Arabian Centres Co. announces its Interim Financial Results for the Period Ending on 2021-09-30 ( Six Months )
| Element List | Current Quarter | Similar quarter for previous year | %Change | Previous Quarter | % Change |
|---|---|---|---|---|---|
| Sales/Revenue | 497 | 464.8 | 6.927 | 510.7 | -2.682 |
| Gross Profit (Loss) | 266.9 | 254.8 | 4.748 | 285.7 | -6.58 |
| Operational Profit (Loss) | 183.1 | 212 | -13.632 | 214.5 | -14.638 |
| Net Profit (Loss) after Zakat and Tax | 90.8 | 111.1 | -18.271 | 126.3 | -28.107 |
| Total Comprehensive Income | 89.5 | 149.4 | -40.093 | 126.5 | -29.249 |
| All figures are in (Millions) Saudi Arabia, Riyals | |||||
| Element List | Current Period | Similar period for previous year | %Change |
|---|---|---|---|
| Sales/Revenue | 1,007.7 | 940.7 | 7.122 |
| Gross Profit (Loss) | 552.6 | 553.4 | -0.144 |
| Operational Profit (Loss) | 397.6 | 479.4 | -17.062 |
| Net Profit (Loss) after Zakat and Tax | 217.1 | 264.2 | -17.827 |
| Total Comprehensive Income | 216 | 325.5 | -33.64 |
| Total Share Holders Equity (after Deducting Minority Equity) | 5,912.2 | 6,072.3 | -2.636 |
| Profit (Loss) per Share | 0.46 | 0.55 | |
| All figures are in (Millions) Saudi Arabia, Riyals | |||
| Element List | Explanation |
|---|---|
| The reason of the increase (decrease) in the net profit during the current quarter compared to the same quarter of the last year is | Net Profit decreased by 18.2% to SAR 90.8 million in Q2-FY22 compared to |
SAR 111.1 million one year previously, while recurring net profit recorded SAR 189.3 million for Q2-FY22, up by 18.9% y-o-y compared with same quarter last year. The decrease in net profit driven mainly by the following:
• An increase in cost of revenue driven by year-on-year normalization of operating costs compared to the second quarter of FY21, when the Company recorded large, nonrecurring savings on variable costs due to partial centre closures and mobility restrictions imposed to contain the spread of COVID-19. With business activity normalizing as COVID-related restrictions are eased, Arabian Centres has experienced a rapid normalization of operating costs including cleaning and security.
• An increase in depreciation expenses on investment properties and right-of-use assets as Arabian Centres continued to ramp up operations at recently launched assets including the extension to its Nakheel Mall Riyadh, U-Walk Riyadh, and Nakheel Mall Dammam.
• Lower other income in Q2-FY22 compared to Q2-FY21, during which ACC had booked SAR 46.6 million in nonrecurring discounts received from the Company’s landlords to mitigate the impact of COVID-related centre closures.
• An increase in general and administrative expenses driven mainly by an increase in employee salaries and benefits during the period. It is worth noting that the comparable period of the previous year included government support for employee salaries under the SANED program. Growth in general and administrative expenses was additionally driven by the continued ramp-up of operations at recently launched assets (Nakheel Mall Dammam, U-Walk Riyadh and the extension at Nakheel Mall Riyadh).
While the above-mentioned factors impacted net profitability for the period, it is worth highlighting that the ramp-up in activity across ACC’s malls is driving a recovery in the following items:
• An increase in revenue which grew by 6.9% y-o-y in Q2-FY22 to SAR 497.0 million. The growth reflects a decline in average rental discounts and an increase in occupancy rates across the Company’s centres. Revenue growth was further driven by a ramp-up of operations at recently launched centres, including U-Walk Riyadh, Nakheel Mall Dammam, and the extension to Nakheel Mall in Riyadh. ACC recorded a weighted average discount rate of 9.3% (SAR 47.0 million) for Q2-FY22, down from the 14.4% (SAR 71.5 million) booked one year previously. The Company amortized SAR 44.3 million in nonrecurring, COVID-related discounts during Q2-FY22. Quarterly COVID-related discount disbursals have been on a continuous decline, indicating the ongoing recovery in commercial activity following the government-mandated closure of shopping centres during FY21. Visitor footfall at the Company’s centres recorded 21.5 million during Q2-FY22, up by 24.9% from the 17.2 million visitors recorded for Q2-FY21. Footfall in Q2-FY22 attained 76% of the level recorded in the corresponding quarter of FY20, prior to the onset of the COVID-19 pandemic, and a major recovery in footfall is anticipated from Q3-FY22, reflecting the complete removal of government-mandated capacity limitations at centre facilities Meanwhile, market conditions continue to steadily improve, with Saudi Arabia’s non-oil economy expected to grow by 4.7-5.0% in 2021 and growth of 5.0% forecast for 2022.
