Amlak Finance, the Sharia-complaint home financier in the midst of debt restructuring talks, posted a 71 per cent drop in first-quarter net profit as impairment charges increased.
The Dubai-based company's net profit fell to Dh2 million in the three months ending March 31 compared to Dh7m in the prior-year period, Amlak Finance said in a statement to the Dubai Financial Market on Wednesday, where its shares are traded. First-quarter total revenues rose 24 per cent year-on year to Dh122m, including an unrealised fair value gain related to investment properties.
Amlak Finance booked an impairment of Dh44m on Islamic finance assets in the first quarter, compared to Dh2m in the same period last year, largely because of a default by one developer, it said, without naming the firm.
Amlak Finance, which counts Dubai’s biggest listed developer Emaar Properties as its major shareholder, said in March it had faced a "challenging" year in 2018 as global trade concerns, fluctuating oil prices and softening of the real estate market dampened investors’ sentiment. The company added that a more "positive outlook" is expected for the market in 2019 amid a number of UAE government initiatives to improve market sentiment and attract investors.
Dubai's property sector, Amlak's home market, has softened as a three-year slump in oil prices that started in 2014 slowed down the economy, leading to job losses and lower housing allowances as supply increased.
The company said first-quarter revenues from financing business activities increased by 2 per cent to Dh43m on the same quarter a year ago.
Operating costs decreased by 3 per cent to Dh29m year-on-year.
The company is in the midst of ongoing negotiations with creditors to restructure its debt and expects talks to conclude during the second quarter of 2019.
"The company continues renegotiating the funding conditions with its financiers to allow it more flexibility in adapting to current market conditions," it said. "This will provide the company with the opportunity to grow its business resulting in balance sheet growth and increased shareholder value."
The company had previously restructured its Dh10.2 billion investment deposits and settled Dh2.8bn in cash with financiers in 2014, and subsequently revised the terms of the 12-year deal in 2016.
