Dubai: ADNOC Logistics & Services sure knows how to surpass expectations – by some distance.
Everyone knew that the ADNOC entity’s IPO would garner some strong numbers and that it would hit over-subscription instantly. Being an ADNOC venture, those are the bare minimum expectations.
But then ADNOC L&S delivered – over-subscriptions by 163x and racking up $125 billion in offers. The company – which had revenues of Dh7.16 billion for 2022 and profit of Dh957 million – is now getting ready to list on ADX tomorrow (June 1) and be the sixth ADNOC-owned or affiliated entity to do so.
Nicholas Gleeson, CFO, outlines the immediate priorities for ADNOC L&S. And also touches on the days and weeks gone before the IPO. He has every right to…
Any guidance on what revenues and EBITDA could be in 2023?
Our revenue and EBITDA targets are supported by strategic growth levers including expansion of services, entry into new business verticals and growth of our geographic footprint and customer base.
For revenue, we target mid-to-high single-digit year-on-year growth in the medium term. We aim to achieve this through new contracts, expansion of our integrated logistics services, optimised redeployment of jack-up barges, and expansion of shipping fleets. The VLCCs and LNG carriers, for example.
On EBITDA, we target a margin of approximately 30 per cent in 2023. Over the medium term, we target average annual EBITDA growth in the low teens and margin growing to 35 per cent per cent.
The IPO has been one major success, for want of better ways to describe it. But what is the rationale for the IPO at this point in time?
Our IPO represented an excellent opportunity for public participation in our rapidly expanding business while raising our profile with the international investment community. As well as our international customer base.
Listing enables us to be more financially dynamic and helps unlock our full potential by expanding our business network and access in the UAE and beyond. We believe is an exciting opportunity for the citizens and residents of the UAE, as well as international investors, to participate in our ambitious growth plans.
The attractiveness of our investment case was clearly demonstrated by the record-breaking demand. At $125 billion in orders, ADNOC L&S drew the highest-ever demand for a UAE book-build offering. So far, this is the most in-demand IPO in the world this year.
And with your new and prospective shareholders all set for the growth ride?
There is a compelling growth story demonstrated by our historic performance, by the opportunities that exist – and the plans we have – for expanding our operations and our footprint across our business segments. Not only are we ideally positioned to benefit from ADNOC’s announced $150 billion strategic investment program, but we also have an ambitious growth roadmap of our own, which will see medium-term capital expenditure of $4 billion to $5 billion. Our free cash flow outlook enables us to commit to what we feel is an attractive income opportunity through a progressive dividend policy.
We have already demonstrated our track record of delivering powerful organic and inorganic growth, operational excellence, robust cost discipline, and strong and profitable financial results. Our pro-forma revenue has increased at a CAGR of more than 50 per cent from 2020 to 2022.
As we pursue margin expansion and sustainable profitable growth, we will maintain our robust operating cash flows and balance sheet, enabling the payment of a competitive dividend return to shareholders while we grow.
We are targeting annualized dividends of $260 million for 2023, and thereafter we expect to increase the annual dividend at a rate of at least 5 per cent per annum, in the medium term.
Would you consider M&A or JVs to keep growth happening?
We are ideally placed to capitalize on ADNOC’s ambitious expansion plans and growing global demand for cleaner, more reliable energy supplies. Our growth strategy is focused on expanding the scope of the services we provide to ADNOC Group, targeting decarbonization and helping to drive the responsible energy transition.
And expanding our relationships with, and scope of services provided to, existing and new clients, expanding our geographic footprint and operations, and exploring new business verticals such as logistics support to renewable energy production.
Our strategy may also involve further acquisitions and partnering in the future, including in new business areas. In November last, we completed the ZMI Holdings acquisition, which will continue to operate as a wholly-owned subsidiary.
We will continue to consider transactions, including acquisitions, partnerships and other business combinations on a case-by-case basis.
ADNOC is by some distance your largest and most important customer. But who are your other customers?
We provide services to 100-plus global clients and ship to more than 50 countries. As part of our future strategy, we aim to attract new clients and explore further growth opportunities in new geographies and services.
Our clients apart from ADNOC include some of the largest IOCs and energy commodities trading businesses in the world.