposes, but mostly are organic and because of synergies. This market is growing at probably around single digit, but we grew -- we were able to grow revenue by double digit and EBITDA significantly given the synergies we had between the Omorfia Group and The Grooming Company. On the mobility side, the same. This business theoretically grows with population growth. But again, with the effort of our growth and transformation team, we were able to find a lot of pockets to grow EBITDA, whether from digital transformation initiatives or from improving the utilization of the fleet and grew 30% year-on-year. So we've seen how we can say our ways worked over the last few years on the consumer verticals. Hopefully, this -- we will take this also forward with all our new acquisitions. Some highlights of the group in 2025 as well other than Tendam and ISEM and Mwasalat is the entry into the U.K. by our Media vertical through the acquisition of London Lites. It's also a strategic direction that our Media platform took to grow outside the UAE, given our market leadership position in the UAE. And I wouldn't say limited growth potential. But as we said, I mean, we already control 40% to 50% of the market. So we think going outside the region would be the next phase of growth for Media. I will leave it now to Naveed to go into more details into the verticals and the performance of the verticals.

Thank you, Omar. Good afternoon, everyone, and thank you for joining us today. As Omar have quickly walked us through 2025 numbers, we'll go deeper into the verticals to mention key highlights and some examples of how we're extracting value out of these verticals. And finally, we'll close with comments on the balance sheet strength and the future outlook. Going into the Media & Communication, Media vertical delivered a strong year with revenue growing 24% year-on-year and adjusted EBITDA increasing by 33% to AED 420 million. Performance was largely driven by robust demand in our out-of-home market, strong utilization of our static and digital assets and continued success of the Powerhouse strategy. Margin expansion reflects full year business integration, disciplined pricing and operational efficiencies. We also made, as Omar was mentioning, strategic process through expansion into U.K. market and selective partnership in Saudi Arabia, positioning the platform for sustainable regional and international growth. Going into the Mobility. Mobility vertical, which is our best cash-generating vertical, delivered 48% revenue growth and 30% growth in adjusted EBITDA to AED 395 million. Growth was supported by mainly our efforts, and our efforts of growth and transformation team and higher student enrollment, fully integration of excellence driving and continued digital transformation across the platform. While margins were diluted by consolidation of the lower-margin operations in Dubai mainly and stand-alone margins improved significantly through cost optimization and technology adoption. The vertical continues to evolve into scalable mobility platform with expansion into EV charging and smart mobility infrastructure. Going into Wellness & Beauty. The vertical posted AED 631 million of revenue, growing 18% and with a 46% increase in EBITDA to AED 216 million (sic) [ AED 206 million ]. The performance reflects full year consolidation of the TGC, the successful execution of procurement and shared services synergies and material SG&A reduction. Margin expansion was driven by improved cost discipline, ERP integration and centralized operations. Going into Retail & Apparel, as we mentioned earlier, we closed the deal in July and started consolidation from August. It reflects the consolidation of Tendam for a period of 5 months, starting from August 2025. On a pro forma basis, Tendam delivered 21% revenue growth in AED terms, increasing its market share in Spain to 7.5%, supported by strong performance in our own brands and third-party brand sales and continuing growth in online channels. Reported adjusted EBITDA for the vertical was AED 793 million. We remain confident in the long-term trajectory as synergy initiatives mature. Food, as Omar was mentioning, Food reflects 1 month of the consolidation starting from December 1. Our anchor in the Food vertical is mainly Ghitha, which we started from November -- December onward. On a pro forma basis, Ghitha grew by 13.5% year-on-year and adjusted EBITDA increased by 43%, which reflects our pricing discipline, our cost efficiencies and optimization of the old product mix within Ghitha. And within Ghitha, what we are doing is formation of Al Ain Farms Groups and acquisition -- we did acquisition of 5 organic as well to strengthen the platform, while we are implementing technology solutions such as SAP to digitally transform the business and have a clear visibility on the supply chain and have a control over the margins within different product lines. Going into ePointZero, which is our energy vertical, mainly comprising of IRH and within IRH, 3 business, IRH Trading, Mopani and Alphamin. And second -- and our investment into Kalyon. So on pro forma basis, revenue increased by 260% year-on-year, driven by production recovery at Mopani Copper Mines, growth in trading activities and acquisition of majority stake in Alphamin, which was closed in June, and we started consolidation from July onward. The pro forma EBITDA improved significantly, supported by mine-to-market strategy and operational improvements. Reported results were partially offset by Kalyon, not due to the operational results. It's due to one-off adjustments, which relates to FX movements, hyperinflation in Turkey and some hedging activities. Investment vertical, which is mainly our portfolio is comprised of Chimera and Beltone. And within Chimera, we consolidate Lunate. We closed the year with AUMs of AED 115 billion. Revenue growth within Chimera comes from our management fee and also our performance fee, although pro forma EBITDA moderate due to market-dependent advisory and performance management fee I was mentioning earlier. And we are launching new ETFs. We are signing new initiatives and partnerships to expand into logistics and digital investment platforms. Going into the balance sheet. As of 31st December 2025, the group continues to maintain a robust financial performance with a net debt of AED 14.4 billion and net debt to equity of 0.15x. We closed the year with a cash approximate of AED 9.2 billion and relatively low average funding cost of approximately 5% at holdco and AED 48 billion of capital deployed to date. This strength of our balance sheet provides us significant flexibility to continue executing our investment and growth strategy while maintaining prudent leverage. In closing, this was a pivotal year, as we mentioned earlier, transformative with mega merger happening from December -- almost from start of December. We have materially scaled the business. We have diversified our earnings across resilient verticals and delivered strong profitability while maintaining balance sheet discipline. But importantly, our focus going forward is from integration to optimization to extract value, expand our margins and drive sustainable cash generation for the group. We remain confident in our long-term trajectory and strength of our portfolio, strength of our balance sheet and our ability to deliver consistent value for shareholders.

Thank you very much for your time. I hope we gave a clearer view on what the group is trying to achieve and our focus for 2026 and beyond. And if there is any other questions later, we are happy to answer them separately.

Thank you very much, Omar, and thank you, everyone, for attending. With that, we will close off the call.