United Foodbrands Limited (UFBL) Earnings Call Transcript

Good afternoon, ladies and gentlemen. This is Zeina Fares from EFG Hermes Research speaking, and I'd like to welcome you all to Estithmar Holdings Third Quarter of 2026 Results Conference Call. With us on the line today, we have Mr. Basel Shaddad, Holding CEO; Mr. Rashid Sheikh, Holding CFO; Mr. Saad Iskandarani, Corporate Development Director; and Mr. Ahmed Akkam, Investor Relations Specialist. Without further delay, I'd like to hand over the call to Mr. Rashid. Please, the floor is yours.

Good afternoon, everyone. Welcome to Estithmar Holdings Q3 Earnings Review and our investor presentation, which we'll go through in the next half an hour to 45 minutes. I'll be leading the presentation today, along with Mr. Saad, who's joining me. And our agenda today is to review the financial performance of the group, along with its clusters, allow for Q&A in the back end. We'll give some brief overview of our various clusters, some operating performance measures and metrics and how they're performing and how that all wraps up into the consolidated results. If you have -- we will leave questions and answers to the end, so we would appreciate that, and we'll try to cover as much ground as we can. And I think we can proceed now to the formal side of the presentation. I'll hand it over to Saad, who will take over the first part of the presentation, followed by financials. Saad, can you please present?

Thank you, Rashid. So for those who don't know us, we're going to start with a brief intro on our group. We, as a group, own 117 companies. We operate across 10 countries in 8 different industries. We employ north of 24,000 employees. So the way we're organized, we're organized into 5 different groups: Apex, which is our health care business, Contracting and Industries services, real estate, which is our Estithmar Venture Group and Financial Services. Now if we double-click into each of these clusters, starting with Apex Health. So Apex Health follows 2 different business models. The first one is owning hospitals and operating them. For these, we have The View Hospital in Qatar and KNC, Korean Medical Center in Qatar as well. Two other hospitals we plan on owning and operating are HAQA in Algeria and the Baghdad International Hospital in Baghdad, Iraq. The second operating model or the business model is we have O&M contracts, operations and maintenance contracts in different hospitals, one of which is the EWS in Qatar, 2 of which are in Iraq and the fourth is in Libya. Moving on to our next group, which is Elegancia Contracting & Industries. This group has 2 types of businesses. The first is specialized contracting, such as electromechanical kitchens, data centers and fit-out, but also has some manufacturing businesses such as Elegancia Steel, Elegancia Joinery and Stock. This cluster is the biggest in terms of revenue. We use this cluster to enter into new markets. This group gives us scale, and that's why we like it. Moving on to our third group, Elegancia Services. So the main 3 businesses in this group are facility management, catering and resources. We like this group because it gives us stickiness and repeat revenue, recurring revenue given that some of the businesses are either long term or have high customer retention, such as the facility management business. The last 2 groups, Estithmar Smart Venture and Estithmar Smart Capital, these are still relatively small in terms of economics to the group. Estithmar Smart Ventures today has Al Maha Island in Qatar as well as Qatar Hills and Maysan, which are 2 medium-sized hospitality in Qatar as well. However, the 2 significant projects that are currently under development are Rixos in Baghdad and Rosewood in Maldives, and these are expected to bring scale to this group as they go online second half of 2027. The latest addition to our group is Estithmar Smart Capital, and this group is mandated to look after the financial services sector. The most recent update to this group is that we completed the acquisition of Shahba Bank in Q3, which is a bank in Syria. Now all these clusters or groups operate in 8 different industries, contracting, manufacturing, real estate, health care, hospitality, facility management, marine and financial services. All to say that our group is really well diversified across different sectors. Now a little bit about our history leading up to Q3. So starting with 2022, this is when we went public. 2022 was also a milestone year for our group because this is the year when Qatar hosted the FIFA World Cup and our group took part of more than 100 projects leading up to the FIFA World Cup, be it stadiums, infrastructure projects or hospitality assets. Year 2023 was also a key year for us. That's the year where we international, led by Elegancia Arabia, which is our contracting business in Saudi Arabia. In year 2024 and 2025, we continued our international expansion leading up to 2026. Specifically in 2026 and in the last quarter, Q3, we have some updates. So number one, we completed the transaction of Shahba Bank in Syria, which we had announced previously in 2026. Our contracting group, Elegancia Contracting and Industries got awarded a large scope of QAR 800 in Qiddiya, Saudi Arabia, which is the Prince Mohammed Bin Salman Stadium. And this highlights our commitment to being part and contributing to the Saudi Vision 2030. Another big win for us in Qatar was the MEEZA, with MEEZA, the construction of a large data center of around QAR 500. On the capital markets front, we recently in Q3 as well completed the exchange and raise of around QAR 670 million of Sukuk, which will mature in 2029. This slide is just showing our international or regional footprint. We continue to evolve this footprint across the years, and we remain committed to increasing this footprint in the coming years ahead. Our investment highlights, so why should we own our stock? First of all, we're a diversified holding. Our diversification is balanced across the different groups as well as sectors we operate in. Our stock has returned significant shareholder value in the past few years. We are rooted in Qatar, and we -- our businesses are in alignment with Qatar's Vision 2030, but we have also extended the business regionally and hopefully internationally as well to 10 different countries, which also gives our investors additional diversification. And last, we bought the trophy assets, not just in Qatar, but across the world. A few examples, the famous View Hospital in Qatar, Al Maha Island, which is a top tourist destination, Rixos Baghdad and Rosewood Maldives, which are currently under construction. So with that, I'll hand it over back to Rashid, who will walk us through our Q3 financial performance. Rashid?

