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

[indiscernible] and good afternoon, everyone. Thank you for joining us for Two Point Zero Q1 2026 earnings call. I won't go in detail through our history again and strategy today, but for the benefit of anyone who has not attended our previous earnings calls, Two Point Zero is a diversified investment group built around 2 multitrillion-dollar mega themes, the energy and mining super cycle and the global consumer surge. What I want to focus on this afternoon is take you through a quarter that was very active operationally, strategically and from a macro standpoint, as you all know, and give you a clear picture of where we stand. Q1 2026 is a milestone quarter for one important reason. It is the first full quarter for Two Point Zero as a group following the mega merger that happened towards the end of last year between Multiply Group, former Two Point Zero and Riva, that means for the first time, you are seeing the full revenue and earnings capacity of this group reflected in a single reporting period. So just to highlight, so the year-on-year numbers that we will go through are not like-for-like. Q1 2025 was a premerger Multiply group, whereas this quarter reflects the consolidation of Tendam, Riva, Chimera, IRH and Two Point Zero businesses that were a part of the perimeter last year. Where meaningful, I will reference pro forma comparisons to give you a cleaner read on underlying performance. Before maybe going into the details of the quarter, let's address a little bit deeper geopolitical situation. In the escalation of U.S. Iran tensions obviously created a lot of disruptions across the region and to certain local businesses. From Two Point Zero's perspective, like everyone else, I cannot say there wasn't increased operational pressure and a little bit of financial impact across businesses. But what I can say is that we were prepared and we moved very fast. The first priority was our people and their safety. So we reduced nonessential on-site presence across the group. We created a 24/7 hotline that was activated for all employees, giving each member direct access to support, guidance and emergency contact. Cybersecurity protocols also were reinforced across. As you know, we are ISO certified at the holdco level, which means really that our incidence response and business continuity frameworks are tested and are live, not just improvised. On the business side, every portfolio company activated a crisis management plan within days. Measures were taken to prioritize continuity and cash flow. Riva faced the most direct supply chain exposure, as you can expect. Our media vertical experienced some campaign delays, but managed to minimize cancellations. On the Mobility front, we redeployed fleet across cities, while Beauty performance was affected by slightly lower tourism in March. However, once we go over the Q1 financials, we will see it had limited impact on the results. We'll talk in 4 buckets. First is our entry into a new vertical. We closed the acquisition of ISEM, 60%, a majority stake. This would be our sixth consumer vertical and our entry into the European luxury and beauty packaging. We started consolidating ISEM only in March. On the new investment side, through [ Two Point Zero ], we signed an agreement to acquire 100% of Traverse Midstream Partners in the U.S. for $2.2 billion, our first significant step into North America energy infrastructure. Traverse Travis holds minority stakes in 2 large U.S. natural gas pipelines operated by Energy Transfer, one of the largest pipeline companies in America. This is exactly the kind of recurring cash-generative infrastructure stake we want in the energy vertical. We also participated in Series G financing of WHOOP, the AI-enabled consumer health platform, which operates today across approximately 200 markets. And on the investment side, Beltone, the subsidiary of Chimera, completed the acquisition of Baobab Group, expanding its consumer lending businesses across 7 African markets. On the expansion front, within our existing portfolio, Tendam entered Romania, its newest market, opening 4 stores there and launched 3 new stand-alone concepts in Spain, including SPF Kids or Springfield Kids, Auto and Solar. These were concepts that have been tried and tested as part of a larger store, but now they have their own stores. Early indications are very positive on those ventures. In Media, Backlite UK, following the acquisition of London Lites, start consolidating 85 premium digital sites across London and launching The Knightsbridge, which is our first site in our landmark series. In mobility as well, EDC announced the strategic direction to transition to Emirates Mobility Company, becoming a specialized platform focused on the mobility sector. And in that also regard, [ EDC ] signed an agreement to acquire Performise Labs, accelerating this transition. On the AI front, which, as you know, takes a large focus from everyone's agenda under the ecosystem, we now have 4 AI coworkers embedded in the holdco, which represent approximately 7% of our workforce. On top of that, we have 250 live AI agents and many others under development. Now turning to numbers. Again, a very busy quarter. Group revenue was around AED 9.9 billion, 18x year-on-year. As I said earlier, this is largely a consolidation story. So we will talk a little bit of pro forma here to me to give more and more relevance. On a pro forma basis, that revenue is 100% growth. That is the more meaningful number here. This growth is mainly driven by IRH as it grew 400% on a pro forma basis, driven by the acquisition of Alphamin in August '25 and the continued scaling of IRH Trading. The trading business tends to see higher activity in times of volatility. On a gross profit perspective, we recorded AED 3 billion of gross profit, also 10x year-on-year. From a margin perspective, though, we -- our margin was 30% versus a 48% margin last year. However, I mean, this is purely a mix effect, not a margin deterioration story. IRH Trading, which carries by nature, a lower gross margin, represent around 25% of Q1 group revenues. So this explains the most of the -- I mean, most of the drop in margin. From an adjusted EBITDA perspective, we recorded AED 2.5 billion, again, 4x year-on-year, but 85% up on a pro forma basis, driven again, primarily by IRH increasing their EBITDA by around AED 1 billion from quarter-to-quarter. Reported net profit was AED 2.3 