One of Dubai’s flagship conglomerates has achieved a near threefold rise in profits for 2013 on the back of the emirate’s dramatic economic recovery.
Dubai Holdings Commercial Operations Group (DHCOG), which owns the Jumeirah hotels chain, Tecom Investments free zones and big property interests, reported net profits of Dh3.3 billion for the year, compared with Dh1.12bn in 2012.
DHCOG is part of the Dubai Holding conglomerate, one of the biggest of the emirate’s government-related enterprises.
The jump reflected a big improvement in margins as recurring revenue rose on the hotels and free zones, and income from property development and land sales also increased. Total revenue leapt 27 per cent to Dh11.7bn.
The group’s borrowing levels declined in the year. Total debt was down to Dh10.98bn from Dh11.7bn, with cash in the bank and cash flows both improving significantly.
Prospects are also good. “I believe 2014 will be a benchmark year for the group,” said Ahmad bin Byat, the chief executive. “The future looks promising with all our businesses driving overall profitability, supported by exciting growth plans.
“In line with our strategy, we are now operating within optimum debt and regular contractor liability levels,” he added.
One analyst, who did no want to be named, said: “Given DHCOG’s activities – tourism, real estate and free-zones, it is fairly good barometer of the Dubai economy, and that is all very positive.”
The cost of insuring Dubai debt is at its lowest levels in more than five years as its economy expanded 4.9 per cent last year and asset prices recovered. This month, US$20bn worth of loans and bonds extended to Dubai during the financial crisis was rolled over by the Abu Dhabi Department of Finance and UAE Central Bank at a rate of 1 per cent for five years.
“Dubai’s booming,” Farouk Soussa, the head of Middle East economics at Citigroup said last month in a note to investors. “Dubai today is experiencing a real economic upswing and its resilience to exogenous shocks is much greater than in the lead-up to the global financial crisis.”
Dubai Holdings’ Mr bin Byat said: “Our growth has been balanced and broad-based. Sustainable recurring revenues from our hospitality, leasing, facilities and property management businesses registered a consistent growth of 10 per cent, to reach Dh6.9bn.
“Property sales, driven by the handover cycle, and land sales, complemented by growing market sentiment and recovery particularly in the real estate sector, contributed a substantial Dh4.7bn to total revenues,” he added.
Jumeirah enjoyed “another spectacular year,” he said. “The construction of Madinat Jumeirah Phase IV, a 430-room resort opposite Burj Al Arab, which started during the year is on track to be completed in 2016. Jumeirah continues to strengthen its international operations with the opening of Jumeirah Messilah Beach resort in Kuwait, and signing two important management contracts in Russia and Oman.
“Jumeirah’s performance was particularly strong in its home market of Dubai, with increases in occupancy and revenue per available room, while its international businesses also enjoyed solid growth.”
The highlight for Tecom in 2013 was the launch of Dubai Design District (d3) to strengthen Dubai’s position as the design and fashion capital as well as enhancing Tecom’s offering. Nine companies have already been licensed in d3, including the leading brand Hermès. Tecom also launched “in5 Innovation Hub”, an environment that supports entrepreneurship.
Dubai Properties “significantly increased sustainable revenues from its leasing, facilities and property management businesses. It also continued to hand over units in projects such as Remraam and Vision Tower, and progressed on such projects as Mudon, Bay Square and Culture Village,” Mr bin Byat said.
The properties division succeeded in bringing its contractor liabilities to “normal” levels, he added.
The fourth arm of DHCOG, the Emirates International Telecommunications portfolio of shareholdings in mobile businesses, benefited from the rise in value and increased profits of du and Axiom, among other investments, Mr bin Byat said.
“Our consistently solid operating performance, strong cash flows and debt repayments led Moody’s Investors Service [the credit rating agency] to upgrade and assign positive outlook to all DHCOG’s ratings,” he added.
Last month, Moody’s withdrew all ratings for DHCOG because of “insufficient information” from the company, “due to the issuer’s decision to cease participation in the rating process.”
fkane@thenational.ae
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Will the pound fall to parity with the dollar?
The idea of pound parity now seems less far-fetched as the risk grows that Britain may split away from the European Union without a deal.
Rupert Harrison, a fund manager at BlackRock, sees the risk of it falling to trade level with the dollar on a no-deal Brexit. The view echoes Morgan Stanley’s recent forecast that the currency can plunge toward $1 (Dh3.67) on such an outcome. That isn’t the majority view yet – a Bloomberg survey this month estimated the pound will slide to $1.10 should the UK exit the bloc without an agreement.
New Prime Minister Boris Johnson has repeatedly said that Britain will leave the EU on the October 31 deadline with or without an agreement, fuelling concern the nation is headed for a disorderly departure and fanning pessimism toward the pound. Sterling has fallen more than 7 per cent in the past three months, the worst performance among major developed-market currencies.
“The pound is at a much lower level now but I still think a no-deal exit would lead to significant volatility and we could be testing parity on a really bad outcome,” said Mr Harrison, who manages more than $10 billion in assets at BlackRock. “We will see this game of chicken continue through August and that’s likely negative for sterling,” he said about the deadlocked Brexit talks.
The pound fell 0.8 per cent to $1.2033 on Friday, its weakest closing level since the 1980s, after a report on the second quarter showed the UK economy shrank for the first time in six years. The data means it is likely the Bank of England will cut interest rates, according to Mizuho Bank.
The BOE said in November that the currency could fall even below $1 in an analysis on possible worst-case Brexit scenarios. Options-based calculations showed around a 6.4 per cent chance of pound-dollar parity in the next one year, markedly higher than 0.2 per cent in early March when prospects of a no-deal outcome were seemingly off the table.
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