Aldar Properties Q2 net profit jumps 2% on higher revenue

Aldar Properties, Abu Dhabi’s biggest listed developer, reported a 2 per cent jump in its second-quarter net profit as the company recorded higher revenue, despite restrictions to contain the spread of Covid-19.

Net profit attributable to owners of the company for the three months ending June 30 rose to Dh484 million, the company said in a statement to Abu Dhabi Securities Exchange where its shares trade. Revenue climbed 21 per cent to Dh2 billion during the period driven by "robust demand for its prime developments and infrastructure-enabled land."

“Aldar’s highly sustainable and diversified business model is demonstrating strong earnings power even in a challenging global macro-economic environment,” Talal Al Dhiyebi, chief executive of Aldar said.

“Abu Dhabi’s real estate fundamentals remains well supported," he said, adding that "the market benefits from well managed supply and a strong investor base is displaying confidence and fuelling demand for quality developments in prime locations.”

Provisions, impairments and write-downs increased four-fold to Dh10.2m during the period and selling and marketing expenses climbed 45 per cent to Dh24.7m, according to the company.

First half profit, however, dropped 23 per cent to Dh783.4m as provisions, impairments and write-downs rose more than three-fold to Dh43.4m. Revenue, on the other hand, jumped 9 per cent to Dh3.7bn.

“Our prime investment properties continue to perform solidly, and as the most efficient platform for real estate ownership in the region, we are looking at attractive opportunities to expand our diversified portfolio,” Mr Al Dhiyebi said.

The company’s second quarter development sales were Dh505m, on account of strong inventory sales at Nareel Island and Yas Acres projects as well as sales of land plots on Saadiyat Island.

"Aldar reported very strong results amidst challenging operating market conditions," investment bank EFG-Hermes said in a note on Thursday.

"The development segment surprised positively with relatively strong contracted sales in the absence of new launches along with the various restrictive government measurements that were imposed during the quarter," EFG said. "We believe that the company’s strong market presence and premium-located projects have resulted in this outperformance in sales activity."

Adlar's stock has 7 buy analyst recommendations compared with 1 sell, according to Bloomberg data.

"We definitely saw pent up demand in a number of areas, when the malls came out of lockdown...we saw a shift in consumer behavior when it came to our residential portfolio," as more people spent time at home and some upgraded to villas from apartments, Mr Al Dhiyebi told Bloomberg TV on Thursday.

He said he is “cautiously optimistic” for the second-half of the year and the company is "better planned" to handle any possible restrictions that may be reintroduced should there be a resurgence of Covid-19.

The company’s asset management business reported a 21 per cent year-on-year decline in net operating income, as a result of hospitality and retail properties being temporarily closed for much of the period during the second quarter.

Greg Fewer, chief finance and sustainability officer at Aldar said the company is always "on the look out for opportunities" and the second-quarter has been really “encouraging".

“We are encouraged by the activity we are seeing from investors in the real estate market," he said during a conference call with the media.

"The pent-up demand that we saw for real estate and for our malls, with people coming to our malls. That makes us feel good going into the second half of the year," Mr Fewer said.

Earlier this year, Aldar increased its support to property, education and retail customers to Dh190m to supplement the government's efforts to soften the impact of the coronavirus pandemic on the economy.

The company also partnered with banks in Abu Dhabi to offer home finance at low-interest rates at some of its developments in the capital.

Abu Dhabi saw moderate declines in residential values during the second quarter, with average apartment and villa prices falling 1.4 per cent and 1.3 per cent respectively quarter-on-quarter, according to Chestertons. On an annual basis, average apartment prices fell 5.3 per cent and villas declined by 4.8 per cent.

Aldar remains interested in expanding, Mr Al Dhiyebi said.

"Sustainable growth is a key part of our strategy and obviously with Covid, the right thing to do is to revalidate your plans," he said.

Saudi Arabia and Egypt are attractive markets, which Aldar is interested in, Mr Al Dhiyebi said.

"These are key areas of growth. We are looking for the right opportunity and the right structure, we don't want to venture out into five or seven countries all at once," he said.

"It's very important to go in understand the market, understand the fundamentals, understand the customer and deliver the product. The strength of our balance sheet...the strength of our brand is giving us the opportunity to make the right decisions."