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

05/22/2022 | 01:26am EDT


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 Q1 2022

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

Officer and Agility's Investors Relation Team. Without further delay, I will now turn over

the call to Soriana Borjas, Agility's Investors Relation Senior Manager.


Thank you and welcome everyone to Agility's Q1 2022 earnings webcast. Mr. Ehab Aziz

our group CFO who will be with you after this introduction, will present the company's

financial and operational performance during this quarter. Again, if you have any

questions, please type it in the chat box on your screen 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 presentation. Please have a look to read it and then I will hand it over to

Ehab. Thank you.


Good afternoon, good morning, everyone. We will try to go through the different topics

that we have today. Mainly three topics. We will give you the company overview and

when I say the company overview, as we discussed the previous quarter, it's the new

segment reporting that we started with from Q1 this year, then we will go through

performance of the quarter and then we will conclude with the shareholder return and

the dividends that has been announced and reiterate our dividend policy for the next two

years and then we will open it for Q&A.

So, I would like to start by reiterating what we have discussed before, which is how we

are looking at the company going forward and how the company from an operating and

financial perspective will be managed, as you can see on the slide, the company now is

basically split into two segments. In segment one we have what we call the controlled

business segment. The minority stakes or non-controlled investments is in segment two.

And as you can see in segment one, these are all mostly the legacy businesses that we

have. The top four businesses in terms of size, are the Agility industrial real estate, Tri-

Star, GCS, which is the customs business and then NAS, which is as you might be aware

announced the acquisition of Menzies. So, for now, Menzies, as you can see on the right-

hand side is classified under segment two, since we haven't closed the acquisition yet so

whatever amount of money we have paid on that investment so far is classified under the

investment segment. Once the acquisition is concluded, which is expected in Q3 of this

year, Menzies will be consolidated with NAS, and we will shift it to segment one under

the controlled businesses.

We'll walk you through some of the numbers of each segment, and I think it's important

to visualize how the company is currently organized so when you look at the numbers and

the performance, you can understand what is coming from segment one, which is the

controlled businesses and what's coming from the investment segment, which after the

DSV deal became extremely significant as we will talk about later in the presentation.

So, on the investment side, we have listed investments. And you can see the names here, the DSV, NREC, GWC, HYLION, Menzies, and SWVL. And then you have the non-listed. And probably the key investment in the non-listed is the Reem Mall, as you probably know our

Agility Q1 2022 results webcast transcript Arqaam Capital

investment in the Reem mall is through a convertible debt and it's a non-listed investment, hence it is classified under that segment. Moving to the Q1 results, what you see here is the performance comparison to Q1 2021, the previous year, is apple to apple without ie without GIL, all the way, except for the net profits, which we have shaded the part of GIL. So, the numbers that you see on revenues, net revenues and EBITDA are apple to apple, the same businesses that we had last year, which are the controlled businesses as well as the investments are reflected in both years.

So, our revenues, of course, after selling GIL have shrunk. And now we have roughly KWD 130-140 million of revenues quarterly. And year over year, we have achieved about 22.3%, and that is a reflection of strong growth in different entities, as we will see later and also it's the recovery from the COVID situation.

So, we can see the revenues growing very nicely at 22%, net revenue is at 15% growth and then EBITDA has seen significant growth. I will break down EBITDA later on because the EBITDA you see here is for both, the investments, whatever we re-value through P&L plus the operating entities, the controlled entities. So we'll split that in the coming slide. So, to give you a flavor of how much the controlled businesses are generating and how much the investments, which is creating some noise because it's a reflection of the listed entities and the dividends we received from whichever entity. But overall, the results has seen a significant growth 72% year over year, for 2022.

Net profit - the KWD 11.7 million that you see here is from GIL that's before we deconsolidated GIL, because if you remember, GIL was deconsolidated in August last year. So Q1, Q2, and part of Q3 will also have the GIL numbers. So we take that out and that's the shaded KWD 11.7 million. And then the KWD 0.9 million is basically the result of the non-GIL, the continuous operation last year. And, as you can see has seen significant growth year over year.

Now this is, I think is a very important and critical slide because it gives you a clearer picture of how much of the earnings and the revenues are generated by the more sustainable, more operating, more controlled businesses, which is what we label here as control versus investments.

Investments, will go up and down and create noise because as per the accounting treatment, some of our investments are treated through P&L. So if the stock price of certain investments goes up, that will go up in the P&L so you will see significant profits, If it goes down, it's the other way around you see significant losses.

So, if you focus on the controlled businesses, this is where you see the 22% in revenue growth, 15% in net revenue, which is more or less, what we have seen in the previous slide. Now, when it comes to EBITDA and EBIT, because of the investment segment the group EBITDA and EBIT become little bit noisy, but in this slide you can see clearly that the controlled entities have registered 31% growth year over year in terms of EBITDA and about 45% EBIT. And that is, I think, a very strong recovery from COVID and we are seeing all our entities actually performing very well and almost back to the pre COVID levels. There will be another twist if we close Menzies, then Menzies will be consolidated under

Agility Q1 2022 results webcast transcript Arqaam Capital

the controlled entities and these numbers will yet change again. But that I think this is a good problem to deal with and I think our objective here is to increase the size and the magnitude and the importance of the controlled entities, while we nurture and we invest wisely on the investments that we have.

This slide shows the composition of the assets and the liabilities and the key point that I want to make is if you look at the assets today, 60% is actually, non-controlled, that's a significant amount of our assets in the investment segment. Part of that includes the Menzies price that we paid so far, which is for 19% but that's not the significant amount. So again, we have an asset base of KWD 2.8 billion. 60% of that is allocated to the non- controlled or the investment and 40% is allocated to the controlled businesses. So I think, that's why we believe the segment reporting is very critical for shareholders, for investors, for all the stakeholders, to understand the value of the company and how the value of the company is driven going forward because the investment is a significant portion of our assets as a result of the DSV deal. And hence it's very critical and important to split what comes from operations in the P&L, and in the assets, so you can have a better understanding and a better view of the underlying operation and the underlying performance of the company, and hence the value of the company going forward.

