Agility Reports USD $53mn Net Profit for the first 6 months of 2020
Agility, a leading global logistics provider, today reported first-half earnings of 8.47 fils per share on net profit of KD 16.2 million (USD $53mn), a decrease of 61.3% over the same period in 2019. EBITDA declined by 20.1% to KD 75.8 million, and revenue declined 1.3% to KD 765.1 million.
Tarek Sultan, Agility Vice Chairman and CEO, said: “We entered 2020 with our business on sound footing, which is one reason that we were able to react quickly to the sweeping impact of the COVID-19 pandemic. We acted immediately to protect employees, customers, and communities, including providing donated logistics support for local governments and NGOs around the world. We also took steps to bring operating expenses and other costs in line with the new environment. If the crisis has demonstrated anything, it is the essential value of logistics and supply chain providers in times of severe disruption.”
Sultan said the economic fallout from the pandemic has had an uneven effect on Agility businesses. “Our contract logistics business and logistics parks have weathered this reasonably well because demand for storage space has been steady or increased, especially as customers have looked to add to safety stock or support pandemic-driven increases in e-commerce sales. In many instances, we are experiencing accelerated adoption of disruptive and emerging technologies related to the COVID-19 pandemic or underlying CSR paradigms. Other Agility businesses, such as aviation and airport operations have been directly impacted by the decline in air travel and traffic and are now pivoting towards the development of pioneering new technologies that will be essential to the re-enablement of global travel.”
Agility Global Integrated Logistics (GIL)
Global Integrated Logistics’ first-half EBITDA was KD 28.8 million, a 1.3% increase from the same period in 2019. This was driven by strong Contract Logistics, Project Logistics, and Air Freight results, as well as a sharp focus on containing costs.
GIL’s H1 net revenue was KD 135.8 million, in line with last year’s performance. Net revenue increased in Contract Logistics, Project Logistics, and Air Freight, but fell in Ocean Freight and Fairs & Events. GIL gross revenue was KD 570.6 million, a 2.5% increase from same period in 2019.
Volumes were down in both Air Freight and Ocean Freight in the first half of this year, by 23.6% in Air Freight (tonnage) and 14.8% in Ocean Freight (TEUs), due to COVID-19 impact on demand due to lockdowns, production stoppages, and economic contraction across industries and geographies. However, H1 saw higher yields in Air Freight due to capacity shortages and a spike in demand for urgent shipments of PPE and other medical equipment. First-half Air Freight net revenue increased 17% vs. the same period a year earlier, while Ocean Freight net revenue decreased 16% vs. same period last year.
Contract Logistics achieved healthy growth (7% net revenue growth), mainly in the MEA Region (Kuwait, Saudi Arabia) as the result of the addition of new facilities and increased operating efficiencies. Project Logistics showed strong performance across all regions with 25% net revenue increase, driven by new capital projects and positive volume development from existing customers. Fairs & Events net revenue fell 46% with the cancellation and postponement of key events.
Starting in Q1, GIL introduced a range of both temporary and permanent cost reduction measures in response to the pandemic. The measures are intended to ensure continued strength of profitability performance during a period of falling and volatile global trade activity. GIL continues to focus on operational productivity as well as customer solutions to respond to the changing market environment.
Agility’s Infrastructure Companies
Agility’s Infrastructure group EBITDA declined 18% to KD 56 million for the first half of 2020. This decrease was driven mainly by UPAC, NAS and GCS entities, which experienced significant declines as a result of the pandemic. In contrast, Agility Logistics Parks (ALP) and Tristar proved to be resilient during the first half of the year. Infrastructure group net revenue fell 8.4% and gross revenue declined 10.2%.
ALP revenue grew 4.5% in the first half amid increased demand for warehousing space, mainly from suppliers of medical equipment and food. ALP also witnessed strong demand from e-commerce players as it is strategically placed to service the requirements of fulfilment providers. ALP accelerated delivery of a few projects to meet customer demand. Developments in Kuwait, Saudi Arabia and Africa are proceeding as planned, despite some interruptions due to lockdowns.
