Aramex Announces Normalized Net Profit Growth of 42% in Q4 2022 and 9% for the Full Year 2022

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Aramex Announces Normalized Net Profit Growth of 42% in Q4 2022 and 9% for the Full Year 2022

• Financial results were normalized to give a like-for-like comparison to 2021; and therefore, they exclude MyUS performance, transaction costs related to the acquisition and other extraordinary items mostly related to the Logistics product.
• Strong financial performance was supported by growth in the freight forwarding business and successful group-wide performance enhancement initiatives• Strong financial performance was supported by growth in the freight forwarding business and successful group-wide performance enhancement initiatives.
• Reported Q4 2022 gross profit improved 16% YoY driven by a disciplined approach to cost management and realization of performance enhancement initiatives despite cost inflationary pressures.
• Business resilience was driven by growth in our home markets in the GCC and MENAT which also contributed to a solid performance in our outbound regions, primarily the US and UK. This was partially offset by weaknesses in China and Australia.
• In Q4 2022, Aramex successfully closed its biggest acquisition to date, MyUS. Therefore, the international express product benefited from two-and-a-half months contribution from this acquisition.

¹ Excluding MyUS combination and other extraordinary items

² Excluding extraordinary items reported during FY 2021

Financial Performance Commentary

Aramex's FY 2022 Revenue was broadly in line with the 2021, while Q4 2022 Revenue decreased 5% YoY to AED 1.53 billion. Growth in key regions including the GCC and other MENAT countries was offset by weaknesses in other markets, impacted by lockdowns in China, overall slower economic growth and lower consumer confidence as well as the global inflationary environment. Revenue was also impacted by currency devaluation in some operating countries, primarily in Lebanon and Egypt.

Financial results were normalized to give a like-for-like comparison to 2021; and therefore, they exclude MyUS performance, transaction costs related to the acquisition and other extraordinary items mostly related to the logistics product.

For the full year 2022 period, Normalized Gross Profit was down 2% YoY to AED 1.41 billion, while Reported Gross Profit was relatively unchanged from the prior period at AED 1.42 billion. For the Q4 2022 period, Normalized Gross Profit was up 6% to AED 355 million, while Reported Gross Profit was up 16% to AED 381 million. The improvement in Reported Gross Profit in the last three months of the year was primarily driven by the Company's disciplined cost management approach and operational enhancement initiatives.

Normalized Net Profit for the full year was up 9% YoY to AED 173 million, owed in large part to the Company's efforts to drive operational efficiencies underpinned by expansionary GCC economies, increase in industrial activities in the region and resilient consumer spending. FY 2022 Reported Net Profit declined 27% YoY to AED 165.4 million, impacted by currency fluctuations in certain markets. For the Q4 2022 period, Normalized Net Profit surged 42% compared to Q4 2021 to AED 45.3 million, while Reported Net Profit declined 27% to AED 33.9 million.

Aramex ended the year with a strong cash balance of AED 768 million, which was stable compared to last year. We maintained a strong balance sheet with a debt-to-EBITDA ratio (excluding IFRS 16) of 2.2x, providing the Company with considerable opportunity to deliver on its growth agenda.

Othman Aljeda, Chief Executive Officer, Aramex, said: "We ended the year as a stronger and more agile business with four well defined products and a clear growth strategy for the next five years. In 2022 we stabilized our gross profit margin for the group, as well as for our domestic and international express products; we grew our freight product by 27% while increasing its gross profit by 51%, and for our logistics product, we focused on quality revenue and reached 85% utilization of our warehouses while increasing gross profit by 58%.

This was supported by the solid growth in our home markets in the GCC and other MENAT countries, which also contributed to a good performance in our main outbound markets including the US and UK. We now have a more diversified customer base than ever before, with no single customer making up more than 7% of our revenue, thus reducing our concentration risk. Important to note, we stabilized our Group SG&A in an inflationary environment which means that we have a leaner organization which is more cost efficient, more agile and ready to sustain future growth under a similar and stable SG&A structure.

The strong performance of our Freight-Forwarding product contributed significantly to our top and bottom line in 2022. This is attributed to the implementation of our B2B growth strategy and investments in talent and competencies to deliver on it, while capitalizing on market opportunities.

Today, our Domestic and Express products are more efficient and digitized. We modernized our core systems and infrastructure, deployed a secure cloud-based integration platform, and introduced new chatbots to enhance the customer journey. This translated to a 10% improvement in the productivity of our couriers for average daily pickups and drop offs for the full year; while 96% of our customer care cases in Q4 2022 were handled by our new chatbots. A 6% reduction in linehaul rate per kilogram also contributed to the improvement in margins for the express business
corresponding gross profit margin of 32%.What has always set Aramex apart is its people, their passion, commitment and bringing their individuality in ways that inspires collective development. 2022 marked the anniversary of 40 years of Aramex operations and I would like to take this opportunity to thank my team and all Aramexians for their valuable contributions to the business. My sincere gratitude extends to our Board of Directors for their leadership and guidance, to our shareholders for their trust and to our partners and customers for their support."

Domestic Express
Domestic Express Shipment Volumes The Domestic Express FY 2022 revenue declined 7% YoY to AED 1.5 billion driven by foreign exchange impact and lower volumes particularly in Australia. This was partially offset by an increase in volumes in home markets particularly in the GCC and MENA region. As a result of efficiency enhancement initiatives including digital optimization and the doubling of Pick-Up and Drop-Off (PUDO) network, FY 2022 gross profit margin increased to 25% and Q4 2022 gross profit increased 15% to AED 97.6 million with a corresponding gross profit margin at 26%.

Freight-Forwarding

Freight-Forwarding Shipment Volumes
Aramex's Freight-Forwarding business recorded a strong FY 2022 performance with a 27% YoY increase in revenues to AED 1.68 billion, and a 51% YoY increase in gross profit to AED 232.7 million due the increased focus on freight capabilities and competencies. During the year, Aramex expanded its air and sea charters and increased its focus on core markets including UAE and KSA.
Logistics and Supply Chain Solutions The Logistics and Supply Chain Solutions FY2022 revenue increased by 2% YoY to AED 445.3 million, while Q4 2022 revenue declined by 2% YoY to AED 111 million. Utilization rate at warehouses reached 85% in FY 2022. Good cost management and automation helped reduce costs and deliver growth in gross profits. FY 2022 gross profit increased 58% YoY to reach AED 67 million, corresponding to an improved gross profit margin of 15% up from 10% in 2021. Meanwhile, Q4 2022 gross profit rose 332% YoY to AED 16.7 million, corresponding to a gross profit margin of 15% from the previous 3%.

Financial performance was impacted by the change in focus to quality revenue which resulted in certain provisions and extraordinary items. Excluding these extraordinary items, normalized gross profit shows a higher growth of 62% for the full year 2022, while the normalized gross profit margin significantly improved to 17.3% for the same period. For the Q4 2022 period, normalized gross profit more than doubled, while the normalized gross profit margin increased to 18.7%.

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