ADNOC

ADNOC Distribution net profit increases by 2.3% to AED 1.72 billion in first nine months of 2019

Company evolves customer offer, now providing free assisted fueling and will introduce new loyalty program, ADNOC Rewards, in Q4

31 October 2019

ADNOC Distribution (ISIN: AEA006101017) (Symbol: ADNOCDIST), the UAE’s largest fuel and convenience retailer, today reported that underlying EBITDA (EBITDA excluding inventory gains) for the third quarter of 2019 grew to AED 698 million, an increase of 10.0% compared to the third quarter of 2018, driven by higher volumes and improved cost efficiencies. Total fuel volumes sold increased by 3.9% in the third quarter of 2019 compared to the third quarter of 2018, driven by improvements in the core retail markets of Abu Dhabi and the Northern Emirates, as well as contributions from new stations in Dubai and growth in commercial volumes.

The company’s retail volumes were supported by marketing promotions throughout the summer months. Non-fuel retail gross profit also increased by 16.6% for the same period compared to Q3 2018. This was supported by the convenience store revitalization program which offers customers an improved shopping experience, contributing to an uplift in average basket size of 6.5% in Q3 2019 compared to the same period of 2018. Overall, the company recorded a net profit for the quarter of AED549m, demonstrating a solid operational performance. When compared to the same period last year, net profit showed a slight decrease of 1.7% due to the absence of non-operational inventory gains achieved in Q3 2018.  

Commenting on the results, ADNOC Distribution’s Acting CEO, Saeed Mubarak Al Rashdi, said: “We have delivered strong results in the third quarter as well as the first nine months of 2019 and have demonstrated our ability to realize profitable growth, supported by an increase in fuel volumes sold, an enhanced convenience store experience and improved quality of service. Looking ahead, we are focused on the acceleration of our domestic network expansion, particularly in the Dubai market, and the growth of our non-fuel business.”

He further commented: “Our recent marketing campaign offering free assisted fueling has proven to be a success, both in terms of generating an increase in retail fuel volumes in the third quarter of 2019 for the first time since our IPO, and in better understanding our customers’ requirements. This, in conjunction with feedback from extensive customer engagement, has resulted in the decision of the Board of Directors to approve offering free assisted fueling to all our customers, which we will implement beginning this Sunday, 3rd November. We trust this will be very well received by our customers as well as our investors as it will facilitate and strengthen our ambitious network expansion and volume growth targets. As a result of cost reductions and other initiatives, we do not expect this to have an impact on our profitability or dividend policy.”

 

“We remain dedicated to fulfilling the promises we have made to our shareholders and the local communities we proudly serve every day. The company has engaged with nearly 14,000 customers through focus groups and surveys. As part of the evolution of ADNOC Distribution’s offering, our company will launch a new loyalty program, ADNOC Rewards, before the end of the year, further enhancing our customer experience. We are well on our way to making ADNOC Distribution a world-class fuel and convenience retailer and look forward to continuing our journey in the UAE and beyond,” Al Rashdi concluded.

 

In the first nine months of 2019, net profit increased to AED 1.72 billion, an increase of 2.3% compared with the same period last year. Underlying EBITDA (EBITDA excluding inventory gains) for the first nine months of 2019 grew to AED 2.06 billion, an increase of 10.6% compared to the first nine months of 2018. The company’s EBITDA margin has also shown continued momentum, reaching 13.7% in the first nine months of 2019, up from 12.7% during the same period last year. Free cash flow (EBITDA minus capital expenditure) generation was up 18.8% year-on-year to AED 1.94 billion for the first nine months of 2019. Non-fuel retail gross profit also increased by 12.2% for the same period compared to the first nine months of 2018. ADNOC Distribution continues to focus on realizing cost efficiencies, including across its supply chain and logistics operations, which has contributed to a 9.3% reduction in like-for-like operating expenses for the first nine months of 2019 compared to the same period last year.

 

ADNOC Distribution’s priorities remain growth and shareholder returns underpinned by a progressive dividend policy. As previously announced, the company intends to boost growth in both its fuel and non-fuel businesses and has targeted EBITDA in excess of AED 3.67 billion by 2023. In April 2019, ADNOC Distribution announced a new dividend policy, representing a 62% increase in the annual dividend for 2019 (AED 2.39 billion or 19.10 fils per share) and 75% for 2020 (AED 2.57 billion or 20.57 fils per share), compared to the 2018 dividend. This would translate to a 7.3% annual dividend yield for 2019 (based on a share price of AED 2.63 as of 30th October 2019). The company paid half of the 2019 dividend in October of this year and expects to pay the next half in April 2020, subject to Board of Directors approval.

Key Financial Metrics

AED millions

Q3-19

Q3-18

change

9M-19

9M-18

change

 

2018

Revenue

5,637

5,955

-5.3%

15,911

16,922

-6.0%

 

22,893

Gross profit

1,245

1,277

-2.5%

3,723

3,885

-4.2%

 

5,069

EBITDA

698

714

-2.2%

2,181

2,157

1.1%

 

2,774

Underlying EBITDA (excl. inventory gains)

698

635

10.0%

2,062

1,864

10.6%

 

2,536

Operating profit

565

587

-3.7%

1,792

1,777

0.8%

 

2,242

Profit for the period

549

558

-1.7%

1,721

1,682

2.3%

 

2,128

Earnings per share (AED/share)

0.044

0.045

-1.7%

0.138

0.135

2.3%

 

0.170

Capital expenditure

106

195

-45.6%

244

527

-53.7%

 

772

Free cash flow

592

518

14.2%

1,937

1,630

18.8%

 

2,002

 

The full third quarter and first nine months of 2019 earnings announcement can be found at https://www.adnocdistribution.ae/en/investor-relations/investor-relations/