‘Our companies worked hard to mitigate the pandemic’s impact; efforts are reflected in 2020 results’ says company’s Vice Chairman
At its Annual Shafafiyah ‘Transparency’ Investors’ Forum, KIPCO – the Kuwait Projects Company (Holding) – said that it would remain guarded about 2021, as it closely monitors the impact of the ongoing COVID-19 pandemic on business.
At the company’s investors’ forum, KIPCO presented a review of its activities in 2020 and its outlook for 2021. In line with the health authorities’ guidelines regarding social distancing, the event was broadcast live to an audience of shareholders, financial analysts and institutional investors.
Annual General Assembly
The forum followed the company’s General Assembly meeting where KIPCO’s shareholders approved a cash dividend of 5% (5 fils per share). An Extraordinary General Assembly was also held, during which the shareholders agreed to raise the company’s authorized capital from KD 200 million to KD 300 million.
Highlights of 2020
As part of its review of 2020, KIPCO highlighted a growth in revenue to KD 753 million (US$ 2.5 billion) in 2020, compared to KD 698 million (US$ 2.3 billion) in 2019.
The company’s 2019 financials were restated during 2020 due to a change in the classification of OSN after an increase in ownership.
Despite the challenges that came with the COVID-19 pandemic, in July 2020, KIPCO successfully repaid bonds worth US$ 500 million (KD 153.9 million) under its EMTN Program, using existing resources. The transaction has left KIPCO with no debt maturity until 2023 and is a reflection of the soundness of the company’s financial strategy and its proactive management of liabilities.
Performance of Group companies
KIPCO highlighted the performance of its main operating companies in 2020. Burgan Bank reported a net income of KD 34 million (US$ 112 million). The bank’s capital adequacy ratio was at 18%, and it enjoyed stable asset quality with non-performing assets at 3.5%.
Gulf Insurance Group’s (GIG) net profit was up 22% and gross written premiums (GWP) increased 13%. During the year, the company announced the acquisition of AXA’s operations in the Gulf region which, when complete, will place GIG as one of the top three insurance companies in the region.
United Gulf Holding (UGH) completed a rights issue of US$ 70 million in 2020. It’s subsidiary, Kamco Invest, launched its new identity following the completion of its integration with Global Investment House.
KIPCO’s real estate arm, United Real Estate (URC), was affected by the closure of hospitality and retail activities due to the pandemic and gave exemptions and lower leasing rates to its tenants. Despite this, the company reported a revenue of KD 97 million (US$ 320 million). URC also began the construction of Byout Hessah, a residential component in Hessah Al Mubarak District.
Qurain Petrochemical Industries (QPIC), meanwhile, registered a 12% growth in revenue to KD 240 million (US$ 791 million) for the 12 months of 2020 (its financial year starts in April). Despite lower oil prices, QPIC reported a net profit of KD 22 million (US$ 72.5 million) for the 12 months of 2020.
Meanwhile, the Saudia Dairy and Foodstuff Company (SADAFCO) registered a 10% growth in revenue and 11% increase in net profit for the 12 months of 2020 (its financial year starts in April). The company maintains a healthy cash balance of SAR 691 million (US$ 184 million) with zero leverage.
United Education Company (UEC) reported a revenue of KD 27 million (US$ 89 million) and a net income of KD 1.8 million (US$ 6 million) for the financial year ended August 31, 2020. To ensure that its students continued to receive quality education online, the company launched several digital platforms and study aids.
As for OSN, KIPCO said that the hard and long journey of transformation was in progress. The pay-tv and on-demand video operator ranks among the top three streaming players, with OTT subscribers up from 80,000 in April 2020 to 450,000 in February 2021. A best-in-class technology platform is set to be launched in the second quarter of 2021 to further enhance subscriber experience.
OSN’s strong content lineup now includes Paramount+, with Discovery+ to be added soon. Three original Arabic content series were released in 2020, with plans to double investments in Arabic content in 2021. Partnerships with all major telecommunication companies are now in place, and OSN has begun engaging non-telecom vendors to strengthen its positioning.
During 2020, OSN registered improved financial performance, following the completion of its operational turnaround. It also downsized costs after negotiating contracts with major studios and controlling operational expenses. A financial turnaround is expected in the second half of 2021.
Focus in 2021
KIPCO highlighted the focus areas of its main operating companies in 2021. Burgan Bank will be enhancing the operations of its Turkey franchise, while fine-tuning its business model overall. The bank will launch and monetize its digital products during the year.
GIG, meanwhile, will focus on the AXA integration, thereby reinforcing GIG’s position in key markets.
As for OSN, it will continue to grow its customer base and revenue from the OTT platform, in addition to launching products that meet premium customer needs. The pay-tv and on-demand video company will continue to reduce costs and diversify content supply.
In 2021, URC will focus on returning revenue to pre-COVID levels, as progress continues in its residential projects in Hessah Al Mubarak District.
QPIC is expected to benefit from the recovery of oil prices and will continue to evaluate inorganic growth through acquisitions.
As for UGH, the company will look to exit non-core assets in 2021 and re-invent its operating model.
UEC, which has delivered its learning and programs effectively during the pandemic, will continue its digital transformation journey in 2021.
Outlook for 2021
In its outlook for 2021, KIPCO said that it remained guarded about this year, as it closely monitors the business impact of the pandemic. Whilst there is hope that the vaccine rollout will curb the spread of the virus, the second wave of the pandemic continues to pose a challenge despite efforts to bring economic activities back up to pre-COVID levels. Oil prices, however, are forecast to average US$ 20 higher than last year, promising a more positive impact on the market at large.
KIPCO said it would continue to monitor the global impact of the pandemic as the year unfolds. Mr Faisal Al Ayyar, KIPCO’s Vice Chairman (Executive) said:
“Throughout 2020, our companies worked hard to mitigate the impact of the COVID-19 pandemic. The rewards of these efforts are reflected in the results of the past year. Despite the highly conservative requirements of the Central Bank of Kuwait, Burgan Bank faired well in 2020. GIG continues to perform well, and successfully acquired AXA’s operations in the Gulf. While the impact of closures on retail and hospitality was significant, URC’s projects in Hessah Al Mubarak District continued uninterrupted. Both QPIC and its subsidiary, SADAFCO, recorded growth in revenue during the past year.”
“It is evident that the virus will remain with us for some time to come, and though people have begun to adjust their way of life to take precautions against an invisible disease, we remain guarded about 2021. As we face a second wave of the pandemic, we hope that the rollout of the vaccine will bring us closer to the end of the pandemic.”