The second quarter of the current year ended June 30, 2020, is considered to be one of the toughest three-month periods for the corporate world in the recent past, with many having reported loss.
According to the published numbers, Majid Al Futtaim (MAF) Group, one of the most diversified business conglomerates in the region, has closed the first half (H1) of 2020 with an EBITDA of AED1.6 billion, but there was no mention about what happened to the bottom line – a net loss or net profit?
Though the group has disclosed the earnings after interest, tax, depreciation, amortization and impairment for the first half, according to financial analysts, the group must have obviously ended the first half with a net loss given the unfavourable market conditions prevailed during the period, thanks to the COVID 19 that gripped the whole world.
The group reported revenue of AED17.3 billion for the period under review, representing decline of 3 per cent compared with the same period last year.
The asset base of the group that runs the leading shopping mall, communities, retail and leisure networks across the Middle East, Africa and Asia, decreased 4 per cent to approximately AED61.8 billion.
The period (H1) presented two differentiated quarters, driven by the impact of the global COVID-19 pandemic. A statement from the group said Majid Al Futtaim began the year performing above expectations across all its operating units.
However, the second half of March saw the COVID-19 pandemic take hold, leading to temporary asset closures, travel and movement restrictions and supply chain challenges affecting companies globally.
Despite these macroeconomic conditions, the company witnessed strong growth in its grocery retail business, with a 4 per cent and 18 per cent increase in revenue and EBITDA, respectively.
Against strong headwinds
Alain Bejjani, Chief Executive Officer of MAF Holding, said the pandemic has undoubtedly affected the business of the group. “Over the years, the group has built and maintained a sustainable and diversified business ready to withstand the headwinds in the industries.
“Backed by the ongoing prudent financial management, an agile mind-set and the unrelenting drive of our people, we were able to respond quickly to course correct, reduce our cost base, and enhance our digital capabilities to meet the accelerated demand on multiple digital platforms,” Bejjani added.
These measures enabled the group to mitigate some of the impact of COVID-19 on performance and maintain ‘BBB’ rating, which bears testament to the resilience of the group’s business model and financial health.
Support to local food economy
In order to support the local food economy and guarantee a sustainable supply chain, the company collaborated with the Ministry of Climate Change and Environment (MOCCAE) to boost the availability of locally grown produce across Carrefour UAE stores, by opening new distribution channels for more than 6,000 small and medium-sized local farmers and ensuring a sustainable supply of fresh fruit and vegetables across the country.
It also partnered with the UAE Government to launch Carrefour’s third hydroponic farm, which uses 90 per cent less water and less space than traditional farms to deliver approximately 10 kg of fresh herbs and microgreens per day, equivalent to the yield of about one acre of farmland.
Majid Al Futtaim – Properties
Majid Al Futtaim – Properties registered a decline of 26 per cent in revenue and 27 per cent in EBITDA in the first six months of 2020, standing at AED1.5 billion and AED1.1 billion, respectively.
The Shopping Malls business saw a drop in revenue due to temporary asset closures across the region and the proactive decision to forego rents during closure periods.
However, it is now presenting a gradual recovery as footfall has increased across the company’s assets towards the end of the first half of the year.
Majid Al Futtaim Hotels experienced a 41 per cent drop in occupancy rates due to asset closures and reduced demand due to travel restrictions and border closures.
Majid Al Futtaim – Retail
In the first half of the year, the Carrefour business witnessed strong growth despite the prevailing conditions. Revenue increased by 4 per cent and totalled AED15.1 billion, while its EBITDA grew by 18 per cent to AED709 million.
Online sales increased by 263 per cent across all markets the company operates in, and contributed 3 per cent of Carrefour’s total revenue. “Majid Al Futtaim’s early efforts to future-proof the business and enhance its digital capabilities have positioned the company well to respond to shifting consumer behaviour,” a statement added.
Majid Al Futtaim Ventures: Majid Al Futtaim – Ventures felt the greatest impact of the pandemic, with a 46 per cent decrease in revenue and a 199 per cent decrease in EBITDA in the first six months of the year, standing at AED690 million and -AED135 million, respectively.
This decline was largely driven by government-mandated closures due to the pandemic, which required Leisure, Entertainment and Cinema (LEC) assets to close for a prolonged period of time. However, like the Shopping Malls business, towards the end of Q2 2020, customers began to return as leisure and entertainment assets began opening for business in a phased manner.
A company statement said during the second half of 2020, Majid Al Futtaim will continue to support sustainable economic development in its efforts towards economic recovery, while maintaining a disciplined financial management approach. Majid Al Futtaim is fully committed to the markets in which it operates whilst striving to bring the right product to market at the right time to deliver maximum value for customers and tenants.
The company will carry on its expansion plans in core markets, with new dates already announced for the opening of Mall of Oman and City Centre Al Zahia in Sharjah.
Majid Al Futtaim – Retail will also open three supermarkets in Uzbekistan this year, marking the first entry of an international grocery retailer into the Central Asian country. In addition, Majid Al Futtaim – Ventures will open 55 new VOX-Cinemas screens in the second half of 2020, it said..