Thank you so much, Saad. So the next part of the presentation will probably last 15 to 20 minutes. We'd like to give you some analysis of what's happening in our group. We will cover it in 3 sections. We'll talk about the market. This will be followed by financial -- consolidated financial performance. We'll talk about segmental performance and how each of the segments is contributing to the overall earnings and the profile of the group. And last, I'll take a little bit of a deeper dive this quarter and try to talk to you about the actual segmental performance. And that will be for the next 15 or 20 minutes. So -- and on this slide, what we're trying to give you a snapshot of sort of the performance of our stock. So from the beginning of this year to September 30, it's up about 24%, notwithstanding the sort of the regional turbulences that we've been facing locally in the regional market, which we all know. So notwithstanding that sort of those challenges, our stock is continuing to fairly well from a performance perspective. Our P/E currently stands at 17.7x as of September 30. Our market capitalization is currently approximately QAR 19 billion, representing a CAGR of 35% since 2022. Our shareholding distribution by nationality has remained intact. It's not changed much quarter-to-quarter. Again, the primary holders of our stock continues to be Qatari investors at 86%. We do have foreign investors about 7%, which we are trying to increase over time. But from a quarter-to-quarter perspective, it hasn't really changed materially. In terms of financial performance, in terms of financial performance, what we can -- we'll talk about the consolidated numbers first. So net profit rose 6% year-to-date ending September to QAR 744 million. Our EBITDA rose 15% to QAR 1.25 billion, and this is in comparison to the same period last year. Our EBITDA margins lifted to 28% and our net profit margin to 16%. So fairly good metrics on a consolidated measure. However, our revenue has fell slightly by about 7% 2026 versus 2025 September. I'll walk you through the details in a minute. But in terms of -- sorry, go back one slide, please. So just to finalize this. So revenues are currently standing for the 9-month period at QAR 4.5 billion versus QAR 4.9 billion last year. Gross profit is QAR 1.5 billion versus QAR 1.6 billion last year, down slightly 3%. Our EBITDA margin -- our EBITDA is QAR 1.2 billion versus QAR 1 billion last year, and net profit is QAR 744 million this year versus QAR 703 million same time last year. Earnings per share currently stands at 0.165x versus 0.162x last year. So overall, a satisfactory performance. Our earnings are up, and we'll explain to you when we talk about the segmental performance, who is driving this performance. Before I do this, I just want to talk about how we are operating as a performance and who's contributing to our overall numbers. So in the slide, you see here the contribution or contribution towards the group in terms of revenues for the first 9 months. Apex is generating 34% of the revenues coming to our group. And from a profit perspective, they're generating 55% of the group's profit for the first 9 months. Our Contracting business and Industries is generating or contributing 36% of the group's revenues, while generating 12% of the group's net profit. Our service industries, Elegancia Services is generating 25% revenues, while contributing 24% of the group's net profit. And SMR, which is -- which where we hold some of our properties, flagship properties, generating 5% of the revenues, while contributing around 9% of the profits. So revenue is balanced from a consolidated perspective across our groups, although revenue -- sorry, profits continue to be skewed towards the healthcare sector, which is driving a lot of our profitability for the first 9 months of the year. Profit and EBITDA are pretty much aligned to one another, very small nominal differences, but the net profit and EBITDA are similar in terms of overall performance. The next slide, we will talk a little bit about our balance sheet. But before I talk about the balance sheet, I think if you can go back to one slide, I will just talk a little bit about segmental performance. And I think this is important for us to understand as a group. So one of the things that we did in the release of our latest financial information, our September numbers that have been reviewed by PwC, we've enhanced our segmental reporting. So there is more detail on each segment. If you -- for reference purposes, I think it's footnote or Note #26 in the financial statements. So what we've tried to do is enhance our financial reporting, provide a lot more segmental reporting and analysis and how some of those numbers are being driven, including EBITDA numbers for each segment. So we're making a conscious effort to expand sort of transparency of what we do as a group to both our equity investors and our capital market bondholders. I will spend just a few minutes on this slide, although we don't have the numbers per se, but they're available in the financial statements, just talking about some of the segmental performance. So in terms of Apex, in terms of Apex, the revenues for the first 9 months of this year were QAR 1.8 billion versus QAR 1.7 billion last year. Net profit is currently QAR 444 million versus QAR 588 million last year. Profits are slightly trending down on the Apex side by about 25%. This really represents a key acquisition that we did in Q1 2026, which is when we took the acquisition of TVH Hospital. The result of that acquisition, which is positive from an economic perspective is that there are higher interest costs being generated and higher depreciation and amortization costs being generated, and that's what's really causing the major delta between the 2 periods. Performance, the hospital sector continues to operate very profitably, but just the higher interest and depreciation charges is the primary reason why there's a delta between this year 9 months and last year 9 months. Also, our services businesses, which again is mainly manpower, providing manpower services and catering to government entities and nongovernment entities, which Saad will explain later, provides almost about 300,000, 350,000 a day. Revenues are flat same period-over-year, about QAR 1.3 billion this year versus QAR 1.2 billion last year. However, profits are higher. We did QAR 195 million of profit this year in our services business versus QAR 184 million same period last year, which is 6% higher. The real difference what's happening here is that the product mix is changing. So we are