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

9 April, 2023

M/s	Boursa Kuwait

Subject: Analyst/ Investor Conference for the Fourth Quarter of 2022

Reference to the above mentioned subject and pursuant to the requirements of Boursa Kuwait Rule Book issued as per Resolution No. (1) of 2018, we wish to inform you that the quarterly Analyst/ Investors Conference was held through a Live Webcast at 2:00 pm local time on Thursday, 6 April 2023.

Please refer to the attachment for the minutes of the conference and the Investor presentation (Q4 -2022)

Best Regards,

Investors Relation Department

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 Full Year
	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 Awrad from Agility's Investors Relations Team.
Awrad:	Thank you Sidharth and welcome everyone to Agility's Full Year 2022 earnings webcast.
	With us today we have Mr. Ehab Aziz, our group CFO who will present to you Agility's full
	year financial results and the major developments that happened during the year. We'll
	be more than happy to take your questions after the presentation. For the Q&A, there is
	a chat box on your screen where you can type in your question, and we will address it
	towards the end of the session. Now before we begin, I would like to draw your attention
	to the disclaimer available on the second page of the presentation. 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:	Thank you Awrad. Good afternoon, everyone and welcome to Agility's earnings call for
	the Year-end 2022. We'll give you as usual, an overview on the business for the year 2022,
	and then we'll try to spend some time addressing your Q&A. So, the first slide is about
	the business update, it has been a very busy year for us. The year started with multiple
	challenges: Interest rate environment has changed significantly, we closed two
	acquisitions during the year - John Menzies, which is the aviation company that we took
	private from the London Stock Exchange and, Tristar acquired 51% stake of HG Storage.
	So it has been an extremely busy year on that front and as a result we had to re-finance
	our credit facilities and raised about USD 3 billion of credit facilities as part of this
	financing program. We also signed an agreement on the ALP side in the Saudi, which we
	are very optimistic on a new concession in Jeddah on 576,000 square meters of land. Also,
	on the legal front we had many activities happening particularly on the government front
	in Kuwait as we entered into dispute with the Kuwaiti government pertaining to some of
	the leases that we have in Kuwait. So, I think in a nutshell, 2022 has been an extremely
	busy year for us as management, as the board, but also in a very challenging macro
	environment which amplifies the amount of effort, the amount of volatility, the amount
	of risk and the challenges that the company is facing in such environment.
	With that said, I think we believe today Agility is in a much better diversified business -
	diversified geographically, diversified from a business sector perspective. And I think we
	have been positioning ourselves for the next phase of growth, as you will see in the later
	slides.
	If you remember this slide, when we sold GIL to DSV in exchange for shares,
	fundamentally, the structure of the company has changed, and accordingly, we
	structured the company as controlled businesses and investments. So, on the left side,
	you see our controlled businesses, Menzies is now included on this side, and on the right

Agility FY 2022 results webcast transcript

Arqaam Capital

side you can see all the investments that we have. Note this is management accounts because that segment didn't exist in 2019 and 2020. So, the reported numbers and the audited numbers are not presented in this way, we have carved out the GIL business from previous years and carved out the investments that we had in prior years, to give you a view of how the business now looks, as you can see the controlled business segment has been evolving since 2019, the business has expanded significantly, and it's expected to expand even further in 2023 when we have the full year impact of Menzies and HG storage. So, you can see revenues went from KWD 455m in 2019, to almost double by 2022. EBITDA went from KWD 135m to KWD 195m, a significant increase. Mind you, this is only the controlled businesses excluding GIL, excluding, everything else. EBIT increased from a KWD 100m roughly to KWD 143m, part of this increase is a result of the acquisition, the net debt has increased in that segment, which is again, management accounts and went from KWD 74m to almost half a billion KWD. On the right side you can see the investments, and there are some listed investments among them. Our estimate of the net asset value of that segment is about KWD 1.1 billion. The reason, as we explained previously, why we look at the business this way is that you can no longer look at the reported earning power of the company, and get the full picture of the value of the company because of the magnitude of the investment side where the result of any fluctuation in the investment is reflected mainly in the equity and not through the P&L. And that's particularly the DSV shares. And hence we need to give you more visibility on our estimate of the net asset value of that segment for the purpose of valuation.

Now we go into the key financial highlights for 2022. And as you can see 2022 has been a continuation of the recovery from COVID. And you can see excluding the impact of the acquisitions, it has been a very impressive, year over year, performance. Revenue grew by 21%, net revenue about 15%, and EBITDA is up 44% excluding the acquisitions Menzies and HG storage and net profit has increased by 153%, excluding the acquisitions and almost 180% with the acquisition impact. Again, that's mostly the controlled businesses with some impact from some of the investments that are classified as available for sale where the impact of that goes to the P&L and that's what this slide shows. The second slide we try to eliminate the noise of the investments because that goes up and down depending on the markets, and the markets have been quite volatile in the past couple of years, particularly last year. And as you can see, the performance of the controlled businesses was quite impressive and we are extremely satisfied by what we have been able to achieve, particularly after selling the GIL business and now repositioning our controlled businesses for further growth. Balance sheet, what I would like to highlight here as you can see on the asset side, the controlled business constitutes 56% of our assets today, and 44% is attributed to the investment segment. The decline that you see in equity is mainly due to the decline in the price of DSV shares and we realize that the markets has been extremely volatile, especially with higher interest rates as a result of the higher inflation. Today we own 8.8% in the DSV, and we take the movement in the stock price, which has been subject to some significant volatility over the last year, to the

Agility FY 2022 results webcast transcript

Arqaam Capital

equity, and thus what you see here is the decline. And as we disclosed, we have entered a hedging instrument to hedge part of our stake in DSV and that is to minimize the impact of that volatility. That said, we consider our investment in DSV as a long-term strategic investment and we are still very, very, bullish on the management's ability to create value and the company, to continue to grow in the future.

