Majid Al Futtaim records resilient performance with continued investments in strategic initiatives

Majid Al Futtaim, the leading shopping mall, communities, retail and leisure pioneer across the Middle East, Africa and Asia, today released its preliminary and unaudited operational and financial results for 2017, showing resilience in a challenging business environment. The company continued to invest in strategic plans to enhance customer experience, develop talent, reinforce its omni-channel offering and ensure the business is well-positioned for long-term growth.

During the year, group revenue increased by 8% to AED 32.2 billion, while EBITDA increased by 1% to AED 4.2 billion. The slower EBITDA growth predominantly resulted from a change in business mix across the portfolio, with food grocery retail growing at a faster rate than the higher margin Properties businesses. At constant FX rates, overall group revenue would have grown by 14% and EBITDA by 5%. The difference can be largely attributed to the EGP devaluation that occurred in the fourth quarter of 2016. The company continues to maintain a strong balance sheet with total assets valued at approximately AED 59.4 billion and a net debt of around AED 10.4 billion.

Alain Bejjani, Chief Executive Officer at Majid Al Futtaim Holding, said: “Majid Al Futtaim’s diverse businesses and the markets in which we operate are experiencing rapid change and new innovations. At the same time, our region continues to face volatility, our competition is becoming global and the needs of our customers continue to evolve. Despite these challenges, we have delivered a solid performance as a result of a clear growth strategy, with unparalleled customer experiences and talent capability-building at its core. These pillars, along with our focus to become as prominent digitally as we are physically, will continue to drive our resilience and competitiveness.”

To further personalise Majid Al Futtaim’s customer experience, the company developed infrastructure to advance its data and analytics capabilities, with the introduction of A², its Advanced Analytics Centre of Excellence. This Centre is intended to be a complementary resource to the newly opened Majid Al Futtaim School of Analytics and Technology. In addition, the company became the first private sector organisation to advance a Memorandum of Understanding in collaboration with Smart Dubai to enhance, improve and leverage raw data in the Emirate.

The company continued to amplify its digital and e-commerce capabilities by investing in omni-channel solutions that optimise the customer journey. Carrefour launched its online retail platform in Abu Dhabi and Dubai, which allows customers to order groceries and household essentials online, while Majid Al Futtaim also invested in last mile delivery start-up, Fetchr.

Bejjani added, “Majid Al Futtaim is on track to becoming a technology-fueled enterprise that keeps our customers at the heart of everything we do.”

In strengthening its commitment to sustainability, Majid Al Futtaim launched a Net Positive strategy, which aims to reduce water consumption and carbon emissions to the extent that the company will put more back into the environment than it takes out by 2040. Majid Al Futtaim is the first in the region to make such a significant commitment.

Operating Company Performance

Majid Al Futtaim Properties: Majid Al Futtaim Properties registered 3% revenue growth to end the year at AED 4.6 billion, primarily driven by the strong performance of its shopping malls business. EBITDA increased by 3% to AED2.9 billion, contributing almost 69% of overall group EBITDA. At constant FX rates, revenue would have grown by 6% and EBITDA by 5%. The company welcomed 186 million customers during the year, a 6% increase, as compared to 2016. Total shopping mall occupancy stood at 94% impacted by the soft opening of Mall of Egypt in March. Excluding this, total occupancy of shopping malls remained strong at 97%.

Works commenced at Majid Al Futtaim’s first two destinations in Abu Dhabi; City Centre Al Jazira (ground breaking) and My City Centre Masdar, as well as at City Centre Al Zahia in Sharjah, and Mall of Oman and City Centre Sohar in Oman. Majid Al Futtaim Properties also completed the construction of My City Centre Al Dhait in Ras Al Khaimah before its doors opened in January 2018. Majid Al Futtaim hotels reported average occupancy of 76% and experienced a decline in revenue per available room (RevPAR), despite outperforming the broader hospitality market.

