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Dubai’s exclusive toll booth operator Salik Company has posted a strong second half (H2) 2022 net profit of AED529 million (US$144 million), bolstered by a resilient economy.
Based on the strong performance, the Salik Board of Directors proposes to distribute 100% of Salik’s net profit for the second half of 2022, net of AED 37.5 million as AED 1-491.4 million (655.21 fils per share) upon reaching 50% of paid-in capital After the statutory limit, the statutory reserve is withdrawn in a timely manner in accordance with the dividend policy announced by Salik and upon shareholder approval at the company’s upcoming general meeting.
Mattar Al Tayer, Chairman of the Salik Board of Directors, commented: “Salik’s positive performance in 2022 reflects the emirate’s unwavering economic resilience amid global turmoil, as well as its continued efforts to attract a diverse and growing population. This year is One of the new beginnings for Salik, we are proud to play a role in Dubai’s ambitious privatization plan with a landmark listing in September 2022. At Salik, we are committed to driving growth in Dubai’s capital markets and supporting the greater emirate economic development plans. As a key player in Dubai’s economy, we will continue to work closely with the government and other stakeholders to realize the leadership’s vision and create new opportunities for the people of Dubai.”
successfully listed
Ibrahim Sultan Al Haddad, CEO of Salik, commented: “We started our journey with a very successful listing on the Dubai Financial Market in September, positioning Salik as a strong financial performer with an attractive business model and strong shareholder value proposition. Now, our 2022 results paint a story of victory amid global turmoil and uncertainty, driven by the resilience of Dubai’s economy.
“Strong growth in toll road usage is a key driver of our success, compounded by the return of traffic to pre-pandemic levels in the fourth quarter of 2022. I am pleased to report that Salik achieved strong profitability, with an EBITDA margin of 67.5% in the second half of 2022. I am committed to ensuring that Salik continues to deliver outstanding performance and create additional value for our shareholders.”
traffic highlights
Continued recovery from the pandemic drives revenue-generating travel up 13% YoY to 413 million in 2022; Q4 traffic levels return to pre-pandemic peak levels in Q4 2019.
Total trips through Salik’s eight tollbooths will increase 12% year-on-year to 539 million in 2022 from 481 million a year ago, as restrictions are lifted across the board in 2019, continuing from the impact of the Covid-19 pandemic Dubai, driven by recovery, and positive growth from Expo 2020 in the first quarter of this year. In turn, revenue-generating trips increased by 13% to 413 million trips from 367 million in 2021.
In Q4 2022, revenue-generating trips increased 15% quarter-over-quarter to 111 million as activity picked up in October after the summer holidays. Traffic levels in the fourth quarter were roughly on par with the pre-pandemic record in the fourth quarter of 2019. Compared to the fourth quarter of 2021, revenue-generating travel 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 in Salik rose 7% year-on-year to 3.7 million as of December 31, 2022 from 3.5 million a year earlier, reflecting the emirate’s ongoing efforts to attract tourists and talent. Tag activations in 2022 will reach 779,000 new tags, a 13% increase over last year.
financial summary
Due to changes in operating structure and cost profile, comparing Salik’s profitability between 2021 and 2022 may not accurately reflect the company’s performance on a like-for-like basis. From July 2022, Salik operates as a separate legal entity from the RTA through a 49-year franchise agreement. This has resulted in new costs that did not exist before July 2022, such as franchise fees, rent, amortization and transition service charges, and finance costs.
In 2022, Salik’s revenue will increase by 11.8% year-on-year to AED 1.892 billion, mainly driven by the following factors:
• Toll Usage Fees: Strong growth in revenue-generating trips drove toll usage fee revenue up 12.6% year-on-year to AED 1,652 million from AED 1,467 million in the prior-year period, driven by the post-Covid-19 lockdown Continued recovery from Dubai restrictions. Toll usage fees accounted for 87% of total revenue during the year.
• Fines and penalties: Fines and penalties revenue increased by 9.4% year-on-year to AED 202 million from AED 184 million in the same period last year, roughly in line with the increase in traffic during the same period, resulting in a net increase of 11.5% in the number of violations and the number of dismissals (2.39 million in 2022, compared to 2.14 million a year earlier). As a fraction of net fee flow, the number of net violations remained largely unchanged, with fines and penalty revenue accounting for 11 percent of total revenue.
• Tag Activation Fees: Despite a 13% increase in tag activation volume, the company’s tag activation fee revenue fell 9% YoY to AED 36 million, as revenue is recognized over the expected average lifetime of tags of five years and is driven by the following Impact of Factors Label sales for the current fiscal period and previous periods impacted by pandemi label activation fees accounted for 2% of total revenue.
Q4 revenue
Salik Q4 2022 revenue increased by 12.7% QoQ to AED 502 million mainly due to a 14.8% increase in toll revenue, which in turn was driven entirely by positive seasonality and organic growth in trips. The increase in toll revenue was partially offset by a 2% decrease in fines and penalty revenue, although net violations rose 5% to 610,000 due to a softer fines mix. The fine mix of Salik depends on the nature of the fine committed.
Fourth quarter 2022 revenue was up 2% year-over-year compared to fourth quarter 2021, primarily driven by a 4% increase in toll revenue from an already strong base, more than offset by a 5% decline in fines revenue and penalties. The reduction in fines and fines due to a softer penalty mix more than offset the increase in the number of net infractions. As a fraction of net billed traffic, the number of net violations remained largely unchanged.
Salik achieves EBITDA of AED 640 million in the second half of 2022, covering the period from the signing of the concession agreement between Salik and RTA on 1 July 2022 until 31 December 2022, with an EBITDA margin of 67.5%, reflecting Salik has an attractive franchise framework with RTA.
Salik’s EBITDA for Q4 2022 reached AED 349 million, an increase of 19.8% quarter-on-quarter, mainly driven by a quarter-on-quarter increase in toll usage. During the quarter, Salik successfully leveraged its fixed costs to offset more revenue-generating travel, resulting in an increase in Salik’s EBITDA margin to 69.5% from 65.4% in Q3 2022.
business outlook
Supported by the strong growth trajectory of trips through Salik’s tollgates in 2022 and a broad return of traffic levels to pre-pandemic levels in Q4 2022, Salik expects a full recovery in revenue-generating trips through its eight tollgates by 2023 Annual growth of 5-6% and guidance for EBITDA margin of 63-64%. — trade arab news agency
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