Introduction to Al Ansari Financial Services Initial Public Offer
Al Ansari Financial Services PJSC (under incorporation in the Emirate of Dubai, United Arab Emirates and in the process of being converted from a limited liability company to a public joint stock company) (“AAFS” or “the Group”), has formally announced its intention to float 10% of its issued share capital on the Dubai Financial Market (“DFM”) through an initial public offering (“IPO” or “the Offer”).
As one of the leading integrated financial services groups in the United Arab Emirates (“UAE”) with 56 years of experience in the money transfer and exchange business, the Group has today created a specialised ecosystem that provides cross-border payments, foreign currency exchange solutions, access to the Wage Protection System (WPS) in the UAE, and other services such as bill collection and pre-paid cards, as well as payment technology solutions to consumers and businesses in the large and growing payments and foreign currency exchange and remittance market in the UAE.
The Group is ready for its next chapter of growth and to become a publicly traded company and is inviting eligible prospective investors to become part owners in the Group.
This webpage provides important information about the Offer and we invite you to browse through the content and download the necessary documents to ensure you have all the information you need.
List of Eligible Investors
- Individual Subscribers who hold a NIN with the DFM and have a bank account in the UAE.
- Professional Investors (as defined in the SCA Board of Directors’ Chairman Decision No.13/R.M of 2021)
For further information on Al Ansari Financial Services, please refer to the Local Prospectus available in Arabic and English under the ‘Key Documents‘ section of this page. Please note only the Arabic-language Local Prospectus has been approved by SCA. The translated English-language version of the Local Prospectus is provided for convenience only and does not constitute a legal document.
Our Investment Highlight
Leading and pioneering Exchange House in the United Arab Emirates with unparalleled physical branch network and customer-friendly digital transactional platforms
- Deep roots with nearly 60 years of experience, evolving from family business to a Group. With a history dating back to its establishment as a family business in 1966, the Group has grown its presence across the UAE and introduced services to cater to changing customer needs in order to enhance their experience. The total number of employees as at 31 December 2022 was 4,123.
- Physical branch dominance across the UAE. With 231 physical branches as at 31 December 2022, the Group has the largest physical branch network in the UAE, which is more than double compared to the second player in the market according to a report prepared by Edgar, Dunn and Company (the “EDC Report”). The Group has branches entrenched in neighbourhoods to act as an easy access point for residents and a presence across premium locations, with a focus on malls, to capture footfall and offer an easy access point for tourists.
- Rapid growth in its digital offering to cater to evolving customer needs and to remain competitive. In order to cater to more sophisticated customers, the Group introduced digital channels to transact business and the Group has witnessed rapid growth in its mobile application, which it now considers to be a vital part of its service offerings. Although the Group’s focus on these digital platforms so far has been largely focused on its retail customers, the Group has also started to incorporate digital business-to-business (“B2B”) solutions for its corporate customers through its e-Exchange offering.
Leading player in the world’s second largest and growing outward personal remittances market
- UAE’s massive and growing outward personal remittances market. The UAE is the second largest outward personal remittances market globally with a total outward remittances value of USD 48 billion, according to the EDC Report, and exchange houses are expected to continue to play a significant role given the large and growing low-income expatriate population who have less access to bank accounts. In addition, favourable visa and citizenship programmes are expected to attract more people to the Emirates, which is expected to further increase the demand for remittances.
- Exchange houses in the UAE are expected to be largest contributor to outward personal remittances market growth. According to the EDC Report, the market for outward personal remittances is forecasted to grow at approximately 3.2% CAGR between 2021 and 2027 (with exchange houses growing faster than the market at a CAGR of 4.2% between 2021 and 2027), while the market for bank notes is expected to benefit from the recovery in tourist inflows. The overall outward personal remittances market is expected to grow to AED 211 billion by the year ending 31 December 2027, with AED 138 billion being attributed to exchange houses and AED 73 billion being attributed to banks.
- The Group is a leading player in the personal outward remittances market in the UAE. In 2021 the Group handled approximately 2.6% of global outward personal remittances. According to the EDC Report, as at 31 December 2021, Al Ansari Exchange held 38% of the exchange house outward personal remittance market and has historically grown at a much faster pace than the UAE personal remittance market.
