Management Report

KIPCO 2021 results
At last year’s Shafafiyah Investors’ Forum, we said that we would closely monitor the impact COVID-19 would have on our core businesses.

In 2021, we achieved a net profit of KD 7.2 million (US$ 23.8 million), compared to the restated figure of KD 1.1 million (US$ 3.6 million) for 2020. KIPCO’s earnings per share for 2021 came to 0.7 fils (US$ 0.23 cents).

Total revenue from operations came to KD 711 million (US$ 2.4 billion), compared to the restated KD 724 million (US$ 2.4 billion) for 2020. KIPCO’s consolidated assets came to KD 10.2 billion (US$ 33.7 billion), compared to KD 10.4 billion (US$ 34.4 billion) reported at year-end 2020.

Executive management
Following a career of over 30 years, the Board of Directors approved Mr Faisal Al Ayyar’s request to be relieved of his executive duties at the end of 2021 and expressed its happiness at his agreement to continue to serve as Vice Chairman.

Sheikha Dana Nasser Sabah Al Ahmad Al Sabah was appointed the company’s Group Chief Executive Officer, effective January 1, 2022. Sheikha Dana Al Sabah is the Founder and Chair of the Board of Trustees of the American University of Kuwait (AUK). She is also Chairperson of United Education Company. She was formerly the CEO of Al Futtooh Holding Company and has been a KIPCO Board Member since 2020. She holds Board positions in Gulf Insurance Group, OSN and Kamco Invest.

KIPCO business updates
In 2021, KIPCO sold 55% of its beneficial ownership in its subsidiary, Al Ansar United Real Estate Company, to Al Futtouh Holding for KD 59.4 million (US$ 196 million).

In November, KIPCO announced the successful completion of the company’s share capital increase and the allocation of the shares to the subscribed shareholders. The rights issue of the 640 million shares on offer was oversubscribed, and KIPCO raised KD 80 million (US$ 264.5 million) in equity. The company’s issued and paid-up capital now stands at KD 264 million (US$ 872.7 million), an increase of 32%. The rights issue saw the participation of a wide range of KIPCO’s shareholders, including financial institutions, funds, portfolios and individuals. The price offer was set at 125 fils per issue share.

Burgan Bank
Over the past twelve months, Burgan Bank’s operations registered a 35% increase in net profit to KD 45.4 million (US$ 150 million) while the total operating revenue was up 10% to KD 234.7 million (US$ 776 million). Net operating profit reached KD 140 million (US$ 463 million), an increase of 21%. Group deposits went up 1.7% to KD 4.2 billion (US$ 13.8 billion), while the non-performing loans (NPL) ratio dropped from 4.2% in 2020 to 1.7% in 2021.

This year, Burgan Bank relocated to its new head office and main branch to a new building on Abdullah Al Ahmad Street in Kuwait City. The new headquarters provides an environment that supports more effective teamwork, quality interaction and greater productivity. The modern and spacious main branch area was completely revamped to serve customers with the full range of Burgan’s top-notch services in a comfortable space that promotes the highest level of engagement and customer satisfaction.

In the latter part of the year, Burgan Bank successfully completed a capital increase through which 375 million shares were issued. KD 71.25 million (US$ 235.5 million) was raised with the aim of supporting the bank’s growth strategy and improving its financial and operational performance. The rights issue saw unprecedented demand, with subscription levels at 220%, and as such there was no need for public offering or underwriting.

In March, Burgan Bank exercised a call option to redeem its KD 100 million Subordinated Tier 2 bonds, issued in 2016 and due in March 2026. The redemption comes after Burgan’s issuance of US$ 500 million Subordinated Tier 2 bonds in December 2020. Both the issuance and the redemption contributed to the bank’s effective management of capital and long-term liquidity requirements.

To further support the bank’s regulatory liquidity ratios, Burgan Bank obtained CMA approval in September to indirectly issue bonds worth up to US$ 500 million under its EMTN Program and through Burgan Senior SPC Limited.

Gulf Insurance Group
Gulf Insurance Group (GIG) maintained its market leadership position in Kuwait and Bahrain in terms of gross written premiums, in Jordan in terms of written premium and profitability, and in Egypt in terms of technical profits (ie. general insurance private sector). In 2021, GIG announced a net profit of KD 50.2 million (US$ 166 million) an increase of 207% on the KD 16.3 million (US$ 54 million) reported in 2020. Total operating revenue was up 47% to KD 311 million (US$ 1 billion), while net operating profit registered a 49% increase to KD 41.6 million (US$ 138 million).

