Two Point Zero Group P.J.S.C (2POINTZERO) Earnings Call Transcript

Good afternoon, everyone, and thank you for joining us for Two Point Zero's H1 2026 Earnings Call. I believe everyone should be familiar by now. But for anyone new to the story, Two Point Zero obviously, is a diversified investment group built around 2 multitrillion dollar mega themes, the energy and mining super cycle and the global consumer surge. Last quarter, I took you through our first full quarter as a combined entity together with Two Point Zero and [ Ghitha ]. Today, I want to do the same for the first half, a period that was active operationally, disciplined on capital and one where our global footprint really started to show up in the numbers. I will skip the next 2 sections for the benefit of time. I'm sure I don't need to sell you on the attractiveness of Abu Dhabi. But maybe I will just emphasize our playbook because H1 embodied really everything we aim to achieve. So if we just go to the -- our playbook of turning our belief and conviction on $2 trillion mega themes we are riding is built on 3 distinct stages. The first pillar is disciplined investment aligned to the mega themes following strict capital allocation framework and very clearly defined metrics. The second pillar is mainly value creation through finding pockets of synergies, helping businesses grow organically by launching new services, entering new geographies as well as inorganically through bolt-ons and M&As. And the last pillar is capital recycling, reallocating away from certain assets and crystallizing value through selective exits. It's important to note this because I think we will touch on each one of those pillars in the next few slides. So if we go over now the highlights of the first half before we delve into the numbers. As we said, I mean, this half was very busy across every stage of the playbook. On the entry side, we launched our sixth consumer vertical, the packaging vertical with the acquisition of a 61% stake in ISEM for around AED 700 million. This was our entry into European luxury and beauty packaging. Our strategy there is to build a global specialty-led packaging platform between pharma, beauty and premium rather than bulk and to consolidate a large structurally fragmented $1 trillion market through further anchor acquisitions using the same repeated playbook we have run in our other verticals. It is a defensive nondiscretionary physical manufacturing business with high cash conversion, exactly the kind of real asset platform our AI era needs more of. On new investments, ePointZero completed the $2.2 billion acquisition of Traverse, which was our entry into North America and more precisely the North American energy infrastructure, giving us a non-operated interest in 2 critical U.S. gas pipelines, both operated by Energy Transfer. The energy thesis here is very simple. We are building a full value chain platform between generation, distribution, midstream and essential equipment anchored around contracted dollar-linked and resilient cash flows and drives the AI-driven power super cycle from data centers to electrification, which are lifting demand across the grid, storage, gas and nuclear and secured energy infrastructure is one of the few places we can fund that build-out with defensive recurring income. We move on to our acquisition under our Beltone subsidiary. So Beltone completed its first cross-border transaction, acquiring Baobab Group across seven African markets. We also invested in the Series G of WHOOP, the AI-enabled consumer health platform operating across more than 200 markets. On the expansion front, Tendam entered Romania with Springfield and launched several stand-alone concepts. On the other hand, MMG rebranded London Lite to BackLite U.K. and consolidated 85-plus premium sites, launched the Knightsbridge and entered Saudi Arabia with BackLite KSA, whereas Emirates Mobility signed an agreement to acquire a majority stake in Performise Labs. On the third pillar on the capital recycling side, I think we've already mentioned our sale of TAQA, our full stake in TAQA, a clear demonstration of divesting at the right time. mostly related to our operating businesses. From a non-operational perspective, 3 external milestones can be seen this half. One, FAB Securities initiated coverage with a buy recommendation at a target price of AED 3.3. TIME ranked us 36 on its inaugural World's Growth Leaders list and ADX listed Two Point Zero as one of six new single stock futures. Those were mostly the highlights of the half. Now we turn into numbers. And I want to remind you here one thing on comparability before we start. So H1 2025 was largely a premerger period, so purely multiply numbers. This half reflects the full consolidation of Tendam, Ghitha, Chimera, IRH, ISEM and ePointZero. So the reported year-on-year numbers are not like-for-like. Where it matters, I'll point you to the pro forma comparison, which treats all the group entities as if they had been acquired and consolidated for the full period in 2025 because really, this is the cleaner read on underlying performance. So to give you an idea on our performance during the half, revenue for the first half was around AED 22 billion. On a reported basis, that is more than 2,000% up. Again, a consolidation effect. But still on a pro forma basis, revenue grew 113%. That is the number that matters. And it was led mainly by IRH, 405% up following the acquisition of Alphamin and the increased activity of IRH trading. On the gross profit side, we recorded AED 6.3 billion of gross profit at a margin of 29%. Similar to the story of Q1, the margin upticks here are a mix effect. IRH trading is a pass-through commodity model that carries low gross margin but adds real profit in absolute terms. And hence, our margins are compressed versus last year. But again, as I said, it's a mix effect mainly. Adjusted