Agility Public Warehousing K S C P : Transcript of the Analysts Conference

Agility Public Warehousing Company

Full Year 2021 Analyst Webcast

Sunday, April 3rd 2022

Kindly find enclosed the minutes of Agility's analyst webcast, which was held on Wednesday March 30, 2022 at 12:00 PM Kuwait time, to discuss Full Year 2021 earnings.

Attendees from Agility:

Ehab Aziz - Group CFO

Soriana Borjas - Investor Relations Senior Manager

From Arqaam Capital:

Sidharth Saboo

Sidharth Saboo: Good afternoon, ladies and gentlemen, and thank you for joining us today. This is Sidharth

Saboo and on behalf of Arqaam Capital, I would like to welcome you to Agility's FY 2021

Earnings webcast. With me here today. I have Mr. Ehab Aziz, Agility's Chief Financial

Officer and Agility's investor relations team. Without further delay, I will now turn over the call to Soriana Borjas, Agility's Investor Relations Senior Manager.

Soriana:Thank you Sidharth and welcome everyone for Agility's FY earnings webcast. With us today, Mr Ehab Aziz, our Group CFO who will present you Agility's full year financial and operational performance and the major developments that happened during the year. We will be more than happy to take your questions after the presentation. For this, as you can see there is a chat box on your screen, please type in your question there and we will address it towards the end of the session. Before we begin, I would like to draw your attention to the disclaimer available on the present page. As this presentation may contain forward looking statements. Such statements are subject to risks and uncertainties. Please take a moment to read this, and then I'll hand it over to Ehab. Thank you. Ehab, over to you.

Ehab:

Good morning and good afternoon, everyone. Today we will try to go over different subjects, definitely the financials of the year; but also as you have seen, the company went through lots of changes last year and changes are still ongoing with the current acquisitions. So, we want to share with you how we view the company today and going forward, in terms of structure and how you should think about the company, and the different assets and investments we are embarking on. So, this, I believe, would be the best way of looking at things, as we transition from the previous structure where we had the logistics business GIL, and then, restructuring ourselves into a new way of doing things. I think it is important for you to understand that at a very early stage, and as we evolve, we will keep you updated.

So, we will start with the company overview, and this is to give you a flavour of how we see things, then we will get into the financials for the year 2021, and then we will go back to the Agility business profile. We will also give you more details of each business. And then, finally, we will share with you the shareholders' return, which probably most of you have seen, as we shared with you in the previous year.

So today, as you know, we sold our logistics business last year, which was our largest business in terms of revenues, but not from profitability perspective. As a result of that there has been a fundamental change in the profile of the company, the financial profile as well as the strategic profile. So, now, when you look at our financials, there is a lot of noise in the numbers, particularly in the P/L. On the balance sheet, you will realize it, probably dominated by the significant asset, which is the 8% that we have in DSV. So, I think the way we look at the company today; and again this is a preliminary view, since we are still evolving in terms of numbers and how we split and segment the company, but broadly we view the company today as controlled businesses, which we own and operate, we own a majority stake in that more than 50% and the non-controlled businesses, which is pre-dominantly the minority stake that we have in different areas. And we have a slidethat will talk about that later in the deck. That area, the non-controlled, is pre-dominantly the DSV shares. So, what we are trying to do going forward, from 2022 onwards and you will not see that in the 2021 numbers because, as I said, there is a lot of noise because of the exclusion of GIL in August. Because until August, we have some numbers line by line and after that we excluded that. But going forward, starting from Q1 2022, we will report the numbers under two segments, the controlled businesses and non-controlled businesses.

Then, I think the rest of this slide is just to give you a flavour of the profile of the company today, we are the fifth largest company by market cap on Kuwait stock exchange, as of the end of 2021, the market cap was KD 2.1bn. We are among the few non-banking, or non-telecom companies in this list. Most of the top eight companies are dominated by banks and telecom. The major shareholders are predominately Kuwaiti: NREC Kuwait owns about 22%, and the Public Social Security about 19%. And since the index inclusion FTSE-MSCI, we started seeing foreign investors, non- Kuwaiti, coming into our shareholders register; like The Vanguard Group and BlackRock, as you can see on the bottom right.