actually having more business being generated from higher-margin businesses versus last year. And those are primarily in the catering business, the catering side and especially because we have contracts to the military and other government services, which are using our services. So those contracts continue to generate substantial revenue for us, but are at the higher end of the profitability margin. So hence, our profit is increasing this year versus last year, although revenues are materially the same. In terms of our Venture business, and again, our Venture business holds some of our key flagship assets such as Rosewood in Maldives, which was currently under development, also Rixos, which is another hotel in Baghdad and some locally owned assets as well. Revenues this year are QAR 294 million versus QAR 152 million same time last year. It's 94% higher -- profitability this year is QAR 71 million for the 9 months versus QAR 21 million last year. The key driver of this is that for the first 9 months of this year, we managed to sell quite a lot of our hotel units, the apartment units in Baghdad. We sold around 74 units at the 174 units available. So that -- those sailing of units has resulted in the better performance this year versus last year. And that's the key driver of the performance for Ventures. From C&I, which is our Contracting and Industries business, it continues to perform well, notwithstanding the regional pressures in this group. Revenues this year are QAR 1.9 billion versus QAR 2.1 billion same time last year. Although it's 10% lower, profitability is much higher at QAR 100 million this year versus a profit last year. A couple of reasons are driving these revenue and profitability performance measures. First of all, last year, we managed to conclude some large projects. So earnings for 2025 were amplified, I would say, versus this year. [indiscernible] is one of the projects that completed last year, resulting in 6. But at the same time, in -- there has been some softness in the selling market in terms of our C&I business, which we expect to catch up in Q4. And also one of the key drivers of the profit in last year and this year that the QAR 100 million has come through. We will be taking certain provisions in Q4, which are planned to be taken, and this will modify the profits coming for the full end of the year. But so far, the profit performance continues to be quite strong in the C&I business. The latest -- the latest sector that we added, which was highlighted in Q2, we have managed to complete the acquisition of Shahba Bank. This is falling under to our Estithmar Capital vertical or segment. The acquisition was completed sometime in July. And however, earnings will be coming in Q4 through an associate of how we account for it. But there's been not a small loss, but there's just about a QAR 10 million P&L impact, which really reflects staffing costs, some consultancy costs that were generated for the first 9 months of the year prior to any earnings being generated through the acquisition of the investment we just spoke about. That's a high level in terms of our financial performance by sector. We would like to just talk a little bit about the balance sheet and how it's sort of transformed for the first 9 months of the year. So our total assets have grown 3.7% from QAR 14.5 billion to QAR 15 billion. The key drivers of this movement is really that we continue to invest in our CapEx program. I'll highlight a couple of the CapEx programs that are currently underway, and that's why the investment is -- continues to rise. So as I mentioned earlier, we have Rixos, which is a hotel in Baghdad. We've invested around QAR 294 million as of Q3. Project is around 75% in Maldives. It is also being under construction, it is progressing. We've invested around QAR 647 million as of Q3. That's approximately 56% completed. We also are investing in HAQA, which is a hospital that is currently around 70% complete. So those investments are ongoing. There are some other investments. This also -- this number also includes the Shahba Bank acquisition, which is about QAR 160 million approximately that we took on in July. So this continued CapEx investment is driving up our total assets, as I mentioned, by about circa 4% from the beginning of the year. At the same time, our liabilities have fallen by around 2.5%, and I'll explain some of the key drivers of that. One of the observations I'll make is so our total liabilities is coming from QAR 9.7 billion down to QAR 9.5 billion. We've managed to take some new loans. We've added some of our debt. We've extended some of our debt beyond into 2029. And this has resulted in our current assets and current liabilities -- sorry, current liabilities and long-term liabilities rebalancing from about 66% at year-end to about 50% -- 50-50 as of September 30. So this is a very dedicated thing that we're doing where we're trying to look at our liabilities, extend them out, match the assets along to the same sort of life cycle that we have for some of our investments. So this is progressing well and we will continue to modify as we go forward. Liabilities have come down primarily because some lease assets have been coming off the balance sheet and replaced by hard assets that we took on in Q1 and also some intercompany and related party movements along the way. In terms of equity, our equity has increased by around 16% from December 31, 2025, to now. Key driver of that equity change continues to be our profitability, which mentioned earlier, QAR 744 million for the first 9 months of this year. In terms of some of the key metrics on the balance sheet, we closed the quarter off with QAR 414 million of cash and cash equivalents versus QAR 338 million at the end of last year. Our return on assets is currently sitting at 6.6% versus 6.4% at the end of the year. Our return on equity is currently sitting at 19 -- sorry, 17.9% versus 19% at the end of the year. Return on capital is 11.5% versus 13% at the end of last year. Current ratio is currently at 1.14x versus 0.97 at last year. Our cash conversion cycle that we look at very closely is at 76 days versus 73 days. We're financing this position by 3 more days. Our net debt-to-equity ratio has maintained steady from quarter -- from the last quarter to this quarter at 1.1x and our interest coverage continues to be quite healthy at 4.8x. This is the overview we just wanted to highlight in terms of our performance until September. I'll hand it over to Saad to continue with the business group's overview and some of the key metrics that we have on each of the businesses.

