Sorouh Third Quarter 2010 Financial Results
Sorouh Real Estate PJSC (“the Company” or “Sorouh”), the Abu Dhabi-based real estate developer (ADX: SOROUH), today announced its third quarter results for the period ended 30 September 2010.
- Sorouh continues to perform well and deliver profit from a range of activities
- The rental portfolio continues to be a meaningful contributor strengthening the quality of earnings
- Good progress being made across the development portfolio with AED 1.5bn spent on work in progress in the year to date
Revenue for the third quarter 2010 was AED 371m (Q3 2009: AED 1,351m), principally driven by the sale of one plot on Shams Abu Dhabi, construction revenue from the Watani project and rental income from Sorouh’s property investment portfolio. The rental portfolio continues to be a meaningful contributor to revenues and provides cover for the Company’s operating expenses. Generating consistent rental income is part of the Company’s risk management strategy and positions Sorouh well for the future. Recurring income will strengthen as Sorouh continues to invest in and grow its rental portfolio.
Revenue for the first nine months was AED 991m (9M 2009: AED 2,665m) including the sale of two plots on Shams Abu Dhabi, recognition of income from 44 units at Golf Gardens, construction revenue from Watani and rental income from the property investment portfolio.
Gross profit for the quarter was AED 183m (Q3 2009: AED 232m). Net profit for the third quarter 2010 was AED 63m (Q3 2009: AED 185m). Profit was affected by AED 42m of one-off items accounted for during the quarter. These include fees expensed as a result of the early redemption of the Sukuk. Sorouh redeemed the Sukuk on 7 July 2010 after successfully raising AED 2.35bn in a four-year facility to strengthen Sorouh’s liquidity position and extend its debt maturity profile.
Gross profit for the nine month period was AED 491m (9M 2009: AED 590m). Net profit for the nine month period was AED 215m (9M 2009: AED 467m).
Earnings per share (EPS) for the three month period were 2 fils (3M Q3 2009: 7 fils). EPS for the nine months were 8 fils (9M 2009: 18 fils).
Net assets as at the end of the third quarter were AED 6.4bn (YE 2009: AED 6.1bn).
We continue to invest across our development portfolio, by investing AED 1.5bn in work in progress, including The Gate, Sun and Sky, alrayyana, the mall in Al Ain and others.
Shams Abu Dhabi
- The infrastructure works are almost 100% complete. These include works done on roads, canals, pedestrian bridges, sea wall, utilities as well as dredging and reclamation works, sewage works and the synthetic natural gas plant. Major progress has been made with general vehicular access to Shams Gate, including the Sun and Sky towers, with the roads now operational. District cooling services have also been energised and are currently being supplied to the Sun and Sky Towers.
- The advanced stage of infrastructure has allowed numerous sub-developers to start their developments, with 10 plots now under construction and expected to be completed by 2012. Shams Abu Dhabi is seeing some deal flow in the sub-developer market with one new international investor purchasing a site in the secondary market.
- The Sun and Sky towers are physically complete and will be the first Grade A buildings to be delivered in Abu Dhabi’s new investment-zone on Al Reem Island. The towers are at present undergoing testing and commissioning. Several approvals have been obtained from the authorities and the remaining approvals are being pursued vigorously. Pre-handover inspections by owners are progressing well, with nearly 1,000 residential units having been viewed by owners. Sorouh is currently finalising all required approvals with the authorities for the completion of the towers and expects to start handing over apartments to owners in early 2011.
- There has been promising leasing interest in the commercial space in Sky Tower from numerous corporate entities as companies increasingly strive for better quality office space in Abu Dhabi. This resulted in the sale of a commercial office floor in the Sky Tower.
- Sorouh’s innovative ‘Lease to Own’ promotional offer for Sky Tower’s commercial space is progressing well, generating over 100 serious enquiries. There are ongoing discussions with several blue chip companies for office space. Sorouh will be launching a residential ‘Rent to Own’ promotion shortly.
- The Gate Towers - the three towers that form part of Shams Gate - are advancing rapidly, and the core walls have reached 42, 39, 35 storeys respectively. Progress to date is within the projected construction timetable.
- Sorouh is actively investigating options to develop middle-income housing on Shams, as outlined by the Urban Planning Council (UPC), in conjunction with various third parties.
- Construction of the 33 buildings is progressing well and several buildings have already topped out. The district cooling plant has been procured and assembly is moving in tandem with the construction works. Given the flexibility that alrayyana offers, it is of interest to a growing number of corporations seeking individual buildings to house their staff. Once complete, alrayyana will be a significant recurring income contributor to Sorouh
- The development is progressing well, with 90% of the deep infrastructure now complete. Construction on 10kms of roads, 13kms of storm water gravity drainage, 16kms of portable water networks and 18kms of gravity sewers will bring the overall infrastructure to completion. Procurement of various utility packages is underway and good progress has been made on the alghadeer 33/11kV substation.
- The construction tender for alghadeer’s homes has been awarded and building will start by the end of the fourth quarter, on track for completion in 2012.
Master-planned communities for Emirati families
- Sorouh is helping the Emirate achieve housing goals set out in Abu Dhabi Plan 2030 by working in partnership with the Government of Abu Dhabi to master plan prestigious
contemporary homes for UAE Nationals in well-designed communities that incorporate a strong sense of local heritage.
- Substantial progress has been made at Watani. The enabling works for Phase 1 have already been completed, while the sub-structure work is nearing completion. Abu Dhabi-based PAL Technologies was awarded the construction contract for Phase 1 and has progressed with 20% of the Works. Phase 2 of the construction was awarded to Construction General Contracting House in October and the contractor is currently on site.
Sorouh Mall at Al Ain
- Construction is progressing well with 71% of the work completed, and final completion expected for the end of first quarter 2011. External structures are finished, and internal building is underway. Leasing efforts have commenced and discussions are underway with numerous potential tenants. Once complete, Al Ain Mall will be a significant recurring income contributor.
H.E. Saeed Eid Al Ghafli, Chairman, Sorouh, commented:
“Sorouh continues to demonstrate its ability to respond to a challenging market with a further quarterly profit and solid strategy that is delivering results. Good progress has been made across all our developments, especially Shams Abu Dhabi on the Al Reem Island investment zone, where our investment in land and infrastructure approaches AED3bn to date.
Abubaker Seddiq Al Khouri, Managing Director, Sorouh, added:
“These results are testament to Sorouh’s business model and the diversity of its income streams. The strength of our Board and the management team, our focus on cash, cost control and project delivery, combined with our relationship with the Government of Abu Dhabi, position us well for the future. Sorouh, having offset risk by raising significant funding in a challenging environment, is well-capitalised to benefit further from Abu Dhabi’s strong economic fundamentals as liquidity improves.”