EGYPT. Citadel Capital (CCAP.CA on the Egyptian Stock Exchange), the leading private equity firm in the Middle East and Africa, announced today its standalone financial results for the third quarter of 2011. Highlights of the 3Q11 Business Review include the addition of US$265.5 million in new investments under control (equity and debt), including US$ 101.6 million in new assets under management.
In the three months ending September 2011, the firm thus reports a 3.1% quarter-on-quarter rise in total investments under control to US$ 9.0 billion (EGP 53.6 billion), a 2.5% rise in assets under management (AUM) to US$ 4.2 billion (EGP 25.0 billion), and a 17.3% narrowing of its standalone loss quarter-on-quarter.
“Citadel Capital is on track to close this tumultuous year on very solid footing,” said Citadel Capital Chairman and Founder Ahmed Heikal.
“Cost-cutting at the firm and platform company levels has allowed us to preserve cash, while new fundraising from international limited partners and regional co-investors alike has seen us add important equity and debt to key platform investments. The capital increase concluded in October has added US$ 175.6 million in long-term capital to our 4Q11 balance sheet and, moreover, the finance guarantee approved in 4Q11 by the board of directors of the US Overseas Private Investment Corporation sees us in the final stages of securing US$ 150 million in long-term finance.
“While we enter 2012 on a cautious footing,” Heikal continued, “we do so mindful that our portfolio is firmly on the right side of macroeconomic trends. We are also cognizant that there will be significant opportunities to add value to our portfolio in a year that we expect will be transformative for many of the economies in which we invest.”
Meanwhile, the drawdown of US$ 38.7 million (EGP 230.4 million) in new fee-earning third-party AUM in 3Q11 into Africa Railways and Nile Logistics has allowed those platform investments to return to Citadel Capital previously advanced funds of US$ 9.2 million (EGP 54.9 million).
With no exits in the quarter, Citadel Capital reports a standalone net loss of US$ 3.5 million (EGP 20.7 million) for 3Q11 on revenues of US$ 2.8 million (EGP 16.8 million).(1)
This represents a 17.3% narrowing from the US$ 4.2 million (EGP 25.0 million) loss the previous quarter, on the back of lower spending on operating expenses under an ongoing program of cash preservation and cost control.
Notably, OPEX spending in 9M11 declined 11.7% year-on-year in absolute terms, while the cash component of OPEX spending declined 31.0% in the same period. Management has prioritized cash preservation and cost control at both the firm and platform / portfolio levels since the onset of the Egyptian Revolution and will continue to maintain a close watch on costs going forward.
In the nine months ending September 2011, the firm recorded a net standalone loss of US$ 12.1 million (EGP 72.3 million), on par with expectations in a period with no exits. By comparison, the firm reported a standalone net profit of US$ 3.4 million (EGP 20.2 million) in 9M10, which included exit revenue, revenue from the recovery of pre-operating expenses (absent in 2011 on the back of a slower pace of new business activity), and both advisory fees and interest income related to upstream oil and gas platforms on which management opted to take write-downs at the end of 2010.
In 3Q11, Citadel Capital recorded substantial operational progress at important platform companies including:
• Nile Logistics (newly operational greenfield): Drawdown of funds from international LPs will allow acceleration of fleet buildout, while new contracts and improving market conditions have allowed a narrowing of loss placing it on a path to its first break-even month.
• Africa Railways: Drawdown of first funds from capital increase. US$ 287 mn turnaround program for portfolio company Rift Valley Railways (RVR) is now fully funded. RVR reports declining turnaround times and declining accident rates alongside strong rises in gross revenues and margins.
• ASCOM: Return to profitability after adverse market conditions in 1Q11 and one-time charges in 2Q11.
• Wafra: Accelerated development plans and first cotton harvest in progress.
• ASEC Holding: Shows narrowing losses in 3Q11 on the back of cost savings. ASEC Cement Zahana now benefitting from a 30% rise in ex-factory prices, and hence doubling EBITDA margins; narrowing losses at ESACO on the back of intervention; and ASEC Automation’s rising profitability.
• TAQA Arabia: Rising contribution to Citadel Capital consolidated financials on the back of an increase in power generation. TAQA Marketing (its fuel distribution arm) opened six new filling stations in 2011, driving growth in sales volumes as TAQA Arabia finished September 2011 with 17 operational stations. Municipal (residential) gas distribution volumes are up, although industrial volumes lag.
• Finance Unlimited: Greenfield microfinance portfolio company Tanmeyah reports first single-month profit in September 2011, having nearly doubled its loan portfolio since the start of the Egyptian Revolution.
Management’s discussion of operational performance as well as details of Citadel Capital’s 3Q11 standalone and consolidated financials are to be found in the full Business Review, available at www.citadelcapital.com.
Notes: Citadel Capital (CCAP.CA on the Egyptian Stock Exchange) is the leading private equity firm in the Middle East and Africa. Citadel Capital focuses on building regional platforms in select industries through acquisitions, turnarounds, and greenfields executed via Opportunity-Specific Funds.
The firm’s OSFs control 19 Platform Companies with investments worth more than US$ 9.0 billion in 15 countries spanning 15 industries, including mining, cement, transportation, food and energy. Since 2004, Citadel Capital has generated more than US$ 2.2 billion in cash returns to its co-investors and shareholders (on investments of US$ 650 million), more than any other private equity firm in the region.
Citadel Capital is the largest private equity firm in Africa by PE assets under management (2006-2011, as ranked by Private Equity International).
For more information, please visit www.citadelcapital.com.
(1) Citadel Capital principal investments are converted per exchange rates carried in Citadel Capital’s balance sheet. All other figures relating to financial results in 3Q11 are converted using a spot rate of EGP 5.9533 : US$ 1.00. Historical figures have been re-stated using the same exchange rate. Citadel Capital typically analyzes its own financial statements in EGP and investments in US$. Management notes that private equity earnings are by definition ‘lumpy,’ with significant revenues and profits typically generated at exit of investments.