Majid Al Futtaim swings to profit in 2021 amid continued economic recovery

Majid Al Futtaim, one of Dubai’s biggest private sector conglomerates and the Middle East's largest malls operator, swung to a profit in 2021 amid continued economic recovery in the region and despite lingering pandemic-related uncertainties. Group net profit for the 12 months to the end of December surged to Dh2.46 billion ($670 million) from a net loss of Dh2.71bn recorded a year earlier, the privately held company said in a regulatory filing to Nasdaq Dubai, where its debt trades. Earnings before interest, taxes, depreciation and amortisation rose to Dh3.91bn at the end of last year from Dh3.76bn in the 2020 financial year. Revenue during the reporting period dropped 1 per cent year-on-year to Dh32.29bn. “2021 was a year of evolution and renewal for the group,” Majid Al Futtaim said in the bourse filing. “The business had to address the challenges of new Covid variants and their impact on the regional and global economic environment, which included supply-side shortages, disruptions to labour markets, production and supply chain bottlenecks, fluctuations in global energy markets, as well as shipping and transportation constraints, all adding to existing inflationary pressures.” The company, which owns and operates 29 shopping malls, 13 hotels and five mixed-use communities, said the comprehensive vaccine programmes and robust pandemic mitigation plans across the region led to a relaxation in travel restrictions. The subsequent increase in consumer spending drove an overall growth in consumer confidence across the GCC, it said. The retail industry was heavily affected by the Covid-19 pandemic, which led to border closures and movement restrictions in 2020. However, many countries, particularly the UAE, have rebounded strongly due to mass testing and vaccination programmes. The start of Expo 2020 Dubai in the fourth quarter of last year also contributed to positive business and consumer sentiment that helped Majid Al Futtaim's earnings. “With over 10 million visits at the end of January 2022, Expo 2020 has been a catalyst for growth in the region, driving increases in hotel occupancy and residential real-estate prices,” the company said. Against the positive backdrop, Majid Al Futtaim has maintained robust cash flows and a strong balance sheet, ending 2021 with “a good performance across all its operating units”. The company’s properties business revenue grew 26 per cent to Dh4.41bn, despite temporary closures and the impact of Covid-19 on footfall and sales. “Following the swift roll-out of vaccinations, footfall and sales are picking up,” it said. Majid Al Futtaim's retail business registered a 6 per cent decline in revenue to Dh26.3bn. The business started the year facing continued geopolitical and economic headwinds but improved by the end of the second quarter as tourism picked up. It further gained momentum in the third and fourth quarters although the business remained affected throughout the year, Majid Al Futtaim said. Revenue from Majid Al Futtaim’s leisure, entertainment and cinemas business grew 65 per cent to Dh1.3bn from a low base in 2020. “New content releases and the easing of restrictions are contributing to increased revenue and footfall,” the mall operator said. Majid Al Futtaim's lifestyle business reported revenue of Dh580m at the end of last year, up from Dh413m reported for 2020. The company said it remained focused on generating and preserving cash by driving trade through promotions. It strengthened its online offer and capacity, managed working capital and optimised supplier payment terms, which led to cash flow from operations reaching Dh5.28bn. “The group continues to manage its balance sheet to ensure that shareholders’ wealth is protected while simultaneously ensuring it remains well-positioned to fuel future growth opportunities.” Majid Al Futtaim's net debt at the end of last year declined to Dh11.98bn, a reduction of Dh414m from the 2020 level. Despite entering 2022 in a strong financial position, the company said pandemic-related risks that could affect the business remain. “2022 is starting on a firm footing, with the region set to benefit from continued policy innovation, a rebound in tourism and a gradual global recovery. Covid-19 variants may continue to present some risk to the outlook, but the underlying drivers of growth remain firm,” the company said. “Majid Al Futtaim is well placed to benefit from the improving conditions and has started to see positive signs through higher footfall, increased consumer spending and an uptick in hotel occupancy levels.” Earlier in February, the conglomerate said it would continue to operate normally as a special judicial committee looks into potential inheritance issues among 10 heirs of its late founder. The special judicial committee has been set up to oversee the transition period after the passing of founder Majid Al Futtaim in December. The company on Wednesday said the group remains fully owned by Majid Al Futtaim Capital. Its late founder owned 99.6 per cent of the shares in the parent and the rest is owned by Tariq Al Futtaim, a non-executive director. The inheritance will be passed on to 10 heirs, including Mr Tariq, it said. “All current decision-making authorities and accountabilities within the delegation of authority to the boards and to management remain in effect, ensuring the group and its businesses continue to operate as normal,” it said.

Majid Al Futtaim swings to profit in 2021 amid continued economic recovery

One of Dubai's biggest conglomerates says 2021 was a 'year of evolution' as it had to contend with lingering pandemic-related challenges