VASRO has published an update report on Spinneys 1961 Holding PLC following the company's first-half 2026 results.
The central message is not that the growth story has broken. It has not. The more important development is that Spinneys has already built much of the capacity required for the next leg of growth, while demand temporarily moved in the opposite direction.
H1 2026 revenue increased 5.1% to AED 1,909m. Profit for the period rose 2.5% to AED 175m, while profit attributable to shareholders increased 4.5% to AED 182m.
The second quarter tells a different story.
Revenue fell 1.6% to AED 895m and like-for-like sales declined 5.4%, reversing the 7.4% growth recorded in Q1. Airport closures, flight disruption and school closures hit some of the formats most exposed to traffic. The UAE, which generates approximately 94% of group revenue, declined 3.4%. Saudi Arabia grew 67.8% from a much smaller base.
That distinction matters.
Despite falling UAE sales, UAE profit before tax increased 6.1% during the quarter. At group level, the principal drag on profit came from Saudi Arabia, where the loss widened by AED 7.2m.
The reported margin also needs to be unpacked.
Spinneys reported a 40-basis-point decline in H1 gross margin and a 60-basis-point improvement in Q2. Neither number gives a clean view of the underlying business. An AED 8.5m inventory provision release benefited the current period, while the prior year contained an AED 2.9m charge in the opposite direction. Adjusting for both effects, underlying gross margin declined by approximately 101 basis points, from 41.61% to 40.60%.
Below gross profit, however, the picture was more constructive. Q2 operating costs declined 0.9% even as revenue fell 1.6%.
This is why the physical estate matters more than the quarterly headline.
Selling area is now 17.0% larger than one year ago, while sales per square foot are 10.0% lower. On VASRO's estimates, closing that utilization gap represents approximately AED 209m of half-year revenue potential within stores that are already built, staffed and leased.
The recovery therefore requires footfall more than another large round of capital deployment. June returned to growth, and management indicated that July was running at double-digit growth. Spinneys also ended the period with approximately AED 838m of net cash and continues to operate with a 75% dividend payout policy, supporting a 5.9% forward yield at the current share price.
Expansion outside the UAE adds another layer to the case.
Kuwait will be 51%-owned alongside Alshaya, meaning its start-up losses will consolidate into Spinneys' accounts. The Philippines structure is different: Spinneys holds 40% alongside Ayala, so the investment is equity accounted, with AED 4.8m of contributed capital at risk while Spinneys earns an operating fee and supplies private-label products.
Saudi Arabia remains the most important near-term drag. After the reporting period, Spinneys approved the acquisition of a further 20% of the Saudi operation for SAR 18m, taking its ownership to 70%. The business lost AED 15.4m during the first half, meaning the higher stake increases Spinneys' exposure before profitability arrives.
But the locations matter. The committed Saudi pipeline includes Diriyah, ROSHN and King Abdullah Financial District. VASRO's read is that management is accepting near-term losses to secure high-quality positions in a market it expects to scale.
We maintain BUY, while reducing our target price to AED 1.65 from AED 1.75.
The forecast comes down because the original FY2026 revenue trajectory is no longer realistic. After 5.1% growth in the first half, Spinneys would need approximately 12.8% growth in H2 merely to reach the bottom of its 9-11% full-year guidance range. VASRO now models FY2026 revenue of approximately AED 3.87bn.
The valuation uses two equally weighted methods. Our ten-year DCF produces AED 1.67 per share, while 9.0x FY2027 EBITDA after rent produces AED 1.60. The resulting blended value is AED 1.64, supporting a target price of AED 1.65. At the AED 1.25 reference share price, that represents approximately 32% upside.
The target falls because the model does, not because the investment case does.
The key question for the second half is now straightforward: can the larger estate convert its existing capacity into traffic and revenue as operating conditions normalise?
If it can, much of the infrastructure required for that recovery is already in place.
Access the Update - 12 August 2026
The post Spinneys 1961 Holding PLC: The Estate Grew 17%, Demand Did Not - First Half 2026 Update appeared first on VASRO GmbH.
