Middle East's largest mall operator reports rise in earnings amid economic recovery

Majid Al Futtaim said its financial position allowed it to remain 'resilient' and earn $436m in the first six months of the year

The Mall of Egypt in Cairo. The mall is part of Majid Al Futtaim's Dh5.1 billion investment in the North African country. Photo: Majid Al Futtaim

Majid Al Futtaim, the Middle East's largest mall-operator, said first-half earnings climbed 2 per cent as the region's economic recovery continued despite the impact of the Covid-19 pandemic on its business.

Earnings before interest, taxes, depreciation and amortisation rose to Dh1.6 billion ($436 million) in the first six months of the year, the privately-held company, which discloses its performance, said on Monday.

Net profit after tax for the period stood at Dh662m and its total equity rose marginally, it said without giving year-on-year comparative figures. Revenue in the period fell 10 per cent to Dh15.6bn.

“Despite the prolonged impact of the Covid-19 pandemic, Majid Al Futtaim has delivered a robust performance over the first half of the year, driven by prudent financial management and a diversified portfolio,” said Alain Bejjani, chief executive of Majid Al Futtaim Holding.

“While we continue to feel the impact from continued disruption, our strong financial position has enabled us to remain resilient to that pressure and agile in how we respond to the stressors within our operating environment.”

The company, which owns and operates 28 shopping malls, 13 hotels and four mixed-use communities, attributed the rise in earnings primarily to the stabilisation of the retail market and steady asset valuations and said it remains committed to its regional growth strategy.

The retail industry was heavily affected by the Covid-19 pandemic, which led to border closures and movement restrictions last year.

Developed economies are bouncing back, with consumer confidence on the rise. However, uncertainty remains amid a rise in infections caused by the more virulent Delta strain across markets that has led to renewed movement restrictions.

Majid Al Futtaim said there have been “encouraging signs of recovery" across its markets, as consumers gain confidence in resuming their pre-pandemic activities.

“We remain committed to investing in all areas of our business to ensure we are well positioned to best serve our customers’ evolving wants and needs,” Mr Bejjani said.

The impact of the pandemic on MAF's businesses in the different markets it operates in has varied.

"It is a bit premature to put a date on when we are going to go back to pre-pandemic levels [of earnings] across the board, but I am very confident that 2022 to 2023 we will get there," Mr Bejjani told The National.

The company's retail business registered a 12 per cent decline in revenue and a 12 per cent drop in Ebitda to Dh13.2bn and Dh623m, respectively.

It attributed the drop mainly to the challenging economic environment as new Covid-19 variants and measures taken by governments to curb infection rates continued to constrain operations and opening hours in certain locations.

The company is closely monitoring inflation and the rising cost of logistics that have affected prices, Mr Bejjani said.

While he said its is very important to "continue to watch" inflation, MAF has not passed on the increase to consumers and won't be doing so in the future.

"We have policy at Majid Al Futtaim ... to ensure that we keep prices at the right level for our consumers. This is something that is very important to us."

However, its property arm recorded a 6 per cent increase in revenue to Dh1.6bn. Ebitda for the first half of the year also climbed 6 per cent to Dh1.1bn as the company opened its City Centre Al Zahia mall in March this year.

MAF is scheduled to open the Mall of Oman in September, which will be the company’s fifth and largest shopping and entertainment centre in the sultanate.

Revenue for the company’s hotels unit stayed flat year on year at Dh147m, with average occupancy increasing by 16 per cent to 53 per cent, offsetting a 2 per cent drop in revenue per available room.

Revenue from the company’s leisure, entertainment and cinemas businesses increased 25 per cent to Dh502m. However, that rise is from last year's low base when most sites remained closed due to the pandemic.

The company's revenue from the cinema business improved 22 per cent to Dh420m, with admissions rising by 9 per cent to 5.5 million moviegoers.

The company said it remains committed to its expansion into Saudi Arabia where it increased the number of screens by 17 to a total of 141 as of the end of June. It expects to add another 13 screens in the second half of this year to its cinema portfolio.

MAF is also expanding its leisure and retail businesses in Saudi Arabia, as well as its new investments in the kingdom, which include the Mall of Saudi project that is set to break ground in the fourth quarter of this year, it said.

The company's retail business is also expanding across Egypt, Kenya and Uganda in Africa and Uzbekistan in central Asia.

MAF will continue to invest and scale up its e-commerce capabilities to meet growing online demand across the region. The company is investing heavily to improve the digitisation of its logistics infrastructure, Mr Bejjani said.

"We are investing a lot in digital and backbone infrastructure, dark store and robotisation of fulfilment centres," he said. "The performance of Majid Al Futtaim has always been fuelled by continuous investment into the business to make sure that we are ahead of the curve."