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FINANCIAL INFORMATION |
ARCAPITA ANNOUNCES RESULTS FOR FISCAL 2010 Manama – August 6th, 2010 – At the end of a 12-month period presenting a poor deal environment, a sparse market for exits, sizable negative fair value adjustments within the portfolio, investor sentiment damaged by continuing uncertainty and adverse currency movements, Arcapita Bank B.S.C.(c) has recorded a loss for the year. The loss is driven substantially by non-cash, negative fair value adjustments taken on its investment portfolio and adverse currency movements related to euro and sterling weakness. For Fiscal 2010, before adjusting for fair value changes, foreign exchange movements and other allowances, Arcapita recorded a net loss of $174.2 million. In addition, the bank recorded unrealized losses of a further $385.2 million, consisting of fair value adjustments to its investment portfolio and foreign exchange losses. Taking these unrealized losses into account, the overall net loss for the year increased to $559.4 million. Atif Abdulmalik, Chief Executive Officer of Arcapita commented, "The last two years have brought immense challenges to investment firms worldwide. We were able to limit the extent of our loss during the first 12 months of the downturn as others were announcing steep losses, but during Fiscal 2010, the net effect of making unrealized fair value and foreign currency adjustments in light of the ongoing challenges in the financial markets has left us recording a sizable loss for the year. While this loss was expected and widely communicated in advance, it is nonetheless a disappointment, although we do expect that some of the unrealized component of the loss will move back in our favor in due course." Although income has been limited during the last 12 months, Arcapita's balance sheet remains strong as a result of the highly diversified portfolio of investments the bank has built up, representing assets of $2.4 billion. These comprise investments in the US, Europe, the Middle East and Asia, broadly split between the asset classes of private equity, real estate, infrastructure and venture capital. The operating environment for these investments has been demanding, but as a result of concentrated operational focus, the earnings trends across the portfolio are strongly positive. "As a result of early action from our portfolio management group, earnings within the portfolio are now showing strong upward quarterly trends. We expect to see this feeding through into improved valuations within the portfolio, as well as in brightening investor sentiments overall. In addition, we have made progress in the implementation of our strategic plan to complement our deal-by-deal investment model with a series of traditional GP/ LP funds. The bank launched a Real Estate fund with Al Rajhi Capital during the year, and is advanced in its plans to launch one or two new funds towards the end of the year." Diversifying the product suite to include funds, Arcapita aims to develop its access to the large pools of institutional money, both within in the GCC region and beyond. "Adding funds alongside our existing business will allow us to diversify our investor-base and move towards an earnings stream which is more evenly split between recurring and transactional revenues," said Mr. Abdulmalik. During a period of extremely tight credit markets, Arcapita succeeded in raising over $1.6 billion for Arcapita's balance sheet, allowing the bank to deleverage its balance sheet, support its portfolio and maintain liquidity. "Overall, we believe the outlook for 2011 is brightening. We have a strengthened balance sheet, the bank finance market is improving, the prospects for portfolio exits are more promising and we are seeing a pick-up in sentiment among investors. Although we believe the market will remain discerning and demanding, we now consider that as a result of the measures we have taken in fortifying the bank's balance sheet, we are well positioned for a return to profitability over the course of the year ahead," concluded Mr. Abdulmalik. For the full consolidated financial results for fiscal 2010 click here.
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