SHUAA Capital Financial Results for Q1 2016

SHUAA Capital today announces its Q1 results with an increase in total revenues to AED 45.5 million and a net loss of AED 27.5 million, compared with revenues of AED 44.0 million and a net loss of AED 1.6 million for the corresponding quarter of 2015. 

Gulf Finance, the Group’s SME lending division, underperformed despite seeing revenues rise to AED 40.6 million due to increased provisioning against bad loans as SMEs continued to suffer from the macro economic impact of low oil prices.

Interest income and net fees and commission grew to AED 38.8 million (Q1 2015: AED 33.0 million) and AED14.4 million (Q1 2015:  AED 9.6 million) respectively, citing an improved operating landscape by each of the Asset Management, Lending and Corporate divisions.

SHUAA’s Asset Management division continued to perform remarkably well despite current market sentiments. The division reported an increase in both total revenues to AED 9.4 million and profit to AED 4.5 million, compared to revenues of AED 4.4 million and a profit of AED 0.4 million during Q1 2015. On the other hand, the Investment Banking division was able to bridge losses on a quarterly basis with a Q1 2016 loss of AED 0.3 million as compared to Q1 2015 loss of AED 1.5 million. The division worked on a number of strategic advisory mandates during the first quarter including Gulf Navigation’s Mandatory Convertible Bond issuance, and later in April was the sole buy-side financial advisor to Amanat Holdings’ acquisition of a 16.02% stake in Madaares PJSC.

Abdul Rahman Hareb Rashed Al Hareb, Chairman of SHUAA Capital said, “Despite a challenging first quarter due to the ongoing volatility across markets, we see our business lines adapting to the prevalent head winds, and ensuring recurrent revenues at reasonable levels. Our Asset Management team continues to exceed expectations, and we’ve already had a good start to the year with our Investment Banking division completing three strategic advisory transactions for UAE-based firms, one of which is a cross border one. The division continues to work on a number of buy and sell-side advisory transactions expected to be concluded during the rest of the year.

We are committed to balancing decisions about operational efficiencies, enhanced risk-assessment and to seeing our new business development mandate through to fruition. 2016 will continue to be characterized by a cautious growth outlook for everyone in the market.”

SEGMENTAL PERFORMANCE

Asset Management

The Asset Management division reported Q1 2016 revenues of AED 9.4 million (Q1 2015:  AED 4.4 million) and a profit of AED 4.5 million (Q1 2015:  AED 0.4 million). The division’s real estate and hospitality funds managed by the SHUAA Capital Saudi Arabia team performed well and are already approaching key milestones with two hospitality projects in the Kingdom nearing completion. The division manages the SHUAA Saudi Hospitality Fund I, the Jeddah Centro Fund I, and the Dammam Rayhaan Fund I, all of which focus on projects within the rapidly growing hospitality sector. SCSA also manages the SHUAA Wadi Al Hada Real Estate Fund and the Cayan Real Estate Development Fund I, for the development of a fully integrated residential compound in Riyadh and a residential and serviced apartment complex in Dubai’s Al-Barsha, respectively.

The division’s flagship open-ended funds, the Emirates Gateway Fund and the Arab Gateway Fund recorded quarterly returns of +1.0% and -7.6% respectively.

As of 31 March 2016, Client Assets under Management grew to AED 1,385 million from AED 856 million as of 31 December 2015.

Investment Banking

The Investment Banking team reported quarterly net revenues of AED 1.4 million (Q1 2015: AED 2.0 million) and net loss of AED 0.3 million (Q1 2015: loss AED 1.5 million).

Despite the difficult market conditions, the team successfully closed two advisory mandates: Gulf Navigation’s Mandatory Convertible Bond issuance during the first quarter, and later in April advised  Amanat Holdings on its strategic acquisition of a 16.02% stake in Madaares PJSC.

The division is forging ahead with a number of advisory and placement mandates, and continues its active strategic advisory support for SMEs in Dubai via a strategic relationship with Dubai SME a division of the Department of Economic Development.

Lending

Gulf Finance UAE and Gulf Finance Saudi Arabia reported combined net revenues of AED 40.6 million (Q1 2015: AED 34.3 million) and a net loss of AED 17.1 million (Q1 2015: profit of AED 7.3 million). Combined interest income grew 17.3% to AED 38.2 million, while the combined net fees and commissions also grew 38.8% to reach AED 2.5 million, both on a year-on-year basis. Net provisions increased to AED 34.0 million (Q1 2015: AED 5.6 million) affected by a rise in bad loans from the subdued SME sector. Customers and their businesses continue to report difficulties and delays in collecting payments. The division reduced General and Administrative costs to AED 14.8 million (Q1 2015: AED 16.1million) as back office operations were consolidated and enhanced.

As of 31 March 2016, the size of the Gulf Finance UAE and Gulf Finance Saudi Arabia loan portfolios were AED 839 million and AED 220 million respectively, compared to AED 925 million and AED 193 million as of 31 December 2015. Gulf Finance’s client base combines a strategic selection of small businesses specializing in the wholesale trade, transportation and manufacturing sectors.

Gulf Finance Saudi Arabia continues to see strong potential in the Saudi market, especially in light of the Government’s gradual easing of rules and restrictions for small and medium business owners and entrepreneurs. The company recently inaugurated its new head office in Jeddah, and is arranging for other new office openings during the course of 2016 in Riyadh and Dammam.

Capital Markets

The Capital Markets division reported net revenues of AED 1.4 million (Q1 2015: AED 2.1 million) and a net loss of AED 2.0m (Q1 2015: net loss of AED 0.8m) affected by ongoing volatilities and turbulent markets. The division is continuing to invest in and expand the equity and credit desk’s market making capabilities, and is actively working to grow and develop its stock market equity research capabilities.

Corporate

The Corporate division’s performance was dragged down as a result of losses from investments in SHUAA managed funds, reporting a AED 12.7 million loss (Q1 2015: loss of AED 7.1m). 

The division continues to implement a cost containment strategy to support operational efficiencies, a strategy which has also led to an improvement in the state of its general and administrative expenses.