Majid Al Futtaim’s first-half earnings jump 18% on revenue boost

One of Dubai's biggest privately-held conglomerates says the continued economic recovery underpinned its revenue growth

Majid Al Futtaim reported strong growth across its business lines in the first six months of the year. Silvia Razgova / The National

Majid Al Futtaim Holding, one of Dubai biggest private sector companies and the Middle East's largest mall operator, reported an 18 per cent rise in first-half earnings as a sharp rebound in retail and leisure sectors amid steady economic recovery boosted revenue.

Earnings before interest, taxes, depreciation, and amortisation (Ebitda) for the six months to the end of June climbed to Dh1.9 billion ($517.71 million), the privately-held conglomerate said in a statement on Wednesday.

Revenue for the first six months of the year climbed 15 per cent year-on-year to Dh18bn, underpinned by strong operational performance, diversification efforts and cost efficiencies.

“A strong, customer-focused strategy supported by unrivalled data and analytics capabilities has enabled Majid Al Futtaim to deliver sustained growth through first half of 2022,” Alain Bejjani, chief executive at Majid Al Futtaim, said.

“Our efforts have been further amplified by Mena’s steady progress in moving beyond post-pandemic recovery as we collectively turn our efforts towards economic expansion and regional prosperity.”

The retail industry that took a severe hit during the pandemic-driven slowdown bounced back strongly last year and maintained the growth momentum into this year. The rebound was underpinned by steady economic recovery across the markets where the company operates, especially in the UAE.

The UAE economy is set to post its strongest annual expansion since 2011 after it grew by 8.2 per cent in the first three months of this year on higher oil prices and measures to mitigate the impact of the Covid-19 pandemic, according to data from the Central Bank of the UAE.

UAE consumer spending increased 22 per cent in the first half of this year, despite rising fuel costs and higher inflation.

Spending on retail items grew an annual 16 per cent, while spending on non-retail goods rose 31 per cent, Majid Al Futtaim said in its State of the UAE Retail Economy report earlier this month.

The boost in consumer confidence benefited the company, with “increased shopping mall footfall, hotel occupancy rates, and admission to its cinemas and leisure and entertainment venues”, the company said.

With retailing trends such as the consumer demand for digital and omnichannel experiences gathering pace, the company is well-placed to capitalise on digital opportunities, Majid Al Futtaim said.

"People are shopping more and you see that the retail economy in the UAE is recovering faster than the global economy, which I think is very good," Mr Bejjani told The National on Wednesday.

However, with inflationary pressures on the rise, people do not do grocery shopping that often and they are shopping at lesser value, which means "the average basket is shrinking a little bit", he said.

Majid Al Futtaim is taking necessary steps to mitigate any immediate inflationary impact stemming from supply chain strain, Mr Bejjani said.

The company is "engaged in very constructive conversations and dialogues" with governments to make sure that "there are either caps or very limited pass on" of increased costs for certain basic items, he said.

Continuing the dialogue with the governments and engaging big supply chain and consumer goods companies is essential to keeping inflation at bay, he said.

"It's not easy, but everyone is trying to do their best".

While the broader Mena region is not immune to rising global inflation and supply chain pressures, Majid Al Futtaim remains optimistic about the broader economic outlook.

"It's a very tricky business to anticipate things especially in a world that's so volatile," Mr Bejjani said.

However, after the first two months of the second half, "we see that the first half performance is confirming itself so we are very cautious and measured in our optimism" he added.

The company said its prudent financial discipline and strong governance ensures its "resilience in the face of any immediate impact".

Majid Al Futtaim, which benefited from an Expo 2020-driven tourism influx earlier in the year, reported strong earnings and revenue growth across its business verticals.

Revenue at the company’s properties business jumped 51 per cent to Dh2.4bn, while Ebitda increased 27 per cent to Dh1.4bn.

Shopping mall tenant sales rose 21 per cent during the first six months, while footfall increased 20 per cent to 100 million visitors.

The company’s hotel portfolio’s revenue grew to Dh333m from a lower base of 2021 due to capacity restrictions. Revenue Per Available Room, a measure of performance in the hotel industry, and average occupancy rates climbed 142 per cent and 43 per cent, respectively, the company said.

Majid Al Futtaim’s retail business recorded a 9 per cent increase in revenue to Dh14.4bn, however, Ebitda fell 9 per cent Dh567m. The company also continued to expand its international footprint and opened 18 new stores across the countries in which it operates.

The company’s leisure, entertainment and cinemas arm registered a 56 per cent increase in revenue to Dh784m, boosted largely by the removal of operating capacity restrictions. Its cinema admissions increased by 60 per cent to 8.8 million.

Majid Al Futtaim’s lifestyle arm reported a 42 per cent annual rise in revenue to Dh360m.

The company said it remains “committed” to the markets it operates in and will continue to invest across business lines during the second half of 2022.

It plans to invest in corporate initiatives including digital transformation, data and analytics, customer experience and loyalty programmes.

Majid Al Futtaim said its robust balance sheet has allowed it to maintain a “strong financial and liquidity position.

The company said its debt maturity profile remains light with no material debt maturity until September 2024.