Management Discussion and Analysis Report

Al Anwar Holdings SAOG (Al Anwar) was incorporated on 20th December, 1994 as a publiclylisted company onMuscat Securities Market (MSM). Over the last twenty-five years, we have built successful companies and exited some of them through stake sales or flotation.

Investment Strategy: Clear, Differentiated and Proven

Private-Equity& Private Investment in Public Enterprises(PIPE) model of owning and investing in private companies with the intention of growing them and improving their business performance forms the core of Al Anwar’s investing framework.

At Al Anwar, we crave for efficiency. And to achieve our goals, we follow an approach emphasizing investing in businesses run by cost-conscious and efficient managers.

After the investment, our role is to create an environment in which our entrusted CEOs can maximize both their managerial effectiveness and generate value for shareholders.

Our flexibility in capital allocation and willingness to carry out bolt on acquisitions, gives us a significant edge in the market.We are judicious in having ownership stakes with respect to getting a controlling/non-controlling/significant minoritystakes in businesses, depending on the nature of opportunity at hand.

Gulf Co-operation Council (GCC) Economic Landscape:

  • GCC markets, with the exception of Oman, registered a positive performance in 2019, mainly driven by market inflows in Saudi and Kuwait on the back of MSCI and FTSE indices inclusions.
  • Regionally governments continue to announce schemes to spur economic growth.
  • The keydevelopment for 2019 besides the flows in KSA was the IPO of ARAMCO which sailed thru smoothly just before year end. The listing created history as it surpassed $25b to become the largest company globally.
  • The market performance of the regional markets for 2019 was as follows;
Abu Dhabi Bahrain Dubai Kuwait Oman Qatar Saudi Arabia
3.3% 20.4% -9.3% 23.7% -7.9% 1.2% 7.2%
  • Volumes across GCC remained buoyant during the last quarter, especially during its initial half as local institutions supported the market.
  • The key markets such as Saudi Arabia, Kuwait, Abu Dhabi and Qatar witnessed sizable inflows from the foreign investors especially during the first nine months of 2018. This along with relaxation of foreign ownership limits in Qatar and inclusion of Kuwait and Saudi Arabia into the global indices such as MSCI and FTSE benefited the markets.
  • The GCC economies with their recent reforms and borrowings have managed to improve the liquidity. Government spending and corporate performance could help the medium to long term outlook.
  • As we move ahead in 2020, the sharp fall in crude oil prices in March 2020 to below $30/bl and the spread of COVID-19 across the region and the world, pose serious economic and fiscal challenges on the GCC economies whose benchmark equity indices recorded massive sell-offs pushing markets to multi-year lows as equity investors fear that low oil prices will weigh on Govt. revenues.
  • Sovereign debt issued by oil exporting GCC countries took a hit from the oil price crash. Yields of all six GCC countries shot up widening the CDS spreads and spreads with US 10yr treasury yields
  • GCC countries, in their announced budgets for the year 2020, have factored in average prices of USD 55 to 65 per barrel, which at present means there will be a significant shortfall on revenue estimates, unless oil prices recover. To combat these current low oil prices GCC countries may resort to restrictions on government expenditures.

Oman Economy And Outlook:

The year2019 was characterized by Government’sefforts to diversify the economy.

The Oman Government has announced a Budget for 2020 with a fiscal deficit.In the 2020 budget, total income is estimated at OMR 10.7 billion and expenditure is budgeted at OMR13.2 billion, increase of 2%compared to last year, with the budgeted deficit estimated at OMR2.6bn, which is 9% of Oman’s estimated GDP for 2019. The budget is based on the oil price of $58 per barrel. The deficit will be mainly financed through external borrowings.Oman has introduced Excise tax on certain items and has plans to introduce VAT in 2021.

With the fall in Crude oil prices and the estimated impact of COVID-19 on the macro economic scenario, Credit rating agencies Fitch (downgraded from BB+ to BB with a negative outlook) and Moody’s (downgraded from Ba1 to Ba2 with a stable outlook) downgraded Oman’s ratings in March 2020 and expect Oman’s fiscal deficit to widen to over USD10 billion (around 16% of GDP) in 2020.

It is expected that the government will strengthen and accelerate the implementation of its planned medium-term fiscal adjustment plan under the National Program for Fiscal Balance (Tawazun) to offset some of the hydrocarbon revenue loss along with the privatization of government entities in the coming months.