- The Group has the largest share of digital outward personal remittances among exchange houses in the UAE. Approximately 41% of the total digital outward personal remittances in 2021 was conducted through Al Ansari Exchange’s digital platforms, according to the EDC Report.
- Attractive and promising corporate remittance business. The corporate remittance business is showing very promising signs and the Group has already been penetrating and growing its market share in that market segment, which is currently dominated by banks.
Leveraging on the Group’s physical branch dominance and unparalleled global network reach. The Group is able to cater to the increasing numbers of low-income expatriate individuals given its large network of physical branches, which reached 231 physical branches as at 31 December 2022. The Group has an unparalleled global network reach with 131 correspondent banks and 137 agents present in 45 countries, as at 31 December 2022.
Prominent player in highly in-demand banks notes market, well positioned to capitalise on increase in tourism, tourist spend and economic expansion in the UAE
- Increase in inbound tourists and tourists’ spend supports foreign currency exchange market growth in the UAE . Foreign currency exchange in the UAE is expected to grow as a result of increasing tourist numbers and tourist spend in the country. According to the EDC Report, exchanged foreign currency cash volumes in the UAE are forecasted to grow at an approximately 4.0% CAGR between 2022 and 2027 and income tourist spend in the UAE is forecasted to grow at an approximately 6.7% CAGR over that period.
- The Group is one of the top players in the UAE in the retail foreign currency exchange market. Its share of the retail foreign currency exchange market for the year ended 31 December 2021 was 35%, according to the EDC Report.
- The Group’s strong presence across UAE malls further boosts its ability to capitalise on the growing tourism industry in the UAE. Malls represent a strategic location for exchange houses to capture footfall and are an easy access point for tourists. As at 31 December 2022, the Group had 61 branches in malls across the UAE.
- Pre-paid cards provide the Group with an additional revenue stream and support its expanding foothold in the digital space. The Group offers pre-paid cards to its individual customers, which has allowed it to access the digital space of foreign currency exchange. For the year ended 31 December 2022 the load value of the pre-paid cards was AED 1.63 billion compared to AED 1.11 billion in 2021 and AED 599 million in 2020. In August 2022, Visa, the Group’s strategic business partner for the pre-paid product, noted that the Group had the fastest-growing multi-currency pre-paid card in the UAE between 2021 and 2022.
- Economic growth and strong synergies between retail and wholesale bank notes transactions support wholesale foreign currency exchange. The Group is expected to benefit from this trend given Al Ansari Exchange’s leading position in the UAE wholesale market. According to the EDC Report, the Group’s market share in the UAE wholesale market for 2022 is estimated to be between 45% and 50%.
Well-defined retail and corporate customer acquisition and retention strategy, supported by cross-selling capabilities through its growing B2B offerings
- Quality of service, ease of access, promotional campaigns, digital channels and diverse offering supports retail customer acquisition and retention. Based on feedback collected through customers using the Group’s tablets at its branches, the Group had a 98% customer satisfaction rating for July 2022 to December 2022.
- Expanding B2B offerings to cater to unmet corporate needs and to retain customers through effective cross-selling. For its corporate clients, the Group’s offering includes cross-border payments, end-to-end cash management solutions through CashTrans, and bill collections. The Group has been expanding its B2B offering, which not only helps to attract new customers but also to retain customers through effective cross-selling.
- WPS offering acts as a vital customer acquisition channel for both retail and corporate customer groups. As at 31 December 2022, there were over 160,000 corporate customers registered to use the Group’s WPS solutions. There were around 550,000 monthly salary disbursals in December 2022. The Group also provides WPS card users with a full suite of services through its large branch network. WPS card users also have access to branches and smart counters, which allow them to use the Group’s cash withdrawal, remittances, and utility payments services, supporting cross-selling.
Setting industry standards and best practice in a highly regulated industry with high barriers to entry
- The Group operates in a highly regulated industry. Remittances and foreign currency exchange operations can only be carried out by banks and CBUAE licensed exchange houses. Exchange houses must comply with strict anti-money laundering compliance rules. Furthermore, in December 2022, the CBUAE announced that it is requiring exchange houses to increase their Emiratisation percentage by 4% annually until it reaches the target ratio of 30% of the total number of employees by 2027.