Debt is becoming a major topic for management, and this is just to give you a flavor of how the debt has evolved over the years and also where we stand today. So roughly one third of our corporate debt, which is almost 80% of the group debt, is denominated in Euros and two thirds is in US dollars. For the maturity, after the refinancing as you can see, we have reasonably spread maturities over the next, five to six years. And I think we are comfortable today with that and I think it's well managed. On the right side you can see the group net debt bridge, so where we started, back in the end of Q4 2021 until end of Q4 2022, there has been an increase of KWD 476 million in our group net debt position. You can see that most of the net debt if not all, is attributed to the acquisition which had KWD 378 million impact and also the capex and investment that we have made during the year. So if you combine these two elements it almost explains the entire debt increase from last year to this year.

Going to the following slide, which is the cash flow. Again, we continue to have a strong operating cash flow, almost a KWD 100 million, I will highlight the change in working capital that was negative last year, and that's not due to any bad debt or any mismanagement, but it's due to the recovery in the businesses, and it's linked to the increase in net revenue. So again, we continue to deliver strong operating cash flow, but as you can see, most of that cash flow has been consumed by the investments and the acquisitions. You can see on the right side of slide 11 that 85% of the CAEX that we have spent in 2022 went to controlled business. So management and the board are focused on putting more investments in the controlled businesses, which is effectively the operating entities that we manage and control and that, as we have seen in the previous slides, continue to perform well year over year. And we expect it to continue to grow significantly in the near future.

This is just to give you a flavor of the major entities within that segment. Aviation is becoming one of our largest and key segments and grew 417% in revenue, year over year. And this growth is definitely due to the acquisition and also due to the recovery in the aviation sector, in NAS. EBITDA grew 169% year-over-year. Fuel logistics, that's Tristar, increased 60% in revenue and 39% in EBITDA, this growth is due to the acquisition, and also due to the organic growth year over year. Then Others, include everything else, mainly ALP, UPAC, GCS, all of them continue to grow nicely. The combined growth rate for revenue on this group is about 14% and 42% in EBITDA.

Moving to dividends, which I think has been a very sensitive subject. And we are very conscious, as the board and management, of the importance of dividends to our shareholders. And as you can see, throughout the years, we have been consistently paying

Agility FY 2022 results webcast transcript

Arqaam Capital

dividends. But I think the board this year has decided to shift from an annual dividend to an interim dividend. And the reason behind that is when you look at the context of the current environment that we have, you see that interest rates has significantly increased year over year and there is big question mark on how long interest rates are going to continue to be at these levels, as a result, the environment and the liquidity environment in general has been under pressure. We have seen several banks going bankrupt. We have seen some companies under pressure, so we think it's only prudent to manage liquidity in a very measured way. Also as we discussed, last year, the company made two major acquisitions, and when you look at the investments and at the acquisitions done last year, both consumed about half a billion KWD, and this is invested to augment our growth in the future. So that also has put further pressure and further limitation on what we can and what we can't do. And it's a tradeoff that we must manage. Also, we have a legal dispute with the government in Kuwait, And it's unknown what would be the outcome. We hope that we get a positive outcome out of the dispute, but again, it adds to the uncertainty and adds to the question mark of the environment we operate in today.

So if you look at the macro environment, it's very uncertain. And if you look at the micro, the company specific environment, it has some risks and some limitations. And hence, the board has decided to shift from an annual dividend to an interim dividend, where the board, every quarter would look at the environment, look at the situation of the company, and then decide if they are going to distribute dividends or not, and how much that dividend is going to be and the form of that dividend as well. So I think it's only prudent for the company and its shareholders to manage liquidity in that manner. It doesn't mean that the board has decided to cancel the dividends all together, but it meant that the board wanted to have more flexibility in the way they distribute dividends over the next year. And I think that's only prudent given the current environment and given the current situation.

As we can see from the next slide, we have consistently created shareholder value over the years. We have consistently paid dividends, if you go back 10 years, we have paid dividends almost every year, and nothing has changed, we are very conscious about our shareholders and we believe it's a balance act that we need to have but at the same time we also need to be conscious about the current environment that we operate in. So, I just want to reiterate, because maybe there has been either misunderstanding or high sensitivity about dividends, that the board is only acting in being prudent and shifting the dividends from an annual dividend to maybe an interim dividends, which gives the company and its board as well as its shareholders, the flexibility to manage the current situation.

Coming to the last slide, I will explain the funded-equity-collar which we did recently if it's not very clear to some of you. What we have basically done with DSV shares is that we have entered with some international banks into a funded collar. The main objective of it is to provide some hedge to part of our stake in DSV. This funded collar does not mean

Agility FY 2022 results webcast transcript

Arqaam Capital