In 2021, GIG successfully completed the acquisition of AXA Gulf’s operations in the region: AXA Gulf (Bahrain, UAE, Oman and Qatar), AXA Cooperative Insurance Company (Saudi Arabia) and AXA Green Crescent Insurance Company (UAE). This complex acquisition involved five countries, two listed entities, a joint-venture and seven insurance regulators. The acquisition took GIG to the top three position in the MENA insurance market. The company also went through the first rating process and achieved a financial strength rating of ‘A’ excellent and long term issuer credit rating of ‘a’ (excellent)from AM Best.

GIG – Kuwait successfully acquired a controlling interest in Gulf Takaful Insurance Company and integrated all its policies, procedures and brand identity into the Group. Meanwhile, GIG – Jordan completed the merger with Arab Life & Accidents Insurance Co.

This year, the insurance company entered the debt capital market when it issued a KD 60 million (US$ 198 million)

Subordinated Perpetual non-callable five-year Tier 2 bond. This is the first issuance by a Kuwaiti insurer and the country’s first Perpetual bond in Kuwaiti Dinars.

GIG issued 14.1 million ordinary shares, worth KD 7.1 million (US$ 23.5 million), via a rights issue that resulted in raising the company’s paid-up capital to KD 20.12 million (US$ 66.5 million). Later, it completed a second rights issue by placing 83.3 million ordinary shares, worth KD 50 million (US$ 165 million), thus increasing GIG’s paid-up capital to KD 28.46 million (US$ 94 million).

United Real Estate
Our real estate arm, United Real Estate (URC), continued its development projects in Hessah Al Mubarak District. Sales of residential units continued in the two high-rise Hessah Towers, with an additional 39 units sold during the year, bringing the total to 130. Construction continues and the project is expected to be completed in 2022.

URC, through its associate Mena Homes Real Estate Company, awarded Alghanim International General Trading and Contracting Company the construction, completion and maintenance of Byout Hessah. The contract is worth KD 16.7 million (US$ 55 million) and the project is set to be completed in 2023. Alghanim is also the main works contractor for Hessah Towers.

Conceptualized by SSH, Byout Hessah comprises 40 luxury four-bedroom townhouses and two 12-floor residential buildings with 104 upscale two-bedroom apartments, including seven penthouses. The development spans over a land area of
13,000 sq.m. Since its launch, 44 units have been sold.

In 2021, URC raised its ownership in Mena Homes from 33.3% to 35.7% through a capital increase.

URC also signed on Ahmadiah Contracting as the main contractor for the Commercial District in Hessah Al Mubarak District at a value of KD 42.6 million (US$ 140.8 million). The commercial component is expected to complete by 2023 and includes retail, F&B, offices, clinics, serviced apartments and a community center.

In URC’s Beirut property, Raouche View 1090, 24 residential units were leased for five years, commencing March 2022. In Morocco, URC completed infrastructure and ground preparation for the construction of a hotel within the Assoufid Development.

In Oman, Salalah Gardens Mall and Residences became self-sustaining and is covering its expenses from its operating revenue. Abdali Mall in Jordan saw the completion of green, cost-saving initiatives.

OSN
For OSN, the past twelve months have seen the continued turnaround of its business model towards stronger streaming services. This came following a major upgrade in OSN’s streaming platform that was launched in June. OSN adopted a hybrid, modular approach in the development of the new platform, leveraging innovative technology to drive agility and adaptability.

OSN further strengthened its partnership with HBO and extended its exclusive licensing agreement. The agreement cements OSN’s position as the exclusive home for HBO programing across the MENA region. As part of the deal, OSN Streaming will be the exclusive home to complete boxsets of favorite HBO series. The pay-tv company’s production of original Arabic content continues to be very popular among viewers.

Jordan Kuwait Bank
In 2021, Jordan Kuwait Bank (JKB) achieved a net profit of KD 3.3 million (US$ 11 million) while the total operating revenue reached KD 48 million (US$ 159 million). The bank also achieved an 11% growth in corporate and SMEs direct credit facilities, an 8% growth in corporate and SMEs indirect credit facilities, as well as a 22% increase in retail credit facilities. Revenue from sales of seized real estate increased 323%.

During the year, JKB enhanced its CSR evaluation approach through relating social community initiatives to the UN Sustainable Development Goals to assess the effectiveness of the bank’s community initiatives. The bank also issued the first Sustainability Report in line with the Global Reporting Initiative (GRI Standards), reflecting initiatives in relation to ESG issues.

