Shuaa Capita's net profit dropped to Dh5.6m in first quarter of 2022. Jaime Puebla / The National
Shuaa Capita's net profit dropped to Dh5.6m in first quarter of 2022. Jaime Puebla / The National
Shuaa Capita's net profit dropped to Dh5.6m in first quarter of 2022. Jaime Puebla / The National
Shuaa Capita's net profit dropped to Dh5.6m in first quarter of 2022. Jaime Puebla / The National

Business

Economy

Shuaa Capital Q1 profit softens due to asset write-down

Company's net profit would have jumped to $10m without the write-off

Mary Sophia
Mary Sophia

May 12, 2022

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Dubai-based investment bank Shuaa Capital has reported a drop in its first-quarter net profit after accounting for a write down of intangible assets worth Dh31 million ($8.4m).

Net profit attributable to owners of the parent for the three-month period to the end of March fell to Dh5.6m, compared to Dh25m reported during the same period last year, the company said in a statement on Thursday to the Dubai Financial Market, where its shares are traded.

The company's net profit would have jumped 46 per cent to Dh37m without the write-off, Shuaa said.

“The business has successfully managed through the significant headwinds since the start of the year: the war in Ukraine and the associated geopolitical uncertainties, accelerated inflationary pressures and commodity price increases along with heightened market uncertainty and volatility," said Jassim Alseddiqi, group chief executive of Shuaa Capital.

"The strengths of our business model are the high degree of diversification and our ability to adapt quickly and take advantage of market opportunities while continuing to build on increasing our recurring revenues and strengthening our balance sheet."

The group's reported debt-to-equity ratio declined by a net 22 percentage points to 112 per cent during the quarter, making it the lowest ratio since 2019.

Shuaa Capital merged with the Abu Dhabi Financial Group three years ago to create a business with both an asset management and investment banking platform that offers diversified revenue streams across different countries.

In March, the company's asset management arm launched a $250m fund, the GCC's largest venture debt fund, to support the growth of regional technology companies seeking alternative sources of capital.

Shuaa also launched a $100m initial public offering on Nasdaq New York in March, as the first of its three planned special purpose acquisition companies (Spacs).

The same month, Shuaa Capital also bought Abu Dhabi-based offshore support vessels provider Allianz Marine and Logistics Services in a deal that will create the Middle East's largest portfolio and the fourth biggest fleet in the world.

The transaction is one of the largest merger and acquisition deals in the maritime offshore sector in the Middle East.

The group also acquired a stake in UAE-based FinTech Souqalmal in an effort to enter the personal finance space.

These deals have demonstrated the company's "ability to effectually execute in a challenging environment”, said Mr Alseddiqi.

The company also said "its management remains focused on delivering performance in its core business and identifying new opportunities for the group".

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How to apply for a drone permit
  • Individuals must register on UAE Drone app or website using their UAE Pass
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Ten tax points to be aware of in 2026

1. Domestic VAT refund amendments: request your refund within five years

If a business does not apply for the refund on time, they lose their credit.

2. E-invoicing in the UAE

Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption. 

3. More tax audits

Tax authorities are increasingly using data already available across multiple filings to identify audit risks. 

4. More beneficial VAT and excise tax penalty regime

Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.

5. Greater emphasis on statutory audit

There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.

6. Further transfer pricing enforcement

Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes. 

7. Limited time periods for audits

Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion. 

8. Pillar 2 implementation 

Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.

9. Reduced compliance obligations for imported goods and services

Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations. 

10. Substance and CbC reporting focus

Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity. 

Contributed by Thomas Vanhee and Hend Rashwan, Aurifer

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Killing of Qassem Suleimani

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

Labour dispute

The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.


- Abdullah Ishnaneh, Partner, BSA Law 

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