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

Agility Public Warehousing Company

Third Quarter 2022 Analyst Webcast

Sunday, November 20th 2022

Kindly find enclosed minutes of Agility's analyst webcast, which was held on Thursday November 17, 2022 at 2:00 PM Kuwait time, to discuss Third Quarter 2022 earnings results.

Attendees from Agility:

Ehab Aziz - Group CFO

Soriana Borjas - Investor Relations, Senior Manager

Awrad Alenezi - Investor Relations, Senior Analyst

From Arqaam Capital:

Sidharth Saboo

Agility Q3 2022 results webcast transcript

Sidharth:	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 Third
	Quarter 2022 earnings webcast. With me here today I have Mr. Ehab Aziz, Agility's Chief
	Financial Officer and Agility's Investors Relations Team. Without further delay, I will now
	turn over the call to Awrad from Agility's Investors Relations Team.
Awrad:	Thank you Sidharth and welcome everyone to Agility's third quarter 2022 earnings
	webcast. As usual, Mr. Ehab Aziz, our group CFO will take you through Agility's third
	quarter performance and the major developments that happened in the quarter. After
	the presentation we will open the floor for the Q&A. We will receive all your questions in
	the chat box and we'll address them 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 this over to
	Ehab. Thank you.
Ehab:	Good afternoon and good morning everyone. We'll start the presentation with a business
	update, and then we'll go to the company overview and then we'll walk you through the
	numbers. Then we'll open the floor for Q&A. So hopefully it's a short and effective call.
	We have been extremely busy over the past couple of years to basically refocus the
	company and reshuffle our portfolio of businesses that we have. As you know, we have
	sold our logistics business GIL to DSV in exchange for about 8% stake in DSV and now it's
	about 8.8% of the net outstanding shares. And then immediately after that we acquired
	Menzies. Menzies transaction has been closed last August.
	So, GIL transaction was closed in August'21, and Menzies transaction was closed in
	August'22. So, we have been extremely busy with that and it has been very, very exciting
	times, but also very hectic times. I hope that all the effort will basically position the
	company for the next phase of growth.
	We're very excited about Menzies and the potential it provides us. It is a very solid
	platform in a very fragmented industry. Today Menzies has about 35,000 employees and
	operate in 254 airports in 58 countries. So, it's a truly global company and provides us
	with a platform that we can add on, both organically and inorganically and take Menzies
	to the next level and be the undisputed leader in that space. Also, during that quarter, we
	closed another transaction on Tristar where Tristar acquired 51% in HG Storage. HG
	Storage was a joint venture between HNA and Glencore and we acquired the HNA stake.
	So, we became the 51% partner with Glencore on that asset. The transaction was about
	USD 215 million, and it gives us a significant capacity in multiple geographies in fuel
	storage, which strengthens Tristar position. Also, it's worth noting that we refinanced our
	facility as a result of the acquisition of Menzies and there is a slide later in this
	presentation about our financing profile and how it looks today after the transaction. I
	think it's an important topic that we need to discuss and address.

Agility Q3 2022 results webcast transcript

So, these are the key events during that quarter. As far as Menzies is concerned, since it would be one of our largest entities within our controlled group. As you know, our company today is divided into controlled segment and investments. Within the controlled group, Menzies will be the largest contributor and will contribute about 40% of our revenues going forward and about 35% of our EBITDA. And we have also integrated NAS into Menzies. So now when we say Menzies Group, that includes NAS and Menzies and not just John Menzies that we acquired from the UK market so we are rebranding everything under Menzies Aviation. We will operate under Menzies Aviation brand globally and NAS now predominantly became Menzies Middle East and Africa region for the purpose of the integration.

What is the value of Menzies for us? So definitely it provides a very good asset financially and strategically, but more importantly, it gives us the platform to continue to acquire businesses in that space. And that space is quite fragmented and there is significant scope to expand and acquire small, medium size and even sizeable M&A, which should create value in the next three to five years. So, we are very, very optimistic about Menzies. We are very optimistic about the future and very optimistic about the value that this should bring to our shareholders.