Thank you, Rashid. So similar to each quarter, we have a deeper dive on each of our groups. If you allow me, I will skim through this section quickly so we can leave enough time for the Q&A. So starting with Apex Health, our health care business. As discussed before, we have 2 business models, the asset-light, which is the O&M contract. We're going to continue seeking similar contracts to grow the business, and we're going to opportunistically as well seek attractive investments and hospitals to own and operate. This group has generated QAR 672 million in EBITDA the past 9 months. And some of the -- this is an overview on some of the assets that we own, the View Hospital on the left, Korean Medical Center on the right in Qatar, the Military Medical City Hospital, which we operate and HAQA in Algeria, which is currently under development in Algeria. Moving on to the Contracting and Industries Group. Again, this is our largest in terms of revenue. And just to give you an idea, as of Q3, this group holds QAR 5.6 billion of backlog, which we estimate or expect to be converted to revenue in the next 18 months. On top of that, this group holds a huge pipeline of more than QAR 10 billion of projects, which we expect to convert into wins as well. Overview on some of our projects. So MEEZA on the left, which was awarded to us in Q3, the stadium in Qiddiya in Saudi Arabia, which was also awarded to us in terms of MEP scope, electromechanical, some projects in KSA in the Red Sea, the airport, Shura Island, the water treatment facility in Qatar on the left, the Rosewood, AMALA and the Red Sea. So all this to say that this group is really involved in some of the most iconic projects in Qatar and in Saudi and abroad as well. Moving on to the third group, Elegancia Services. This cluster or group is mainly catering Elegancia Resources, which is our manpower supply business and Elegencia Facility Management. Again, this group gives us recurring revenue. You can see this through the client retention of 95% on the bottom right of the slide. The catering business generates around 350,000 meals per day, just to give you an idea on the scale. And this group generated QAR 280 million of EBITDA in the first 9 months of 2026. Our Smart Venture, which is our real estate hospitality group, again, it's still relatively nascent. Back to Rashid's point, what helped our revenue is the sales of the apartment in Rixos in Baghdad. But really what will give scale to this group is once the Rixos and Rosewood are operational, which we expect to happen around mid of next year. This is a picture of our Rixos Baghdad Hotel in Baghdad. The construction progress is currently at 77%, 54% of our residential apartments have been sold. And we used the proceeds of these residences the construction of the project. Again, this is very iconic projects currently under development in Rosewood in the Maldives. Estithmar Capital is the latest addition with the acquisition of Shahba Bank. And with this, we have for your reference, the Board of Directors composition and the composition of our executive management. You can access this presentation on our website at any time. And with this, we end our presentation, and we will open it up for Q&A. Thank you.