In terms of cash flow, again, there is little bit of noise this year. This year is clean I would say, but the noise is coming from the comparative figure in 2021, because what you see here is as per the accounting standard, it's the consolidated cashflow statements, including GIL. So the numbers that you see here are not necessarily apple to apple, but we have been able to generate a positive operating cash flows of KWD 23 million for the quarter which I think is a positive sign because if you compare that to EBITDA and our EBITDA is less leases, you see most of our earnings are being converted into operating cash flow, and then that operating cashflow gets invested in CAPEX and investments. And again, the KWD 60 million investment that you see here is basically due to the money that we have paid for Menzies.

Again, in this slide is a big picture view of the two segments of the company today, and we are trying to put the historical figures in perspective. 2019, 20 and 21 are annual figures, the Q1 2022 is quarter to date. So, they are not comparative, but you can more or less annualize what you see in Q1. These numbers will give you a sense of the magnitude relative to the historical numbers. And you can see clearly from the numbers that, one we are recovering from COVID. So we are going back very closely to the pre- covid levels. And then overall, there is actually a growth in that segment of the company relative to the 2019. So, we are not only recovering, but we probably exceeded the 2019 figures with that segment. What you also see here, which is something that is based on management accounting, it's not necessary audited, it's something that we tried because cash is fungible and even debt is fungible since all the debt is at corporate level and then we fund the businesses. We tried to allocate as much as possible how much net debt belongs to the controlled businesses and how much debt belongs to the investment segments. And you can see here, net debt is about KWD 80 million and about KWD 100 million for lease obligations.

Agility Q1 2022 results webcast transcript

Arqaam Capital

So again, we are trying to peel that onion as much as possible to provide transparency, so

you can have a better assessment and a better view of the value of the company. Now

we move to investments, the segment two. The value as of the end of Q1 2022 is about

KWD 1.3 billion on the listed and on the unlisted, the unquoted, which is predominantly

based on either comparable valuation or predominantly it's the cost or the carrying value

and is about KWD 355 million. In that segment, we have about KWD 1.6 billion of

investments, and we allocated internally around KWD 305 million of net debt. So that also

gives you an idea of how are the numbers allocated per segment, not only the P&L but

also how much at the end of the quarter, is the value of the investment segments, as well

as the allocated net debt.

Here you can see the components of the controlled entities. The industrial real estate is

a 7.6% year over year revenue growth. Customs business is about 6%. Tri-Star significant

growth of 29%, NAS and that's organic growth, Menzies is not reflected here and is about

37%, UPAC about 37%. You can see most of our major engines in that segment has been

performing very well.

I will just touch base very briefly on value creation story throughout the years. And as you

can see, an IRR of about 24%, and I think the market has been, I would say very receptive

to the DSV deal, which you can see the impact in 2021, about 55% year over year growth

in 2021 over 2020, and then 19% in 2022 return as of 27th of May 2022.

So significant value creation with an IRR of 24%. And I think we will continue to generate

significant amounts of value which was almost USD 8 billion over the past 10 or 11 years.

We continue to focus on shareholder value and creating shareholder value. Of course, the

task from here is much difficult because the base is bigger, but I think we have proven

throughout the year that we can create value and make investments that in the medium

and long term create shareholder wealth.

This slide is just a reminder of the dividends. As you can see, the board declared for 2021

cash dividends of KWD 42 million, which is about 20 fils per share. Of course, you can see

that we are issuing also bonus shares, which makes the amount in absolute KWD higher

in the following year. We have been paying around 2% dividend yield in a low interest

rate environment and that, I think, is reasonable. Going forward we are very conscious of

the dividend-driven-nature shareholders' base that we have. However, we would need to

balance between our investments, servicing the debt we have, and as well as rewarding

our shareholders in different means. So, and again, the payout ratio is quite low in 2021

because of the significant profits that we have realized from DSV.

I think that concludes my presentation and I think we'll move to Q and A's, if any.


Thank you. As a reminder, if anyone would like to register a question, please use the chat

box provided. We've just had a question written from Ryan Kahn.


this questions is about the Menzies time-line. I think it's a regulatory process now. And I

think our expectation is that we closed the deal, if everything goes well and it gets all the approvals required - should be in Q3. And that's the timeline that we are working on.

Agility Q1 2022 results webcast transcript Arqaam Capital

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Agility - The Public Warehousing Company KSCP published this content on 22 May 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 May 2022 05:25:04 UTC.

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Sales 2022 512 M 1 666 M 1 666 M
Net income 2022 44,0 M 143 M 143 M
Net Debt 2022 - - -
P/E ratio 2022 44,0x
Yield 2022 2,17%
Capitalization 1 955 M 6 360 M 6 360 M
Capi. / Sales 2022 3,82x
Capi. / Sales 2023 3,63x
Nbr of Employees 37 418
Free-Float 53,4%
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Agility Public Warehousing Company K.S.C.P. Technical Analysis Chart | MarketScreener
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Spread / Average Target 16,3%
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Tarek Abdulaziz Sultan Al-Essa Vice Chairman & Chief Executive Officer
Ehab Fekry Aziz Bassilios Chief Financial Officer
Henadi Anwar Essa Al-Saleh Chairman
Naser Mohammed Fahed Al-Rashed Director
Faisal Jamil Sultan Al-Essa Non-Executive Director
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