Tristar, a fully integrated liquid logistics company, posted a 10% revenue decline in the first 6 months. Despite that, Tristar’s contractual business model provided resiliency, allowing profitability to grow by double digits during the same period. The revenue decline in the first half of the year was primarily due to the sharp drop in fuel prices and volume slowdown from COVID-19 pandemic impacting Fuel and Road Transport and Warehousing (RTW) segments. The Maritime segment showed healthy growth due to the deployment of new vessels and strong market demand. With the Coronavirus outbreak, Tristar took measures to ensure no business interruption for its customers. Although uncertainty remains in market, we believe Tristar is positioned us for a successful second half of 2020. Tristar continues to execute and to look for opportunities to unlock additional value for its shareholders.
National Aviation Services (NAS) reported a revenue decline of 29%, despite performing well in January and February. In March, NAS revenue came under pressure as airlines and airports where it operates curtailed flights and related services, or in some cases, halted operations entirely. Despite the limited operations at many airports, NAS continued to serve evacuation flights, private jets, and cargo freighters. With airport and carrier activity resuming in some locations, NAS is seeing increased demand for its services. NAS’s focus for the remainder of 2020 will be on cash flow, reduction of costs in line with the two-year outlook for aviation, pursuit of new growth opportunities, and adjustment of policies and procedures to operate in a post-COVID world.
The pandemic impacted United Projects for Aviation Services Company (UPAC), which saw revenue fall 51.8% in the first half due to the cessation of operations at the Kuwait International Airport. In response, UPAC activated its business contingency plan and took steps to reduce the negative impact on its business.
At GCS, Agility’s customs modernization company, revenue fell 21%, due to precautionary measures taken by the Kuwait Government in response to COVID-19. Some border areas were closed temporarily starting March, curtailing trade and causing decreases in GCS revenue.
Sultan said: “In response to the COVID 19 crisis, all entities across the board activated their BCPs and cost alignment measures. And even during these difficult times, each business has contributed to several CSR activities including delivering food to families in Kuwait and supporting the Kuwait Red Crescent Society’s initiatives. Agility also provided free warehousing and local transportation services as part of its COVID-19 response. In Mozambique, we moved PPE for seven hospitals and arranged for storage at the newly built Agility Logistics Park in Maputo.”
Recap of Agility H1 2020 Financial Performance
- Agility’s net profit decreased 61.3% to KD 16.2 million. EPS was 8.47 fils vs. 21.89 fils a year earlier.
- Agility’s EBITDA decreased 20.1% to KD 75.8 million.
- Agility’s revenue declined 1.3%, to KD 765 million and net revenue decreased 3.7%.
- GIL revenue increased 2.5% to KD 570.6 million.
- Infrastructure’s revenue declined 10.2% to KD 202.8 million.
- Agility enjoys a healthy balance sheet with KD 2.2 billion in assets. Net debt was KD 143.1 million as of June 30, 2020. Reported operating cash flow was KD 93.6 million for the first half of 2020, an increase of 128.2%.
“The full impact of COVID-19 is not yet clear – there are many possible scenarios and many unknowns – but we are taking steps to weather the storm and emerge stronger. We are adjusting to the reality on the ground within each respective business, and bringing the cost structure in line with the new levels of business we are seeing. We have a strong focus on cash, with a view to having ample liquidity to cover us for the foreseeable future,” Sultan said.
“Ultimately, we feel that our long-term vision of infrastructure growth in emerging markets, our growing focus on disruptive technologies and digital enablement for logistics, and expansion into new market segments like e-commerce, is more important than ever. We would like to thank our employees, customers and shareholders for their support during this difficult period. We are confident that together, we can build back stronger and better,” Sultan said.