Dubai: Shares in Shuaa Capital shot up 14.5 cent after the DFM-listed investment firm, on Tuesday, resumed trading on the bourse and revealed that during the first quarter it saw Dh5 million in adjusted net operating income, swinging from Dh14 million loss reported in prior quarter.
After sustaining losses in 2023, it devised a new 5-year plan to revamp the business back to growth again. The efforts are evidently paying off, which is why investors cheered a recovery recorded in the company’s earnings and margins during the quarter. Operating margin came in at 16 per cent, a stark improvement compared to the negative 29 per cent reported in the prior quarter.
Management at Shuaa, which adjusted its valuation of an assosiate firm’s underlying assets and impairments of legacy investments in the UK during the first quarter of the year, views these impairments as a necessary step in facilitating a “right-sized balance sheet” and establishing a “lean and efficient” capital structure.
Receovery from setbacks
Wafik Ben Mansour, Group CEO of Shuaa Capital, said, “The company is starting to turn a corner by taking a proactive stance towards its legacy investments, bolstering its capital base and laying the foundation for a new business model focused on growth and shareholder value.”
“I continue to remain optimistic about the company’s strong fundamentals and future direction, along with the dedicated support of the newly appointed Board Members under the leadership of our Chairman. We also anticipate releasing our reviewed financials for the second quarter of 2024 within the set regulatory deadline.”
Shuaa has been passing through a tumultous time, after having recorded losses of Dh1.15 billion for 2023, against a loss of Dh122 million a year before. It had been late reporting the financial statements and that resulted in the DFM ordering a halt to trades in the stock.
The company’s strategic intent at the time was to ride on the property boom Dubai and the UAE was experiencing, with even plans to create a Gulf-wide profile on the property side using its property arm Northacre.
But by early 2023, Shuaa started reporting losses and which then led to the changes at the top in the second-half of the year. As of end May this year, its accumulated losses were Dh829 million (coming to 32.68 per cent of the capital).
No remuneration
A meeting of the Shuaa general assembly late last month also approved that directors will not be paid any remuneration for the 2023 period. All of which is far removed from how the company was faring in 2021-22. There had been a series of big-ticket investments, including in the Arabic music streaming portal Anghami and a real estate project that was to be launched on the Palm Jumeirah. (Shuaa had a partial exit from Anghami after the latter listed on Nasdaq via a SPAC deal.)
Typically, shareholders pass instant approvals when it comes to previous year clearance from liability for their Board of Directors and of the auditor, but in the crucial shareholder meeting, Shuaa also took a call to not absolve its former auditors ‘from any liability’ for their work during 2023, and decided that their former board member Jassim AlSeddiqi will not be absolved from liability for 2023.
AlSeddiqi was at one time the major shareholder in Shuaa and had been credited with helping the company effect a turnaround after overseeing a merger with ADFG in 2019. He had in the recent past brought down his stake in Shuaa from over 20 per cent to the single-digits. It was in August 2023 that he stepped down as managing director and wound down his stake, which also triggered subsequent departures for the CEO and other top executives.
