Dubai developer Damac reports 46% profit rise despite property slowdown

Damac’s 2014 full-year profit was $937m, up from $641.5m, the company said in a filing to London’s bourse.

Visitors at the Damac stand at Cityscape Global 2014 held at Dubai World Trade Centre in Dubai. Pawan Singh / The National

Profit at Damac rocketed 46 per cent last year as the high-profile Dubai developer completed thousands of new homes despite the recent slowdown in the emirate’s real estate market.

Damac, which is known for signing licensing agreements with the likes of Fendi, Tiger Woods, Donald Trump and Paramount, and for offering customers buying its posh apartments yachts and luxury cars, said net profit grew to US$937 million last year from $641.5m the previous year.

The company, which began trading on the Dubai Financial Market in January after listing on the London Stock Exchange in 2013, reported that revenue for the year grew 64 per cent to $2 billion from $1.2bn the previous year.

Damac attributed the growth to the completion of 3,553 homes in eight projects during the period.

These included five apartment blocks in Business Bay – most of which were started before the global financial crisis – Lincoln Park on Umm Suqeim Road, two buildings of Lakeside at the International Media Production Zone, and its first international development, Al Jawharah in Saudi Arabia.

Land sales at Damac’s Akoya and Akoya Oxygen golf course-led housing areas also generated revenue of $873.5m – 43 per cent of total revenue – the company reported.

It added that advances from customers stood at just short of $2bn at the end of December, up from $1.71bn a year earlier.

The news comes as property analysts are predicting that real estate prices in the emirate will plunge by up to a fifth this year on the back of falling oil prices, the imposition of mortgage caps and higher transaction fees.

Last week, the real estate broker JLL and the ratings agency Standard & Poor’s put out pessimistic market predictions for the year, with S& P predicting that house prices could fall by as much as 20 per cent this year and JLL forecasting average falls of up to 10 per cent.

The Dubai Land Department last month reported that the value of property transactions last year fell 7.6 per cent compared with the previous year to Dh218bn as the market slowed at the end of the year.

But Damac remained upbeat in its assessment of the market.

“Against the backdrop of economic growth and a stabilisation of real estate prices in Dubai, we believe that Damac will continue to benefit from customer demand for our product,” said Hussain Sajwani, Damac’s executive chairman and chief executive.

Sebastien Henin, the head of asset management at The National Investor, said: “These were good results today that enabled Damac to outperform the rest of the market. However, the real question with Damac is whether it will be able to sustain this sort of performance going forward in an environment of falling real estate prices. The problem is that if oil prices continue to fall, investors may well postpone their purchases, which will make it harder for Damac and other real developers to sell.”

Holders of Damac’s London-listed global deposit receipts (GDRs) voted overwhelmingly to swap each GDR for about 23 ordinary shares on the Dubai Financial Market in January. However, a small percentage have so far remained trading in London after their owners elected not to swap them.

In a separate announcement, Damac said it was delisting from the LSE and cancelling the company’s GDRs. It expects to acquire remaining GDRs on or before March 16.

Damac shares closed up 6.84 per cent at Dh2.03.