PE Tech Report


Like this article?

Sign up to our free newsletter

Global reports fee-based profit of KWD10.6m (GBP23.53m) in 2010

Global Investment House saw fee-based business – asset management, investment banning and brokerage – generate operating income of KWD20.7m and a profit of KWD10.6m in 2010, according to the company’s year-end results.

During 2010 the Asset Management business remained resilient with USD5.1 billion of assets under management. Several funds managed by Global outperformed their respective indices and peers. Standard and Poor’s Fund Services assigned an “A” fund management rating to three of the funds managed by Global Kuwait: Global GCC Large Cap Fund, Global 10 Large Cap Index Fund and Global GCC Islamic Fund.

The total assets managed by Global Saudi Arabia through Global Saudi Equity Fund and Global Saudi Islamic Equity Fund (Al Noor) reached over USD100million at the end of December 2010 placing Global’s Saudi operations among the most dominant fund managers in the Kingdom. The Global Saudi Islamic Equity Fund (Al Noor Fund) was named by Lipper-Reuters as the best performing fund in the Saudi Arabian market for the first half of 2010. In 2010 we started the discussions with Standard & Poor’s (S&P) Fund Services for rating the Global Saudi Equity Fund and earlier this year they assigned an “A” fund management rating to the Global Saudi Equity Fund, the first Saudi equity fund to be assigned such rating by S&P Fund Services. This success confirms the importance of Global’s geographical expansion strategy in selected GCC states, where Global has a deep understanding of market dynamics and an impeccable track record.

Global GCC Large Cap Fund delivered an absolute return of 23.1% during 2010, thus becoming the best performing fund in the GCC as per Zawya. Global was named “Kuwait Asset Manager of the Year” and the Global 10 Large Cap Index Fund received “Kuwait Equity Fund of the Year” award from MENA Fund Manager (MENA FM), one of the leading organisations that monitor the regional asset management industry. The Global Distressed Fund was ranked sixth in the Fund of Fund-Distressed Securities/Event Driven category for May 2010 by BarclayHedge. The Global Large Cap Fund was ranked the best in a group of 14 comparable GCC funds by Zawya.

Furthermore, Global Capital Management, the alternative asset management arm of Global, distributed USD70 million to clients in 2010 through exits and returns generated from the underlying investments in the private equity funds. With this, the total amount distributed to clients exceeded USD120 million in the past two years despite a challenging market for private equity exits.

In Investment Banking, Global signed advisory mandates with certain regional companies in the real estate, transportation, telecommunications and other sectors. Global acted as the Sole Regional Financial Advisor for Bharti Airtel in acquiring Zain Africa (excluding Morocco and Sudan) in a transaction worth USD10.7 billion and Global Egypt played the role of co-lead manager for the IPO of Amer Group Holding. Global received several recognitions on the role it played in Investment Banking mandates and was ranked among the leading international investment banks providing financial advisory services for mergers & acquisitions (M&A) in two separate reports issued by Thomson Reuters and Mergermarket, based on international M&A deals during the first six months of 2010.

To strengthen our presence in the core GCC and MENA markets, Global appointed new CEOs for its operations in Saudi Arabia, Egypt and Jordan.

During 2010 Global’s principal investment book’s performance continued to be negatively impacted by the market turbulence in GCC and the rest of the MENA markets where Global’s principal investments are focused and investment specific issues. Nevertheless, we remain confident about the future prospects of the equity markets in the GCC and MENA region.

Despite recent political developments, given the macro-economic backdrop, Global sees the potential for upside driven by a pick-up in earnings growth and simultaneous re-ratings towards long-term valuation levels. The company continued to make orderly exits from the principal investment book in the period, thereby generating over USD190 million of liquidity during 2010. Global will continue to realise its investments in an orderly fashion as and when market opportunities arise.

Global continues its drive to rationalise its cost base. General overheads (including business travel, promotion and communication costs) in 2010 were 35% lower than the comparable period. Personnel costs remained almost unchanged despite redundancies due to additional senior hiring to support business expansion.

During 2010, interest costs were reduced by 32% to KWD23.8 million compared to 2009 interest cost of KWD35.0 million stemming from the reduced interest margins in the new restructured facilities and reduced levels of debt from KWD578.8 million at 31 December 2009 to KWD521.0 million at 31 December 2010, a 10% reduction.

During 2010 Global made USD178.3 million principal repayments of its restructured bank debt, representing 10.3% of the total original debt restructured, thereby marginally exceeding the total repayments due by 10 December 2010. Despite the continued market turbulence in GCC and rest of the MENA markets where Global has the majority of its principal investments, these were financed by the ability of Global to exit some of its investments at attractive prices. So far we have succeeded in meeting all our commitments of the Debt Restructuring Agreement. Going forward, the success in meeting the principal repayments will be dependent upon the continued ability to make exits from principal investments and real-estate portfolio, capital raising and resolution of legal disputes relating to recovery of a USD250 million deposit with National Bank of Umm Al Qaiwain (NBQ).

Global received the “Most Innovative Deal” award by Euromoney for the Islamic tranche of its debt restructuring. The award was in recognition of Global’s professionalism and transparency in dealing with the banks during the restructuring process, and for the innovative structure of the deal which has enhanced the stability of Global’s financial platform.

As previously announced, on 19 July 2010 the Honourable court of first instance in the Emirate of Dubai passed a judgment ordering NBQ to repay Global Investment House USD250 million towards the refund of a deposit placed by the Company with NBQ in August 2008 plus annual interest at the rate of 9% from 8 February 2009 until the date of payment and all expenses. Furthermore, the court rejected all counter claims made by NBQ. Regrettably, NBQ continues to deny Global its contractual and legal rights and has appealed against the said judgment.

Commenting on the results, Maha Al-Ghunaim (pictured), Chairperson and Managing Director of Global, says: “While the market environment has continued to impact the performance of our principal investment business, we remain pleased with the success of the strategy of focusing our efforts on developing the fee-generating lines of our core business, namely asset management, investment banking and brokerage. 2010 was a year full of accomplishments for our core business. While we continued to excel at product and pillar level in asset management and investment banking, we continued to make exits from principal investments and reduce our debt.”

Like this article? Sign up to our free newsletter