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
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.