Business

Online shopping growth helps Aramex raise profit 15%

'Our revenues would have reached 10 per cent had we not been faced with weak global currencies,' the Aramex chief executive Hussein Hachem said.

Dania Saadi

July 29, 2015

Aramex, the Dubai-based courier company, posted a 15 per cent rise in second-quarter net profit helped by the growth of online shopping.

Net profit grew to Dh92.6 million, up from Dh80.8m a year earlier, the company said in a statement. Revenue rose about 6 per cent to Dh967m from Dh915m.

"Significant revenue growth was recorded from both the international express and domestic express businesses due to a continued increase in demand for global online shopping services particularly in the GCC, Europe and North America," Aramex said in a filing.

“Growth in the freight business was negatively impacted by the recent drop in global oil prices and currency fluctuations, while logistics recorded a particularly strong performance mostly driven by growth in core GCC markets and South Africa.”

The price of Brent crude has lost about half of its value since peaking at $115 per barrel in June last year because of an oil supply glut, weak demand in Asia and Europe and a strong dollar. The strong greenback has battered currencies including the euro.

“While we’ve had a strong double-digit net income, our revenues would have reached 10 per cent had we not been faced with weak global currencies,” the Aramex chief executive Hussein Hachem said.

“While we remain confident about extending our growth momentum and performance into the remainder of 2015, the impact of global oil prices and weak major currencies continue to be areas we will carefully monitor moving forward.”

The company, which acquired PostNet South Africa for US$16.5m and Australia’s Mail Call Couriers for $26m last year, will continue to hunt for acquisitions in the second half of this year, it added in the statement.

“We will also continue to seek potential acquisitions in the second half of 2015 for companies sharing the same synergy with us, and for that we have made available a new line of credit from a consortium of banks in the UAE,” Mr Hachem said.

Shares of Aramex fell 1.16 per cent to Dh3.42 in Dubai on Wednesday.

dalsaadi@thenational.ae

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Milestones on the road to union

1970

October 26: Bahrain withdraws from a proposal to create a federation of nine with the seven Trucial States and Qatar. 

December: Ahmed Al Suwaidi visits New York to discuss potential UN membership.

1971

March 1:  Alex Douglas Hume, Conservative foreign secretary confirms that Britain will leave the Gulf and “strongly supports” the creation of a Union of Arab Emirates.

July 12: Historic meeting at which Sheikh Zayed and Sheikh Rashid make a binding agreement to create what will become the UAE.

July 18: It is announced that the UAE will be formed from six emirates, with a proposed constitution signed. RAK is not yet part of the agreement.

August 6:  The fifth anniversary of Sheikh Zayed becoming Ruler of Abu Dhabi, with official celebrations deferred until later in the year.

August 15: Bahrain becomes independent.

September 3: Qatar becomes independent.

November 23-25: Meeting with Sheikh Zayed and Sheikh Rashid and senior British officials to fix December 2 as date of creation of the UAE.

November 29:  At 5.30pm Iranian forces seize the Greater and Lesser Tunbs by force.

November 30: Despite  a power sharing agreement, Tehran takes full control of Abu Musa. 

November 31: UK officials visit all six participating Emirates to formally end the Trucial States treaties

December 2: 11am, Dubai. New Supreme Council formally elects Sheikh Zayed as President. Treaty of Friendship signed with the UK. 11.30am. Flag raising ceremony at Union House and Al Manhal Palace in Abu Dhabi witnessed by Sheikh Khalifa, then Crown Prince of Abu Dhabi.

December 6: Arab League formally admits the UAE. The first British Ambassador presents his credentials to Sheikh Zayed.

December 9: UAE joins the United Nations.

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.”

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