ADES sees SAR 17B cash flow over 5 years, cites infrastructure-like model

Mohamed Farouk, CEO of ADES Holding Co.

ADES Holding Co.'s business model has increasingly come to resemble that of infrastructure companies due to the long-term nature of its contracts, which typically exceed five years, CEO Mohamed Farouk told Al Arabiya TV.

Farouk said the company's operations require periodic capital expenditures every five years to refurbish assets and renew operating licenses.

On debt, he said total borrowings stood at about SAR 17 billion at the end of Q1 2026, noting that ADES does not rely on asset-backed financing but rather on the strength of its future cash flows, enabling it to secure funding at a cost of no more than 1% above SAIBOR.

The company has a backlog exceeding SAR 34 billion, with an earnings before interest, taxes, depreciation, and amortization (EBITDA) margin of around 50%, implying the generation of nearly SAR 17 billion in cash flows over the next five years, Farouk said.

He added that these figures exclude ongoing contract renewals, which occur monthly or every two months, further strengthening cash-flow visibility and underscoring the company's ability to meet its obligations.

Farouk said ADES is targeting sustainable growth rather than merely expanding revenue, focusing on enhancing returns, supporting capital, and delivering long-term value, which he described as a key source of investor confidence.

He added that the planned capital increase would improve the stock's liquidity and trading appeal, supporting investor interest as the move is part of the company's strategy to reinforce shareholder confidence in its long-term outlook and reflects management's conviction in the strength of expected growth.

Farouk said the planned capital increase will be funded through the share premium account rather than retained earnings, ensuring ADES' dividend policy remains unchanged, with the company continuing to distribute 60% of net profit semiannually while maintaining retained earnings on its balance sheet.

A significant portion of the capital increase proceeds will be used to finance operations and restructure certain debt facilities, supporting long-term operational sustainability, he added.

Farouk said ADES is pursuing both organic growth and acquisitions, noting that the company is currently participating in more than 50 tenders and has expanded its asset base through internal growth without completing any acquisitions recently.

He added that ADES continues to evaluate acquisition opportunities and is in advanced discussions with several companies regarding high-quality assets, particularly newer assets less than 10 years old.

Any acquisition decision is primarily contingent on securing long-term contracts that generate sufficient cash flows to cover acquisition costs while maintaining the company's financial discipline, Farouk said.

ADES' board of directors recommended on June 8, 2026, that shareholders approve a 100% capital increase through the issuance of one bonus share for every existing share by capitalizing SAR 1.13 billion from the share premium account, according to Argaam’s data.