billion, up 10x year-on-year and 100% on a pro forma basis, 108% on a pro forma basis. A couple of items worth flagging here. There was a fair value gain of AED 1.1 billion, a mix of Chimera assets and listed stocks as well as a revaluation loss of AED 400 million on digital assets under IFRS 9. So those were noncash mark-to-market items. If we go into a little bit more into the verticals, the mining, as I said, was the largest single contributor, 50% of the group revenue with an adjusted EBITDA of AED 1.1 million. This reflects, as we said, the full quarter of Alphamin, the world's highest grade tin producer and the consolidation and agreed activity of IRH Trading. On the consumer side, the consumer business has delivered AED 3.6 billion in revenue, which is 37% of the group. But within consumer, Tendam contributed AED 1.4 billion and AED 200 million of EBITDA. Food grew 21% on a pro forma basis, driven by stronger consumer purchasing and higher stocking activity during Q1. Mobility delivered around AED 190 million of revenue, 13% up from last quarter -- from Q1 2025 with an EBITDA of AED 100 million, also up 14%, maintaining approximately the same margins. Media revenue grew 11% to AED 200 million, although EBITDA was AED 100 million, slightly below last year, mainly reflecting the disruption from Abu Dhabi regulatory changes on the out-of-home content as well as some geopolitical impact on advertising budgets. On the Beauty front, revenue was AED 150 million and EBITDA of AED 50 million, much in line with the prior year. On the investment side, they delivered AED 1.2 billion in revenue and AED 530 million in adjusted EBITDA, driven mostly by Chimera's strong performance. From a cash flow perspective, we generated AED 2.6 billion of operating cash flow, 8x year-on-year growth. From a balance sheet perspective, we try to maintain a very healthy balance sheet with cash balances at the end of Q1 of AED 9.5 billion. Net debt to equity at 0.2, again, very healthy with total assets of AED 135 billion. So that's -- that in a nutshell, the performance. I'll take you through the details of each vertical. I'll try to not repeat myself, but I'll talk you through the highlights of each vertical. On the Media side, as we said, revenue was up 11% year-on-year as the group continued leveraging its powerhouse strategy in the UAE and controlling the vast majority of budgets. We rebranded London Lites to Backlite U.K., and have now consolidated over 85 premium digital assets across London, which will be rolled out as the year goes on. On profitability, EBITDA was AED 100 million for the quarter. As we said, margins were softer versus Q1 last year, partly due to the fast food advertising restrictions in Abu Dhabi and some demand disruption from regional environment. Mobility had a strong quarter, revenue up 13% with EBITDA up 14%. The growth was led by EDC and student registrations. On the strategic side, we signed with for Mwasalat, and are deploying 200 EV chargers across 30 Abu Dhabi sites in 2026 as part of the ChargePoint ITC concession. We are also advancing the long-term BMT agreement to establish a flagship training hub in [indiscernible], extending our coverage in the Eastern region. On the Wellness side, this is probably the only vertical that saw a decrease in top line, 5%, mainly driven by a lower footfall of 6%, coupled with Ramadan this year coming fully in Q1. However, the team deserves credit for the margin performance. EBITDA, they were able to maintain a flat EBITDA year-on-year despite the revenue shortfall through tighter cost discipline across most cost categories. On the retail front, Tendam delivered very strong results on a pro forma basis, 15% up on revenue, 12% up on EBITDA. Again, keep in mind that this is a very mature large business. So delivering such growth is always good to see with both in-store and online contributing to the growth. As we said, they entered Romania in March with Springfield. The first stores are open. Alongside that, Springfield Kid launched stand-alone stores, Slowlove added 4 new locations and Out of the Office also opened its inaugural store. Tendem is systematically extending its brand footprint beyond Iberia, as we said, with the Romania expansion. On the AI front, within Tendam, we rolled out the strategy across 3 key priority areas: mainly demand planning; CRM; and pricing, which underpins where we see the next layer of margin improvement for Tendam. You can see that as a quarter, there was a loss at the net income level in Q1. However, this is a natural part of the seasonality of the sector, especially in transition periods between seasons, mainly usually Feb, March and September, October, which we call them transition season between fall/winter and summer/spring. Having said that, Tendam has beat its budget for Q1 on the net income level by 40% and is on track to deliver more than 10% growth at the net income level. I thought it's important to clarify that point. [indiscernible], they delivered, as we said, 21% revenue growth, driven by stronger consumer purchasing and elevated stocking activity in the current environment, and gross profit also grew by 7.5% year-on-year, but EBITDA margin contracted mainly as a result of the supply chain pressure from the geopolitical situation. We see this really as a cyclical and not structural, and hence, we expect things to normalize in the coming weeks. On the strategic side, NRTC completed the acquisition of Taaza, deepening our vertical integration in fresh produce, which is a fresh produce from fruits and vegetables and juices. On the energy front, the headline event is obviously, as we said, the acquisition of Traverse in the U.S., $2.2 billion, hopefully, our first entry into North American energy infrastructure. It's resilient income-generating infrastructure and it anchors our global diversification in energy. On the mining side, as we said, it was a standout performer for this quarter, revenue up 4x pro forma, EBITDA up 20x to AED 1 billion, mainly the Altamin acquisition in August is transformative, 60% EBITDA margin on Altamin alone and IRH Global Trading continued its momentum. On the investment side, they delivered 45% revenue growth and 28% EBITDA growth, supported by the continued AUM growth across the platform. And from a strategic angle, Beltone, as we said, completed the acquisition of Baobab, which gave us exposure to 7 new African markets, which is the first cross-border transaction in Africa.