Damac slips to loss in first quarter despite higher revenue

The company took impairment provisions of more than Dh180m against the value of its development properties and trade receivables

DUBAI , UNITED ARAB EMIRATES – Sept 6 , 2016 : View of the model of Akoya at the Damac stand at the Cityscape Global 2016 held at Dubai World Trade Centre in Dubai. ( Pawan Singh / The National ) For Business. Story by Lucy Barnard / Michael Fahy. ID No - 18387
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Dubai-based developer Damac Properties slipped to an annual loss in the first quarter of 2020 despite a 37 per cent year-on-year revenue hike.

The company reported a Dh106 million loss for the period, compared to a Dh31m profit in the same quarter last year, according to a regulatory filing on Sunday with the Dubai Financial Market, where its shares trade.

Profits were lower due to a Dh130m impairment provisions taken against the value of development properties, and a Dh52m impairment made against trade receivables. Revenue increased to Dh1.2bn, up from Dh896m in the same period last year.

“In 2020 we will remain focused on delivering projects that are already in our development pipeline,” the company’s chairman, Hussain Sajwani, said.

“Our strategy is aligned with the overarching need to create a balance between supply and demand in Dubai's real estate market."

Concerns about an oversupply of properties in Dubai have pushed prices lower and led to the establishment of a higher committee in September last year, bringing public and private developers together to achieve a better balance between supply and demand.

More than 12,000 units were handed over in the first quarter, according to JLL, with average sale prices falling by 7 per cent year-on-year.

In a recent interview with Bloomberg TV Mr Sajwani said he expects market fundamentals will improve next year as economic activity ramps up ahead of Dubai's Expo 2020 event, which was recently postponed until October 2021, as a result of the coronavirus outbreak.

“I think in October 2021, when the expo starts, we could see the market changing in a positive way,” Mr Sajwani said.

He predicted a tough year for the property sector in 2020, but said the market offered bargains for potential buyers.

Damac delivered more than 650 units in the first quarter in its Akoya master community. The company said it has implemented lockdown and social distancing measures following the coronavirus outbreak, and that it has “proactively and seamlessly” moved its sales platform online.

“This will change the way business is conducted in the future and Damac is ready due to historical heavy investment in digital transformation,” the company said in its statement.

Damac’s shares did not trade on Sunday as the Dubai Financial Market is closed for the Eid Al Fitr holidays.

The company’s shares halved in value between January and mid-March this year, but have subsequently rebounded and closed last week 16 per cent lower for the year-to-date at Dh0.62 per share, giving it a market capitalisation of Dh3.75bn.