Kuwait Projects K S C P : Transcript of the Analysts Conference

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KIPCO Q2 2022 Investor Call Transcript

Introduction: Good afternoon, everyone. This is Ahmed El Shazly and on behalf of EFG Hermes, I welcome you all to the KIPCO's First Half 2022 Results Conference Call. It is a pleasure to have with us in the call today Mr Sunny Bhatia (Group CFO), Mr Moustapha Chami (Deputy Group CFO), Mr Anuj Rohtagi (Group Senior Vice President, Financial Control) and Ms Eman Al Awadhi (Group Senior Vice President, Corporate Communications & IR) at KIPCO. I would like to handover the call to Ms Eman Al Awadhi. Thank you.

Eman Al Awadhi: Thank you, Ahmed and good afternoon, everyone. We welcome you to our earnings call for the six months ending 30 June 2022. Please note that today's presentation is also available on our website along with financial statements for the period.

Page 2 of the presentation reads out a brief disclaimer. Some of the statements that we will be making today and information available in the presentation can be forward looking. Such statements are based on KIPCO's current expectations, predictions and estimates and are subject to risks and uncertainties which may adversely or otherwise affect the future outcome. They are not guarantee of future performance, achievements, or results. I will now hand over to Sunny

Sunny Bhatia: Thank you Eman and good afternoon, everyone.

We will start with key highlights for second quarter of 2022 or second half of 2022 on page 3 of the presentation. We have reported a net profit of US$ 18 million for first half of financial year 2022. In the following slides we will provide you further details on the key drivers of performance, including the performance of our key companies. Secondly, KIPCO has progressed well on key milestones in relation to the merger. We received Capital Markets Authority or CMA's approval of the merger contract including swap ratio, as a result of approval of valuation and fairness opinion

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reports. Further to this, CMA also approved an increase of KIPCO's share capital by 2.408 billion shares (all numbers we are quoting are rounded) to execute the merger. Each share of QPIC will be swapped with 2.24 shares in KIPCO. This will result in KIPCO's authorized, issued and paid-up capital of US$ 1,644 million compared to US$ 860 million as of June 30, 2022, an increase of 91%. In addition to CMA's approvals, we recently received Competition Protection Agency approval of the economic concentration in relation to the merger. We are currently in process of completing regulatory steps to set a date for Extraordinary General Assembly of KIPCO shareholders to approve the merger and share capital increase.

We have also made good progress towards the end of the second quarter in strengthening the liquidity position of the company by executing a US$ 375 million committed credit facility with a group of six international banks during Q2 2022. Along with our reported cash balance this sufficiently covers our next 12 months debt maturities. Supported by a significant increase in equity capital base of the company, we are well placed to further strengthen and diversify our funding profile.

I will now hand over to Moustapha to provide details on the financial performance of the Group.

Moustapha Chami: Thank you Sunny, and good afternoon everyone.

Let us move to slide 5, covering consolidated financial performance of the Group. H1 2022 revenue of US$ 1,098 million was 6.7% or US$ 79 million less compared to H1 2021 revenue of US$ 1,177 million. Interest income from banking operations increased by US$ 43 million or 9% recorded at US$ 521 million compared to US$ 478 million in H1 2021. Share of results from associates also increased by US$ 21 million to US$ 57 million in H1 2022 mainly driven by improved results of GIG and QPIC. The overall revenue decrease was largely due to lower investment income which decreased from US$ 155 million in H1 2021 to US$ 48 million in H1 2022 due to adverse market performance and H1 2021 also included a onetime gain of US$ 89

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million on derecognition of a subsidiary. Additionally, there was a decrease of US$ 28 million in media and digital satellite network services income.

On the other side, total expenses of the Group during H1 2022 were also lower than H1 2021 by US$ 9 million. There was a decrease of US$ 34 million in media and digital satellite network services expenses and a decrease of US$ 20 million in hospitality and real estate expenses. These were offset by increase in expenses across other expense line items. Below the operating profit line, provisions for credit losses and investments reduced to US$ 38 million in H1 2022 compared to US$ 184 million in H1 2021. The Group recorded a net monetary loss of US$36 million during the period due to application of hyperinflation accounting for its banking subsidiary in Turkey. For further details, please refer to Note 2.5 in KIPCO's Interim Condensed Consolidated Financial Information for H1 2022.

As a result of these key revenue and expenses line items, KIPCO reported a net profit of US$ 18 million in H1 2022 compared to a profit of US$ 10 million in H1 2021. This translates into an earnings per share of 0.8 fils per share or 0.26 cents per share for H1 2022 compared to earnings per share of 0.2 fils per share or 0.07 cents per share for H1 2021.

We can now go to page 7, which covers Burgan Bank Groups' results. We would like to direct you to Burgan Bank's H1 2022 earnings call held on August 3, 2022 for more details. In our presentation today, we will be covering key performance highlights of the bank.

The loan book as of 30 June 2022 was US$ 13.7 billion, recording a marginal decline of US$ 281 million i.e., -2% compared to December 2021. The decline was contributed by Turkey (US$ -114 million or 6%), Kuwait (US$ -91 million or 1%) and Algeria (US$ -67 million or 5%).

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