Union Properties has reported a sharp drop in its second-quarter net profit, as the developer continues to implement a revised turnaround strategy to cut costs and boost profitability.
Net income for the three months to the end of June declined to Dh285,000 ($77,656), down from about Dh27 million recorded for the same period in 2021, Union Properties said in a statement on Thursday to the Dubai Financial Market, where its shares are traded.
Finance costs related to legacy debt of Dh16m also weighed down earnings, underpinning the need for continued efforts to restructure the company’s debt.
But revenue from contracts remained stable at Dh99m in the second quarter, as group subsidiaries delivered “healthy performance improvements, supported by strong market dynamics in the UAE’s real estate sector”, the company said.
Union Properties ran into problems last year after the UAE's market regulator, the Securities and Commodities Authority, filed a complaint against its senior executives in October, accusing them of forgery, abuse of authority, fraud and causing damage to the interests of the company.
A new board was appointed in December and a complete financial and accounting review was conducted by a third party.
The review uncovered "widespread fraud and misconduct by the company’s former management involving forgery, misappropriation of funds and various other financial violations", Union Properties said.
The company on Thursday said it had made strong progress in the execution of its turnaround strategy, delivering significant cost efficiencies during the second quarter of the year.
Administrative and general expenses declined by 42 per cent year-on-year to Dh17m in the second quarter, and by 32 per cent on an annual basis to Dh37m in the first six months of the year.
“The continued improvement in Union Properties' financial performance reflects our success to date in executing our turnaround strategy,” said Amer Khansaheb, managing director of Union Properties.
“We remain laser-focused on driving growth and delivering cost efficiencies, particularly at a subsidiary level.”
The company owns a vast land bank in a fast-developing location of the emirate and it remains “cautiously optimistic” as it explores several development options that could generate long-term value for its investors, Mr Khansaheb said.
As part of its revamp, Union Properties merged three of its existing business units — Edacom Owners Management Association, Uptown Mirdiff Mall and Al Etihad Cold Storage — into a single entity, Edacom Asset Management.
The company expects to realise additional one-time cost savings of Dh7m over the next 12 months from the reorganisation of its business.