Aldar Properties unveiled a 200 per cent increase in second quarter net profits yesterday as the company benefited from a Dh2.6 billion one-off capital gain on the back of its merger with Sorouh. Aldar completed the deal with Sorouh Real Estate in June, creating a company with US$13 billion in assets.
In an upbeat financial statement to the market, Aldar said that net profits for the three months to the end of June rocketed to Dh1.25 billion from Dh417.9 million during the same period the previous year. Revenues, however, fell 73 per cent from Dh4.6bn to Dh1.3bn as the company handed over fewer completed homes.
Aldar and Sorouh were both hit hard by the global financial crisis, which led to falling sales and spiralling debts, prompting both companies to sell off assets to the Abu Dhabi Government and eventually to consolidate. Aldar reported that the company’s gearing following the merger had reduced from 144 per cent to 60 per cent, which equates to outstanding liabilities of Dh14bn.
In a conference call with reporters yesterday, Aldar said that it was planning to refinance outstanding debt, including a $1.2bn bond maturing next May. It added that it had already achieved an interest rate margin reduction of 2 per cent on one loan.
“The merger of the two companies is already delivering significant benefits. This includes a strengthened financial position as shareholder equity has almost doubled, gearing has more than halved and the business has a more balanced and diversified portfolio,” said the Aldar chairman Abubaker Seddiq Al Khouri.
“Good progress is being made with the integration of the merger and we have already commenced the realisation of financial synergies by reducing the company’s cost of borrowing.”
Aldar said it would hand over more than 7,400 completed homes in the next 12 months including The Gate on Reem Island, the newly fixed up Al Rayyana scheme on the Abu Dhabi mainland – evacuated last year after a courtyard collapsed – and its Alghadeer development on the Dubai border. The chief financial officer Greg Fewer said that house prices on the company’s available inventories had increased by 10 to 15 per cent this year and the company was putting together plans for new developments in the capital.
“We hope to announce something new by the end of the year,” he said. “We have a team of masterplanners and developers working diligently on some fantastic ideas. We have a number of very interesting opportunities, which we are fast-tracking and we will be bringing forward projects based around market demand.”
Sebastien Henin, the frontier markets portfolio manager at The National Investor in Abu Dhabi, said: “Aldar is in a much stronger position after the merger. It has a much stronger balance sheet and it is now better able to refinance its debts.
“One must not forget that these results look artificially good due to the merger and we will only really be able to judge the company’s performance going forward.” “The outlook for the Abu Dhabi real estate market, however, does not look good and we see prices for apartments, offices and hotels staying flat at best for the short to medium term. Retail is the only exception because we believe it is still under-represented in Abu Dhabi.”
Aldar said its new strategy included a plan to drive up recurring revenues from its portfolio of rental homes, offices and malls. It said that it was targeting a gearing level of 40 per cent of recurring revenues, which it hoped to achieve in the coming 18 months. It declined to give a corresponding figure for the company’s current debt measured in this way.
The merged company said its 233,000 square metre Yas Mall shopping centre was 80 per cent complete. It added that recurring revenues from its investment properties increased 10 per cent to Dh767m during the first half of the year, while occupancy levels at the company’s hotels increased to 78 per cent from 58 per cent a year earlier.
Mr Fewer declined to say exactly how many jobs had been lost at both companies as a result of the merger.
“We are midway through the integration process,” he said. “We estimate that we will save between Dh90m and Dh110m per annum on synergies overall, and one sub-set of that is headcount reductions.”