- Stricter capital requirements and higher operating costs led to drastic drop in the number of exchange houses in the UAE in the recent past. New capital requirements and increasing costs of compliance and operations are also making it more difficult for other existing players to survive in the exchange houses market and very stringent requirements from the CBUAE make it difficult for new players to enter the market. As a result, according to the EDC Report, the number of exchange houses in the UAE dropped drastically from 140 in 2017 to 84 in 2022.
- The Group believes that it has strong regulatory compliance. The Group has no outstanding regulatory fines or penalties. The Group has a strong internal compliance and risk framework, which it believes builds greater credibility with regulators. The Group has over 90 compliance and risk professionals and rigorous “know your customer” (“KYC”) and risk procedures for all of its partners and correspondent banks as well as an in-house compliance module.
- Group’s staunch commitment to supporting the exchange industry in the UAE. The Group is a founding member of the Foreign Exchange and Remittances Group (“FERG”), which is a non-profit organisation and is the main bridge between the exchange and remittance industry and the CBUAE. The Chairman of Al Ansari Financial Services is also the chairman of FERG and the Group believes it is seen by FERG as a thought leader for regulations and best practices.
Innovative and proprietary digital capabilities enhancing customer experience, enabling scale, boosting efficiency and supporting data security
- The Group has innovative and proprietary digital capabilities. The Group operates a state-of-the-art technology suite integrated across multiple customer touchpoints allowing for cross-selling opportunities and scale through multiple digital offerings. The Group’s integrated technology platform was purpose-built to implement a wide array of digital channels through its proprietary digital products, connect its global network and operations, localise its marketing, products and experiences and facilitate its data-driven approach.Digital capabilities leveraged as a customer intelligence tool. The Group’s digital capabilities allow it to collect data analytics for the Group on customer trends, which it uses to enhance its offering and customer experience. In addition to its proprietary software, the Group uses other leading and sophisticated third-party software. Given the scale of the Group’s business and complexity of digital cross-border payments, the Group’s technology platform has broad and complex capabilities and together with the Group’s data, gives it a competitive advantage in understanding its customers.
- Award-winning Fintech App. Launched in 2018, the Al Ansari Exchange mobile app was rated as the top Fintech App in the United Arab Emirates and the GCC region and placed second in the Middle East Region on the Forbes Middle East list of the Top 15 Fintech Apps 2021. The Group also offers its web-based e-Exchange platform to both its retail and its corporate customers.
Solid financial performance, resilient through the COVID-19 pandemic with a history of delivering growth
- Exceptional growth in operating income between 2020 – 2022 despite COVID-19 pandemic induced challenging market conditions. The Group reported AED 1,154 million in operating income for the year ended 31 December 2022, with remittances accounting for 64% of the Group’s operating income, bank notes accounting for 29% of the Group’s operating income and the remaining 7% of operating income being split between the Wage Protection System and The outward remittance market for exchange houses contracted by 23.9% and tourist spend in the UAE contracted by 52.4% between 2019 and 2021 primarily as a result of the COVID-19 pandemic. Despite the challenging backdrop, the Group was able to gain market share and strengthen its position as a market leader.
- Increased number of digital transactions, higher foreign exchange margins and the overall operating leverage of the Group supported improving EBITDA margins. The Group achieved EBITDA margin of 56.9% in 2022, with EBITDA growing at an approximately 25% CAGR between 2020 and 2022. The increase in EBITDA and improvement in profitability was mainly driven by higher foreign currency exchange margins, higher penetration of digital transactions which enjoy higher margins compared to physical transactions, and the overall operating leverage of the Group’s business. In addition, the Group’s business model generated strong profitability with limited capital expenditure requirements while expanding its branch network and continuing to invest in its digital offering.
- Generated a sustained increase in cash flows year-on-year between 2020 and 2022. The sustained growth is mainly driven by EBITDA growth, with a relatively stable cash conversion of 95%, 95% and 96% for the years ended 31 December 2022, 2021 and 2020, respectively.
- Historical dividend distributions with pay-out ratio between 67% and 74%. Given the strong cash generation, the Group has been able to deliver strong value to the shareholders, with a dividend pay-out ratio of 67% and 74% for the years ended 31 December 2021 and 2020, respectively.
