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ADX

Annual Report 2017

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2018 Aug 13

Waha Capital net profit rises 31% to AED 239.7million

ABU DHABI, 13 August 2018 – Waha Capital PJSC, a leading investment company in Abu Dhabi (ADX: WAHA), reports a 31% year on year rise in net profit in H1 2018 to reach AED 239.7 million. The strong H1 results were largely driven by Waha Capital’s successful exit of NPS Holdings in June 2018. The company’s balance sheet remains robust with a strong level of cash realization and consistent performance from both its Private Investments and Asset Management businesses.

FINANCIAL HIGHLIGHTS

H1 2018

  • Net profit of AED 239.7 million, up 31% YoY
  • Total income of AED 618.7 million, up 12.3% YoY
  • Return on average equity of 7.2%
  • Net profit from Private Investments business of AED 196.0 million, up 12.5% YoY
  • Net profit from Asset Management business of AED 145.0 million, up 31.7% YoY
  • Leverage of 26.7% at June 30, 2018 compared to 25.9% as at December 31, 2017.
  • Total assets of AED 11.5 billion, compared to AED 11.3 billion as at December 31, 2017
  • Operating cash flow of AED679m, reflecting cash generation from activities on AerCap and NPS

Q2 2018

  • Net profit of AED 132.4 million, up 38.5% YoY
  • Total income of AED 306.5 million, up 7.7% YoY
  • Net profit from Private Investments business of AED 162.0 million, up 77.4% YoY
  • Net profit from Asset Management business of AED 26.7 million, down 53.0 % YoY

H.E. Salem Rashid Al Noaimi, Chairman of Waha Capital, said: “Waha Capital has produced another strong set of results and an attractive return on equity of 7.2 % in the first half of 2018. The company’s leadership team has built a very well balanced and diversified business, and both divisions – Private Investments and Asset Management – have delivered robust growth this year. In recent years, we have increased the proportion of liquid assets in our investment portfolio and enhanced the company’s ability to generate healthy cash flows. Now, thanks to our strong balance sheet, Waha Capital is well positioned to make additional direct investments, focusing on sectors where we have built significant expertise. The company is also taking our attractive offering to third-party investors, both for direct co-investment opportunities and for our award-winning asset management business.”

Michael Raynes, CEO of Waha Capital said: This is another great set of results. We have shown strong profitability and return on equity, as well as robust cash flows. We have a good balance between our Private Investments and Asset Management businesses and good visibility on cash flows. To manage risk, we have increased liquidity across our investments. We now benefit from diversified exposure to listed securities, through our Asset Management funds and listed investments, including AerCap and NESR.

“Thanks to our exceptional people and their strong focus on governance, we are well-positioned to deliver on the Company’s mission of long-term sustainable growth for our shareholders.”

PRIVATE INVESTMENTS HIGHLIGHTS

*Waha Capital’s full financial statements can be found on www.wahacapital.ae

NPS Holdings

During June 2018, the Group acquired a 5.8% stake in a NASDAQ-listed entity, National Energy Services Reunited Corp. (“NESR Corp”) as part of exit consideration of NPS Holdings Limited. The formation of NESR Corp as an operating entity was completed in June 2018, after the transaction was approved by the Securities and Exchange Commission in the United States and NESR shareholders.

 

NESR is the first and only NASDAQ listed national oilfield Services Company in the MENA region and one of the largest oilfield services provider in the Middle East, North Africa and Asia region. In June 2018, NESR consummated the 100% acquisition of NPS Holdings Limited for a gross consideration of c. $599 million and Gulf Energy S.A.O.C. for a gross consideration of c. $289 million – aggregating total consideration of c. $888 million.

 

The sale transaction of NPS Holdings, Which Waha Capital held 20.62% stake, took place in two stages, with the first stage exit (representing 4.68% stake) completed in December 2017 and the second stage exit (representing remaining 15.94% stake) completed in June 2018. During June 2018, the Group recognized a gain on disposal of AED 92 million and total consideration of AED 312.3 million, comprising cash of AED 130.6 million and 5.8% equity stake in NESR Corp.  Total gain on the transaction was AED 142.3 million and total consideration was AED 426.5 million, comprising cash proceeds of AED 245.5 million and 5.8% equity stake in NESR Corp.

