SHUAA Capital reports reviewed consolidated financial results for the first half and second quarter ended 30 June 2014.
Revenues increased 46.1% to Dhs116.2m in the first half of 2014, compared to AED79.5m during the same period in 2013. This significant revenue upswing stems from continuously growing client activity across the Group’s core businesses as well as gains from investment in SHUAA managed funds. Net fees and commissions were Dhs34.8m, more than twice the Dhs16.4m recorded in H1 2013.
This was led by the Investment Banking and Capital Markets units which posted Dhs13.2m and Dhs6.4m in fees and commissions, respectively. Total expenses increased by 18.2% to Dhs95.0m; this included an increase in interest expense to Dhs7.6m and total provisions to Dhs10.7m. SHUAA generated a net profit of Dhs14.4m during the first half 2014, an Dhs19.0m improvement compared to a net loss of Dhs4.6m during the same period last year.
HH Sheikh Maktoum Hasher Al Maktoum, Executive Chairman of SHUAA Capital, commented, “SHUAA delivered strong first-half performance despite the volatile operating environment towards the end of the second quarter. This reaffirms SHUAA’s successful strategy, solid financial position and the diversified operating model we have created to generate sustainable profitability throughout market cycles.”
SHUAA maintains a very strong balance sheet and healthy liquidity position. As at 30 June 2014, SHUAA’s total assets were Dhs1.47bn, Dhs22.8m lower than at year-end 2013. Since the beginning of the year, cash and deposits with banks rose 21% to Dhs229.4m. Total liabilities decreased by Dhs43.8m to Dhs332m, a reduction of 11.7%. Shareholder’s equity increased by Dhs21.4m to Dhs1.13bn. During the quarter, SHUAA completed a successful exit from Amwal.
During the second quarter of 2014, total revenues increased by 20% to Dhs52m despite lower gains on investments in SHUAA managed funds. Led by a 96% increase in net fees and commissions and a 27% rise in interest income, 82% of SHUAA’s revenues were generated from recurring fee & interest income in the second quarter. Total expenses increased by 14.7% to Dhs47.3m, which included provisions of Dhs7.7m. SHUAA’s net profit in the second quarter was Dhs6.2m, a nearly five-fold increase from the net profit of Dhs1.3m reported in Q2 2013.
First Half Segmental Information
•14% revenue growth to Dhs10.2m
The Asset Management division generated revenues of Dhs10.2m in H1 2014 (H1 2013: Dhs9m) and recorded a 64% growth in net profit to Dhs7.3m (H1 2013: Dhs4.4m) due to an increase in net fees and commissions and a decrease in G&A expenses. Assets under Management remained stable at Dhs1.055bn (Q1 2014: Dhs1.053bn) and have grown 51% on Q2 2013’s Dhs697m in assets under management.
SHUAA’s two flagship funds, the Emirates Gateway Fund and Arab Gateway Fund, have held firm despite recent market volatility. The Arab Gateway fund generated 7.56% year to date. The Emirates Gateway Fund generated a return of 13.86%, beating its benchmark of 8.82% as at 30 June 2014.
Furthermore, Thomson Reuters/Zawya has named the Emirates Gateway Fund the Best UAE Equity Fund of 2013 at the Zawya Fund Ranking Awards. It is the second consecutive year that SHUAA’s Emirates Gateway Fund has ranked top of the Zawya UAE Funds Ranking. It returned 87% in 2013.
•6x revenue increase to Dhs13.2m
The Investment Banking division witnessed strong half-year revenues totalling Dhs13.2m (H1 2013: Dhs2.2m) and a net profit of Dhs12.5m (H1 2013: loss of Dhs0.6m). The division contributed 11.4% to Group revenues. The division’s cost/income ratio significantly improved to 47% from 127% in H1 2013.
During the first six months of the year, the Investment Banking team worked on a number of public and private transactions. The most prominent public transaction being the USD 200m Emirates REIT IPO where SHUAA acted as Sponsor, Joint-Lead Manager and Joint-Bookrunner. In March the team was also appointed Exclusive Financial Advisor, Lead Manager and Bookrunner for the IPO of Able Logistics Group in the UAE.
The team continues to work on a number of high-profile mandates and is expected to realise further revenue upside from the execution of its strong deal pipeline, driven by increased market and IPO activity.
•91% revenue increase to Dhs7.4m
The Capital Markets division saw revenues increase to Dhs7.4m (H1 2013: Dhs3.9m) which represented 6.3% of Group revenues. In the first half of the year, net fees and commissions were up nearly two-fold, as was interest income while G&A expenses decreased by 25% to Dhs4.3m (H1 2013: Dhs5.8m).
Capital Markets reported a net profit of Dhs3.3m as compared to Dhs3.6m in H1 2013. Investments have been made to further enhance the service portfolio, ensuring that the division continues to be in a strong position to capitalise on growing investor interest in regional markets.
•41% revenue growth to Dhs64.2m
The Lending division posted a 41% increase in first half revenues to Dhs64.2m (H1 2013: Dhs45.4m) and a nearly four-fold upturn in net profits to Dhs14.4m (H1 2013: Dhs3.7m). Provision charge for the period was Dhs18.3m, compared to Dhs11.6m in the same period last year.
The loan book stood at Dhs785.4m, down Dhs28.7m from Dhs814.1m at year-end 2013. The reduction of the loan portfolio is a result of decisive steps taken to settle large ticket loans early in order to reduce concentration risk, improve diversification of the loan portfolio and generate higher margins going forward.
During the second quarter, the Lending division implemented Moody’s Analytics to further institutionalize its credit risk assessment processes and procedures.
•11% top line improvement to Dhs21.2m
The Corporate division posted half-year revenues of Dhs21.2m (H1 2013: Dhs19.0m) and a net loss of Dhs23.1m (H1 2013: net loss of Dhs15.7m). Gains from investment in SHUAA managed funds reached Dhs18.8m, Dhs3.2m higher than the first half of the previous year and G&A expenses was Dhs38.3m (H1 2013: Dhs37.1m).