Damac Properties reports second quarter loss on higher impairments
The company reported a loss of Dh280.5m for the three months ending June 30
Dubai's Damac Properties, which owns and operates the Middle East's only Trump-branded golf club, swung to a second-quarter loss on higher impairment charges, despite a rise in revenue.
The company reported a loss of Dh280.5 million for the three months ending June 30, compared to a profit of Dh50.5m a year earlier, it said in a statement to the Dubai Financial Market, where its shares trade. The company has Dh307.8m in impairment provisions on development properties during the period. There were no impairments in the same quarter last year.
“’2020 saw a relatively good start to operations, however in March we witnessed the global pandemic. This has and continues to clearly impact all companies globally,” Hussain Sajwani, chairman of Damac Properties, said.
“Subsequent lockdowns and social distancing measures introduced had a negative impact on sales and business activity. Resulting travel restrictions impacted the economy and the real estate sector and we will see a difficult market for the coming 18 to 24 months,” he added.
In the first half, the company reported a loss of Dh387m, compared to a profit of Dh82m during the same period last year. Impairment on development properties stood at Dh438m, while revenue climbed 27 per cent to Dh2.4 billion. It also booked sales of Dh1.05bn during the period.
“Whilst we have been going through headwinds, both from a tough GCC macro-environment and a global real estate asset class perspective, Damac remains extremely strong from a balance sheet perspective,” Mr Sajwani said.
“We continue to focus on cash collections, cutting our receivables & controlling operational costs whilst still managing to compete within a highly competitive market.”
As of 30 June 2020, the company’s gross debt stood at Dh3.5bn, while cash and bank balances reached Dh4.4bn. Damac also reached the milestone of crossing 30,000 unit deliveries during the first half, according to the statement.
The coronavirus pandemic has impacted businesses globally, leading to bankruptcies in the US, Europe and Asia and to lenders taking on billions of dollars in provisions for losses. The global economy is set to contract 4.9 per cent this year, marking its deepest recession since the Great Depression, according to the International Monetary Fund.
“Damac remains aligned with the government’s strategy to create a healthy balance between supply and demand in the market by having no new launches to avoid adding new commitments. Our focus remains on selling completed and near completion inventory,” Mr Sajwani added.
Dubai's real estate market slowed in the wake of a drop in oil prices that began in 2014, and as a result of a property oversupply. The coronavirus pandemic added further pressure on the sector.
Still Mr Sajwani said he is "optimistic that the lead up to the Dubai Expo at the end of 2021 will allow some of the excess real estate supply be absorbed".
Published: August 13, 2020 01:47 PM