EFG Hermes, a leading financial services corporation in Frontier Emerging Markets (FEM), reported a growth of 19% year-over-year (y-o-y) in revenues to reach EGP 4.3bn in fiscal year (FY) 2018, supported by the non-bank financial institutions (NBFIs) arm, which posted revenues in excess of EGP 1bn, the firm announced on Tuesday.
Revenues from core operations, which excludes gains related to investment and seed capital exits, as well as other non-recurring revenues grew by 32% y-o-y in FY 2018, supported by the growth in revenues reported by all business lines.
“Despite a challenging global investment climate, our product diversification strategy has enabled the group to deliver profitability above the EGP 1bn mark for the third consecutive year. Our NBFI platform’s performance continued to skyrocket, recording revenues of EGP 1.1bn in FY 2018,” said EFG Hermes Group CEO, Karim Awad.
The group’s NBFI platform reported revenues growing by 89% y-o-y to EGP 1.1bn and contributing 25% of the total group revenues in FY 2018, driven by both microfinance provider Tanmeyah and EFG Hermes Leasing, which reported 125% and 48% y-o-y revenue growth, respectively.
Despite capital gains being 34% less in 2018 versus 2017, the group still reported a net operating profit of EGP 1.4bn, down by only 5% y-o-y in FY 2018, supported by strong operational performance throughout the group. Meanwhile, net profits after tax and minority interest for the year – which does not include fees and capital gains expected to be realised in the first quarter of 2019 on Vortex I and II exits – were down by 16% y-o-y to EGP 1bn.
Accounting for 71% of the group’s revenues in FY 2018, fee and commission income grew 34% y-o-y to EGP 3bn.
Regarding EFG Hermes’s sell-side businesses in the investment bank platform — encompassing securities brokerage, investment banking, and research — its revenues grew by 13% y-o-y to EGP 1.4bn. The revenue growth was driven by the brokerage division, which grew 15% y-o-y in FY 2018 to EGP 1bn. Meanwhile, the firm’s investment banking advisory revenues grew 8% y-o-y in FY 2018, after successfully closing its largest number of transactions in a single year, with a record 19 equity, mergers and acquisitions, and debt transactions worth an aggregate $2.5bn.
Additionally, the investment bank’s platform buy-side businesses achieved a 22% growth in revenues y-o-y to EGP 555m, while revenues from merchant banking activities and treasury operations came in at EGP 1.3bn for the same period.
According to Awad, the continued diversification of the firm’s product offering in 2018 gave the group greater flexibility to navigate challenging market conditions and maintain profitability.
On the other hand, he explained that the firm’s board of directors proposed the cash dividend of EGP 0.65/share, which is equivalent to 50% of attributable profits.
Furthermore, the group’s operating expenses increased 35% y-o-y to EGP 2.9bn in FY 2018.
“Among our priorities for 2019 is the continued growth of our NBFI platform, where we look forward to the evolution of valU, our instalment sales services business, as well as our new factoring arm,” said Awad.