Shuaa 2012 results and successful strategy execution in line with market guidance

The improvement was driven primarily by the successful completion of the restructuring and rightsizing programme. Total expenses for the year were reduced by Dhs163.0m. General and Administrative expenses were down Dhs37.7m as the number of staff was reduced and processes made more efficient. The Lending business recorded a Dhs13.7m expenses increase in line with its expansion plans in the UAE and Saudi Arabia. All other business units recorded a significant decrease of expenses totalling Dhs51.4m. This represents a year-on-year improvement of 29%.

During the first half of 2012, Shuaa incurred charges related to the Company's restructuring programme, which only started to have a positive impact on General and Administrative expenses during the second half of 2012. The full impact of the 2012 restructuring programme is expected to be recognized in 2013 with an additional cost improvement of 10%.

Revenues for Q4 2012 were Dhs25.2m compared to Dhs20.1m for Q4 2011, representing an increase of 25% and bringing 2012 annual revenues to a total of Dhs137.3m, a 38% increase over 2011 revenues of Dhs99.3m. Revenues were buoyed by an increase in interest income and a positive swing in investments in Shuaa's managed funds.

In the fourth quarter 2012, Shuaa achieved its strategic and financial objectives. The fourth quarter net loss improved to Dhs20.7m from a loss of Dhs111.9m in the same period last year with the benefits of the rightsizing programme showing a positive impact on the Company's bottom line. Shuaa continues to prudently value its assets and as such there were no investment impairments in the period.

Shuaa further strengthened its balance sheet. As at 31 December 2012, total assets stood at Dhs1.4 bn. Cash and deposits rose 24% to Dhs423.3m. Throughout the year, the Company continued to reduce liabilities by retiring debt. Total liabilities consequently fell by 38% to Dhs269.4m from Dhs437.2m at the end of 2011, lowering interest expenses by 28 % to Dhs11.7m from Dhs16.2m in 2011.

HH Sheikh Maktoum Hasher Al Maktoum, Executive Chairman of Shuaa Capital, commented on the results, "Despite the volatile market environment in 2012, Shuaa's financial results for the full year are in line with our market guidance. Strategically, 2012 was a transformational year for Shuaa and the business achieved key milestones in its announced restructuring programme. We successfully completed four major turnaround initiatives, including the rightsizing programme, the reduction in non-core assets, the transformation of our industry leading balance sheet by strengthening our liquidity position and the announcement of a clear strategic, financial and operational roadmap with a focus on recurring revenue generation."

"The reduced scale of our industry and the renewed need for capital and advisory expertise are playing out in our favour. While most of the regional financial services industry is still in restructuring mode, Shuaa now has a competitive advantage and the ability to focus on revenue generation. The recent revitalization of our financial brand and the positive feedback on our strategic direction from shareholders and clients underscore our position of strength versus peers. Shuaa is now in a unique position to focus on growth which will result in a stronger performance in 2013," he added.

Segmental Information:

Lending

Shuaa's Lending division recorded full year revenues of Dhs75.6m (FY2011: Dhs61.2m) and Q4 revenues of Dhs19.9m (Q4 2011: Dhs18.2m). Full year profit was Dhs3.0m (FY2011: Dhs23.4m), with a marginal quarterly loss of Dhs0.8m (Q4 2011: profit of Dhs5.4m). Overall, Lending had another strong year and contributed over 55% of Shuaa's revenues in 2012.

In 2012, Gulf Finance Corporation generated a net profit of Dhs10.0m, offset by a significant investment of Dhs7.1m in the recently launched Gulf Installments Company in Saudi Arabia and the establishment of Shuaa Credit. In line with its strategy, Shuaa has successfully redeployed parts of its balance sheet to GFC.

During the year, Gulf Finance Corporation has applied with the UAE Central Bank for a license to establish an Islamic Window for some of its financing activities with a view to being market-ready in the spring of 2013, subject to regulatory approvals.