• Higher recurring EBITDA, which normalizes for the effects of nonrecurring items, recorded SAR 405.8 million during Q2-FY22, an increase of 1.8% y-o-y, reflecting the Company’s operational strength. The recurring EBITDA margin of 81.6% recorded for Q2-FY22 exceeds the EBITDA margin of 76.3% recorded for the same quarter of FY20, prior to the onset of the COVID-19 pandemic, reflecting ACC’s ability to leverage the recovery in commercial conditions to drive core profitability.
• Higher recurring net profit of SAR 189.3 million for Q2-FY22, up by 18.9% y-o-y and yielding a recurring net profit margin (NPM) of 38.1% against the 34.2% booked one year previously. ACC’s recurring NPM of 38.1% exceeds the NPM of 37.2% recorded for the same quarter of FY20, prior to the onset of the COVID-19 pandemic, marking a recovery to historical levels of bottom-line profitability once nonrecurring items are adjusted for.
• Gross profitability on account of lower revenues and higher depreciation expenses on investment properties and right-of-use assets.
• An increase in general and administrative expenses driven mainly by an increase in employee salaries and benefits during Q2-FY22 compared with Q1-FY22.
• An increase in interest expense on lease liabilities to SAR 47.9 million in Q2-FY22 up from the SAR 36.9 million recorded one quarter previously.
It is worth noting that visitor footfall for Q2-FY22 was up by 14.6% q-o-q from the figure recorded in Q1-FY21, a highly encouraging development given that ACC’s peak annual footfall tends to coincide with the months between April and June (Q1).
• Gross profit decreased slightly to SAR 552.6 million in H1-FY22 compared to SAR 553.4 million in H1-FY21. This decrease was driven by an increase in ACC’s cost of revenue, reflecting the normalization of operating costs against H1-FY21, when the Company recorded large, nonrecurring savings on variable costs due to COVID-related centre shutdowns and mobility restrictions. The decrease in gross profit was further driven by increased depreciation expenses on investment properties and right-of-use assets.
• Lower other income in H1-FY22 compared to H1-FY21, during which ACC had booked SAR 73.0 million in nonrecurring discounts received from the Company’s landlords to mitigate the impact of COVID-related centre closures.
• An increase in general and administrative expenses, driven mainly by an increase in employee salaries and benefits during the period. It is worth noting that the comparable period of the previous year included government support for employee salaries under the SANED program. Growth in general and administrative expenses was additionally driven by the continued ramp-up of operations at recently launched assets (Nakheel Mall Dammam, U-Walk Riyadh and the extension at Nakheel Mall Riyadh).
• Following the successful issuance of USD 650 million in Sukuk during Q1-FY22, in Q2-FY22, Arabian Centres completed a further issuance of USD 225 million in international Sukuk. The Sukuk were consolidated and form part of the same series as the USD 650 million issuance completed in Q1-FY22. The offering was three times oversubscribed, leading the Company to increase the initial issuance size from USD 150 million to USD 225 million. The Sukuk hold a maturity of 5.5 years and the re-offer price was approximately one percentage point below the pricing on the Q1-FY22 offering. Total current outstanding Sukuk stood at USD 1.375 billion following the re-offer completed on 28 July 2021.
• ACC inaugurated Jeddah Park in Q2-FY22, introducing an additional 121.6 thousand square meters of GLA to the Company’s portfolio. Consolidating the Company’s already deep presence in Saudi Arabia’s Western Region, Jeddah Park houses over 350 commercial units and a wide range of international and local brands in fields ranging from fashion and cosmetics to food and beverage. The launch marks important progress in Arabian Centres’ efforts to develop an asset-light model that enhances the Company’s financial flexibility, allowing it to rapidly scale operations while strengthening efficiency and profitability. Under the terms of ACC’s agreement with the holders of the Jeddah Park property, the Company has undertaken to lease, manage, operate, and carry out maintenance works at the centre in exchange for a share of the net annual revenues generated by the facility.
For more information regarding Arabian Centres financial and operational results for Q2-FY22, please see the Earnings Press Release accompanying this disclosure. The release also includes comments from the CEO and the date and time of the analyst call.
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