Heikal: Mitigated Risk Spurs Citadel’s 2013 Standalone Net Profit of EGP10.5mn

Egypt’s Citadel Capital swings to net profit in FY13 against a net loss of EGP 66.4 million the previous year; revenues rise 1.9% year-on-year to EGP 126.6 million; Board of Directors calls for shareholder meeting to approve mechanism of capitalizing liabilities from c. EGP 3.5 billion in asset purchases, thus putting capital increase on track to close by 31 March 2014.

Citadel Capital (CCAP.CA on the Egyptian Exchange), the leading investment company in Africa and the Middle East, announced today its standalone financial results for the fourth quarter and full-year 2013, reporting a net profit of EGP 10.5 million on revenues of EGP 126.6 million for FY13.

By comparison, the firm reported a net loss of EGP 66.4 million in FY12; the fourth quarter of the year just-ended marks the fourth consecutive quarter of profitability for the firm, driven by steady advisory fees, net financing gains and proceeds from dividends.

“Prudent management mitigated risk across the board in 2013 — at Citadel Capital as a standalone entity and across our portfolio of core and non-core investments,” said Citadel Capital Chairman and Founder Ahmed Heikal. “The result has been improving financial performance, particular at the Citadel Capital standalone level and the level of our operational core platforms. We look forward to the successful conclusion of the capital increase in late March, which will propel us well down the road in our transformation into an investment company.”

The release of the standalone figure comes as the firm prepares for the second and final round of subscriptions to the capital increase. Citadel Capital disclosed earlier this month that it had completed its planned purchases of additional stakes in platform companies totaling approximately EGP 3.5 billion as part of its ongoing transformation into an investment company that will hold majority stakes in its subsidiaries in five core industries: energy, transportation, agrifoods, mining and cement.

Citadel Capital will continue to report its Consolidated financial results as it continues its transformation into an investment company that should be judged by the consolidated performance of its investments. While it typically discloses both Standalone and Consolidated Financials in the same Business Review, the firm is reporting Standalone Financials only at this time to satisfy a regulatory requirement for the finalization of the ongoing EGP 3.64 billion capital increase.

Quarter-on-quarter, revenues rose 59.8% on stable advisory fees and EGP 31.2 million in dividend proceeds from a fully-owned Citadel Capital subsidiary. On a full-year basis, revenues rose 1.9% y-o-y to EGP 126.6 million, despite the impact of non-recurring advisory fees generated in 1H12 on additional fees related to Orient.

Notably, successful cost control efforts saw OPEX drop 14.6% in FY13 to EGP 137.8 million, from EGP 161.4 million in FY12.

Relevant to the ongoing capital increase process, Citadel Capital had completed investment purchases of approx. EGP 2.2 billion by the end of 2013, a figure that has since risen to c. EGP 3.5 billion.

The asset purchases disclosed cover the platform companies and subsidiaries outlined in Citadel Capital’s Form 16 submission on use of proceeds from the capital increase, as approved by Egyptian Financial Services Authority (EFSA).

In December 2013, Citadel Capital invited shareholders to subscribe to an EGP 3,641,875,000 capital increase at par (EGP 5 per share). The capital increase would see Citadel Capital’s total issued capital rise to EGP 8,000,000,000 from EGP 4,358,125,000 through the issuance of 728,375,000 new shares.

At a meeting held on 13 February 2014, Citadel Capital’s Board of Directors accepted a report by its independent auditor (KPMG) certifying EGP 3.7 billion in liabilities to co-investors and shareholders arising mainly from these securities purchases. Citadel Capital will capitalize an amount equivalent to the total value of the ongoing capital increase (EGP 3.64 billion), with the balance of  the liabilities remaining due. The capitalization is expected to take place during the second subscription round for the capital increase — anticipated to be completed by the end of 31 March 2014 — thereby resulting in full subscription to the share issuance.

Finally, Citadel Capital’s Board of Directors resolved today to call for a general meeting of shareholders to approve the mechanism by which liabilities resulting from the firm’s c. EGP 3.5 billion in investment purchases will be capitalized as part of the ongoing capital increase. The meeting is scheduled for 17 March 2014, placing the firm on track to complete the second and final subscription stage for the capital increase by the end of March 2014.