EBITDA, around AED 5 billion, up 400% on a reported basis, but 78% on a pro forma basis. And reported net income was recorded at AED 7.7 billion, up 178% on a pro forma basis. Let me talk a little bit about the quality of that AED 7.7 billion, roughly AED 2.2 billion came from operating businesses. The balance is mostly investment income, including gains across Chimera's investment portfolio, such as SpaceX and Anthropic, partly offset by some noncash revaluation on our -- on the group's Bitcoins. Again, these marks are noncash and will move both ways quarter-to-quarter. From an operating cash flow perspective, we recorded AED 3.4 billion of operating cash flow, 300% up over last -- over 2025 first half. We closed the half with AED 13 billion of cash and a total asset of AED 147 billion. In today's environment, sitting on cash is a strategic advantage. Maybe we move on to the vertical performance to you in more details how did each vertical performed. On Media and Communication, I would say it was a difficult half. Although revenue was up 1% despite when it was up 11%. U.K. expansion offset demand disruption from regional tensions. Adjusted EBITDA was 20% less than last year for several reasons. One, MMG was really gearing for international scale through BackLite U.K. and the Wildstone agreement, but several factors simultaneously impacted performance. One, we all know what's happening in the region, which led directly to a reduced marketing budget and Out-of-Home was the main channel to experience that reduction in spend. Abu Dhabi also enacted new regulations, which is impacting the wider Out-of-Home sector. And the U.K. expansion was slightly delayed with regulatory approvals taking longer than anticipated. But overall, we think this is cyclical, not structural. So we're -- we don't foresee any issues on the long-term viability of that sector. On the Mobility segment, I think it was a very resilient half. Revenue was up 2%, reaching AED 361 million given or despite the geopolitical tensions. It was mainly led by an increase in student registrations at EDC. Profit decreased slightly from last year [indiscernible] reported net income, but that included nonrecurring property income in 2025. And from a strategic perspective, as we said, we signed the majority acquisition of Performise Labs as we move to transition towards a more diversified mobility platform. On the Wellness and Beauty side, revenue was down around 4%. It was mainly driven by a lower footfall tied to, I would say, the crisis, especially in the second quarter. But here, we can really discuss the margin story. Adjusted EBITDA grew by 11%, with EBITDA margin up more than 500 basis points. The team fully offset that top line growth, the top line shortfall through cost discipline. So really full credit to the team here. On the Retail & Apparel side, Tendam, I think, delivered a very strong half. Revenue up 12% reaching AED 3 billion, EBITDA up 13%, around AED 700 million and net profit up 32%. I mean, in any business, that would be a great achievement. But in a business as mature as Tendam with leading market share position in Iberia, that speaks a lot on the execution capabilities of the management. Again, I mean, main driver for this growth is both in-store and online, expansion as well is helping. We entered Romania, as we said, extended the emerging brand footprint and rolled out the AI strategy across demand planning, CRM, pricing. And here is really where we see the next layer of margin. Moving on to Food. Ghitha grew revenue to AED 3.4 billion, a 28% growth on a pro forma basis, mainly driven by stronger consumer purchasing. Net profit reached around AED 128 million. Having said that, gross margin compressed by 300 basis points to 20%, but that was really mainly reflecting the supply chain pressure from the regional situation. Again, cyclical, not structural. And on the other side, NRTC completed the Taaza acquisition, deepening our fresh produce integration. Moving on to Energy. The headline there is Traverse, our entry into North American energy infrastructure, resilient and income generating. Pro forma net income for ePointZero was up 2% on solid organic performance, but also Kalyon delivered better operational results than last year. On the Mining side, that is the standout. Pro forma revenue, as we said, up 400% to AED 11 billion and adjusted EBITDA up to AED 1.9 billion. Mainly, as we said, Alphamin, the world's highest grade tin producer was acquired in August 2025. And with the current tin prices, they are delivering on better profitability. And IRH trading kept its momentum, signing 20-year LNG agreements with several parties. On the Investment side, revenue grew 62% on a pro forma basis on continued AUM growth. Net profit reached AED 4.6 billion, as we said, supported mainly by some NAV uplifts across the portfolio. And Beltone completed Baobab and launched its private equity platform. Maybe on a smaller side, also Lunate partnered with Blackstone on the GLIDE logistics platform and expanded to 22 ETF listings. Moving on to the balance sheet. I think no major movement there. The balance sheet remains healthy and built for deployment. Group cash of AED 13.7 billion, assets of around AED 147 billion, net debt of AED 17 billion, very healthy ratios and net debt to equity kept at less than 0.2x. Our funding cost at the holdco averages 4.7%, and we know we are in a high rate environment. This is a conservative structure that gives us the flexibility to invest through the cycle. I mean, to summarize, a very strong half as the combined group, AED 22 billion of revenue, AED 5 billion of EBITDA and AED 7.7 billion of net profit, AED 2.2 billion of which are coming from operating businesses. Very strong and resilient balance sheet, an active strategic agenda across all 4 stages of our verticals and external recognition of the platform we have built.