Last week, Gulf Finance House (GFH) announced that it would recommend distributing bonus shares. That comes on the heels of a share buyback program launched last year. The idea of a share buyback program is that shares of GFH are cheap and so it makes sense for the company to buy them back. The reverse, issuing bonus shares, makes sense for GFH when shares are expensive. So the two are, on the face of it, inconsistent if executed at the same time.
Author Archives: Sabah al-Binali
Is UAE Economic Productivity Declining?
Economic production, usually measured using gross domestic product (GDP) or gross national product (GNP), is not the same as economic productivity. Production is creating goods and services. Productivity is what you do with goods and services. To gain insight into the difference let’s look at a simple example.
Continue readingThe UAE’s Equity Market Performance
My last article regarding the effect of rising interest rates on the UAE’s equity markets sparked quite a bit of debate on LinkedIn and got me to thinking about how the equity markets have been performing. So I looked at the year to date (YTD) return for Abu Dhabi’s market at found out it is 9.82% as of today (source Bloomberg). For Dubai’s financial market the YTD return is -12.62% (source Bloomberg). This doesn’t tell me much about the overall equity performance on a national level. Continue reading
Interest rates are a threat to equities
The UAE Dirham peg to the US Dollar means that UAE interest rates are driven by the US Fed, whose policies might not be optimal for the UAE’s economy.
Continue readingVAT’s Impact on Business Strategy
Disclaimer: I am not an expert on VAT and I am not providing advice. I am simply trying to expand the discussion around VAT from how it is applied to what it might mean to business strategy.
The first point that I want to discuss is the idea that this is a value added tax levied by the government and collected by various vendors and suppliers. From my understanding this is a legally correct definition. The problem is that this phrasing does not change the laws of supply and demand. If the price of a good or service moves, it matters not why it has moved in terms of the effect of demand. Price up, demand is usually down. Continue reading
Personal Productivity Systems
For the past three years I have been working with family groups on transitioning their investments and businesses into today’s economic reality via innovative transformative strategies. Basically, I used my experience, detailed in the over 250 articles on this blog and in The National. One of the major obstacles that I faced was executives who did not have a personal productivity system. Even when I managed to help them develop their transformative strategies, and even though these executives understood the concepts and the project plans, they still found challenges in executing the plans. I decided to put all of what I learned together as I think people might find it useful. It doesn’t fit with the vision and mission of this blog, so I launched Personal Productivity Systems as a separate site. I hope that you find it useful.
Good acquisitions, an unfit brand, and Abu Dhabi’s rising international reputation
While this column has traditionally focused on one key business event or topic that has caught my eye from the past week, there are often several events of note that are worth commenting on at greater length.
The past week is a case in point, with key lessons to be learnt about what makes a good acquisition, how calculations about what’s best for the bottom line can have disastrous consequences for your brand, and the rising attraction of Abu Dhabi and Abu Dhabi-based entities for international investors.
On Monday, the UAE’s NMC Health deployed $207 million to acquire majority stakes in two healthcare firms, UAE-based cosmetic surgery company CosmeSurge, and Saudi-based Al Salam Medical Group. The acquisitions were eye-catching for four main reasons. Continue reading
Predictions for UAE Business in 2018
My economic, business and financial predictions for 2018 and beyond. These are forward looking statements that should not be relied on to make decisions. Continue reading
Effectiveness beats Efficiency in Strategy
Efficiency slowed profit deterioration
Effectiveness will replace efficiency as the main strategic goal of UAE companies in 2018. At least, it will for the successful companies. 2017 was the year of efficiency, as companies learnt to do what they used to do with less. Less money, less time, fewer people. Efficiency cut costs and slowed down profit deterioration. As important a step as that was, it was a stepping stone to the important strategic goal of effectiveness. In simple terms, efficiency is getting things done whereas effectiveness is getting the right things done. After all, there’s no point finding cheaper ways to reach a goal if it is the wrong goal.
Effectiveness leads to profit growth
Effectiveness looks at where new revenue, and profit, are going to come from as, opposed to efficiency’s focus on costs. There is nothing wrong with working to achieve efficiency first, as it gives the company time to understand the new external environment. But there comes a time when cutting costs no longer works. In the end, sustainable profit growth is driven by increases in revenue, not decreases in cost. So how do companies become effective? What does it even mean? It means evolving, even transforming if necessary, so as to adapt to the new realities of the economy.
Executives might ask what can they do to generate revenues in a challenging economy? A simple example, just to make a point, is this: take advantage of all the efficiency initiatives. Cost cutting means downsizing, so moving companies will thrive. But what else can happen? Property management companies might provide a discounted rent during the time a client is unemployed. Continue reading
Cash Conversion Cycle Red Flags
In my work helping companies transform themselves to take better advantage of economic opportunities and to manage risks more efficiently, working capital risks are frequently overlooked even though they are at the front line of risks faced by companies of all sizes.
The cash conversion cycle, an important liquidity measure that usually forms the core of a company’s working capital, is of particular importance . The cash conversion cycle is a measure of how long it takes for a dollar that is spent on the development of a product or service (which is subsequently sold on to a client) to be converted back into cash in the form of revenues. Mismanaged it can destroy a company’s finances. Continue reading