Shares in Dubai’s Shuaa Capital surged 13.42 per cent in today's trading after the investment bank announced narrower losses for the fourth quarter of 2011 compared with the same period of 2010, and said in a statement that it will be further reducing its headcount by more than 31 per cent in the first half of 2012.
“Shuaa will be making a further headcount reduction of 55 employees, primarily from retail brokerage, in the first half of 2012, subject to regulatory approval,” the investment bank said in the statement.
In 2011, the company undertook a fundamental restructuring programme that identified the real revenue opportunities and areas to further reduce costs. So far, Shuaa has reduced its headcount by 39 per cent, implying cost savings of Dh46 million. The number of employees at Shuaa was reduced from 285 to 174 in 2011.
With another 50+ staff at its brokerage unit set to receive the sack in the next four-odd months, overall, its headcount is expected to drop to 130 employees this year, the firm said. Following the reduction in headcount, Shuaa will also reduce rent related expenses by over Dh4m.
Shuaa today reported results for the fourth quarter and year-ended 2011. Revenues in the fourth quarter 2011 were Dh20.1 million (2010: Dh42.8m) and the company reported a net loss of Dh111.8m (2010: net loss Dh186.7m).
In general, 2011 was a bad year for the company with revenues declining by more than a quarter (25.6 per cent) while its losses surged by 31.3 per cent.
In the statement, the firm said its revenues for the full year 2011 were Dh131.1m (2010: Dh176.2m) before losses on investments in Shuaa-managed funds of Dh31.8m (2010 gain on investments Dh12.2m).
Overall, for the financial year 2011, the company had a total net loss of Dh293.8m (2010: loss of Dh223.7m). The bank attributed a majority of the loss, Dh129.9m, directly to its beleaguered brokerage arm. “This includes one-off costs related to closing down Shuaa Securities offices in Jordan, Egypt as well as significantly reducing its presence in Abu Dhabi and Riyadh, related employee termination expenses and provisions as well as a Dh69.7m goodwill impairment charge for the exit from its retail brokerage activities,” it said.
The remaining goodwill of Dh34.1m, accounted for at year-end 2011, relates solely to Gulf Finance, it added.
Sheikh Maktoum bin Hasher Al Maktoum, Chairman of SHUAA Capital, said: “Since my appointment in May 2011, and after careful consideration by the Board of Directors, we have taken decisive and necessary action to eliminate legacy risks and clear the path to achieving our vision of becoming a truly regional financial services provider.
“This required us to take significant write-downs on our legacy portfolio, a rigorous restructuring of our cost base and a material headcount reduction, primarily in brokerage. The cost cutting measures have reduced both the number of employees and employee related costs by 39 per cent, which is equivalent to annualized cost savings of Dh46m, and real estate related expenses of Dh3.5m.
“We have pulled out of the loss-making retail brokerage business, reduced our risk positions and are now implementing a new strategy under the leadership of Michael Philipp who joined Shuaa in October 2011. Since then, we have accelerated the pace and direction at which we are moving and our actions, coupled with our solid balance sheet, will give our shareholders increased financial visibility for the year ahead and an opportunity to renew their confidence in Shuaa.”
Michael Philipp, CEO of SHUAA Capital, added: “The 2011 financial results mirror the difficulties Shuaa has faced in the past but also its resilience in the face of adverse market conditions. In a year of ongoing turmoil, our SME Finance business remained highly profitable. The realigned asset management business reported a profit, an increase in assets under management, and generated outperformance for our clients.
“In investment banking we are getting closer to executing our pipeline of mandates. We have materially reduced our overall cost run-rate and our portfolio risk to a level that makes us less vulnerable to market volatility and allows us to prosper when markets improve. We have entered 2012 with a better financial position, a more resilient operating model and a new strategy that focuses on building out our revenue enhancement program. Our determination to seize the opportunity of repositioning Shuaa as the leading financial services platform in the Middle East remains undiminished.”