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The Salik Board meeting

Salik H2 2022 net profit rises to robust $144m

DUBAI, March 7, 2023

Salik Company, Dubai’s exclusive toll gate operator, has posted a robust a net profit of AED529 million ($144 million) for the second half (H2) of 2022, propelled by a resilient economy. 
 
Based on the strong set of results, Salik’s Board of Directors has proposed to distribute 100% of Salik’s net profit of the second half of 2022, equivalent to AED491.4 million (6.5521 fils per share) after deducting AED37.5 million as one-time statutory reserves after reaching the statutory limit of 50% of paid-in capital, in line with Salik’s announced dividend policy and subject to shareholder approval at the company’s upcoming General Assembly Meeting. 
 
Mattar Al Tayer, Chairman of the Board of Directors of Salik, commented: "Salik’s positive performance in 2022 is a reflection of the Emirate of Dubai’s unwavering economic resilience amid global turbulence and the ongoing efforts to attract a diverse and growing population. This year was one of new beginnings for Salik, and we are proud to have played a role in Dubai's ambitious privatisation programme through our landmark listing in September 2022. At Salik, we are committed to driving Dubai's capital market growth and supporting the Emirate's larger economic development plans. As a key player in Dubai's economy, we will continue to work closely with the government and other stakeholders to achieve the leadership’s visions and create new opportunities for the people of Dubai." 
 
Successful listing
Ibrahim Sultan Al Haddad, Chief Executive Officer of Salik, commented: “We began our journey with a highly successful listing on Dubai Financial Market in September, positioning Salik as a strong financial performer with an attractive business model and strong value proposition for shareholders. Now, our 2022 results depict a story of triumph amid global turmoil and uncertainty, driven by Dubai’s economic resilience. 
 
“The strong increase in toll road usage was a key driver of our success, compounded by traffic levels in the fourth quarter of 2022 having recovered to pre-pandemic levels. I am pleased to report that Salik enjoyed robust profitability in 2022, with an EBITDA margin of 67.5% for the latter half of 2022. I am committed to ensuring that Salik continues to deliver outstanding results and unlocks further value for our shareholders."
 
Traffic highlights
Continued recovery from the pandemic drives 13% YoY growth in revenue-generating trips to 413 million in 2022; Q4 traffic level returns to peak pre-pandemic level seen in Q4 2019. 
 
In 2022, the total number of trips made through Salik’s eight toll gates increased 12% YoY to 539 million trips, from 481 million trips a year earlier, driven by continued recovery from the impact of the Covid-19 pandemic as restrictions were fully lifted in Dubai, as well as by the positive growth resulting from Expo 2020 in the first quarter of the year. Revenue-generating trips, in turn, increased 13% to 413 million trips from 367 million in 2021.
 
In the fourth quarter of 2022, the number of revenue-generating trips grew 15% quarter-on-quarter (QoQ) to 111 million, as activity picked up in October after the end of the summer holidays. Traffic levels in the fourth quarter were broadly in line with those recorded before the pandemic in the fourth quarter of 2019. Compared to the fourth quarter of 2021, revenue-generating trips increased 4% from an already strong base which was positively supported by the launch of Expo 2020 in October 2021.
 
The number of vehicles registered with Salik increased 7% YoY to 3.7 million as of December 31, 2022, from 3.5 million a year earlier, reflecting the Emirate of Dubai’s ongoing efforts to attract tourists and talent. Tag activations reached 779,000 new tags in 2022, a 13% increase from last year. 
 
Financial highlights
Comparing Salik's profitability between 2021 and 2022 may not accurately reflect the company's performance on a like-for-like basis, due to changes in its operating structure and cost profile. From July 2022 onwards, Salik operates as a separate legal entity from the RTA through a 49-year concession agreement. This has resulted in new costs, such as concession fees, rent, amortisation, and transitional service expenses, as well as finance costs, that did not exist prior to July 2022.
 
In 2022, Salik’s revenue increased 11.8% YoY to AED1,892 million, primarily driven by the following:
•Toll usage fees: strong growth in revenue-generating trips drove a 12.6% YoY growth in revenue from toll usage fees, reaching AED1,652 million from AED1,467 million a year earlier, driven by ongoing recovery after the lifting of Covid-19 restrictions in Dubai. Toll usage fees contributed 87% to total revenue during the year.
•Fines and penalties: revenue from fines and penalties increased 9.4% YoY to AED202 million, from AED184 million a year earlier, broadly in line with growth in traffic during the same period, resulting in an 11.5% growth in the number of violations, net of violation dismissals (2.39 million in 2022 compared to 2.14 million a year earlier). The number of net violations remained mostly unchanged as a fraction of net toll traffic, and revenue from fines and penalties contributed 11% to total revenue.
•Tag activation fees: despite a 13% YoY increase in tag activations, the Company’s revenue from tag activation fees decreased 9% YoY to AED36 million, as revenue is recognised over the estimated average tag life of five years, and recognised revenue is affected by tag sales during the current financial period as well as previous periods which were impacted by the pandemi Tag activation fees contributed 2% to total revenue.
 
Q4 revenue
Salik’s revenue for the fourth quarter of 2022 increased 12.7% QoQ to AED502 million, mostly driven by a 14.8% increase in revenue from toll usage fees, which in turn was entirely driven by positive seasonality effects as well as organic growth in the number of trips. The growth in revenue from toll usage fees was partially offset by a 2% decrease in revenue from fines and penalties, despite a 5% increase in the number of net violations to 610,000, due to a softer fine mix. Salik’s fine mix is dependent on the nature of fines committed. 
Compared to the fourth quarter of 2021, revenue for the fourth quarter of 2022 increased 2% YoY, led by a 4% increase in revenue from toll usage fees from an already strong base, more than offsetting a 5% drop in revenue from fines and penalties. Fines and penalties decreased on the back of a softer fine mix, more than offsetting an increase in the number of net violations. The number of net violations remained mostly unchanged as a fraction of net toll traffic. 
 
Salik achieved an EBITDA of AED640 million in the second half of 2022, covering the period since the start of Salik’s concession agreement with the RTA on July 1, 2022 until December 31, 2022, with a strong EBITDA margin of 67.5%, reflecting Salik’s attractive concession framework with the RTA. 
 
Salik’s EBITDA for the fourth quarter of 2022 reached AED349 million, a 19.8% QoQ increase that was predominantly driven by the sequential rise in toll usage. During the quarter, Salik successfully leveraged its fixed costs against a higher volume of revenue-generating trips, resulting in an increase in Salik’s EBITDA margin to 69.5% from 65.4% in the third quarter of 2022.
 
Business outlook
Supported by the strong trajectory in the number of trips made through Salik gates in 2022, and with traffic levels broadly recovering to pre-pandemic levels during the fourth quarter of 2022, Salik expects the number of revenue-generating trips through its eight toll gates to fully recover to increase 5-6% in 2023, and guides for an EBITDA margin of 63-64%.-- TradeArabia News Service
 



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