Union Properties narrows second-quarter loss, with restructuring plan under way

Developer has brought down overheads and new leadership has 'a clear road map' to return to growth

Union Properties said last week that it had reached a debt-restructuring agreement with Emirates NBD. Pawan Singh / The National

Dubai developer Union Properties narrowed its second-quarter net loss by 54 per cent as it cut costs and embarked on a plan to restructure the company.

The group's net loss for the three months ending June 30 reached Dh38.6 million, compared with a Dh84m loss a year ago, Union Properties said in a financial statement on its website on Saturday.

Second-quarter revenue from contracts with customers fell to Dh83.3m from Dh104.6m in the same quarter a year ago.

The company reduced its loss quarter-on-quarter by 68 per cent as the result of "a drastic cost cutting effort, including a reduction of the group’s administrative and operational expenses", it said.

"The group has successfully engaged in a series of transformational initiatives opening the way for a new chapter of growth and sustained development."

Administrative and operational costs fell by about 24 per cent to Dh57.9m for the first six months of 2020, compared with Dh76.4m for the same period last year, Union Properties said.

Its first-half net loss of Dh160.4m in 2020 widened from Dh82.3m in the same period last year due to a "significant drop" in the property sector and a subsequent mandatory “marked-to-market” revaluation, Khalifa Hasan Al Hammadi, Union Properties newly-appointed chairman, said.

The company suffered a Dh74.3m loss on the value of investments held and a Dh19.8m loss on the disposal of investment properties during the six-month period.

First-half revenue fell 5.7 per cent year on year to Dh195.7m.

The group’s new leadership now has "a clear road map and we are committed to remain on the right track", Mr Al Hammadi said.

"We will continue to work towards the improvement of our operational efficiencies, operating cost management as well as our overall financial position."

The developer is also working with partners to improve and develop its land bank to create assets with recurring cash flows, in addition to identifying new business alternatives to suit market demand, he said.

Union Properties, whose projects include Dubai's Motor City district, said last week that it had reached an agreement with Emirates NBD to restructure an outstanding debt of Dh946m with the bank.

The deal with Dubai’s biggest lender, which includes payment of an initial amount, will significantly improve the company’s debt profile, Union Properties said on August 10.

On Saturday, the group said it successfully negotiated and finalised a comprehensive restructuring of the largest part of its outstanding debt with various financial institutions, which will "ultimately improve its overall cash flow profile and liberate funds for growth".

Noting that its peers were massively affected by the crisis, Union Properties said it remained confident of its growth prospects.

"We are confident that our group will ultimately thrive, notably thanks to the diversification of its operating subsidiaries through different sectors of the economy," Mr Al Hammadi said.

"Those diversified operating subsidiaries bring to the group more confidence, resilience and sustainability during these challenging times."

The developer completed a blueprint of its three-year strategy and plans to unveil a new project, Motor City Hills, in Dubai.

The development is next to the Dubai Autodrome on Sheikh Mohammed Bin Zayed Road and will include 195 villas, 490 town houses and six commercial land plots.

The company is also planning a Dh200m expansion of the Dubai Autodrome.

Union Properties is turning three business units – ServU, The Fitout and the Dubai Autodrome – into private joint stock companies as it reorganises its business to cut costs and improve its bottom line.