SHUAA reports preliminary first half 2008 net loss of Dhs371.1m impacted by global financial market meltdown

The company today reports a net loss per diluted share of Dhs0.475 for the first half of 2008 (1H2007: Net profit per share AED 0.226). The total net loss for the period was Dhs371.1m (1H2007: net profit Dhs128.6m).

SHUAA's results were principally impacted by the global market downturn which has affected all equity markets around the world. This especially affected the Principal Investments business, where 'mark to market' reductions in asset valuations were booked to operating income but remain unrealized; the Investment Banking business, where a number of major capital market transactions have been delayed due to the adverse market conditions.

Mr Majid Saif Al Ghurair, Chairman of SHUAA Capital said:

"The unprecedented turmoil in global financial markets has dramatically impacted investor confidence and consequently the region's equity markets. The effect on our results in the first half has been significant but we remain as confident as ever in the long term prospects for this region and in SHUAA's ability to be able to deliver long term shareholder value given that we are diversified across six business lines."

He added: "SHUAA's management has grown the company 20 fold over the past 10 years, but we are in a cyclical industry and while we remain on a solid footing, we are not immune to the world around us."

SHUAA Capital's annuity fee business still performed well, although not at the pace seen in the first quarter, reporting an overall increase of operating income for the half year to Dhs262.4m (H1 2007: Dhs133.1m) and a net profit of Dhs125.5m (1H2007: Dhs68.9m).

This was led by the Asset Management, Brokerage and Private Equity divisions which continued to outperform in falling markets. SHUAA's Finance subsidiary generated a record result of Dhs39.3m in operating income (1H 2007: Dhs24.9m) and a net profit Dhs25.1m (1H 2007 Dhs15.3m).

The results of our Group wide investments were mainly affected by Dhs400.1m of unrealised 'mark to market' reductions in asset valuations which were booked to revenues under IFRS accounting standards. These reductions were a result of the fall in global markets. We believe they do not reflect the quality of the assets held or any major change in their trading fundamentals.

In the Principal Investments division our multi-strategy, multi-asset class portfolio has regionally allocated over 75% to the GCC and India where we believe the economic growth will slow and hence we expect a faster market recovery than in developed markets. During the period, the investment portfolio significantly outperformed the relevant indices.

Also included in the results are losses in relation to:

• Write-downs of Dhs78.6m on structured products and fixed income securities that were exposed to Lehman Brothers.

• One-time provision of Dhs45.8m attributable to Orion Holding Overseas

Mr. Iyad Duwaji, Chief Executive Officer of SHUAA Capital, summarized:

"It is disappointing to report a loss of Dhs0.475 per share. However, our capital base remains strong with Dhs3bn in shareholders' equity and the reported loss can be absorbed within our retained earnings of Dhs658m. Additionally, our leverage ratio is very low at 0.53 times equity compared with international investment banks at around 20-30 times equity. We do not believe that the real economy in the GCC will go into a recession as in the US."

He added, "We see more moderate growth in the range of 5-6% going forward and a de-coupling from global markets in due course. We therefore feel confident that we are well positioned to take advantage of the inevitable return to normalcy in the regional financial markets."