Majid Al Futtaim Retail: Majid Al Futtaim Retail generated strong revenue growth and finished the year at AED 25.9 billion, an 8% increase as compared to 2016 figures. EBITDA declined by 1.6% to AED 1.2 billion, largely impacted by the EGP devaluation that occurred in the fourth quarter of 2016 as well as some disruption in the Qatari operations. At constant FX rates, revenue would have grown by 15% and EBITDA by 6%. Majid Al Futtaim Retail grew its grocery retail market share by opening 8 new Carrefour hypermarkets and 21 supermarkets during 2017, as well as completing the acquisition of Retail Arabia, the franchise owner of Geant in UAE, Bahrain and Kuwait. In total Majid Al Futtaim Retail added 58 stores, increasing its presence to 231 outlets in 14 countries across the Middle East, Africa and Asia. Other key milestones for Majid Al Futtaim – Retail during 2017 included the opening of two new Carrefour stores in Kenya, the announcement of the largest and most advanced distribution hub in the region, and the implementation of a number of new in-store innovations to ensure seamless customer experiences.

Majid Al Futtaim Ventures: Majid Al Futtaim – Ventures’ revenue increased by 14% in 2017 to AED 2.1 billion (AED 3 billion including joint ventures and associates). The diverse portfolio of cinemas, leisure and entertainment, fashion, consumer finance, food and beverage and facility and energy management reported EBITDA decline of 3% to AED 258 million.

VOX Cinemas, the winner of ‘Global Achievement in Exhibition’ award at the CinemaCon 2017 convention, continued its successful expansion across the region with 59 new screens added, including Egypt and Bahrain, where the business solidified its presence. The company’s leisure and entertainment offering introduced several new experiences, including Orbi at City Centre Mirdif, Ski Egypt at Mall of Egypt and the first Magic Planet in Kenya.

Within its fashion business, Majid Al Futtaim opened 27 stores, including the first Abercrombie & Fitch in Saudi Arabia. It also launched its new ‘home pillar’, which includes 2 Maisons du Monde stores, while a franchise partnership was signed with Crate and Barrel to operate the homeware and furniture brand. Majid Al Futtaim also acquired the rights for the ‘American Girl’ toy brand, opening two stores during the year.

Future Investment

Majid Al Futtaim continues to explore organic and inorganic growth opportunities that have the potential to enhance its capabilities and cement its position as the market leader across the industries in which it operates. In response to the evolving needs of its digitally savvy customers, the company will continue to merge the online and offline worlds, with the acceleration of digital integration within the business.

In the year ahead, Majid Al Futtaim plans to deliver on its previously announced intent to introduce the Dreamscape Immersive VR entertainment experience to the Middle East. The company will also continue to expand and enhance its cinema experience across the region through its VOX Cinemas brand.

The company is set to open three new shopping malls in 2018, including My City Centre Al Dhait, which opened in January in the UAE, City Centre Sohar and My City Centre Sur in Oman. Work continues on a mix of super regional, regional and community shopping mall projects; Mall of Oman in Oman; City Centre Al Zahia and My City Centre Masdar in the United Arab Emirates; City Centre Almaza in Egypt; and City Centre Mall in Ishbiliyah and Mall of Saudi in Riyadh, Saudi Arabia.

Financing

Majid Al Futtaim has continued to maintain a very strong financial and liquidity position covering its net financing needs for the next two years through its cash and available committed lines.

In the first quarter of 2017 the company issued a new USD 500 million corporate hybrid to pre-fund its inorganic expansion plan. The company also improved its liquidity profile by refinancing about USD 1.5 billion of near term maturities while adding an additional USD 0.3 billion via syndicated facilities from regional and international banks.

Both Fitch Ratings and Standard & Poor’s have reaffirmed the company’s credit rating at BBB with a stable outlook, for a sixth consecutive year, reiterating its credit strengths such as the resilience of its business model, quality of assets, strong corporate governance and prudent financial management.