Posted on August 14, 2012

The Board of Directors of Aamal Company QSC (“Aamal”), one of the GCC’s fastest growing diversified companies, today announces the financial results for the half year ended 30 June 2012.

Financial Highlights

  • Group revenue up 47.8% to QAR 1,154.5m (H1 2011: QAR 781.2m)
  • Gross profit up 7.8% to QAR 226.1 m (H1 2011: QAR 209.6m)
  • Net profit1, up 2.0% to QAR 119.5m (H1 2011: QAR 117.2m)
  • Net profit margins2 of 10.4% (H1 2011: 15.0%) in line with management expectations and company strategy, reflecting the expansion of higher volume, lower margin industrial manufacturing within the overall Group sales mix, supported by increased marketing spend
  • Financial gearing3 increased to 10.9% (31 December 2011: 10.2%)
  • Net investment in capital expenditure of QAR 166.1m (H1 2011: QAR 20.9m), driven by Phase 1 of the City Center Doha expansion project commencing and purchase of land for retail development
  • Reported earnings per share level at QAR 0.19 (H1 2011: QAR 0.194)

(N.B. there may be slight differences due to rounding)

 

1 There were no fair value gains on investment properties in either H1 2012 or H1 2011; net profit is stated after the deduction of Head Office costs but before the deduction of non-controlling interests

2 Including income from Associates

3 Net debt to net debt plus equity

4 In April 2012, Aamal issued and capitalised bonus shares so HY 2011 EPS has been adjusted accordingly (Company share capital increased to QAR 5.4bn from QAR 4.9bn)

Sheikh Faisal Bin Qassim Al Thani


H.E. Sheikh Faisal Bin Qassim Al Thani, Chairman of Aamal Company QSC, commented: 
“With a rise in revenues of almost 50% over the past six months, the performance of Aamal  clearly demonstrates how we have built upon the strong foundations for growth that we have laid over preceding years. Aamal has re-positioned itself as primarily an industrial company, now with over 60% of total company revenues derived from Industrial Manufacturing: for the corresponding period in 2011 this figure was just over 50% and in 2010, just over 40%, illustrating how far we have come in such a short space of time. It is our belief that this re-positioning is crucial in order to capture the significant growth opportunities afforded by the rapid industrialisation of Qatar, driven by the National Vision 2030 infrastructure development plan, accelerated by the award of the 2022 FIFA World Cup and underpinned by the country’s huge hydrocarbon wealth. The impressive rise in revenues for the first half of this year serves only to highlight the success of this strategy."

“That is not to say that we will become complacent: Aamal will always strive to identify opportunities that will create value for our stakeholders. Indeed, seizing the first mover advantage in order to establish strong competitive positions is part of our corporate DNA. The joint venture with C&C Lightway of South Korea announced towards the end of June is a fine example of this ethos: this partnership will initially trade in and distribute LED and other lighting products and plans to establish in the near term a factory to assemble and manufacture LED lamps and other lighting products. This factory will serve the Qatari market and the wider GCC region and be the first of its kind in Qatar. Going into strategic partnership with such leading international companies is central to Aamal’s strategy to combine world class technology and expertise with Aamal’s local market access, knowledge and skills on the ground."

“Despite now becoming a company with a predominantly industrial focus, it is important not to overlook that Aamal has market leadership positions via its Trading and Distribution, Property and Managed Services divisions, which all saw growth in revenues and profits over this period. This diversification is one of Aamal’s key strengths and it is one of the few Qatari companies with the business model to benefit across the economic spectrum, giving investors a comprehensive and well-balanced exposure to the remarkable Qatar growth story. These are genuinely exciting times for Aamal.”

Breakdown by division

(nb. there may be slight differences due to rounding)

Revenue

QAR m

H1 2012

H1 2011

Change %

Industrial Manufacturing

733.1

401.0

82.8%

Trading and Distribution

282.7

258.3

9.4%

Property

121.3

105.7

14.8%

Managed Services

44.3

23.3

90.0%

less: inter-divisional revenue

(26.9)

(7.1)

279.0%

TOTAL

1,154.5

781.2

47.8%

Net profit

QAR m

H1 2012

H1 2011

Change %

Industrial Manufacturing

27.6

22.2

23.9%

Trading and Distribution

31.8

28.8

10.2%

Property

95.8

83.4

14.9%

Managed Services

6.7

5.0

34.6%

Less: Head Office costs

(42.5)

(22.3)

90.5%

TOTAL

119.5

117.2

2.1%


Divisional review

(nb. there may be slight differences due to rounding)


Industrial manufacturing

QAR m

H1 2012

H1 2011

Change %

Revenue

733.1

401.0

82.8%

Net profit

27.6

22.2

10.2%

Net profit margin %

3.8%

5.5%

(177) bp

Revenues at Aamal’s Industrial Manufacturing division rose by 82.8% for the first six months of 2012 compared to the same period in 2011 and now make up 62.1% of total company sales (versus 50.9% in 2011, before the elimination of intra-company sales). This excellent rate of growth is a strong endorsement of our decision to re-position the Company in recent years to be predominantly an industrial one, in order that it may participate fully in the rapid and continuing industrialisation of Qatar.

This revenue growth has been driven by both organic and acquisition means. From an organic perspective, growth mainly came from two business units within the division: Doha Cables and Aamal Readymix. In August 2011, Doha Cables, the first cables manufacturing facility in Qatar, was awarded a two year contract by Kahramaa (Qatar’s sole transmission and distribution system owner and operator for the electricity and water sector) to supply low and medium voltage power cables; furthermore, Doha Cables has begun to supply export markets such as Bahrain, Iraq, Oman, Turkmenistan and the UAE and has initiated studies with a view to expanding its product range to include fibre optic cables. In January 2012, Aamal Readymix, already one of the largest producers in the market, increased its production capacity by over 60% with the addition of a new, state-of-the-art ELBA ready mix concrete batching plant which ranks as one of the largest in the region.

