Egypt and new markets underpin Majid Al Futtaim growth despite challenges

Company reports a 1% increase in revenue to Dh35.2bn last year

Majid Al Futtaim Group's City Centre Almaza project in Egypt, which opened last year. The company's retail business in Egypt increased its contribution to the group's overall earnings to 9 per cent, says chief executive Alain Bejjani. Courtesy of Majid Al Futtaim
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Earnings at Dubai's Majid Al Futtaim Group edged up 1 per cent in 2019 despite tough market conditions as the company benefited from double-digit sales growth in Egypt and moves into new markets.

Earnings before interest, tax, depreciation and amortisation increased to Dh4.6 billion as group revenue also rose 1 per cent to Dh35.2bn. The contribution from the company's Egyptian operations to overall earnings increased to 9 per cent of the total, from 6 per cent in the prior year, chief executive Alain Bejjani told The National.

"Add to that the very big expansion we're having in Saudi Arabia on the Vox Cinema side — we now have about 80 per cent market share there and excellent performance," he said.

The company's retail segment, its biggest business line that includes the regional franchise of France's hypermarket Carrefour, reported sales growth of 1 per cent to Dh28.1bn, as earnings climbed 2 per cent to Dh1.4bn.

Retail was helped by the opening of 12 new hypermarkets and 30 supermarkets last year, with expansion in Egypt a particular focus. The company also opened its first Carrefour in Uganda in December, and is opening its first stores in Uzbekistan this year. Mr Bejjani said the firm will continue to expand into East Africa and Central Asia this year.

"We don't have specific markets to announce yet, but we will pursue [these] during the year," he said.

Carrefour's online business grew 600 per cent across the Middle East and North Africa last year, and comprises about 1.5 per cent of the retailer's total regional sale, Mr Bejjani.

The Majid Al Futtaim Ventures business reported strong growth last year, due in large part to the push of Vox Cinemas into Saudi Arabia, following lifting of restrictions in 2018. Ventures recorded a 30 per cent increase in Ebitda to Dh416m, as revenue rose 17 per cent to Dh2.8 billion. The company opened 78 new screens in the kingdom last year bringing the total to 82 — a number it is set to double this year, Mr Bejjani said, as it pushes ahead with a target to operate 600 screens in the market.

"Cinemas is a big driver of growth. That is something for us that is sustainable," he said.

"2020 will see us also in Saudi Arabia opening in three new secondary cities. Geographical diversification is important so we're not only present in the main cities but also in secondary cities," Mr Bejjani.

Revenue in the properties division declined, however, by 1 per cent to Dh4.6bn with Ebitda remaining flat at Dh3bn. Although footfall was up 4 per cent to 200 million and the frequency rates of visitors to its properties remains "very high by global standards" at 93 per cent, there is a more negative sentiment with customers being more cautious on spending, Mr Bejjani said.

Despite this there are signs of "green shoots" that point to a recovery, with the company recently selling out the 300-unit first phase of its Tilal Al Ghaf project in Dubai — a Dh14bn, 3 million square metre scheme of 6,500 homes due to be delivered over the next 10 years.

"Now we are about to launch the second phase. There is great demand," Mr Bejjani said. "We're seeing very strong demand from end users and this is in itself also a very solid recognition of the resilience of the market in the UAE. We'll be launching another 300 units in [the] coming few days."

The grocery retail market in the UAE grew 3.5 per cent last year to $17.4bn (Dh63.9bn), according to data from Euromonitor, with the overall retail market in the country climbing 4.7 per cent to $54.7bn. For the wider MENA market, the grocery retail market grew 9.5 per cent to $389.4bn.