Red Sea International, a market-leading integrated building solutions provider in the Middle East and worldwide, has announced its financial results for the full year ending 31 December 2023 (FY23), reporting substantial growth for both the top and bottom lines.
Revenues increased 241% year-on-year (YoY) to SR 1,378 million, supported by a number of factors, including the strategic acquisition in October 2023 of a 51% stake in Fundamental Installation for Electric Work Company (First Fix), with the recognition in RSI’s consolidated financial statements starting in 4Q 2023. Furthermore, RSI’s increasing focus on streamlining all stages of the supply chain, combined with competitive pricing strategies and advanced procurement techniques, has also resulted in an improvement in revenues.
First Fix is a leading contractor in the GCC, providing end-to-end infrastructure services that include MEP solutions across a wide range of customers. The acquisition has enabled RSI to gain a critical stream of electromechanical and civil construction capabilities that add to its position as an established brand in residential, industrial, and commercial modular construction.
During the year, the board of directors carried out a comprehensive assessment of the company’s business model, resulting in key decisions to transform RSI’s operations and organizational structure, and the onboarding of a new leadership team. A focused 90-day action plan was put in place, to increase the company’s focus on project execution, delivery, efficiency, integration, and overall performance.
Acquisition of a 51% stake in Fundamental Installation for Electric Work Company (First Fix) to further integrate operations and expand the comprehensive suite of services
Profit from continuing operations improved significantly to reach SR 16 million, compared to a loss of SR 190 million in the prior year, predominantly due to the impact of the First Fix acquisition. Net profit also turned positive at SR 2 million, compared to a net loss of SR 198 million in FY22, including the proposed sale of Premier Paints Company, which is classified as a discontinued operation.
Marwan Sayegh, Chief Executive Officer of Red Sea International, commented: “2023 was a pivotal year for Red Sea International, during which we focused on a transformative repositioning exercise, that saw the initial phases of implementing our new business model, which included the strategic acquisition of a majority stake in ‘First Fix’ and the disposal of the ‘Premier Paints Company’.
These critical steps have consolidated our business and expanded our integrated suite of innovative solutions to our growing customer base. We are excited about the renewed foundation we are creating for the company, and look forward to unlock further growth avenues, through stronger market positioning and enhanced competencies.”
Ghassan Ashkar, Chief Financial Officer of Red Sea International, said: “Red Sea International reported a positive set of financial results for 2023, as we witnessed a return to profitability, driven by decisive measures undertaken to charter the path ahead for a new phase in our strategic growth, leading us to regain market leadership. From this base, we will continue to recalibrate our business priorities and strengthen our financial position, to generate sustainable long-term value for our shareholders.”
Business model transformation and new leadership to drive growth
Income Statement Analysis
Revenues increased 241% year-on-year (YoY) to SR 1,378 million, supported by several factors, including the strategic acquisition of a 51% stake in First Fix. Additionally, in line with the guidance of the board, RSI increased its focus on streamlining all stages of the supply chain, in addition to implementing competitive pricing strategies and improving procurement techniques, leading to a boost in revenues during the year.
Cost of Revenue increased 169% YoY to SR 1,241 million in FY23, from SR 461 million in FY22, as a result of the increasing momentum for project execution and delivery during the year. Gross profit amounted to SR 114 million, compared to a gross loss of SR 57 million in FY22.
EBITDA witnessed a marked improvement to SR 99 million in FY23, compared to an EBITDA loss of SR 118 million in FY22, supported by the robust top-line performance during the period.
Profit from continuing operations jumped to SR 16 million, compared to a loss of SR 190 million in FY22. Overall, Net Profit amounted to SR 2 million in FY23, improving sharply from a net loss of SR 198 million, as the positive impact of the First Fix acquisition flowed through.
Refreshed focus on high-quality project execution and delivery, supporting financial performance
Balance Sheet Analysis
Red Sea International concluded the year with SR 158 million in cash and cash equivalents, compared to SR 32 million as of 31 December 2022, due to an improvement in the cash conversion cycle and an increase in proceeds from interest-bearing loans and borrowings.
Total loans increased to SR 327 million as of 31 December 2023, from SR 122 million at the end of 2022, which is primarily targeted towards the financing of RSI’s expanding project pipeline.
Meanwhile, net debt to equity nearly halved from 0.96x in FY22 to 0.52x in FY23.
ESG
RSI’s ESG principles are guided by the Omnipreneurship philosophy based on three principles of ‘Giving, Earning and Sustaining’. The company is aiming to contribute to a sustainable society by continuing to embed the principles of sustainability, ethics, and innovation.
RSI is committed to ‘sustainability’ and has already formulated its ESG framework and has set a baseline to measure annual progress against key ESG targets. The company is looking to develop its sustainability roadmap for 2030, using a structured problem-solving approach, to ensure that the proposed solutions create tangible value and are truly impactful for all stakeholders.