Financial services

The Company

KIPCO was established in 1975 and has significant ownership interests in a portfolio of more than 60 companies operating across 24 countries through its core subsidiaries and associates. KIPCO’s portfolio includes companies in high growth markets spanning different sectors that include banking, financial services, real estate, industry, media, education and more. Nevertheless, the group’s primary activities remain focused on the banking and financial services and media sectors, which include its core companies, namely Burgan Bank, United Gulf Bank (Bahrain), and Orbit Showtime Network (OSN), a leading pay-TV operator in the MENA region. In terms of total assets, more than 90% of the group assets are allocated to the banking, asset management and investment banking segments, which collectively accounted for close to 66% of total revenues during 2013. KIPCO ranks sixth on the Kuwait Stock Exchange in terms of market capitalisation, which stands at KD1.1bn ($3.87bn).

KIPCO’s financial and operational performance continued to improve in 2013, as indicated by the positive results of its core companies. The group’s asset quality also performed well, supported by an increase in total assets by 20% to KD8.6bn ($30.24bn) in 2013 from KD7.2bn ($25.32bn) in 2012, resulting in a five-year total assets compound annual growth rate of 10.6%. In addition, the group maintained a robust liquidity position reflected in its strong cash balance of KD1.4bn ($4.92bn) and a staggered debt maturity profile with an average maturity of 4.4 years.

Its position was further strengthened with quoted investments comprising over 50% of its total investment assets. The significant increase in liquidity resulted in a cash-to-total assets ratio of 22.7% in 2013, as compared to 20.7% in 2012. The group also reported higher returns to shareholders with return on average equity at 7.2% in 2013 compared to 5.6% in 2012, coupled with a marginal increase in return on average assets.

KIPCO has maintained a diversified revenue base, keeping its business model resistant to market and political risks in the region. The group’s five-year average net profit margin stood at 10%, while its topline compound annual growth rate over the past four years stood at 6.6%. In 2013, KIPCO’s consolidated total revenues grew by 27.6% to KD513.0m ($1.8bn) and net profits grew by 26.9% to KD40.1m ($141m) on the back of higher interest income, higher revenue contribution from OSN and hospitality and real estate subsidiaries, as well as higher share of results of associates.

OSN reported a significant improvement in operations, which resulted in KIPCO’s share of profit at KD7.1m ($24.97m) in 2013 from a loss of KD2.1m ($7.38m) in 2012. The group is planning to list OSN, possibly on the London Stock Exchange, which is expected to favourably impact the group’s levels of liquidity. KIPCO’s asset management arm KAMCO also reported a turnaround in its performance by reporting profits during 2013 as compared to losses during the previous year. In a sign of investor acceptance of KIPCO’s financial strategy, during 2013, KIPCO’s real estate arm, United Real Estate, successfully completed a KD60m ($210.97m) bond issue which was oversubscribed by almost 50%, further strengthening the firm’s balance sheet. To diversify its banking assets, the group acquired a majority stake in Malta’s trade finance specialist Fimbank during 2013 and has further increased its stake to 80.54% in 2014.

Development Strategy

KIPCO adopts a proactive investment strategy by continuously assessing its investment portfolio to maximise shareholders’ value and minimise associated risks. KIPCO invests in companies with sustainable and predictable cashflows in the region with a target return on equity of 20%. The group also aims to diversify investments in terms of location and sector, as demonstrated by the acquisitions made by its subsidiaries, Burgan Bank and GIG. The acquisition of Fimbank and the expansion of Takaud, KIPCO’s pension and savings subsidiary, in Bahrain, highlight the group’s niche investment strategy. The group has streamlined its operations and reinvested in subsidiary companies to create regional powerhouses in core sectors.