Extra toll gates and more fines drive Salik’s profit up 16% in fourth quarter

Dubai toll operator Salik reported a 16 per cent jump in its fourth-quarter profit on revenue growth driven by an increase in fines and an introduction of more toll gates.

Profit for three months to the end of December climbed to Dh342.5 million ($93.26 million), the company said in a statement on Tuesday to the Dubai Financial Market, where its shares are traded.

Revenue for the period rose 15.6 per cent annually to Dh651 million ($177 million) as trips by motorists through Salik gates rose 15.8 per cent year-on-year, to Dh142.6 million. Salik introduced two more toll gates in November, at Business Bay Crossing in Al Khail Road and at Al Safa South in Sheikh Zayed Road.

Revenue from fines also increased 14.5 per cent annually, to Dh62.1 million, as the number of net violations rose 5.4 per cent to 730,000. Net violations during the fourth quarter represented 0.4 per cent of net toll traffic, and toll usage revenue grew 15.7 per cent to Dh570.2 million amid the continued inflow of tourists to the emirate and increased of movement, the company said.

Driving in Dubai is about to get more expensive

00:59

“With this growth, we see promising opportunities to continue to increase and diversify our revenues, enhance our financial returns, and contributing to the long-term sustainability of our business,” said Mattar Al Tayer, chairman of the board of directors of Salik.

The company’s full-year profit grew 6 per cent annually to Dh1.16 billion, as revenue jumped 8.7 per cent to Dh2.29 billion. Its total assets as of the end of last year reached Dh7.98 billion, up about 53 per cent annually.

The company revised its revenue guidance for the full year upwards to 28 per cent-29 per cent, compared to its previous guidance of 25 per cent-26 per cent, amid the introduction of the new Salik gates and variable pricing in January.

Motorists will be charged Dh6 during peak hours between 6am and 10am and from 4pm to 8pm, and Dh4 during off-peak hours between 10am and 4pm and from 8pm to 1am.

The company's board of directors proposed a dividend of Dh619.8 million to be paid during first half of 2025 in light of the strong financial performance.

The Salik system was introduced in 2007 to ease traffic congestion, raise state revenue and encourage residents to use public transport. The first two gates were installed in Gharoud and Barsha, with Safa and Maktoum bridge gates added a year later. In 2013, three more were introduced at Airport Tunnel, and two at Mamzar – south and north. In 2018, the Jebel Ali gate was introduced. Motorists are charged to pass through each gate, with the amount deducted automatically from tags fixed to windscreens.

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.”

Extra toll gates and more fines drive Salik’s profit up 16% in fourth quarter

Company's revenue for three months to the end of December climbed to $177 million