Al Ansari profit slides on higher depreciation charges

Company board approves minimum dividend payment of $163 million

Al Ansari Exchange branch in Dubai. Satish Kumar / The National

Al Ansari Financial Services, the UAE money exchange and transfer company, reported a 13 per cent decline in second-quarter profit on the back of higher depreciation charge from expanding its branch network and increasing finance costs.

Net profit attributable to the shareholders of the company for the three months to the end of June fell to Dh130 million ($35 million), from about Dh148 million in the same period last year, amid higher finance costs due to interest payments on an Dh300 million term loan, the company said on Thursday in a statement to the Dubai Financial Market, where its shares are traded.

Second-quarter operating income increased 1.2 per cent year-on-year to Dh291 million, mainly driven by strong growth in the bank notes, wage-protection system and other services, while the company recorded a slight decline in the income from its remittance business, it said.

“While our cost base has increased compared to the year ago period, mainly attributed to our aggressive expansion plans, regulatory requirements to achieve Emiratisation targets, and an overall higher operating cost environment … we believe that once … 15 new branches break even, they will contribute towards profitable growth,” Mohammad Bitar, deputy group chief executive of Al Ansari Financial Services, said.

Ansari Financial Services is well funded with ample liquidity to fund growth and as a result the board has approved a dividend payment of Dh600 million ($163 million), said Rashed Al Ansari, group chief executive. The first interim payment is expected in October and the second will be disbursed in April 2024.

Al Ansari Exchange was set up in 1966 and has 231 branches in the UAE, along with operations in Kuwait. It offers exchange services, remittances, savings plans and a system to pay domestic workers.

The UAE is the second largest outward personal remittances market in the world with a total value of $48 billion, according to Edgar, Dunn and Company.

The company has opened 15 new branches in the UAE since the first half of 2022, in line with its expansion plans. As a result, its employee headcount increased 19.2 per cent in the first half of 2023 compared to the same period last year.

Its capital expenditure in the first half of 2023 increased 62 per cent year-on-year to Dh20 million as the group continues to invest in growing its business.

Al Ansari's earnings before interest, taxes, depreciation and amortisation for the April to June period declined 8.3 per cent year-on-year to Dh147 million on the back of higher operating costs, driven predominantly by the group’s expansion, rising costs and lower margins on the remittance business.

The company's free cash flow declined by 9 per cent on an annual basis to Dh137 million, it said.

The company drew $3.45 billion in bids for its initial public offering earlier this year which raised $210 million from the sale of a 10 per cent stake, with the offering oversubscribed 22 times on average.

Al Ansari's net profit attributable to shareholders of the company in the first six months of the year fell to Dh263 million, from over Dh273 million in the corresponding period of 2022, mainly driven by lower remittance margins, higher costs and the increase in financing costs, the company said in the bourse filing.

Ebitda in the first half held steady at Dh299 million, despite an increase in expenses during the period related to the opening of the new branches and a “rising cost environment,” it said.

However, first-half operating income increased 5 per cent year-on-year to Dh578 million driven by a 10.7 per cent increase in the total number of transactions, making it the highest six-month operating income to date, the company said.

“The increase in the number of transactions was predominantly driven by very strong demand from the corporate business segment underpinned by expansionary economic conditions in the UAE,” Al Ansari said.

The UAE's economy, the Arab world's second-largest, grew by 3.8 per cent on an annual basis in the first quarter of this year, boosted by its strong non-oil sector as it continues to push for diversification, according to preliminary government data.

A strong increase in the bank notes business, including multicurrency prepaid cards on the back of the tourism boom and the peak holiday season, also contributed to the company's transaction growth. These increases were partly offset by a marginal reduction in the number of remittance transactions.

“We are firing on all cylinders across our businesses. We are investing in our domestic expansion while also expanding our footprint in other promising GCC markets,” Mr Al Ansari said.

The company expects to complete the 100 per cent acquisition of Al Ansari Exchange Kuwait by the end of the year and anticipates the impact of the consolidation to be reflected in the first quarter of 2024, with “revenue and cost synergies to be unlocked thereafter,” it said.

Earlier this week, Al Ansari said it had received initial approval to acquire a majority stake in one of Oman's major exchange companies as part of its plan to expand in the Gulf region.

The acquisition is still at its initial stage, subject to the necessary regulatory approvals and due diligence, with the expected completion date for the deal set for the first quarter of 2024.