BHM Capital Finance Costs Surge, Eat into Profit

BHM Capital, a Dubai-listed brokerage regulated by the UAE Capital Market Authority, reported interim accounts on Tuesday showing that finance costs nearly doubled in the first half of the year, eroding profit growth. Interest and related charges reached AED 39.1 million ($10.6 million), up from AED 21.1 million a year earlier. While revenue rose 25% to AED 118.99 million and net profit increased 14% to AED 25.2 million, the growth gap is almost entirely attributable to higher borrowing costs. Finance charges now consume 32.9% of revenue, up from 22.2% a year earlier, pushing net margin down to 21.2% from 23.3%.

CEO Abdel Hadi Al Sa'di said the results provide a base to "broaden our capabilities and capture new opportunities across regional and international capital markets," but the company's statement did not address the rising finance costs. The accounts show that lending to clients is now the largest business, with margin trading income up 43% to AED 64.1 million, accounting for 53.9% of revenue. This lending sits on the balance sheet as trade and other receivables of AED 1.27 billion, or 59% of total assets. The company funds this lending with debt: bank borrowings stood at AED 652.2 million against shareholders' equity of AED 514.4 million at June 30. The borrowings include a fully drawn AED 450 million overdraft facility and a AED 202 million short-term loan repayable on demand and partially secured.

The second quarter showed a slowdown: revenue grew 15% year-over-year versus 36% in Q1, and net profit growth fell to 5% from 22%. Operating costs were not the cause, as general and administrative expenses rose only 5% across the half, and in Q2 they fell 11% year-over-year. Legal and professional fees, however, quadrupled to AED 4.2 million. Client acquisition also cooled, with BHM Capital opening 30,711 new accounts in the half, a 38.81% market share, down from 42% in Q1.

For retail traders, the rising finance costs and reliance on debt-funded margin lending signal increased financial risk for the broker. While the company remains profitable, the higher interest burden could pressure future margins and liquidity. Traders using BHM Capital may want to monitor the broker's financial health, particularly its ability to meet obligations given the large short-term debt and the recent slowdown in growth.

This is information, not investment advice.