Swvl posts first annual net profit, thanks to settlement with creditors

Swvl announced its financial results for 2023 less than two weeks ago. The company, which has been struggling since its public markets debut, posted its first annual net profit, hinting at a turnaround.

From a net loss of $123.6 million in 2022, the Cairo-born and Dubai-headquartered mobility startup achieved a net profit of $3.1 million in 2023. The gross profits grew eightfold, from half a million dollars in 2022 to $4.1 million in 2023. The gross margins of the company improved from a mere 1.2 percent in 2022 to about 18 percent in 2023.

The revenue, however, took a hit, decliing 48 percent year-over-year to $22.9 million, as the company tried to move its focus on segments and markets with healthy unit economics.

Swvl termed the results as its swift transition to profitability, emphasizing its focus on financing stability and operational efficiency.

Mostafa Kandil, the co-founder and CEO of the firm, in a statement, said, “In 2023, our team demonstrated exceptional skill and dedication, achieving profitability. As we advance, our commitment to innovation will be marked by the launch of a wide range of products slated for the upcoming year and for our new potential markets. Additionally, in the meantime, we are expanding our strategic partnerships into more Gulf Cooperation Council (GCC) countries. Our focus today remains towards improving profitability while resuming our high paced growth.”

We’ll dissect and discuss the financials in a different piece later but for now it is important to highlight another overlooked detail in the results. Swvl was able to turn a net profit because of $18.9 million it was able to generate as ‘other income’.

Most of this other income, $18.7 million to be exact, came from settlement arrangement agreements Swvl did with its creditors, “In order to avoid defaulting under several agreements with different service providers, we entered into settlement arrangements with the parties to reduce aggregate amount of unpaid invoices. The parties offered us a discount of 85% of the original amount owed in return for prompt payment of the new discounted amount. In total we entered into 13 settlement arrangement agreements, totaling to $18,7 million of discounted fees,” note the details the company provided in its disclosures.

These agreements were mainly associated with the SPAC transaction of the firm.

Without these agreements which helped the company record this one-time income, the company would’ve made a net loss of $15.6 million. But regardless of that, the overall financial health of the company has improved, as evident from its gross margins as well.

The stock price of Swvl hasn’t moved much after announcing the results, hovering around $10, giving it a market cap of close to $70 million. The day the results were announced, there was a jump of over 30 percent, but it was short-lived.

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