[Operator Instructions] We have our first raised hand from [ Iaong Veenid ].

Can I just make a request, please with whoever is asking the question, if you can just mention your name and also the institution that you're from -- so it just gives us a little bit of guidance, please wait.

Iaong, you are unmuted, but we can't hear you. We still can't hear you. Okay. So we'll wait for more questions to come in. We have a question from Aakash.

I just have one question regarding the ongoing projects in Saudi, if you can kindly update us in terms of what the progress is looking like across those projects. And given the current situation that we are facing currently geopolitically, are you expecting certain delays in execution on that front? And where do you see -- like, if any, where do you see most of those challenges sort of coming in on your front?

Yes, sure. I can take this one. So look, our largest scope in Saudi currently is the Red Sea project. These projects are being finalized. So we're at 90-plus percent completion. We have some delays in material delivery, but really these haven't impacted the overall progression of the project. However, we have new projects that have been awarded, one of which is the QAR 800 million stadium MBS in Qiddiya, which we expect to start in Q4 or the latest beginning of next year.

Got it. And just as a follow-up, in terms of the project that is expected to start, I'm sure you're already in negotiation with suppliers regarding raw materials, et cetera, and sort of logistics on that front. So, are you facing any challenges or in terms of when you sort of got into the pipeline for that project? Since then and now, have there been any material changes in terms of what has been discussed with the client?

So no material changes since we started negotiating the contract, the situation hasn't changed. Some of the suppliers have corrected some of the prices, especially the commodity prices. But aside from that, the project was awarded to us in fair value. Again, because the win was recent. It wasn't before the event started.

Maybe I can highlight a little bit more. So I think in terms of financial performance, we've managed the cost side on some of these projects quite well. Even on -- as of September 30, for this reporting season or time period, our manage on the contracting side, which is where a lot of the activity happens in Saudi, continues to hold well. On a consolidated basis, the C&I business continues to hold gross margins at around 12%, which is pretty good given the situation that's happening. So there's a lot of tight cost control that we're implementing on our side to make sure that margins and earnings are maintained.

Okay. So, one, wrote his question in the Q&A box. He's asking, what is the occupancy of the hospitals operated by Estithmar, KMC and the View in particular? What about the revenue per patient? And how has this evolved in the last quarter -- in the last 2 quarters actually?