Majid Al Futtaim presses on with expansion even as first-half earnings drop

Company's chief executive is 'cautiously optimistic' and sees recovery in the second half of this year

Majid Al Futtaim Group, the Dubai-based conglomerate whose interests span shopping malls, real estate, retail and leisure sectors, is pressing on with its expansion plans even as it reported a drop in first half earnings as large-scale business disruptions affected revenue.

The company’s earnings before interest, tax, depreciation and amortisation (Ebitda) for the six months ending June 30, fell 27 per cent to Dh1.6 billion. Revenue for the reporting period declined 3 per cent to Dh17.3bn, it said on Wednesday.

Covid-19 has affected everyone and "we immediately acted on cost base because the operating reality [of the business] changed with the pandemic", Alain Bejjani, chief executive of Majid Al Futtaim – Holding, told The National.

"The reality is that it is [still] a volatile situation and we continue to operate in different ways in different markets, given lockdowns and restrictions on trading that are out of our hands."

A reduction in its cost base and a focus on digital transformation has enabled the company to mitigate the impact of Covid-19. However, Mr Bejjani does not see a full economic recovery until the end of the second quarter of 2021, as a rise in consumption is dependent on the development of a Covid-19 vaccine.

Despite a weaker economic backdrop, he remains positive about growth prospects in the company's core markets including the UAE, Saudi Arabia and Egypt.

"I have a cautiously positive outlook. The second half is going to be better than the first half," he said. "Generally speaking, we are back to business. The recovery is [also] a bit faster than expected."

Companies around the world have seen revenues and profitability come under pressure during the pandemic. Global banks, airlines, oil and gas companies, major corporations in retail, hospitality and tourism have all looked to minimise their cost base, bolster cash reserves and accelerate digital transformation during the crisis.

Majid Al Futtaim said the first six months presented two “differentiated quarters”. The company began the year performing above expectations across all its operating units. However, the second half of March saw the pandemic take hold, leading to temporary asset closures, travel and movement restrictions and supply chain challenges. Despite difficult macroeconomic conditions, its grocery retail business saw a 4 per cent and 18 per cent increase in revenue and Ebitda, respectively, it added.

The retail arm of the company behind Mall of the Emirates and Ski Dubai, reported strong results during the first six months. Revenue increased 4 per cent to Dh15.1bn, while Ebidta grew 18 per cent to Dh709 million.

The company's Carrefour franchises in countries across the Middle East, Africa and Asia saw a 263 per cent increase in online sales, contributing to 3 per cent of the total revenue of the Carrefour business. Majid Al Futtaim also opened five physical stores and three new fulfilment centres during the first six months of the year.

Majid Al Futtaim Properties, on the other hand, registered a decline of 26 per cent in revenue and a 27 per cent slide in Ebitda in the first six months of 2020, to Dh1.5bn and Dh1.1bn, respectively, the company said.

Its shopping malls business saw a drop in revenue due to temporary asset closures across the region and the company’s decision to provide rent relief to tenants during the pandemic. Majid Al Futtaim said it waived rents at its 27 shopping malls across five markets to ease the financial burden on its tenants amid the pandemic.

The shopping malls business, however, is gradually recovering, with footfall increasing across the company’s assets towards the end of the first half of the year, it said.

Majid Al Futtaim Hotels also saw 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 Ventures, the group’s leisure and entertainment arm, saw the biggest impact of the pandemic. Revenue dropped 46 per cent to Dh690m during the first six months of the year, while Ebitda slumped 199 per cent to Dh135m.

The company said it will maintain a disciplined financial management approach in the second half of the year.

It will continue to implement its expansion plans, with new dates already announced for the opening of Mall of Oman in Muscat and City Centre Al Zahia in Sharjah. The company’s retail business will expand its physical presence across existing markets, while Majid Al Futtaim Ventures will open 55 new VOX Cinemas screens in the second half of 2020, it said.

“Majid Al Futtaim is fully committed to the markets in which it operates,” it added.