 

The deal is an important milestone for Waha Capital. It demonstrates the company’s strong execution capabilities and builds on its track record to monetize an unquoted investment, with a combination of cash and shares in a publicly listed company. 

AerCap

New York-listed AerCap Holdings NV is the world’s largest aircraft leasing company.  AerCap continues to be a key asset for Waha, we hold 15.54% and two board seats. In the first half of 2018, Waha Capital recognized total income of AED 144.2 million from its investment in AerCap which represents 31% of the company’s total income and 38% of its total assets, with a carrying value of AED 4.4 billion.

Waha Capital has benefitted from the meaningful increase in the share price of AerCap since the implementation of the option strategy in late 2014.  These options have been an effective hedge, allowing participation in the increase in the price of the stock, while also limiting downside exposure. Waha Capital structured these options in a series of tranches some of which have been exited with the remaining tranches maturing over the next two years, giving us the option to exit all of the AerCap position smoothly over this timeframe, while still benefitting from some of the potential future increases in share price.

Waha Capital accounts for these options in accordance with International Financial Reporting Standards (IFRS) as a cash flow hedge. As such, any change in the value of the options (mark to market, “MtM”) is recognized under Other Comprehensive Income. The change in share price and the change in value of the options are inversely related. The MtM of the options is currently negative due to the increase in the share price which has in turn increased the time value of the options, which will converge to zero upon settlement. At maturity, the gain or loss on disposal of such shares together with the net cost of the options will be recognized in the P&L of the group.

These options were initially implemented in late 2014, at an average spot price of $44.50, generating cash proceeds of approx. AED 3.6 billion. Since then, Waha Capital has recognized total income of AED 1.7 billion. As of June 30, 2018, the carrying value of our investment in AerCap was US$ 52.02/share compared to the market value of US$ 56.01/share (as of July 30) achieving a total implied IRR of greater than 30% and money-on-money multiple of c. 2.8x.

ASSET MANAGEMENT DIVISION

Waha Capital’s Asset Management division continued to deliver strong absolute performance, grow its third-party assets under management and increase its overall contribution to the company’s profitability. The year to date returns of the funds as of the end of June were 13.8% for the MENA Equity Fund; 6.4% for the MENA Value Fund and 4.9% for the CEEMEA Fixed Income Fund. This performance took place in the context of a challenging backdrop for emerging market assets globally.  

During the first half of the year, Waha Capital made some key hires to strengthen its global fund raising capabilities, as a result, total assets under management reached AED 2.6 billion as of June 30, 2018 compared to AED 2.1 billion as of December 31, 2017, an increase of 24%. The company’s investor base includes a diverse mix of regional and international institutions.

Total income from Asset Management was AED 246.4 million for the period ended June 30, 2018 (40% of total income) compared to AED 171.4 million during the corresponding period in 2017 (31% of total income).

During the year, the CEEMEA Fixed Income Fund was named ‘’Best Fixed Income Fund’’ by the Banker Middle East, and the MENA Equity Fund was chosen ‘’Asset Manager of the year 2018- UAE & Best Absolute Return Fund since inception’’ by Wealth & Finance Alternative Investment.

Note on exposure to Abraaj Group:

Waha Capital has not invested in the Abraaj Group, nor in any of its funds.

Waha Capital is the ultimate beneficial owner of 49% of Aqua Consortium Limited, which holds the Stanford Marine group of companies (including Stanford Marine, Grandweld and Gallagher International); the remaining 51% of the Stanford Marine group is ultimately held by the Abraaj Group. Waha Capital has no financial exposure to the Abraaj Group through its shareholding in the Stanford Marine group of companies and foresees no direct financial loss for Waha Capital arising from the Abraaj liquidation process. Waha Capital wrote off the remaining carrying value of its investment in Stanford Marine group in Q1 2017.

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