Dubai: Describing the region’s retail environment as “challenging” in its full-year financial results released on Wednesday, Dubai-based Majid Al Futtaim saw its group revenue increase in 2017, but profits from its shopping mall business slipped.
Last year, the retail and leisure giant’s group revenue increased by 8 per cent to Dh32.2 billion, while its earnings before interest, taxes, depreciation and amortisation (Ebitda) increased by only 1 per cent.
Addressing the slowdown in earnings, Majid Al Futtaim said in a statement that the slower Ebitda growth predominantly resulted from “a change in business mix across the portfolio, with food grocery retail growing at a faster rate than the higher margin properties businesses.”
Majid Al Futtaim Properties registered 3 per cent revenue growth to end the year at Dh4.6 billion, primarily driven by the strong performance of its shopping malls business. Ebitda increased by 3 per cent to Dh2.9 billion, contributing almost 69 per cent of overall group Ebidta, the company said in a statement.
The owner of Mall of the Emirates, Mall of Egypt and a number of smaller community malls, in addition to residential properties and hotels, Majid Al Futtaim noted that it was hit hard by the devaluation of the Egyptian pound in the fourth quarter of 2016.
In November 2016, Egypt devalued its currency by 48 per cent, the result of an agreement with the International Monetary Fund (IMF) that saw Egypt receive a $12 billion (Dh44 billion) loan in exchange.
Four months later, Majid Al Futtaim opened a new megamall in Cairo, one of its largest in the region.
In its financial results, the firm said that largely as a result of the currency devaluation, Ebitda in its retail business declined by 1.6 per cent to Dh1.2 billion.
Qatari factor
Disruption to its Qatari operations as a result of the ongoing diplomatic rift between the Gulf countries was also a factor, the statement added.
“Majid Al Futtaim’s diverse businesses and the markets in which we operate are experiencing rapid change and new innovations. At the same time, our region continues to face volatility, our competition is becoming global and the needs of our customers continue to evolve,” Alain Bejjani, chief executive officer at Majid Al Futtaim Holding, said in a statement.
Despite these challenges, Bejjani added, “we have delivered a solid performance as a result of a clear growth strategy, with unparalleled customer experiences and talent capability-building at its core. These pillars, along with our focus to become as prominent digitally as we are physically, will continue to drive our resilience and competitiveness.”
Retail occupancy was down too as a result of Mall of Egypt’s soft opening, with total occupancy standing at 94 per cent. Excluding this, Majid Al Futtaim said its total occupancy would stand at 97 per cent, indicating that vacancies in its Cairo mall were dragging the average down by 3 per cent.
On a more positive note, the company said it saw customers at its malls increase by 6 per cent to 186 million in 2017.
Noting that it would continue to invest in customer experience, the company said it would also continue to develop talent, reinforce its omni-channel offering, and ensure that the business was well-positioned for long-term growth.
On the hotels front, Majid Al Futtaim reported an average occupancy of 76 per cent, experiencing a decline in revenue per available room (RevPAR), a key metric for measuring hotel performance, despite claiming to outpace the broader hospitality market.
The company says it continues to maintain a strong balance sheet with total assets valued at approximately Dh59.4 billion, with a net debt of around Dh10.4 billion.
