Dubai-listed brokerage BHM Capital reported sharply rising finance costs that are squeezing profitability despite revenue growth, according to interim accounts approved August 6. The firm’s interest and related charges nearly doubled to AED 39.1 million from AED 21.1 million year-over-year, now consuming 32.9 percent of revenue compared to 22.2 percent previously. While first-half revenue climbed 25 percent to AED 118.99 million and net profit rose 14 percent to AED 25.2 million, the widening gap reflects mounting financing pressure.
The cost burden stems from aggressive expansion in margin lending to clients, now the largest business at 53.9 percent of revenue. BHM Capital is funding this growth with AED 652.2 million in bank debt against just AED 514.4 million in shareholder equity, including a fully drawn AED 450 million overdraft and AED 202 million demand loan. Momentum also decelerated sharply in the second quarter, with revenue growth slowing to 15 percent from 36 percent in Q1.
FXnCO Insight
Watch BHM Capital’s debt-to-equity ratio closely as rising financing costs and client lending concentration present liquidity and margin compression risks for regional brokerages pursuing similar growth strategies.
Source: Finance Magnates