Spinneys: revenue turns negative for the first time in a year, but profit rises on margin and a low base

On 25 August Spinneys released its second-quarter 2026 results. Revenue declined 1.6% year on year to AED 895.1 million, EBITDA added 0.6% to AED 183.1 million, and net profit rose 5.7% to AED 90.6 million. The EBITDA margin improved to 20.5% from 20.0%, and the net margin to 10.1% from 9.4%. At the current price the share looks rather attractive: the EV/EBITDA multiple of 5.3x is well below its own three-year average of 8.6x, the dividend yield of 5.4% exceeds the key rate, and the portal model puts the upside to fair value at 17%.

Key takeaways

— Revenue declined for the first time in a year – down 1.6% year on year to AED 895.1 million

— EBITDA rose 0.6% on falling revenue – the margin improved to 20.5% from 20.0%

— Net profit added 5.7% year on year to AED 90.6 million despite lower revenue

— Operating cash flow for the quarter was AED 166.7 million with capex of AED 21.6 million

— Net debt is negative at AED 837.9 million, with net debt/EBITDA LTM at minus 0.12

— The dividend yield of 5.4% exceeds the key rate, and the 2025 payout is covered by profit

— EV/EBITDA at 5.3x versus its own three-year average of 8.6x – a discount to history

Attractiveness

Key figures, AED bn

Revenue declined for the first time in a year – down 1.6% year on year to AED 895.1 million

In the second quarter of 2026, Spinneys' revenue amounted to AED 895.1 million, down 1.6% from a year earlier. This is the first decline in quarterly revenue in the last five quarters: in previous periods growth ranged from 10.8% to 16.2%. The main reason was a contraction in like-for-like sales, as seen in comparison with the first quarter of 2026, when revenue reached AED 1,014.2 million.

The revenue decline occurred against a high base in the second quarter of 2025, when growth was 16.2% year on year. In absolute terms, revenue decreased by AED 14.5 million compared to the same period last year. The company does not disclose segment details, so it is impossible to pinpoint whether the cause was lower footfall or a lower average ticket.

For investors, it is important that the revenue decline was not accompanied by a deterioration in profitability. On the contrary, the margin increased, indicating cost control. However, the sustainability of this model amid further revenue declines raises questions.

EBITDA rose 0.6% on falling revenue – the margin improved to 20.5% from 20.0%

EBITDA in the second quarter of 2026 was AED 183.1 million, up 0.6% year on year. The EBITDA margin rose to 20.5% from 20.0% a year earlier. Growth in the metric amid falling revenue means the company reduced operating costs or improved its sales mix.

Operating profit in the second quarter was AED 107.0 million, almost exactly matching the year-earlier figure of AED 107.0 million. This confirms that the margin improvement did not come from one-off items below the operating line but from cost control.

The margin increase of 0.5 percentage points is small but significant against the backdrop of falling revenue. If the company manages to keep the margin at 20.5% in coming quarters, this will support profit even with weak sales dynamics.

Net profit added 5.7% year on year to AED 90.6 million despite lower revenue

Net profit in the second quarter of 2026 rose 5.7% year on year to AED 90.6 million. Profit growth on falling revenue is explained by margin improvement and, likely, lower financial expenses or tax burden. The net margin rose to 10.1% from 9.4% a year earlier.

It is worth noting that net profit growth outpaces EBITDA growth: while EBITDA added 0.6%, net profit rose 5.7%. This means that items below operating profit, such as interest or taxes, made a positive contribution. The company does not disclose details, so the exact cause cannot be named.

Over the last twelve months, net profit amounted to AED 349.3 million. This figure includes the results of four quarters and should not be directly compared with quarterly dynamics.

Operating cash flow for the quarter was AED 166.7 million with capex of AED 21.6 million

Operating cash flow in the second quarter of 2026 was AED 166.7 million, significantly exceeding net profit of AED 90.6 million. This indicates high earnings quality and efficient working capital management. Capital expenditures for the quarter were AED 21.6 million, slightly below the previous year's level (AED 30.7 million).

Free cash flow thus amounted to about AED 145.1 million. This is a solid sum that covers dividend payments and supports negative net debt. Over the last twelve months, operating cash flow reached AED 780.0 million.

Low capital expenditures relative to revenue (2.4% of quarterly revenue) allow the company to generate stable cash flow even amid declining sales. This is an important factor for maintaining dividends.

Net debt is negative at AED 837.9 million, with net debt/EBITDA LTM at minus 0.12

As of the end of the second quarter of 2026, Spinneys' net debt was minus AED 837.9 million, meaning the company has a significant cash cushion. The net debt to EBITDA ratio for the last twelve months is minus 0.12. This is a very low level of debt burden, effectively negative net debt.

Compared to the previous reporting date, net debt decreased by RUB 0.7 billion, and over the last twelve months also by RUB 0.7 billion. This indicates further balance sheet strengthening. The company does not depend on debt financing and can direct free funds to dividends or development.

Negative net debt is rare for a retailer and provides a margin of safety in case of deteriorating market conditions. However, it is important that most of the cash is likely denominated in dirhams, which reduces currency risks.

The dividend yield of 5.4% exceeds the key rate, and the 2025 payout is covered by profit

Spinneys is a dividend story. Based on the last twelve months, the dividend yield is 5.4%. This is above the current key rate, making the share attractive for income-oriented investors. The company pays dividends from net profit, and the 2025 payout was covered by profit.

Our estimate for the 2026 dividend assumes the payout ratio remains at last year's level and profit stays close to the LTM figure of AED 349.3 million. At the current price, this gives a yield of about 5.4%. However, if revenue continues to decline, profit could come under pressure, limiting dividend growth.

The main risk to the dividend is a further drop in revenue and margin. If the company fails to maintain profitability, profit could decline, leading to a cut in payouts. Nevertheless, negative net debt and strong cash flow provide the ability to sustain the dividend even amid a temporary deterioration in results.

EV/EBITDA at 5.3x versus its own three-year average of 8.6x – a discount to history

The current EV/EBITDA multiple is 5.3x, significantly below its own three-year average of 8.6x. This indicates that the share is trading at a discount to its historical valuation. The P/E LTM is 13.4, which also looks moderate.

Such a low multiple may reflect market concerns about the slowdown in revenue growth that we observed in the reporting quarter. However, if the company manages to stabilise sales and maintain its margin, the multiple could return to historical levels, providing upside potential for the share price.

According to the portal's model, the fair value of the share implies 17% upside from the current level. This is our own calculation based on EBITDA growth and a target multiple, and it is not a market consensus.

Valuation on the latest reported figures

Bottom line

Bottom line: Spinneys delivered mixed results. Revenue declined for the first time in a year, but profit and margin rose on cost control and, likely, lower expenses below the operating line. The company maintains a strong balance sheet with negative net debt and stable cash flow, supporting a dividend yield of 5.4%. The share trades at a discount to its own history on EV/EBITDA (5.3x versus 8.6x), and the portal model implies 17% upside. The key question for a holder is whether the company can return revenue to growth to justify a higher valuation. Verdict – rather attractive.