High quality management team with a wealth of industry experience
- Seasoned management team including over 75 years of collective industry experience. Members of the Group’s senior management team have an average of over 20 years of experience in the industry including Rashed A. Al Ansari, the Group Chief Executive Officer, Mohammad Bitar, the Deputy Group Chief Executive Officer, and Faisal Anwar, the Group Chief Financial Officer. In addition to Mr Al Ansari, Mr Bitar and Mr Anwar, the Group’s Chief Operating Officer, Group Chief Technology Officer, Group Chief Human Resources Officer and Group Chief Corporate Services Officer each have at least two decades of experience in the industry.
- Achieved several key milestones, supporting the Group’s evolution, expansion and delivering robust financial performance. The Group’s management team has had several accomplishments including reaching the target of over 230 physical branches in operation, delivering operating income and EBITDA growth between 2020 and 2022, making the Group the first exchange house in the UAE to implement e-KYC procedures for its digital offering.
- The Group’s management team retains a high level of independence. Rashed Al Ansari is the only member from the Al Ansari family on the management team. In addition, the Group’s corporate governance is overseen by a number of internal committees headed by independent directors.
Clear growth strategy to support the Group’s ambitions to further cement market leadership position in the UAE, grow B2B business, expand footprint in other GCC markets, and boost digital capabilities
The Group’s growth strategy is centred on six pillars:
- Expand the Group’s physical branch network in the United Arab Emirates
- Recent roll out of expansion strategy led to 47 new branches opening between 1 January 2020 and 31 December 2022. In recent years, the Group has been implementing a strategy of expansion of its physical presence, of which approximately 59% were profitable within the first month of operations and 90% were profitable within the first six months of operations.
- Branches are expected to remain the key driver of the Group’s growth going forward. The Group believes that its customer base will prefer to continue to interact in a physical branch rather than online for the foreseeable future given its large number of low-income expatriate customers who have limited access to bank accounts and rely on face-to-face interactions. In addition, the branch network acts as a customer acquisition tool with 32% of Al Ansari’s remittances customers for the year ended 31 December 2022 also using other services offered by the Group during that period.
- The Group seeks to gain scale and market share in a growing industry supported by a strong macroeconomic backdrop and taking advantage of a “first mover advantage” The Group intends to continue adding new branches to its network and relocating underperforming branches going forward depending on market conditions to optimise the performance of its branch network. The Group expects to open more than 60 additional branches over the next five years to reach a network of approximately 300 branches in the mid-term.
- Expand to other markets in the GCC region and leverage Worldwide Cash Express to expand international reach
- Other markets in the GCC identified by the Group as attractive markets to penetrate. The GCC market accounted for 25.4% of worldwide outward remittance flows in 2021, according to the EDC Report.
- Group’s imminent and growing presence in Kuwait, the sixth-largest outward personal remittances market globally in 2021. The Group is in the process of acquiring Al Ansari Exchange Kuwait (an entity owned by some of the current shareholders of the Selling Shareholder), which in turn has recently acquired Oman Exchange Company, a leading exchange company in Kuwait. The Group’s acquisition of Al Ansari Exchange Kuwait is expected to be completed after the IPO. According to management, upon completion, this acquisition is expected to create the fourth-largest player in the Kuwait market with a 7.7% market share in terms of number of physical branches.
- Organic and inorganic investment to support Group’s expansion ambitions in Kuwait. Through continued investments, both organic (opening of new branches), inorganic (further M&A opportunities) and digital investments (roll-out of mobile app and smart counters), the Group is aiming to become the largest player by market share in Kuwait. In 2021, the largest player in Kuwait had 103 branches and 22.7% of market share.
Plan to leverage its MTO, Worldwide Cash Express, to expand international reach. The Group believes that Worldwide Cash Express has a differentiated offering compared to other competitors due to its more extensive agent network in what it considers the main receiving countries, its more competitive pricing, and its greater range of pay-out methods. As part of its strategy, the Group plans to open representative offices for Worldwide Cash Express in Europe and in Asia to widen its network of receiving agents. As at 31 December 2022, Worldwide Cash Express had 74 receiving agents and 37 sending partners.
- Continue investing in the Group’s digital offering
- The Group believes digital transactions will grow faster than transactions executed by branch. Management expects digital transaction will account for approximately 20% of the Group’s overall personal outward remittance transactions by 2027, an increase from 15% in 2022.
