Stock - Spinneys
Spinneys' IPO sets up the platform for more retail sector enterprises to start coming to the capital markets. Image Credit: Supplied

Dubai: The supermarket operator Spinneys will pay 70 per cent of its profit after tax to shareholders, the Dubai headquartered company has confirmed. Dividends will be paid in April and October, with the first of these to be made in October this year as H1-2024 payout. 

"The company will endeavour to maintain a dividend pay-out ratio of 70 per cent," Spinneys said in a statement.

"The dividend policy is designed to reflect the company's expectation of cash flows and expected long-term earnings potential, while allowing Spinneys to retain sufficient capital to fund ongoing operating requirements and continued investment for long-term growth."

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Spinneys, which operates more than 70 outlets in the UAE, confirmed plans to float 25 per cent and then list on DFM. The subscription for the retail investor tranche starts April 23.

Last year, the company recorded Dh2.9 billion in sales and which delivered a Dh254 million profit tally. The margins, at near 20 per cent, came out nice and fresh. In Dubai, Spinneys claims a 27 per cent market share in the overall grocery and fresh produce space.

Ali Saeed Juma Al Bwardy, Chairman, and Sunil Kumar, CEO, of Spinneys. The retailer has been working up some serious operating profit margins, which Kumar says, stands out as the best in its category among its Middle East peers. Image Credit: Supplied

Spinneys, which has plans to expand its reach into Saudi Arabia shortly, says it is 'well-positioned to capitalise on the robust economic landscape of the UAE'.

“Having begun our story in Dubai in the early 1960s, we are proud to be taking another significant step in our journey," said Ali Saeed Juma Al Bwardy, founder and Chairman of Spinneys. "Ours is a brand with huge ambition, positioned to flourish in the GCC’s most attractive and fast-growing markets.

"Our IPO represents an opportunity for investors to be part of our next stage of growth and we are excited to embark on a new chapter, bringing our fresh opportunity to a wider shareholder base.”

Ingredients for more success post-IPO

"While the UAE’s population is projected to grow at a CAGR (compound annual growth rate) of 0.7 per cent from 2022-28, the affluent population in the UAE is projected to grow faster, at a CAGR of 4.3 per cent from 2022-28, driving sustained demand for premium food in the UAE," the company said in statement.

Stores in Riyadh, Jeddah

And then there is the move into Saudi Arabia. "The group is planning to expand into Saudi Arabia in 2024, the GCC’s largest economy, where the economy is expected to grow at a CAGR of 3.2 per cent from 2022 to 2028, with projected growth of affluent population CAGR of 6.4 per cent over the same period. Spinneys will focus on store openings in Jeddah and Riyadh."

For Saudi Arabia, Spinneys has entered a JV with Abdul Mohsin Alhokair Group for the store rollouts. The first one will be in Riyadh, a 4,500 square metre facility. "The plan is to go omni-channel by introducing the online sales option for Saudi shoppers too," said Sunil Kumar, CEO of Spinneys.

“Our cash flow position places us at No. 1 position amidst our Middle East peers when it comes to groceries,” said the CEO. “We have touch points - whether that’s our physical stores or online - that creates value across the chain.

“There are more opportunities where we can seek more profitable growth, especially in the communities and affluent customer (demographics) that Spinneys has served for decades.”

Check out the margins

In the UAE, Spinneys will continue to build on its 75 store presence. According to its calculations, the local market can take on another 500-600 stores in the 2,500 square metre and over profile, much of which down to the growth in the country's resident base. "And the growth in affluent residents is growing at a faster rate than the broader retail market," said Kumar. "Which also explains the margins we operate on."

According to Sameer Lakhani, Managing Director at Global Capital Partners, "(Spinneys') profit margins are twice that what you see in comparable markets in the US (stores like Albertsons), indicating a strong growth profile and setting the stage for expansion throughout the Middle East."

A detail that investors - retail and institutional - will zero in on when subscriptions open April 23.