Arzan Financial for Financing and Investment KPSC : Transcript of the Analysts Conference

	Conference English Record: 28/2/2023 , 2 PM
Elena Sanchez	Good afternoon, everyone. This is Elena Sanchez, from EFG Hermes,
	and I would like to welcome you all to the Arzan Financial Group Full
	Year 2022 Webcast. It is a pleasure to have with us in the call Mr Jassem
	Zainal, vice-chairman and CEO. I will hand over the call now to him, so
	that we can begin with the presentation. Thank you.
Jassem Zainal	Thank you, Elena. Welcome everyone. This is the first financial analyst's
	conference for the year in the 2022. This is a first one for AFG, Arzan
	Financial Group, and I hope that the presentation that you will be
	seeing today, it's the first one, and as we go along, inshallah, we will do
	it in a matter that it helps you as analysts to benefit from the
	presentation as much as we can.
	I'll just introduce the panel. Mr Mohammed Farid, the CFO of Arzan
	Financial Group. Mr Fawaz Al Munaya, he is the head of marketing and
	client relations. And Mr Abdulaziz Basheri is the head of Arzan Capital.
	And I think Mr Talal is with us online. Talal Bader Al Bahar is the head of
	the asset management, and he is the deputy CEO of Arzan Financial
	Group Kuwait. And Mr Muhannad Mohammed Abulhasan, he is the
	CEO, Arzan Wealth. So, we'll start our session with the financial
	analysts' presentation by Mr Mohammed Farid.
Mohammed Farid	Good afternoon, everyone.
	I welcome you all to the earnings briefing for the year ending 31
	December 2022.
	I would like to draw your attention that, the financial statements for
	2022 have been uploaded onto our website; and also on to Boursa
	Kuwait portal, where you should be able to access the full set of the
	financial statements from there.
	Please allow me to move on to the Key financial highlights of our
	performance during 2022.
	The First Slide: Key Financial Metrics.
	Firstly: Income statement.
	For the 12 months ending 31 December 2022, AFG reported a Net profit
	of 8.15 million and an Earning per share of 10.12 fils through the
	income statement.
	Net profit and EPS increased by 10% compared to the previous year-end
	2021.
	And a loss of KD 10 million as other comprehensive loss through
	Shareholders equity.
	The major contributor to the OCI during 2022 is a loss in value of
	Kuwaiti quoted Investment at FVTOCI, of 10 million. The main reason of
	this loss is due to the restrictions on sale of one of investments in a

local listed company until 14 February of 2024, for that, the Group has applied a discount at 20% on the quoted bid price when determining its fair value for this Investment in 2022.

The total comprehensive loss for the year is 1.8 million, which is a decrease by 107 % compared to the previous year-end 2021.

Secondly: Financial position.

Total assets, and shareholders' equity attributable to the parent company stood at 193 million and 115 million, respectively, compared to 196 million, and 121 million in the previous year end 2021.

Total Liabilities as at the 31 of December 2022 is 37 million, compared to 31 million in the previous year end 2021.

Finally: Key Ratios

Return on average equity attributable to the parent company, and return on average assets are 7.1%, and 5.2% respectively, during 2022, these two ratios increased by 15% compared to the previous year end 2021.

The leverage ratio as at the 31 of December 2022 is only 0.18: 1 ,

compared to 0.13 : 1 in the previous yearend 2021.

Our quick ratio is 4 : 1 as at the 31 of December 2022, compared to 5 : 1 in the previous year end 2021.

Next slide: YE 2022 Financial Performance.

The charts indicate the growth trajectory of the financial performance for the last 5 years, consisting of the following:

Net Income for 2022 is the highest by AFG since the last 5 years. EPS for 2022 is the highest EPS since the last 5 years.

The proposed distribution for 2022 is one of the highest by AFG since the merger date in 2011.

The Board of Directors have recommended the distribution of 4 fils per share and 2 shares for every 100 shares from treasury shares for the year ended 31 December 2022 out of Retained Earnings and subject to approval of the General Assembly and other regulatory authorities.

Last year 2021, AFG has paid out dividends of 2.5 fils per share in 2020 and 3.5 bonus shares for every 100 shares.

Next slide: YE 2022 Financial Position.

The charts indicate the growth trajectory of the Financial Position for the last 5 years. consisting of the following:

Growth of assets for the last 5 years.

Relative stability in liabilities for the last 5 years.

Growth of shareholders' equity attributable to the parent company for the last 5 years.

