10.5

Return on equity

76

Capital markets division
total income up 76 percent

Waha Capital continued to be a highly profitable business despite the challenging macro-economic context in 2016, recording a total net income of AED 407 million – a return on average equity of 10.5 percent.

The company’s strategy of diversification has ensured that when certain assets, sectors or geographies are affected by a difficult operating environment, the impact on shareholder value is cushioned.

Over the last five years, we have focused on building a robust Capital Markets business to complement our Principal Investments, in order to diversify our revenue streams and enhance liquidity.

The Capital Markets division reported a 76 percent increase in total income in 2016 and now accounts for 30 percent of total income, and 30 percent of assets. Our flagship emerging markets credit and equities funds continued to significantly outperform, adding to an impressive track-record that we have now taken to market.

Our Asset Management offering, which includes our capital markets funds and platforms that invest in private credit and private equity, is starting to gain traction among regional third-party investors. This will gradually add fee income to our overall revenue mix.

Although Principal Investments made lower contributions to our total income than in previous years, we believe that our major investments are holding up well.

For example, in 2016, AerCap’s operating performance remained solid, with the company continuing to win significant contracts. This bodes well for the future.

We have also seen Waha Land mature and deliver steady rental income from its ALMARKAZ light industrial real estate development, following the successful leasing of its existing facilities. In 2016, the company secured a significant financing package for the further development of the project, laying the foundations for further growth in the coming years.

Certain sectors are experiencing a challenging operating environment, and our investments have not been immune. For example, Dubai-based consumer finance firm Dunia Group made a lower contribution to our total income in 2016.

In such cases it is important that Waha Capital remains steadfast. Our investment teams are singularly focused on value creation for all of our assets and through our board representation, we are working hard to implement strategies to promote stability and growth across the Principal Investments portfolio.

Meanwhile, the current economic conditions in the Gulf Cooperation Council countries may well result in attractive investment opportunities.

Thanks to our prudent financial management in recent years, Waha Capital is in an excellent position to take advantage, if we see growth potential and value.

We have a reputation for expertise in identifying the right opportunities, and an ability to act nimbly to grasp them. Our expert teams are adept at utilising their strong regional networks, and rely on extensive research to source and analyse investments. They follow well-defined investment processes, governed by a rigorous framework to assess and mitigate diverse risks.

We firmly believe that by investing private capital in fast-growing sectors, Waha Capital can continue to deliver attractive returns to investors in the coming years as well as contributing to regional economic diversification.

I would like to take this opportunity to thank our shareholders for their continued support, and express my gratitude to the company’s Board of Directors for their guidance. Finally, I would like to thank the company’s management team and employees, for their dedication and drive to deliver on our strategy.

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Salem Rashid Al Noaimi,
Chief Executive Officer & Managing Director