SHUAA Capital reports strong full year 2021 results reflecting strong core business performance

SHUAA Capital psc (DFM: SHUAA), the leading asset management and investment banking platform in the region, has received board approval for its audited financial statements for the fiscal year ended 31 December 2021.

The FY 2021 results demonstrate continued progress in delivering on the Group’s strategic agenda. While net profit for SHUAA and its subsidiaries (the “Group”) of AED 24 million was down 81% year on year from AED 125 million in 2020, the result included one-off charges of net AED 203 million in the fourth quarter mainly relating to valuation impairments following the decision to accelerate the restructuring of a legacy, illiquid investment portfolio. SHUAA’s net profit on a like for like basis would have been AED 227 million in 2021. These net charges increased by AED  16 million from the Group’s preliminary results, following a final valuation assessment of certain illiquid assets. While EBITDA also declined, from AED 349 million in FY 2020 to AED 218 million in 2021 due to these valuation impairments, adjusting for the effect of the one-off adjustments it would have risen to AED 421 million.

Our core revenues continue to show progress towards the high-quality revenues targeted within our strategy, with net fee and commission income up by 21% year on year to AED 265 million in the year, while controlling expenses with operating expenses up 6% year on year, with targeted strategic hiring across the business.

Proactive reduction of non-core assets and deleveraging of balance sheet

During the year, the Group continued to proactively manage its balance sheet. In line with our strategy to focus on our two core business segments (asset management and investment banking) and strengthen our balance sheet, the Group continued to further manage down the assets held within its non-core unit. Since inception this unit has generated net AED 188 million of cash proceeds for the Group. Following the progress in disposing of these assets, the non-core unit was closed in the fourth quarter of 2021 and the residual assets transferred to principal investments, where they can be managed consistently and in line with the Group’s other investments. As well as the closure of the non-core unit, the Group restructured an illiquid, legacy portfolio absorbing the effects in the year. These activities saw the Group reduce its adjusted¹ leverage ratio by 17% points.

Strengthening our offering and delivering for clients

In 2021, SHUAA made key hires across the business, notably within real estate and client coverage, with core headcount increasing by 33%. As well as the internal promotion of two senior executives, announced in April, this ensured that the Group maintained its policy of targeted investment across both product and client relationship capabilities.

The Group’s asset management activities delivered a strong performance during the year, building on the progress made in 2020. The appointment of a new CEO of real estate further enhances the Group’s ability to deliver a high-quality offering to clients across different geographies and markets.

The Group’s flagship Goldilocks fund continued to be active in public markets, identifying investment opportunities focused on high intrinsic value and company-specific turnarounds. It maintained its record of strong outperformance against its benchmarks during 2021 and has risen 241% since inception*. Within private markets, the 2020 transaction that saw the Thalassa fund acquire Stanford Marine Group had its first full year with strong performance in the underlying business creating value for the shareholders in the fund. Within Debt, launched as a vertical in 2020, the team successfully structured and invested in the USD 50 million sukuk issuance of Pure Harvest, an innovative transaction helping a local early-stage business to secure venture debt funding from capital markets.

Outlook

While the Group continues to operate against a backdrop of global geopolitical uncertainty and heightened market volatility, the continued progress within the core of the business since the merger of SHUAA Capital and Abu Dhabi Financial Group in 2019 allows management to remain confident about the Group’s ability to build on its market-leading position and deliver significant value creation for its investors and its shareholders.

Fadhel Al Ali, Chairman of SHUAA Capital, commented: “Despite continued wider market instability, SHUAA has focused on continuing to deliver for our clients. The model of partnering local capabilities has seen a number of high-profile successes in areas we can look to repeat this success, not least the Investment Banking team’s work on behalf of Anghami. We expect this model to continue to benefit both clients and shareholders in the future.”

Commenting on SHUAA’s 2021 preliminary results, Jassim Alseddiqi, Group Chief Executive Officer of SHUAA Capital, said: “SHUAA has continued to progress during the year in broadening its client offering. As we move towards the end of cleaning up legacy and non-core investments and portfolios, we will increase our focus on driving revenues and shareholder returns whilst maintaining a strict discipline on costs. We are continually looking for new ways to meet the demand from both existing and new clients and we remain confident about the numerous and long-term opportunities for our business which will create value for our shareholders.”