Damac Properties third-quarter profit slides on weaker revenues

Dubai developer has struggled to maintain revenue growth in recent quarters

Dubai, United Arab Emirates - April 25, 2019: Damac building with branding. Thursday the 25th of April 2019. Business Bay, Dubai. Chris Whiteoak / The National
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Dubai's Damac Properties reported a 78 per cent slump in its third-quarter net profit as revenue declined and selling expenses climbed.

Net income for the three-month period ending September 30 slid to Dh51 million, the company said on Wednesday in an earnings report to the Dubai Financial Market, where its shares trade. The quarterly income figure only just met a Dh51.5m estimate of two analysts polled by Bloomberg.

Revenue for the third quarter dropped 42 per cent to Dh895.4m from the same period a year earlier. Selling expenses for the reporting period climbed 126 per cent to Dh268.9m from the end of September 2018, it added.

"As we navigate the existing market conditions, we continue to focus on delivering projects that are already in the development pipeline, and we are well on our way to achieving our target of 4,000 unit deliveries by the end of 2019," said Hussain Sajwani, chairman of Damac. "We fully support the government's focus on the need for stability and balance in the real estate market ... [and the] sector will see real value addition from progressive steps such as these."

In September, Dubai set up a Higher Real Estate Planning Committee to rebalance the property market, which has softened as a result of excess supply, lower oil prices and a slowing global economy.

A total of 20,978 residential units were completed in the first half of this year, according to industry portal Property Finder's estimates. An additional 38,426 residential units within 152 projects that have at least an 85 per cent completion status as of July, are scheduled to be delivered by the end of the year.

Average apartment prices in the emirate declined 15.1 per cent in the second quarter of the year, compared with the second quarter of 2018. Villa and town house prices dropped 14.7 per cent during the same period, according to property consultancy Cavendish Maxwell.

Market observers, however, say the sector is poised for recovery on the back of economic stimulus and incentives such as long-term visas for investors and Expo 2020.

Damac’s net income for the first nine months of the year also slumped to Dh132.6m, from Dh1.09bn from a year earlier. The company’s cash and bank balances at the end of September declined to Dh4.9bn from Dh6.17bn reported at the end of last year. Total assets also slid to Dh24.5bn from Dh25.2bn for the same period, according to its earnings report.

Damac, which reported an 87 per cent slide in its second-quarter net profit, has struggled to maintain profit growth amid headwinds for the country's real estate sector. The company is expected to remain under pressure for the remainder of the year and 2020 because of lower revenue, according to EFG Hermes.

“Damac has continued to report disappointing numbers over the past three quarters, a trend we think will continue in 2019-20 because of the current revenue recognition,” the Egyptian investment bank said in a report on after Damac reported its second quarter earnings.

The Dubai developer, which owns and operates the Middle East's only Trump-branded golf club, is still continuing its expansion. The company acquired two plots in Dubai from a related party last month.

In the first nine months of the year Damac delivered 3,072 units, which also include the first handover in Akoya, the company’s largest master development in the emirate.