Next slide: YE 2022 KEY Ratios

The charts indicate the growth trajectory of KEY Financial Ratios for the last 5 years, consisting of the following:

Growth of Return on Assets during the last 5 years. Growth of Return on Equity during the last 5 years.

Leverage Ratio is low and relatively stable during the last 5 years. Quick Ratio is high on the span of the last 5 years.

Next slide: Income Drivers and Expenses.

As shown in the charts, the Income was 16.8 million, and the Expenses were 6.8 million, during 2022.

The income for the 12 months which ended on the 31st of December 2022 was 16.8 million, compared to total income of 14.6 million during the previous year. Therefore, income increased by 15%.

Moving on to Income Drivers,

Gain from Financial Assets at Fair Value Through Profit or Loss contributed 33% of the total income.

Dividend Income contributed 24% of the total income.

Income Fees resulting from the contracts contributed 17% of the total income.

Share of Results of Associates contributed 15% of the total income. Meanwhile Expenses Drivers,

Staff Costs contributed 44% of the total expenses. G&A Expenses contributed 22.5% of the total expenses. Finance Costs contributed 16% of the total expenses.

Next slide: Gain or Loss from Financial Assets at (FVTPL) and (FVTOCI). Going forward with- The Financial Assets at Fair Value Through Profit or Loss.

As illustrated in the charts shown, the Total Financial Assets at FVTPL registered a growth of 26% during 2022, from 18 million at the end of 2021 to 22 million as at the 31 of December 2022.

During 2022, the Group sold investments at FVTPL with a carrying value of 12 million (while the previous year of 2021 the amount was 4 million) for consideration of 13 million (while the previous year of 2021 the amount was 5 million).

Profit on Sale of Financial Assets at FVTPL registered a growth of 120%, from 508K to 1.12 million, during 2022.

Change in Fair Value of Financial Assets at FVTPL registered a growth of 69%, from 2.6 million to 4.4 million, during 2022.

Dividend Income from Financial Assets of FVTPL registered a growth of 30%, from 300K to 390K, during 2022.

Moving on to - The Financial Assets at Fair Value Through Other Comprehensive Income

As illustrated in the charts shown, the Total Financial Assets at FVTOCI declined by 1.7% during 2022, from 117 million at the end of 2021 to KWD 115 million as at the 31 of December 2022.

During 2022, the Group sold investments at OCI with a carrying value of 6 million (while the previous year of 2021 the amount was 17 million) for consideration of 6 million (while the previous year of 2021 the amount was 14 million).

Profit on Sale of the OCI registered a growth of 101%, from 6 million loss to a 34K profit, during 2022.

Change in Fair Value of the OCI registered a decline from 36 million profit to a 15 million loss, during 2022. (As illustrated before in The First Slide).

Dividend Income from the OCI registered a growth of 50%, from 2 million to 4 million, during 2022.

Next slide: Revenue from contracts with customers.

As shown in the charts above, the total Income fees from the contracts is 2.9 million which contributed 17% of the total income.

Firstly -Income from Advisory services contributed 84% of the total Revenue from the contracts; this revenue has been generated by our subsidiary in Dubai (Arzan Wealth Co.), which provides advisory for the assets under advisements.

Secondly- Income from Custodian and other fees contributed 10% of the total Revenue from the contracts; this revenue has been generated by our Brokerage subsidiaries in Egypt and Jordan.

Finally- Income from Assets management contributed 7% of this revenue.

Next slide: Share of resalt from investment in associates.

As shown in the chart, the Total Investment in Associates registered a growth of 4% during 2022, from 30.5 million at the end of 2021 to KWD 31.7 million as at the 31 of December 2022.

The Total share of results of Associates contributed 15 % of the total income.

The total Share of Results of Associates registered a growth of 14%, from 2.2 million to 2.5 million, during 2022.

And the Total dividend received from Associates stayed the same as last year, KWD 549K for 2021 and KWD 549K, during 2022.

The Share of results from each investment are as follows: Starting with - Al Wafir Marketing Services Co KSC

The carrying value of this investment registered a growth of 1% during 2022, from 20.04 million in 2021 to 20.33 million as at the 31 of December 2022.

The Share of Results of Al Wafir registered a growth of 20%, from 1.7 million to 2 million, during 2022.

The Dividend received from Al Wafir stayed the same as last year; this amounted as 477K for 2021 and 2022, respectively.

And the Other comprehensive loss of investment is 1.3 million during