Gulf Finance was awarded the "Best SME Finance Company" at the 2012 Banker Middle East Industry Awards. This is the second consecutive year that Gulf Finance has been recognized for its SME lending activities.

Asset Management

The Asset Management business, which manages Shuaa's investment funds, private equity funds, as well as discretionary portfolio mandates, recorded revenues of Dhs18.0m in the year under review (FY2011: Dhs23.8m) and a net profit of Dhs1.8m (FY2011: Dhs5.2m). Q4 saw revenues of Dhs4.2m (Q4 2011: Dhs6.3m) and a profit of Dhs2.1m (Q4 2011: Dhs2.6m).

Shuaa's flagship funds, the Arab Gateway Fund and the Emirates Gateway Fund, continued to outperform their peers and benchmarks. The Arab Gateway Fund returned 9.02% in 2012, outperforming its benchmark, the S&P Pan Arab Composite Index, by 5.1%. The Emirates Gateway Fund also outperformed its peers with a performance of 30.94% in 2012, 3.85% above its benchmark, the S&P UAE Composite Index.

Shuaa Credit is working closely with the Asset Management team on the development of credit products to be launched in 2013.

In the second half of the year, Shuaa closed its Shuaa Partners Fund following the sale of its two remaining investments generating an IRR of 7.6% over its investment period. During the Fund's vintage period, from 2005 to 2012, public equity markets in the UAE (MSCI UAE Index) posted a decline of 78%.

Shuaa Capital was chosen as the Best Asset Manager in the United Arab Emirates by EMEA Finance for the third consecutive year. Early in 2013, the Emirates Gateway Fund was voted "UAE Equity Fund of the Year" by MENA Fund Manager for the second year in a row.

Investment Banking

In Q4, revenues were Dhs1.8m (Q4 2011: Dhs0.7m) and the division recorded a loss of Dhs0.7m (Q4 2011: loss of Dhs2.5m). The Investment Banking Division recorded annual revenue growth of 64% to Dhs11.2m (FY2011: Dhs6.8m) and improved its bottom line by 90% to a net loss of Dhs1.4m (FY2011: loss of Dhs14.4m).

In April, Shuaa was joint-lead manager on the successful IPO of NMC, a leading integrated UAE healthcare provider. This was notable for being the first ever Abu Dhabi company to list on the London Stock Exchange. Towards the end of 2012, Shuaa entered into a Memorandum of Understanding with PT Pratama Capital Indonesia regarding collaboration between the two firms, to offer a variety of investment banking services to issuers and investors in the UAE and the Republic of Indonesia.

Also, towards the year end, Shuaa was appointed financial advisor to Urbanos Group, Portugal's leading ground handling and logistics company. Shuaa was appointed to offer support and advisory services for business development and funding requirements as Urbanos establishes its hub in Dubai and builds out its operations regionally.

Brokerage

The business recorded revenues of Dhs8.1m in the year under review (FY2011: Dhs19.9m) and a net profit of Dhs0.3m (FY2011: loss of Dhs129.9m). In Q4, revenues were Dhs0.6m (Q4 2011: Dhs2.6m) and the division recorded a loss of Dhs2.3m (Q4 2011: loss of Dhs86.9m).

Due to the exit from the retail brokerage business, total expenses related to brokerage fell 95% to Dhs7.8m from Dhs152.6m in FY2011. Shuaa expects to close down retail brokerage in the first half of 2013.

Corporate

The corporate centre recorded full year revenues of Dhs24.4m (FY2011: negative revenues of Dhs12.4m) and an overall loss of Dhs62.7m (FY2011: loss of Dhs178.1m). In Q4, revenues were negative Dhs1.4m (Q4 2011: negative revenues of Dhs7.7m) and the division recorded a loss of Dhs19.0m (Q4 2011: loss of Dhs30.6m). Headcount at the end of 2012 was 200 compared to 282 at the year-end 2011.