- The Group is keen to keep investing in its increasingly popular mobile app to ensure it remains competitive and aims to transform it to a digital marketplace. For the year ended 31 December 2022, 10% of the Group’s remittance income was generated through its mobile app. The Group is one of the few exchange houses in the market that offers its services through a mobile app to its customers. The mobile app was initially designed for remittances services only. However, new functions and services have been added over time (e.g., pre-paid cards) and management is planning to add more services (e.g., digital wallet and bank notes services), with the aim to transform the app into a digital marketplace. The Group envisages the digital wallet framework to be fully integrated with the existing technological infrastructure of the Group, which will retain all the key functionalities in-house.
- Plans to continue investing in and rolling out smart counters in branches. The Group has already rolled out six smart counters, which it believes have been well-received by its customers. The Group has ordered 100 smart counters in total and intends to complete the roll out of the smart counters by mid-2023. The Group believes the new smart counters will help increase operational efficiencies by reducing personnel costs while increasing onboarding capabilities and providing customers with a convenient and fast way to pay for simple transactions such as bill payments.
Launch of Al Ansari Digital Pay to support Group’s desire to increase its digital product offering. With a view of creating a digital marketplace ecosystem, the Group expects to launch a digital wallet (through Al Ansari Digital Pay) and is looking at a number of more innovative products that focus on digital payments. Also, the Group believes that moving the Wage Protection System business to a digital wallet would allow it to increase cross-selling by keeping client funds in the digital marketplace and accelerate the migration of unbanked clients towards digital remittances.
Pre-paid cards product to be further expanded. To meet customer needs and create a more compelling value proposition for both the customer, the Group intends to further grow this offering.
- Shift to digital to support margin expansion. The Group’s branch network accounts for approximately 60% of the Group’s operating expense cost base, so the shift to digital is expected to lower total cost to serve.
- Increase margins without compromising competitiveness
- The Group also believes that it has scope to increase prices given the quality of the services and its market leadership position. The Group’s customer proposition in terms of speed, reliability and customer experience and the Group’s high level of customer satisfaction and its market pricing compared to the pricing of its competitors and overall pricing in the UAE gives the Group room to increase prices.
- Expand its value proposition in the corporate remittances market
- The Group’s current B2B proposition is primarily represented by the Group’s Wage Protection System offering, a valuable cross-selling tool. The Group has 160,000 registered corporate customers, mostly represented by small-to-medium enterprises (“SMEs”), out of the approximately 370,000 SMEs active in the UAE. Although the Wage Protection System is a low-fee and high-volume offering, it is a valuable cross-selling channel for other services of the Group.
- The Group believes that it has extensive room to gain market share in the corporate remittance space. For the year ended 31 December 2021, Al Ansari Exchange had a 14% market share in the corporate remittances through exchange houses market in the UAE. The Group believes that it has sufficient reach to increase its market share for cross-border remittances now that it has become an area of focus. If the Group were to bring its corporate market share in line with its personal outward remittances market share, it would be able to achieve an incremental AED 14 billion of yearly cross-border volumes.
- Expand its value proposition in the end-to-end cash management market
- Expand the Group’s physical branch network in the United Arab Emirates
- Steady growth in end-to-end cash management market in the UAE creates market opportunity for the Group to expand its offering. According to the EDC Report, the end-to-end cash management market size was approximately AED 334 million in terms of operating income opportunity in 2021 and the market is forecast to grow at a 4% CAGR between 2022 and 2027, reaching an operating income opportunity of AED 422 million by 2027.
- The Group plans to expand its business by offering its end-to-end cash management services to more external customers The Group’s subsidiary, CashTrans, which so far has been mostly serving Al Ansari Exchange’s cash management needs, will be targeting more third-party clients. Recently, the Group has onboarded a number of exchange house and other corporate entities for cash transportation services.
- Planning on investing in scaling the business to support growth ambitions. The Group intends to open a cash sorting facility in the first half of 2023. Through the new cash sorting facility, the Group expects to be able to offer CBUAE deposits and withdrawals, ATM replenishment and maintenance services, bank branch collection and delivery services, cash processing, cash vaulting, customer credits through banks and bulk cash deposit machines.
*This is a non-certified translation of the original Arabic version of the Prospectus. This English version is provided for convenience only and does not constitute a legal document. Subscribers should only rely on the Arabic version of the Prospectus. In the case of any discrepancies or omissions, the Arabic version of the Prospectus shall prevail.
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