Complex Made Simple

Qalaa Holdings releases its consolidated financial results for 30 June 2015

Qalaa remains on track with the delivery of its FY15 strategy, marking significant milestones in its risk reduction, deleveraging and asset divestment programs

Qalaa Holdings (CCAP on the Egyptian Exchange, formerly Citadel Capital) released its consolidated financial results for the quarter ending 30 June 2015, reporting revenues of EGP 2,086.8 million, up 33.7 per cent compared to the same quarter last year.

On a six months basis, revenues climbed 37.8 per cent y-o-y in 1H15 to EGP 4,034.3 million. EBITDA meanwhile stood at EGP 565.1 million in the first half of 2015, a 169 per cent increase over 1H14.

Revenue growth was driven by strong performance at TAQA Arabia’s fuel marketing arm, having recorded top-line y-o-y growth of 72 per cent and 73 per cent in 2Q15 and 1H15, respectively.

In the cement division, ASEC Cement’s Sudan subsidiary Al-Takamol also made a strong contribution to Qalaa’s top-line growth, with the cement unit’s revenue recording 96 per cent and 121 per cent y-o-y growth in 2Q15 and 1H15, respectively. Together the energy and cement divisions contributed some 70 per cent of total revenues in 2Q15.

On the restructuring front, the first six months of 2015 have also witnessed several developments, including ASEC Holding’s sale of its 27.5 per cent stake in Misr Qena Cement, which resulted in a gain from sale of investment equivalent to EGP 67 million booked in 2Q15. Proceeds from the sale were utilized to fully deleverage at ASEC Cement and partially deleverage ASEC Holding, with the balance being distributed to shareholders.

“Our exit from Misr Qena is one of several developments taking place during 2015 that play into our risk reduction strategy and our ongoing deleveraging program,” said Ahmed Heikal, Chairman and Founder of Qalaa Holdings. “Qalaa’s ongoing restructuring efforts meanwhile continue to reflect positively on its financial performance, with significant improvements at the EBITDA level, in line with our previously announced guidance, and a continued narrowing of its bottom-line losses, which recorded a 53 per cent y-o-y improvement in the first half of 2015,” Heikal added.

The company reported a net loss after tax and minority interest of EGP 84.7 million in the second quarter of 2015, a narrowing of 55 per cent from 2Q14 figure of EGP 188.3 million. On a six months basis, bottom-line posted a loss of EGP 196.9 million, a 53 per cent improvement compared to 1H14 figure of EGP 420.2 million. This improvement comes despite charges of EGP 102.5 million in 1H15 related to discontinued operations. Of the EGP 102.5 million, c.EGP 44 million were booked in 2Q15 of which EGP 33 million came from MENA Homes’ Designopolis, one of several assets earmarked for sale as part of the FHI transaction. It is worthy to note that interest and depreciation due to discontinued operations are non-cash items; management accordingly estimates that c. 95 per cent of losses from discontinued operations are non-cash.

Management reiterates its strategy for 2015 with its underlining factors being the mitigation of financial risk by significantly deleveraging at the holding and platform company levels, and limiting operational risk through the divestment of non-core and non-essential assets while focusing resources on core business and ensuring they have the funding needed to deliver on growth plans.

“Qalaa has repeatedly stressed that deleveraging is one of the company’s key strategic goals for 2015 and onward,” said Qalaa Co-Founder and Managing Director Hisham El-Khazindar. “We remain on track with our divestment program, proceeds from which will be utilized in reducing total consolidated debt from the current EGP 7.6 billion — excluding debt associated with Africa Railways and greenfield megaproject ERC — to around EGP 5 billion by the end of FY15,” he added.

“We have cut bank debt by c.EGP 365 million, as proceeds from our exit from Misr Qena were directed toward deleveraging at ASEC Cement; this will be reflected in our 3Q15 financials. Moreover, our agreement with FHI, which we expect to close by December 2015, will result in a further c.EGP 800 million reduction in Qalaa’s consolidated debt and further delivers on our strategy of reducing both financial and operational risk.” (Execution of the FHI transaction is subject to certain conditions precedent and customary termination rights.)

Key elements of Qalaa Holdings’ strategy in FY15 include:
-Deleveraging at the holding and platform company levels
-Acquisition of additional stakes in key platform companies
-Selective investments within existing platform companies
-Share Buybacks: Management is mindful of the opportunity to create value through share buybacks, and intends to use the proceeds from exits post deleveraging to acquire Qalaa shares for so long as these trade at a significant discount to their fair market value.

The aforementioned elements are to be financed through sale of assets where Qalaa is in advanced stages of divestments, including Misr Glass Manufacturing, Dina Farms Op Co, confectioner Rashidi El-Mizan, microfinance platform Tanmeyah, ASEC Cement’s operations in Algeria (Zahana Cement & Djelfa), and the Tebbin land held by Nile Logistics. The company reiterates its stance that further divestments will be executed if the need to do larger share buybacks arises.

Qalaa Holdings’ full business review for 2Q/1H 2015 and the financial statements on which it is based are now available for download on