Tecom Group, the operator of business districts that are home to more than 10,000 companies, reported a 13 per cent rise in its first-half profit, driven by high occupancy rates and solid growth in the Dubai economy.
Profit for the six months to the end of June rose to Dh484.5 million ($131.9 million), from the same period last year, underpinned by strong top-line performance, continued growth across all business segments, improved operational efficiencies and lower total financing cost, Tecom said in a statement on Wednesday to the Dubai Financial Market, where its shares are traded.
First-half revenue increased by an annual 6 per cent to Dh1.05 billion, buoyed by continued growth in rental rates, sustained strong occupancy levels and high customer retention rates across its business districts.
Earnings before interest, taxes, depreciation and amortisation (ebitda) for the January-June period were up 14 per cent year-on-year to Dh824.5 million on the back of improved management of operating expenses and better operational efficiencies, the company said.
“Commercial real estate in Dubai is growing at a steady pace owing to Dubai’s appeal as a global city to businesses, talent and investors alike and to its macroeconomic resilience,” said Abdulla Belhoul, Tecom Group's chief executive.
“Our robust business model and our business districts’ market reputation have enabled Tecom Group to capitalise on the strong demand, supporting our solid performance during the period. The vast majority of our leased assets, especially Grade A centrally located offices, have recorded high occupancy rates.”
Tecom comprises 10 business districts including Dubai Internet City, Dubai Media City and the Dubai Design District. Nine of Tecom's 10 business districts are located in free zones that permit 100 per cent foreign ownership, with tenants including Meta, Google, Visa, BBC, CNN, Unilever and Dior.
The company's board of directors approved the distribution of an interim cash dividend of Dh400 million for the first half of 2023, which will be distributed in September, according to the filing.
The occupancy level for commercial and industrial assets was 87 per cent as of June 30, registering a 5 per cent increase year-on-year, while overall customer retention rate stood at 92 per cent at the end of June.
Tecom recorded an 18 per cent year-on-year increase in the number of customers during the first half of 2023, exceeding 10,000 that include multinational and regional companies.
Tecom is "seeing strong demand for the central business district, which reveals that customers prefer high-quality offices in a prime location," Mr Belhoul said in a media call on Wednesday.
The company is also recording "strong interest" from multinationals seeking to expand into the region and higher demand for co-working spaces, he said.
The outlook for Dubai's commercial real estate market is "promising" as demand continues to exceed supply with new projects coming to the market, he added.
Net profit in the second quarter of 2023 dipped 3.3 per cent to Dh229 million from the same period a year earlier.
However, net profit for the three-month period increased by 19 per cent year-on-year to Dh283 million, excluding the impact of the one-off expense related to settling an old loan facility, the company said.
The existing Dh7.6 billion loan facility was refinanced at lower margins and more favourable terms, leading to an improved loan-to-value ratio of 15 per cent, it said.
Quarterly revenue increased 6 per cent year-on-year to Dh535 million.
The results come as Dubai's economy rebounds strongly from the coronavirus-induced slowdown, supported by the travel and tourism sector and its rapidly improving property market.
Dubai's economy expanded by 4.6 per cent on an annual basis in the first nine months of 2022, with wholesale and retail trade accounting for 24.1 per cent of its gross domestic product, according to data from the emirate's statistics centre.
The emirate's economy is estimated to have grown 5 per cent last year and is forecast to increase by 3.5 per cent in 2023, according to Emirates NBD.
"Tecom Group continued to deliver strong financial and operational performance owed to our dynamic strategy which aims to further increase our occupancy levels across the portfolio while also maintaining prudent capital management. Our performance was underpinned by Dubai’s robust economy," Malek Al Malek, chairman of the company's board, said.
The UAE's property market registered a strong performance across all sectors in the first half of the year amid robust growth in its non-oil economy despite global macroeconomic headwinds, consultancy CBRE said in a report this week.
The total number of office rental contracts registered in Dubai's occupier market reached 29,932 in the second quarter of 2023, up 41.6 per cent from the same period a year ago, according to data by the Dubai Land Department.
Over this period, a total of 20,953 new rental registrations were recorded, marking a 58.5 per cent year-on-year growth.
"We are confident in our ability to sustain occupancy levels for the remainder of the year while also focusing efforts to drive further efficiencies to sustain the strong ebitda margin," Mr Belhoul said.