WE PLAN TO LAUNCH OUR IPO IN FIRST QUARTER OF 2015

By: Gulam Ali Khan

MUSCAT: Owned by the Al Yousef Group, TruckOman is Oman’s leading provider of logistics solutions to the oil and gas industry. The company recently awarded three million free shares to its employees and is in the process of completing formalities for an initial public offering (IPO).

In this exclusive interview with Muscat Daily, Dr. Mohamed Musa al Yousef, executive chairman of TruckOman, talks about the company’s activities, its IPO plans and business outlook.

What are TruckOman’s core business activities? How has the group evolved in recent years?

TruckOman was established in 1978. From its origins as a simple transport company, TruckOman, over the years, has developed into a leading logistics services provider to Oman’s oil and gas sector. It was acquired by the Al Yousef Group in 1989.

Its operations have evolved over time and now include specialised supply chain and logistics solutions such as rig-moving services, rig mobilisation, freight forwarding, cargo haulage, yard management, warehousing and facility management.

The breakthrough came in 1997 when PDO awarded TruckOman its first major rig-moving contract in the south of the country.

During the past decade our infield logistics business has expanded beyond PDO’s concession areas and the growth of TruckOman has been closely associated with the development of other oil and gas concessions.

TruckOman Oil and Gas Services SAOC (which is the holding company for TruckOman Southern and Northern operations, and a number of other subsidiaries and associates) is qualified by major oil and gas producing companies, such as PDO, BP and Occidental, and we are indeed proud to be one of their main logistics providers. We also work with service providers, including Abraj Energy Services, Fahud Oilfield Services, Dalma Energy, Halliburton and Schlumberger.

You recently awarded three million free shares to employees. What prompted this firstof- its-kind initiative in Oman?

This initiative was taken by the Al Yousef Group, which owns a 94 per cent stake in TruckOman. We have a large number of Omanis and expatriates working for the company. It was on my mind for a long time that we must reward our employees for their efforts and at the same time to motivate them towards even better performances and efficient delivery of services to our customers. We were waiting for the company to achieve a certain level and size and ready itself for an IPO.

Al Yousef Group has awarded three million shares (around 5.6 per cent of TruckOman’s share capital) to TruckOman employees. I believe making our employees stakeholders in the company is the best way to grow and prosper together.

The initiative has been widely appreciated by the government and welcomed by our customers, the Oman Labour Federation and society in general. Moreover, it is in line with government’s vision to encourage a broader shareholder base in family-owned firms.

What is the mechanism of trading theses shares?

Al Yousef Group has issued temporary share certificates to all its employees – Omanis who have completed one year of service in the TruckOman Group; and expatriates who have completed one year of service and earn more than RO300 per month. The number of shares allocated to each employee has been based on the number of years of service and basic pay.

These shares were awarded in a ceremony held under the auspices of H E Dr Ali al Sunaidy, Minister of Commerce and Industry, and in the presence of a number of ministers, government officials and members of the Council of Oman and local dignitaries.

The three million shares donated by Al Yousef Group – which have been valued by an independent Omani investment bank at RO1,050,000 – are being held temporarily in trust by United Securities LLC for the benefit of Mazaya TruckOman SAOC (Mazaya).

Mazaya has been set up as a special purpose vehicle (SPV) to hold the three million shares on behalf of TruckOman employees and has been set up as a closed joint stock company to facilitate trading in its shares. Mazaya, in turn, will issue the equivalent of three million of its shares to employees. These three million shares will be equivalent to and represented by the shares of TruckOman donated by the Al Yousef Group.

In order to encourage employees to hold Mazaya shares for a long period, Mazaya will allocate ten per cent bonus shares each year for a period of five years to employees who continue to hold the shares. In addition, at least 75 per cent of annual dividends received by Mazaya from TruckOman will also be distributed every year to its shareholders (who are indeed the employees).

When is subscription likely to open for the TruckOman IPO? How much share capital will be floated in the offering?

We are moving ahead with our IPO plans. Most of the paper work, such as audits and financial projections, has been completed and documents have been submitted to CMA for approval. As soon as CMA approves the prospectus we will announce the launch of the IPO. We are anticipating floatation in the first quarter of 2015.

We have been given a special exemption by His Majesty the Sultan’s government to float 25 per cent of the share capital in the IPO rather than the 40 per cent as is required by law. Therefore, 25 per cent of Truck- Oman shares shall be offered for public subscription. Oman Arab Bank (OAB) has been appointed the issue manager for the IPO. Three or four other banks will also be appointed for collecting applications.

TruckOman has been exempted from the mandatory 40 per cent float as it is a family owned company and the move will encourage shareholders to list on the bourse.

Do you anticipate any major impact on business from the slump in oil prices?

Undoubtedly, there are concerns in the market regarding the drastic decline in oil prices. But we are optimistic that oil production will continue at current levels despite lower prices. The demand for oil and gas services and logistics services will continue, and accordingly, our services will always be required in the oilfields. We are also hoping to secure new contracts in the next three to six months which, hopefully, would balance out any adverse impact of the decline in oil prices.

We, however, anticipate that there will be pressure on service providers from oil and gas producing companies due to weak prices. Therefore, service providers like TruckOman – whose cost base is normally fixed – will no doubt have to look at efficiency improvements and cost rationalisation; although this might not be easy since logistics is very labour-intensive and manpower accounts for nearly 45 per cent of total costs, with fuel, maintenance and depreciation representing another 40 per cent.

With the development of ports, the railway, free zones and other infrastructure, what is your business outlook for the next few years?

Logistics is the backbone of the economy. From the point goods are manufactured to the point they arrive for end-users, supply chains play a big role. And apart from the supply and delivery of materials and goods, you also need a wide range of support services in the process. So the business of logistics and support services will continue to grow in the coming years and the large projects mentioned will surely contribute to the growth of the Oman’s economy in general and to the logistics sector in particular.

In order to capitalise on the opportunities provided by the Duqm development project, TruckOman has set up a new company in the Duqm free zone. This will be our flagship company for that area, and I expect TruckOman to become a leading service provider in Duqm. Given Duqm’s strategic location and its close proximity to oilfields – both northern and southern – I expect Duqm to become the main port servicing the sultanate’s oilfields.

SOURCE: Muscat Daily