Company Realizes First Yearly Net Profit, Attributable to Settlement with Creditors
After a tumultuous year, Swvl, the Dubai-based transit tech company, has announced its financial results for 2023, posting its first annual net profit. Despite a short-lived jump in stock price after the announcement, the company's shares remain around $10, giving it a market cap of nearly $70 million.
The net profit of $3.1 million in 2023 is a significant increase from a net loss of $123.6 million in 2022. Swvl's co-founder and CEO, Mostafa Kandil, stated that the team demonstrated exceptional skill and dedication in achieving profitability.
One of the key factors contributing to Swvl's improved financial performance was a growth in gross profits. These grew eightfold from half a million dollars in 2022 to $4.1 million in 2023. Gross margins also improved, rising from 1.2 percent in 2022 to about 18 percent in 2023.
However, the company's revenue declined 48 percent year-over-year to $22.9 million due to a shift in focus towards segments and markets with healthy unit economics.
A significant portion of Swvl's 'other income' was a result of discounted fees offered by creditors in return for prompt payment. The company generated $18.9 million as 'other income' in 2023, a significant portion of which, $18.7 million, came from settlement arrangement agreements with creditors.
These settlement arrangement agreements were primarily related to Swvl's SPAC transaction. Swvl entered into 13 settlement arrangement agreements, totaling to $18,7 million of discounted fees. The one-time income generated from these agreements prevented Swvl from recording a net loss of $15.6 million.
When a company goes public via a SPAC merger, it sometimes negotiates settlements with creditors to reduce or restructure debts and obligations to improve the post-merger balance sheet. The difference between the book value of liabilities settled and the agreed settlement amounts can be recorded as income, called "other income." In Swvl's case, the $18.9 million income was primarily associated with these creditor settlements tied to the SPAC transaction process.
Looking forward, Swvl plans to launch a wide range of products in the upcoming year and expand strategic partnerships into more Gulf Cooperation Council (GCC) countries.
Meanwhile, in other news, Dubai-based fintech Alaan raised $48 million in Series A to expand its AI-powered expense management across MENA. Breadfast, another Dubai-based startup, raised $10 million as part of Series B2, with a valuation nearing $400 million. Flat6Labs has restructured under the new F6 Group, with a dedicated VC arm named F6 Ventures.
These developments reflect the vibrant and growing tech ecosystem in the region, with startups and investors continuing to innovate and invest in promising ventures.