Moving to the group's financials, again, given the changes that have been happening, in the past two years, the company that we used to know two years ago is totally different today and that was in a very, very short span of time, given the magnitude of the transactions and the changes and the events that have been taking place. And as a result, the numbers keep changing. So, if you remember in the last quarters, we were basically reporting controlled entities without GIL and without Menzies. And now we bought Menzies, which was closed in August. So, we have to consolidate August and September in this quarter, and then we will have the remaining three months of the year, and then the following year, the base year will be different. So, there are so many changes in the numbers and that's why we try to split the numbers as much as possible and give you a little bit more visibility on that. But there is noise in the numbers that we cannot avoid.

So, revenues without John Menzies, is up 34%. That's again, the continuation of the post covid recovery which is well ongoing. With Menzies the increase is about 106% in revenues. As far as net revenues are concerned for the quarter, it's up 11% excluding Menzies and about 126% with Menzies.

EBITDA grew without Menzies 21% year over year and with Menzies it's about 57%. Again, net profit is up 28% and 48% with Menzies. So, I would say it was a very good quarter in a very tough environment. And we hope we continue the progress and positive momentum that we have. But again, we are facing quite unpredictable and significant changes in the market, on the interest rate environment, on the inflation environment and the geopolitical environment. So, we are navigating through very, very tough times. But I think we should be able to navigate through that as much as possible given our strong base and strong performance and the strong entities that we have.

Agility Q3 2022 results webcast transcript

As far as the nine months is concerned, again, very healthy year over year, across the board, across the different metrics and across also the different entities. Revenues up 27% which is quite significant with Menzies is about 53%. 16% growth in net revenue, 21% growth in EBITDA which is more or less similar to Q3 year over year and then net profit is up 57%. The numbers also include the transaction costs that we have been incurring to do the acquisitions and the disposals. So again, once we stabilize, which we are, hopefully we will be lot more stable going forward in the future quarters. You start seeing the true earning power of the company, which we are optimistic about.

This is a slide to remind you of how we look at the company and how the market should look at the company because today you cannot just only look at the earning power and the EPS of the company and make your views on it because we have a very significant part of our company today classified as investments, which we didn't have in the past. We did have some, but not as significant, as it is post the DSV deal. So, we tried to give you a split between the controlled business, which influenced the earning power of the company and the investments. And as far as the controlled businesses, which now Menzies is part of, you can see that the nine month and clarifying that the 2019, 2020 and 2021 are 12 months numbers and the 2022 is only the year to date, nine months. And you can see we are almost even with nine months, almost back to the pre-covid figures, excluding of course GIL which is no longer reported in these numbers. So, you can see that we have been making very good progress, and hopefully for the 12 months of2022 will exceed the 2019 numbers. And that is not only coming from Menzies, it's coming from all the entities recovering and achieving strong growth year over year. And the recovery post covid has been going extremely well. Menzies, by year end, will have almost five months and again, will not be representative of the full year impact. We'll try to give you some guidance in the year-end once we go through the integration and get our hands around it. Integration has been going very well and the team is working extremely well. But I think we still need to get better visibility on the numbers and the combined numbers with NAS and maybe we'll communicate something to you. We might also report Menzies Group including NAS as a separate entity within our segment reporting. So hopefully by year end you'll have a better visibility on that. But the key point here is that we have been recovering from Covid and our numbers, by year-end, should exceed the 2019 EBITDA and EBIT numbers. Of course, you can see that the net debt has increased for that segment and the net debt is something that we calculate internally. It's not audited, but it's our best estimate of how much debt is allocated to the Controlled Businesses versus the Investments. And you can see that the net debt has gone up and that's primarily due to acquisitions that took place and we talked about previously, the Menzies and the HG storage within Tristar.

On the Investments side, the dominant factor is definitely DSV. And as you might know the markets have been going down because of higher interest rates, inflation and because of the geopolitical situation in Ukraine. And as a result DSV's share price has also gone down with the market. Now we believe that is a temporary decline in DSV share price.

Agility Q3 2022 results webcast transcript