SHUAA Capital (SHUAA) Q1 2024 earnings summary

Executive summary

• Q1 2024 revenues declined slightly from Q4 2023 due to lower managed fund valuations and reduced legacy UK investment income, with total revenue at AED 30.2 million, down from AED 59.7 million in Q1 2023.

• Net loss to owners was AED 87.2 million, mainly from one-off impairments in associate Eshraq and UK real estate, with total net loss reported as AED 95 million and accumulated losses reaching AED 916 million.

• Adjusted operating income rose to AED 5 million, up AED 14 million sequentially, driven by cost efficiencies; operating margin improved to 16% from -29% in Q4 2023.

• The Group is in breach of certain loan covenants, with AED 228 million classified as current liability, and an agreement reached to extend bond maturity to 31 March 2025 with plans for equity raise via Mandatory Convertible Bonds (MCB).

• Management continues to focus on deleveraging, balance sheet optimization, and capital optimization, including issuing MCB offerings to settle noteholders and raise fresh equity.

Financial highlights

• Total revenues for Q1 2024 were AED 30.2 million, down AED 3.1 million from Q4 2023 and AED 29.5 million year-over-year; Asset Management generated AED 24.95 million, Investment Banking AED 4.17 million, and Corporate AED 1.07 million.

• Adjusted net operating income was AED 4.8 million, a turnaround from a loss of AED 9.6 million in Q4 2023; net interest income was AED 0.24 million, finance costs AED 13.1 million.

• Net loss attributable to owners was AED 87.2 million (EPS: -0.03 AED), compared to a profit of AED 14.7 million (EPS: 0.01 AED) in Q1 2023; total comprehensive loss was AED 115.7 million.

• Operating margin (excluding one-offs) improved to 16% from -29% in Q4 2023; cost-income ratio improved to 84% from 129% in Q4 2023.

• Total assets decreased to AED 1.59 billion from AED 1.72 billion at year-end 2023; total equity fell to AED 234 million from AED 350 million in Q4 2023.

Outlook and guidance

• Management expects to conclude the MCB offering before end of 2024, aiming to convert at least 50% of outstanding bonds to equity and settle the rest at an 80% discount.

• The Group intends to raise up to AED 367 million in equity capital to support debt settlement and improve liquidity.

• Capital optimization plan includes issuing MCB offerings to settle noteholders and raise fresh equity, with an independent valuation advisor to be appointed.

• Management continues to focus on deleveraging and balance sheet optimization, with further cost optimization measures underway.