Sorouh Full-Year Results 2010
Sorouh Real Estate Company PJSC (“the Company” or “Sorouh”), the Abu Dhabi-based real estate developer (ADX: SOROUH), today announced its consolidated fourth quarter results and full-year results for the year ended 31 December 2010.
- Sorouh concludes another profitable year
- The rental portfolio is a meaningful contributor strengthening the quality of earnings
- AED 2.7bn facilities secured to fund further construction
- Good progress being made across the development portfolio with AED 2bn spent on work in progress during the year
- AED 370m of provisions and impairments during the year, adding to AED 363m already taken in FY 2009
Revenues for the full year were AED 1.2bn (FY 2009: AED 3.1bn) driven by land sales on Shams Abu Dhabi, delivery of units in Golf Gardens, construction income from national housing projects, revenue from subsidiary companies, and rental income from the investment properties. The rental portfolio continues to be a meaningful contributor to revenues and provides cover for the Company’s operating expenses. Recurring income will strengthen as Sorouh continues to invest in and grow its rental portfolio.
Throughout the year Sorouh focused on tight cost control and prudent financial management. In addition, provisions and impairments of AED 370m (2009: 363m) were taken, bringing total impairments and provisions to over AED 730m. During the year, over AED 2bn was invested in work in progress across our development portfolio, principally on Sun and Sky towers, the Gate Towers, Shams Abu Dhabi infrastructure, alrayyana, Sorouh Tower at Danet Abu Dhabi and Sorouh’s Mall in Al Ain.
Net profit for the full year, after provisions and impairments, was AED 16.2m (FY 2009: AED 495m).
The Company maintains a strong balance sheet with net assets at the end of 2010 of AED 6.2bn and cash of AED 1.3bn (FY 2009: AED 6.1bn and AED 2.8bn of cash). Total bank borrowings are AED 1.7bn, representing a debt-to-equity ratio of 28%. During the year, the Company signed a AED 2.7bn four-year finance facility that resulted in almost AED2.4bn of free incremental cash and facilities being available to Sorouh. These funds will be used to finance the construction of Shams Gate and other developments in Abu Dhabi. Fully drawn, gearing will be 44%. By extending the debt maturity profile, Sorouh has significantly strengthened its liquidity position and avoids having to refinance in 2011-2012 when significant market refinancings are expected.
Fourth Quarter Results
Revenues for the fourth quarter were AED 214m (Q4 2009: AED 438m), principally driven by recurring rental income from Sas Al Nakhl, Khalidiya Village and Al Oyoun; construction income from national housing projects and revenues from subsidiary companies.
After provisions, impairments and non-recurring income, the net loss for the quarter amounted to AED 199m (2009 Q4: profit of AED 28m).
All of Sorouh’s Abu Dhabi developments remain on track with the focus being on maintaining delivery schedules:
Shams Abu Dhabi
- The infrastructure works are now complete. These include works done on roads; canals; pedestrian bridges; sea walls; utilities (power, water and telecommunications); sewage works and the synthetic natural gas plant. All major roads and bridges are now complete and operational. District cooling services have also been energised and are currently being supplied to the Sun and Sky Towers, and landscaping around these first two towers in The Gate district is receiving finishing touches.
- Numerous sub-developers are progressing with their developments, with 10 plots now under construction and several more expected to commence by year-end.
- 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 final inspections by authorities. Pre-handover inspections by owners are almost complete, with over 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 the first quarter of 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 has signed a deal for Waitrose to be the anchor tenant supermarket in BOUTIK, the retail podium linking Sun and Sky Towers.
- Leasing of retail space in BOUTIK is still strong, with over 70 % of space rented out. The mall is scheduled for opening during the second half of the year.
- The Gate Towers - the three towers that form part of Shams Gate - are advancing rapidly, and the core walls have reached 61, 60 and 52 storeys respectively. Progress to date is within the projected construction timetable.
- Construction of the 33 buildings is progressing well and several buildings have already topped out, with civil works now complete, and block work and finishes making good progress. The district cooling plant has been procured and assembly is moving in tandem with the construction works. Once complete, alrayyana will be a significant recurring income contributor to Sorouh.
Sorouh Tower at Danet Abu Dhabi
- The project is now in its final stages, and only awaits the provision of power supply and chilled water by the master developer.
- Sorouh is working with authorities to finalise all requirements and will shortly proceed to apply for approvals.
- 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 potable water networks and 18kms of gravity sewers will bring the overall infrastructure to completion. Good progress has been made on the alghadeer 33/11kV substation.
- The construction tender for alghadeer’s homes has been awarded and building has started, on track for completion in 2012.
Master-planned communities for Emirati families and other recurring income projects
- 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 has signed a memorandum of understanding with Abu Dhabi Airports Company (ADAC) to lease 60 villas developed by Sorouh in Khalifa City for a period of 30 years. The villas will allow ADAC to provide housing solutions for the families of its employees and contractors.
HE Saeed Eid Al Ghafli, Chairman, Sorouh, commented:
“We are very pleased to report another year of profit despite the delays in handing over Sun and Sky, and the conservative accounting approach of taking provisions and impairments to ensure that our assets are held at fair value. The management has continued to navigate the business successfully through difficult market conditions, while simultaneously achieving better efficiencies and cost savings from more streamlined operations. Good progress has been made across all our developments and the infrastructure on Shams Abu Dhabi. During the year, we successfully raised AED2.7bn of financing, which leaves us well positioned to complete our projects and deliver value to all our stakeholders in 2011 and beyond.”
Abubaker Seddiq Al Khouri, Managing Director, Sorouh, added:
“The year 2010 was another important year for Sorouh. The Company has achieved over 90% of the strategy it outlined in 2009 by focussing on our core developments in Abu Dhabi, minimising our risk by improving efficiency and productivity, securing funding and developing our recurring income portfolio, which is expected to more than treble its contribution to revenues in the next three years.
“Management has reduced costs, focused on cash conservation, and taken a prudent approach to provisioning and impairment. Our balance sheet is strong, and our financial leverage remains low. Our focus on Abu Dhabi, and securing national housing projects have also paid dividends, laying the foundation for future profit growth from our existing development portfolio. In addition, our land bank will be further enhanced by the master development of Lulu Island, as planning for the first phase nears completion. The profit outlook for the next ten to 15 years will be further supported by our low-to-middle income housing strategy, which is in the planning stages.
“In the short-term, 2011 and 2012 will be years of delivery for us. We will be handing over 1,500 units to customers commencing with Sun and Sky in the first half of this year. Completion of Sorouh Tower at Danet Abu Dhabi, Tala Tower and alrayyana are scheduled to follow towards the end of the year, with alghadeer and the Gate on track for completion at the end of 2012. This means significant cash generation for the business and profits for shareholders.”