Heavy Engineering Industries and Shipbuilding K S C P : Supplementary Disclosure regarding the Analyst Conference Transcript for the second quarter of the period Ended on 30 June 2023

Waleed Attiya Hello, everyone. Thank you for joining us for HEISCO's analyst conference for the second quarter of 2023. This is Waleed Attiya, corporate director of project control. Basically, HEISCO is a Kuwaiti shareholding company listed in the premier market on the Kuwait stock exchange. Over the past 50 years, HEISCO as a group has gained extensive experience in various business operations, such as civil and building, mechanical, electrical and instrumentation, construction, industrial maintenance, fabrication and process equipment manufacturing, galvanising, quality control, mechanical testing and calibration, grading and scaffolding, shipbuilding and repair, dredging, marine construction and specialised technical manpower supply.Currently, we have a branch in Saudi Arabia, and our Saudi branch has obtained already Aramco registration approval.

HEISCO's workshop facilities are certified by the American Society of Mechanical Engineers, and the National Board of Boilers and Pressure Vessel Inspectors. We have various international standard codes followed for our tank manufacturing, such as API-650 and API-620 and so on. And we have also some specific standards such as Swedish SA for surface preparation, and SPCC specifications for painting, coating or lining.HEISCO is authorised to put the U, U2, SPP and NPR stamps on its products, and the API monograms for separators. The testing and calibration laboratory is accredited to ISO/IEC 17025.

HEISCO's quality management system is ISO 9001 2015 certified. The occupational health and safety management system is ISO 45001 2018 certified, and the environmental management system is ISO 14001 2015 certified.HEISCO is an approved contractor of the Central Agency for Public Tenders, CAPT, for civil construction category 1, and electrical works category 2.

HEISCO subsidiaries are Gulf Dredging & General Contracting Company, KSC closed, for onshore and offshore operations, and HEISCO for Technical Specialised Manpower Supply Company WLL, for technical specialised manpower supply.

Now, I will convert the meeting to Mr Joseph Mathew, our corporate director of finance.

Joseph Mathew Thank you, Mr Waleed, and let's go to the finance slides, please. Go to slide seven. Yes, thank you. Good afternoon, everybody. At the onset, thanking you all for attending the half-year earnings call of HEISCO. Let me provide you with an overview of the performance of the group during this period and status of our financial position.

For the half-year 2023, HEISCO, at a group level, have attained revenue of 66.99 million against

56.19 million for the corresponding period last year, showing a growth of 19%. EBITDA, we have recorded a consolidated 5.44 million against 4.77 million, a 14% increase, a net profit of 2.47 from

2.01, an increase of 23%, and an EPS of 13.69 this year versus 11.15 corresponding last year.

Assets have grown slightly over 2% compared to fiscal year 2022 for the last six months. Equity has dropped slightly, 2%, basically because of the difference between the net added and net profit versus the dividend paid. And a change in fair value of our investment in same shares employed. Borrowings, on the whole, has gone up slightly by 1%, to 35 million from 34.76 million.

The first three graphs have already been listed there, but the bottom three are with respect to this quarter, so we have, for Q2 this year versus last year, an increase of 5.52 million in revenue, which corresponds to 19.5%. At the EBITDA level, we have performed in the region of 1.13 million, which is 151%, and at the net profit level we have an increase of KD 910,000, corresponding to the previous period which is an increase of 208%.

Looking at the business segments, the majority of the revenue increase has come from industrial oil and gas, as well as offshore. Shipyard remained constant because we had some trouble with our floating dock, which has been repaired and back in action now. This is with respect to half-year comparison with last year.

Here, we just see the Q2 comparison between two periods, and similarly you see the differences basically coming from offshore, the percentage change of 28.78, and industrial oil and gas at 21.4, and a big drop in shipyard in terms of revenue because, as I said before, the absence of the loading dock, which has already been rectified and in place now.

Coming to the statement of income consolidated, we have a net increase of KD 10 million in revenue over the six-month period comparison, and roughly KD 5 million in terms of quarter to quarter. Now, under general administration expenses, we have managed to just tied up the figures almost very close to the previous six months, irrespective of six months of increase in revenue.

Investment income, as our sole investment is in shares and it is the dividend which has come in. Expected credit loss, we have got a better return, credit back, this year because of aggressive collections, the whole debt has been recollected, and hence the. Finance cost has got an increase compared to the previous six months. We had an additional 2% hit on the [unclear]. Foreign exchange gain or loss is predominantly because of weakening of the euro and strengthening of US dollars.

On the profitability, basic gross profit, the EBIT remains almost unchanged. Net profit margin, ROA and ROE are showing a slight increase. Total debt to assets and debt to equity remain constant and quick ratio, current ratio almost remaining stagnant.

On page 13, consolidation of financial position, we don't see any major change in assets or liabilities with respect to the closing of last year. On the consolidated statement of cash flow, the addition of assets and project execution to the tune of 1 million has shown an increase in cash flow of investing activities. And net cash flow from financing activities, we had a settlement to company for KD 696,000 plus a KD 300,000 miscellaneous dues which we have settled to the banks.

Coming to the financial position on the assets, we see an addition of roughly 7 million from half-year to half-year, and 4 million from December to this half-year. Basically, the addition has been a cutter suction dredger for 3 million, tugboats for 1.3 million, a hopper barge for 1 million, offshore supply port for around 2.6 million. These were the major assets which we have added to our fleet.

On the non-current assets, trade and other receivables, the difference has been transferred from non-current assets retention to current assets retention, and it has been collected subsequently. On the current assets, the contract assets basically being a contracting environment, the clients are normally built on milestones, progress measurement systems, approvals, finalisation of hand-over projects, hence the work in progress. So this number keeps changing from period to period. In the current assets, again trade and other receivables have come down, better collections from.

On non-current leverages due to the company, it has been reclassified to current liabilities, and due to bank working capital loan has been repaid. On the current liabilities, again, due to the company reclassified and current liabilities, trade and other payables, it has been increased because of receipt of advance payment from clients.