The second slide talks about the evolution of the company throughout the years. I joined the company in 1999, and it's been a very exciting journey to see the company going from a very small Kuwaiti warehousing company in 1999 to where we are today (1997 is when the company was privatized, because it was a government owned entity). So joining the management team and seeing the company throughout the years has been very exciting and very rewarding experience to say the least. As you can see, revenues back then were like KD 15 million, and you can see that we grew significantly over the years. I think for a non-banking, non-government, non-telecom organization to grow and expand beyond the borders of Kuwait and the region is quite remarkable. So we feel very proud about what we have been able to achieve throughout the years. The numbers show a very compelling story. These are operating assets that we have owned in 2003-2010. We did more than 40+ acquisitions and all were operating assets, so these are not financial shares, passive investments, or real estate that we have been sitting on and appreciating overtime. These have been real operations and cash flows, competing at the global level. So, strategically and financially, the company has evolved in a very profound way, and we are all proud to be part of this story.

The market cap of the company, and we have a full slide that talks about that later, has grown significantly, and we created a significant amount of wealth and value to our shareholders throughout the years. The market cap was roughly KD 123 million, in 2002. In 2021, the market cap stood at KD 2.1 billion, and this is significant value creation to a non-banking, non-government, non-telecom, which by default have capital and significant market shares as a result of a license etc. So, the importance of that story and that evolution is a very strong foundation for us to look at how things should be moving going forward. So, this is again, just a snapshot of the key acquisitions we did. As you can see, we have been acquiring companies, integrating them, and these are all operatingcompanies throughout the years: Tristar and all the companies that you see today as part of our operating entities, which significantly contributed to our bottom line. You see Transoceanic, you see NAS in 2013, and you see UPAC. This is just a snapshot not a comprehensive list of all the acquisitions that we made, but I think it gives you a flavour of the company's DNA and M&A activity.

This slide is a recap, the company today is KD 2.1 billion of market cap, and about 15,000 employees. We focus on multiple sectors: Supply chain services, industrial infrastructure, commercial real estate as part of the UPAC and the Reem Mall investment, then the aviation sector which has been quite active recently on; and then all the venture and tech investments that we have been making, where we have a minority stake in. And I'll explain where all this fits into the two segments that we talked about earlier. We are guided by experienced management, the management we have been together for quite an extended period of time. We consider ourselves to be disciplined, governed properly from investments and capital allocations as well as from an ESG perspective. Our commitment to shareholders' value creation has been validated by what we have done over the years and what we have contributed and delivered throughout the years to our shareholders.

We will walk you through the financials and it is going to be brief because today we don't have any segment. But hopefully, once we start reporting our numbers in the new way in Q1 2022, you will start seeing the numbers in a different format. So, the key message here is that, 2021 was a recovery, I would say 90-95% recovery of our numbers. The numbers you see here are the continuing operations; so, we exclude any GIL related numbers from the revenues, net revenues, or net profit. I think that we have seen recovery to pre-COVID levels to a great extent (90-95%). We see that recovery continues going forward. So, revenues grew by 22%, net revenue as 17%, Net revenue margins are high, if you remember when we had GIL the net revenue margin was much lower, today it is about 51.7% and then EBITDA at KD 109.0 million, again the margin is much higher than the days of GIL at 24%, and the net profit. There was some confusions about the results of the fourth quarter, we have reported losses in Q4 but it was not an operating loss, we presented the adjusted profit here to give you a clearer picture. If you adjust for the non-recurring items, like the investment property revaluation, because that's an accounting exercise at the end of every period and its non-cash, and we adjust also for the investment revaluation predominantly Hyliion where the fluctuation in stock price is taken to the P/L that's also creating some noise. If we adjust for all of that, then we have registered 47.6% y/y growth in our net profit.

If we look at the reported numbers, of course the reported numbers are a bit distorted by the one-off profit from the disposal of GIL which is almost a KD 1 billion.

Then we have the balance sheet and what we are trying to show you here is, how much of the company's assets today is controlled and how much of it is non-controlled, so as of the end of 2021, we have KD 2.9 billion, 56% of that is attributed to the non-controlled assets and 44% is attributed to the controlled assets. You can see we have a very strong