Revenue growth from acquisition was down to the full consolidation of Ci-San Trading for the first time with effect from 1 January 2012 (previously, it had been equity accounted for), following its acquisition of 51% of Gulf Rocks Company W.L.L., a leading importer and distributor of high quality gabbro aggregates.

Net profit margins for the division decreased to 3.8% for the first half of 2012, from 5.5% for the corresponding period in 2011, reflecting the increased weighting of lower margin revenues at Doha Cables and pricing pressure driven by intensive competition in the market for Aamal Readymix. Margins are expected to improve across both branches over time as higher-cost, excess capacity is squeezed out and the pace of demand recovers.

These falls in the margins for Doha Cables and Aamal Readymix have been slightly offset by an improvement in margins at Aamal Cement, that has also seen its market share expand to 15% from 8%, and the full consolidation of Ci-San Trading.

On 25 June 2012, Aamal established a company together with C&C Lightway of South Korea. This JV will initially trade in and distribute LED and other lighting products for the Qatari market and the wider GCC region and has plans to establish in the near future an assembly and manufacturing site, which will be the first of its kind in Qatar.

The construction of the 85,000m2 Advanced Pipes & Cast Company plant at Mesaieed continues to be on track for completion in the fourth quarter of 2012. This will be the only company in Qatar to manufacture both reinforced concrete and glass pipes.

The development of the Doha Transformers factory also continues apace and is on track for completion during 2013, in line with expectations.


Trading and distribution

QAR m

H1 2012

H1 2011

Change %

Revenue

282.7

258.3

9.4%

Net profit

31.8

28.8

10.2%

Net profit margin %

11.2%

11.2%

10 bp

Revenues for the Trading and Distribution division rose 9.4% driven by an excellent performance from the Aamal Medical business unit which benefitted from the opening of a new hospital at Al Wakra and the winning of new contracts with existing customers. This rise was marginally offset by a one-off boost in the first half of 2011 to the revenue at Aamal Trading, a separate business unit within the division that was not replicated in H1 2012.

Margins for the division were maintained at a healthy 11.2%.


Property

QAR m

H1 2012

H1 2011

Change %

Revenue

121.3

105.7

14.8%

Net profit

95.8

83.4

14.9%

Net profit margin %

79.0%

78.9%

8 bp

Revenues for the Property division rose 14.8%, reflecting an increase in rental levels at both City Center Doha and Aamal Real Estate, including a full six months’ contribution from the Markhiya residential complex which was fully leased out from the beginning of April 2011. Margins increased slightly to 14.9% as these revenue rises were matched by similar rises in marketing and promotional spend relating to the City Center Doha mall, higher depreciation following the installation of the new chargeable parking system there and higher third party management fees.

Aamal Tower

Phase 1 of the City Center expansion project is on track to be completed during the fourth quarter of 2012, adding 7,000m2 of retail space, and increasing parking capacity by around 25%. Phase 2 of the expansion, involving plans to add more shops and redesign the back area of the mall to connect it directly to the front areas, will follow in early 2013 and is expected to be completed later that year, adding a further 15,000m2,or 12%, to the existing retail space of 125,000m2.

Occupancy at both City Center Doha and Aamal Real Estate was 95%, (a high level comparable to past rates), with 5% held back as a strategic reserve to allow for active management.

There were no fair value gains on investment properties in the first half of 2012 as was the case in the first half of 2011.


Managed services

QAR m

H1 2012

H1 2011

Change %

Revenue

44.3

23.3

90.0%

Net profit

6.7

5.0

34.6%

Net profit margin %

15.2%

21.5%

(633) bp

Managed Services grew its revenue by 90.0% in the first half of the year, due principally to a full six months’ contribution from Johnson Controls Qatar: Aamal’s 51% owned joint venture with Johnson Controls Inc. that was launched in June 2011 offering green building and building efficiency solutions.

Net profit margins for the first six months of the year fell from 21.5% in 2011 to 15.2%, due principally to a fall in margins at Aamal Services and at ECCO Gulf, a contact centre and business process outsourcing provider. Margins fell at Aamal Services due to a step-change in direct labour costs. These rises in labour costs will be recovered in due course as existing contracts come up for renewal and new contracts are negotiated. ECCO Gulf margins fell due to an increase in office rents, marketing expenses, staff numbers and higher depreciation charges.


Summary Outlook

H.E. Sheikh Mohamed Bin Faisal Al Thani, Vice-Chairman of Aamal, commented: “Qatar is one of the wealthiest economies in the world on a GDP per capita basis, with the highest sovereign rating in the GCC. It has strong fundamentals, underpinned by huge hydrocarbon wealth and a government committed to fiscal prudence and an expansionary budget as it seeks to transform itself into both a modern and diversified economy. Aamal, with its strong market positions across the whole spectrum of the Qatari economy, particularly in industrial manufacturing, and its proactive approach to identifying new business opportunities, is uniquely placed to participate fully in this transformational drive.”

Tarek M. El Sayed, Managing Director of Aamal, commented: “The last six months have seen Aamal build upon its industrial focus, such that now over 60% of its revenues are derived from the Industrial Manufacturing division. This corporate re-positioning has been a conscious one in order to give Aamal greater exposure to the opportunities offered by the rapid industrialisation of Qatar. It is very pleasing to see this strategy paying off, as exemplified by the Industrial Manufacturing division driving an increase of near 50% in total revenues. That industrial manufacturing will be the primary engine of growth, at least into the medium term, makes me very optimistic for the future.”

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