Letter from the Board of Directors

Dear shareholder,

Global growth is expected to see its third consecutive year of deceleration. According to the World Bank, global growth is expected to slow to 2.4% in 2024 owing to tight monetary policies, restrictive credit conditions and low levels of global trade and investment.

In the Middle East, the ongoing war has increased geopolitical risks in the region. However, oil-exporting economies, including the GCC member states, are expected to witness a positive impact as the oil production cuts unwind.

In Kuwait, despite the government’s announcement that the Kuwait development plan would be pushed to 2040, Fitch reaffirmed Kuwait’s Sovereign Credit Rating at (AA-) with a Stable Outlook. The newly appointed Prime Minister underlined the importance of taking serious steps to implement the development plan, and that it would be a priority on the government’s action plan.

At KIPCO, we continue to seek opportunities to unlock value within our portfolio companies, enhance governance within our companies and ensure that our investments deliver the best possible performance.

In 2023, KIPCO reported a net profit of KD 30 million (US$ 97.9 million), an increase of 19% from the KD 25.3 million (US$ 82.4 million) reported at the end of 2022. Total revenue from operations registered a 24% increase from KD 1.04 billion (US$ 3.4 billion) for 2022 to KD 1.3 billion (US$ 4.2 billion) for 2023. Shareholder equity increased 4% from KD 587.8 million (US$ 1.9 billion) to KD 611.2 million (US$ 2 billion). Our consolidated assets increased 8% to KD 12.3 billion (US$ 40.1 billion) at the end of 2023, compared to KD 11.4 billion (US$ 37.1 billion) for the previous year.

KIPCO’s Board of Director has not recommended the distribution of dividend for the year. The Board of Directors will not receive a renumeration for the year, while the Executive Management remuneration stands at KD 2,190 thousand. It is worthy to note that the regulatory authorities have registered no penalties against the company.

During this year, we successfully completed the sale of our 46.32% stake in Gulf Insurance Group to Fairfax Financial Holdings, which has been our partner in the business since 2010. The deal generated a double-digit internal rate of return during the investment holding period and was worth KD 256.5 million (US$ 836 million). KIPCO’s net profit came to KD 73 million (US$ 238 million) and the proceeds provided liquidity to further strengthen KIPCO’s capital structure and reduce its leverage.

As part of our strategy to proactively manage our liabilities, KIPCO signed a US$ 525 million (KD 160.4 million) credit facility with a group of nine regional and international banks. The proceeds were used to fully repay the US$500 million EMTN that was due in March 2023.

Also this year, KIPCO successfully completed its first Sukuk issuance of KD 103 million (US$ 336 million). This issuance was the first ever KD denominated Sukuk transaction by a Kuwait incorporated corporate.

In 2023, Burgan Bank completed the sale of its 51.8% majority stake in the Bank of Baghdad to Jordan Kuwait Bank. The sale resulted in a reduction in non-performing loans and the improvement of Burgan’s CET1 ratio by 70bps. Later in the year, Burgan Bank sold a 52% of its stake in Burgan Bank Turkey to KIPCO’s fully owned subsidiary, Al Rawabi United Holding. The transaction would have a positive impact on Burgan Bank’s regulatory capital ratios.

In additional to acquiring a majority stake in the Bank of Baghdad, Jordan Kuwait Bank sold a 66.97% stake in the UAE-based BHM Capital to Ethmar International Holding for JOD 30.6 million (KD 13.4 million). The bank also issued the first green bond in Jordan for US$ 50 million (KD 15.3 million).

Over the past year, we continued to make progress in turning around OSN’s operations, and the merger between OSN+ with Anghami is one result of these efforts. Once completed, the deal will create a streaming powerhouse in the MENA region with 120 million users, 2.5+ million subscribers and US$100 million in revenue at closing.

United Real Estate (URC), our real estate arm, announced the sale of its full stake in Medius RE Development in Egypt for EGP 1.9 billion (KD 19 million). In Hessah Al Mubarak District, more than 91% of the residential units in Hessah Towers and Byout Hessah have been sold and handover began in Q1 2024.

As for the National Petroleum Services Company (NAPESCO), it was awarded two contracts totaling KD 6.691 million (US$ 21.8 million) during the year. These include services to Kuwait Oil Company and the Kuwait National Petroleum Company for support, oil well cementing, maintenance, as well as HSE support systems.

We enter 2024 with a promising investment vision that will ensure that our Group companies continue to strengthen their operations and seek opportunities for growth that are value-creating and sustainable.

Sadly in 2023, Kuwait and the world lost a wise and visionary leader, the Late Amir of Kuwait, His Highness Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah. As we mourn this grave loss, we look to the new leadership of Kuwait for guidance.

We thank His Highness the Amir of the State of Kuwait, Sheikh Mishal Al-Ahmad Al-Jaber Al-Sabah, for his continued support and guidance. We would like to thank you, our shareholders, for the support and trust you have placed in your Board of Directors and management during the past twelve months. We would also like to thank all the employees of KIPCO and its operating companies for the contribution they made during the year.

On behalf of our shareholders, we thank the management for the results they achieved during 2023. May God continue to grant us success and prosperity.