Abu Dhabi’s Aldar Properties reported a 36 per cent rise in first-quarter net profit on Thursday as costs fell and earnings from its rental business surged.
Aldar, like other developers in the United Arab Emirates such as Dubai’s Emaar Properties, has diversified its income away from property sales and into recurring revenue businesses – such as residential, office and retail rentals, plus hotels and hospitality.
This has helped mitigate volatility in the country’s real estate sector – which has gone from boom to bust to boom again – and Aldar has now reported rising profits in seven out of the last eight quarters.
The state-linked builder of Abu Dhabi’s Formula One circuit made a profit of Dhs618 million ($168.25 million) in the three months to March 31, it said in a bourse statement. This compares with a profit of Dhs453.4 million in the corresponding period of 2014.
Analyst SICO Bahrain forecast Aldar would make a quarterly profit of Dhs509.2 million.
Aldar’s first-quarter revenue fell 19.5 per cent to Dhs1.38 billion, year-on-year, but its quarterly gross profit margin rose to 47 per cent, from 20 per cent.
The higher margin was due to “a significant improvement in the quality of our earnings”, Chief Financial Officer Greg Fewer said. “This is set to continue,” he added.
Quarterly gross profit from recurring revenue jumped 61 per cent to Dhs368 million.
Aldar’s first-quarter revenue included Dhs579 million from property development and sales, Dhs453 million from investment properties – residential, office and retail rentals – and Dhs157 million from its hotel business.
Direct costs dropped to Dhs737.5 million, from Dhs1.37 billion in the prior-year period.
The company’s borrowing costs fell to an average of 2.75 per cent, from five per cent a year earlier, Fewer said, after it paid off some debt and ratings agencies upgraded the company.
This enabled finance charges to fall 59 per cent quarter-on-quarter, Fewer said.
The company booked property sales and reservations of Dhs1.2 billion in the first quarter.
Aldar reduced its gross debt to Dhs8.2 billion, from Dhs9.2 billion at the end of 2014. This helped cut its net debt-to-equity ratio to 16 per cent from 25 per cent at the end of last year.
State-owned fund Mubadala Development Co owns 30 per cent of Aldar, Thomson Reuters data shows.