The government has so far announced a 5% cut to approved budgets for civil, military and security agencies, equivalent to around 1.6% of GDP, as well as spending cuts for state-owned enterprises. Rating agency “Moody’s” expects further spending cuts, assumes a small increase in oil production and higher dividends from state-owned enterprises, which will both contribute to reducing the decline in fiscal revenues resulting from lower oil and gas prices

Performance Overview Of Muscat Securities Market (MSM):

For the last 3 years MSM 30 Index declined by over 38% from 5,597 in April 2017 to 3,448 in March 2020. The MSM has performed negatively in 2019 and dropped 7.9% compared to the previous year. The decline was seen across the board with all three sectoralindices seeing a fall during the year.Historically MSM has a high co-relation to the oil prices, depicted as follows:

Market Capitalization by Sector (OMR Billions)

Description Mar-18 Mar-19 Mar-20
Banking and Investments 3.78 3.71 3.19
Services 2.80 2.14 1.83
Industry 1.14 0.85 0.76
Total Market capitalization 7.76 6.70 5.77

Since march 2018 the total market capitalisation of MSM reduced by approximately OMR 2.0 billion

The trading activityon MSM Index witnessed a decrease of 6.5% in average daily traded value for the year 2019 at RO 2.9million as compared to RO3.1 million in 2018.


Al Anwar remainscautiously optimistic on the Oman economy and the potential to invest in our chosen sectors.

We are aware that the current economic environment represents an opportune time to acquirebusinesses which has synergy with our associates. As a nimble company with a strong balance sheet, we believe that Al Anwar is in a robust position to take advantage of attractive opportunities.We as an Investment holding company have always looked for growth businesses with a penchant for value investments.

We have a fully engaged board, an exceptional management team and a strong corporate culture. Challenges still exist, and there’s always room for improvement, but as we head into our financial year ending 31st March 2021, we remain proud of these accomplishments and are optimistic about the future.

Performance Analysis

During the the period FY 2006-07 to FY 2019-20, shareholders of AAH have generated total return of 153% (cash dividends received + change in share price), which is around 7% p.a. CAGR.

It should be noted that the market value as of 31st March 2020 is at the lowest level in the last seven years

The profitability for the year ended 31stMarch 2020 was impacted mainly due to absence of any major transaction in our investment portfolio, reduction of profits in our Associates, and the negative impact of all our marked to market investments in MSM.

Owing to the inherent balance sheet strength and comfortable Debt/Equity position, AAH continues to reward its shareholders with healthy cash dividends.

Growth in our investment portfolio over the years has been achieved whilst maintaining a manageable leverage position. As of 31st March 2020, our Debt/ Equity ratio was 0.56

Al Anwar maintains a cautiously optimistic approach with the core focus on financial services and industrials and continue to deliver on business simplification, regulatory requirements, controls, expense discipline and capital requirements. Going forward, in continuance of prudent policy framework, we will align the growth strategies accordingly.

Al Anwar has a very focussed approach to its investments. We have a very strong manufacturing cluster which has constantly produced good returns. Our other clusters are financial services which is a mature sector and has growth potential. Our education has very high growth potential and should expand rapidly. Our investments are mostly strategic and we have a very small amount of trading investments. Our objective is to ensure that we increase the profitability and consequently the value of each of our investment.

Our investment portfolio as of 31st March 2020 by clusters is as follows:

The cornerstones of our next three-year investment strategy are:

  1. Sustainable Operational Improvement of investee companies
  2. Opportune Monetization and acquisition of investments
  3. Effective cash management by prioritizing investment opportunities

Risks And Concerns

Al Anwar has a robust Board-approved Risk Management framework in place that adheres to industry best practices. Risk Management is embedded in all core business functions and is an integral part of the business strategy. Al Anwar follows a proactive Risk Management approach in remediating internal and external risks through conducting regular risk assessment of its portfolio companies, operating environment and taking proactive action to mitigate emerging risks.

Risk issues impacting portfolio companies are proactively managed through close working relationships with investee companies and the prudent oversight of our Board representatives. Broadly, these risks take the form of increasing costs/ decreasing margins, competition from other sources of supply and shifts in customer preference for other solutions.Also, each of the investee companies have their own risk management process in place.

The COVID-19 pandemic has caused steep reductions in globaleconomic activity severely hampering the businesses and human lives across the world. The underlying businesses of Al Anwar are facing challenges in this regard and in our Associates we have undertaken series of action plans, including zero based budgeting for cost rationalization, streamlining production processes and seeking industry support from the Government of Oman to circumvent the challenges and continue to generate value for our shareholders in these challenging times. Our immediate objective is to maintain values of our investment and ensure that they are profitable and do not face liquidity challenges.


We acknowledge the contribution of our Board Members for their wisdom and valuable guidance which has helped us in successful implementation of our strategy. Further, we appreciate the confidence entrusted by our shareholders.

Khalid Ansari
Chief Executive Officer