United Gulf Holding Company
United Gulf Bank (UGB) – a wholly-owned subsidiary of United Gulf Holding (UGH) – announced a net profit of US$ 14.9 million for 2021. During the year, UGH exited one of its property

investments in the US, resulting in gains before taxation of US$ 5.5 million. The company’s AUM increased by 8% to US$ 14.4 billion as at the end of 2021.

Kamco Invest
Our investment arm, Kamco Invest, successfully attracted over US$ 1.1 billion (KD 332 million) in investments for different products and transactions. AUMs grew 12.76% during the year and reached US$ 14.6 billion (KD 4.4 billion). Kamco Invest’s equity funds and portfolios continued to outperform respective benchmarks and peers, and maintained their position among the top performing funds in Kuwait.

Last year the company achieved a net profit of KD 10.3 million (US$ 34 million) while total operating revenue reached KD 30.1 million (US$ 99.5 million), an increase of 99% compared to the year before. Net operating profit was up to KD 11 million (US$ 36.5 million).

Kamco Invest acquired four income-generating real estate portfolios in the US and UK during the year, thereby increasing value of the real estate managed by the company to over US$ 1.36 billion (KD 413 million). It also exited two managed properties in the UK and Germany, generating competitive returns for its clients.

In 2021, together with venture capital thought leaders, Kamco Invest launched the JEDI Fund, offering a unique platform of international venture capital opportunities. The Investment Banking team closed 22 transactions during the year, worth KD 1.5 billion (US$ 5 billion), including six merger and acquisition deals, six equity capital markets transactions and 10 debt issuances.

Oula Wasata, Kamco Invest’s brokerage arm, continued to increase its client base and successfully completed the MD3 test for netting, which now serves as a new revenue stream for the company. The company’s regional offices continued to strengthen their presence in their respective markets and increased their contribution to the company’s core businesses, namely asset management.

Qurain Petrochemical Industries
In the first nine months ended December 31, 2021, Qurain Petrochemical Industries (QPIC) achieved a net profit of KD 5.03 million (US$ 16.6 million), while share of income from associates witnessed a significant increase of 90% compared to the same period last year, owing to oil price recovery and the improved performance of Kuwait Aromatics (KARO). Total assets slightly increased to KD 780 million (US$ 2.6 billion) due to the new acquisition made in Advanced Technology Company (ATC).

Before the end of the year, the Petrochemical Industries Company (PIC) sold its 10.007% share in QPIC, amounting to 110 million shares, in a bid that was won by Aljanah Holding Company. The initial price of the share was 320 fils, and the bid closed at 425 fils.

In September, QPIC purchased an equity stake of 29.5% in Advanced Technology Company (ATC), a deal worth KD 22.18 million (US$ 73.3 million). ATC was reclassified a QPIC associate.

During 2021, ATC signed a contract with the Ministry of Health worth KD 20.31 million (US$ 67 million) to provide nursing services to the Al Sabah, Capital and Jahra Health Zones. The contract came into effect in December.

Over the summer, Jassim Transport and Stevedoring Company (JTC), a QPIC subsidiary, successfully completed its pre-listing private placement. The private placement received excellent
interest from investors. The issue targeted an offering of up to 60 million shares at 450 fils per share, or a total value of KD 27 million (US$ 89 million). JTC was listed on Kuwait Bourse in October.

The National Petroleum Services Company – NAPESCO – signed a five-year contract with Kuwait Oil Company in early 2021 worth KD 7.9 million (US$ 26 million) for maintenance and firefighting systems for KOC’s operations in northern and western Kuwait. It also landed a KD 1.38 million (US$ 4.5 million) contract with KIPIC to offer services dealing with spillage. The three-year contract can be extended for a further two years. NAPESCO’s KOC contract for firefighting systems in southern and eastern Kuwait was extended for 12 months, at an increase of KD 1.31 million (US$ 4.3 million).

Kuwait National Petroleum Company (KNPC) extended its spillage contract with NAPESCO for seven months and made amendments, bringing the contract value to KD 2.47 million (US$ 8 million). The company also won a KOC bid for HSE consultative services worth KD 564 thousand (US$ 1.8 million), as well as an equipment contract worth KD 2.1 million (US$ 7 million) for five years.

The Board of Directors of SADAFCO, Saudia Dairy and Foodstuff Company, appointed Mr Patrick Stillhart as CEO. Mr Stillhart takes over from Mr Waltherus Matthijs, whose 14-year tenure saw SADAFCO’s market value grow six-fold, leaving the company in a very solid financial and market position.