Sorouh Full-Year and Fourth Quarter Results 2011
Sorouh today announced its consolidated fourth quarter results and full-year results for the year ended 31 December 2011
- Sorouh concludes another profitable year
- Proposes 5 fils per share dividend for the full year
- Completes over 1,700 units in 2011
- Delivers 918 units to buyers as successful handover of Sun and Sky nears completion
- Adds over 300 leases to rental portfolio, strengthening quality of earnings
Revenues for the full year were AED3.8bn (FY 2010: AED1.2bn), driven by the handover of Sun and Sky, which generated AED2.2bn, construction income from national housing projects, revenue from subsidiary companies, a significant land transaction and rental income from investment properties. This mix of revenue contributors has helped strengthen the earnings profile of the business and create a more sustainable business for the future.
During the year Sorouh continued to build its recurring income streams. New leases signed over the course of the year provide an annualised lease value of nearly AED50m. The leasing portfolio now includes residential and commercial units from Sun and Sky, Al Murjan, Abu Dhabi Aviation, Sas al Nakhl, Khalidiya Village and Al Oyoun Village. In total, this portfolio accounts for almost 1200 units, an increase of 40% over last year. In 2010, we announced our goal of trebling recurring income in the next three years to over AED500m per annum. We are well on our way to achieving this goal, which will significantly strengthen Sorouh’s quality and predictability of earnings. From 2012, further rental income will be generated from units at al rayyana, BOUTIK Shams and BOUTIK Al Ain. At al rayyana, Sorouh signed a 30-year residential lease agreement with Défense Conseil International (DCI) Group, a French government-related company, for 287 units, representing approximately 20% of the development.
The results from subsidiaries Pivot, our construction and general contracting company, Khidmah, our management services company, and associate company Galaxy, our building materials supplier, demonstrate that our decision to invest in a more vertically integrated model is bearing fruit. Pivot delivered strong profit, and both Khidmah and Galaxy became profitable within two years of inception. All three companies show good potential for future profit growth.
During the course of the year, the Company continued its policy of reviewing its asset values to ensure that they are not held above their fair value and obtaining professional valuations of its Investment Properties and material Development Work in Progress. As a result, impairment of goodwill and fair value losses totalling AED194m were taken (FY2010: AED212m).
Net profit for the full year, after provisions and impairments, was AED383.3m (FY 2010: AED16.2m).
The Company maintains a strong balance sheet with net assets at the end of 2011 amounting to AED6.6bn and cash of AED1.8bn (FY 2010: AED6.1bn and AED1.3bn of cash). Total bank borrowings are AED 2.7bn, representing a debt-to-equity ratio of 42%.
On the strength of these results, the Board of Directors have recommended a full year cash dividend of 5 fils per share, which is subject to shareholder approval at the AGM.
Fourth Quarter Results
Revenues for the fourth quarter were AED1.2bn (Q4 2010: AED 197m), principally driven by revenues from Sun and Sky, recurring rental income, construction income from national housing projects and revenues from subsidiary companies. In addition, in December, Sorouh sold the site for Gate Phase 2, in Shams Abu Dhabi. In partial payment, Sorouh took back from the investor a Marina plot on Shams Abu Dhabi previously sold andthe investor has agreed to progress building the final Gate Tower and Arc in accordance with Sorouh’s master-development plan. This swap arrangement has a net positive revenue impact of AED211m.
After provisions, impairments and non-recurring income, the net profit for the quarter amounted to AED98.1m (2010 Q4: net loss of AED198.6m).
OPERATIONAL REVIEW FOR 2011
Shams Abu Dhabi
- The commercial handover of Sky Tower began in early March and over 90% of sold commercial units have been handed over. Commercial tenants have commenced their fit-out works and the first commercial tenants have moved into the property, including the Austrian Embassy and Agthia Group.
- Handover of residential units at Sun & Sky Towers started at the beginning of May and over 95% of those sold had been handed over by the year end. There is a growing community now forming with over 700 families living in Sun and Sky Towers.
- Sales and leasing of unsold residential and commercial inventory is progressing well with over 170 new sale and lease agreements being executed in the full year 2011.
- In June, Sorouh launched Abu Dhabi’s first ‘Rent to Own’ offer. The offer enables tenants of Sun Tower to have the right to own their apartment after three years of renting and convert 90% of their rent into equity. This initiative is receiving a significant amount of interest, resulting in 30% of the available stock on offer in Sun Tower being taken up by Rent-to-Own tenants.
- Sorouh has completed the infrastructure on Shams Abu Dhabi, with 12 sub-developer plots under construction.
- The Gate Towers, a cluster of residential towers that form part of Shams Gate, the gateway to Shams Abu Dhabi, are advancing rapidly. At present, structural work is being carried out on the last two levels which will then house the penthouse bridge structure.
- In December 2011, Sorouh sold three commercial floors, comprising 64,298 square feet, at Sky Tower, to an Abu Dhabi government entity.
- All infrastructure works at the Saraya master-planned development, near the Abu Dhabi Corniche, are complete and four plots are currently under construction by sub-developers. This is a positive development for the location and is a catalyst for other sub-developers. It has also created an interest in the secondary market for the sale of land plots.
Abu Dhabi Aviation Residential Compound
- The compound was handed over in February and a thirty year lease was signed with the Abu Dhabi Aviation Company for the provision of staff accommodation.
- Construction of the 33 buildings is progressing well and all buildings have already topped out, with external works and finishes making good progress. The district cooling plant is complete and assembly is moving in tandem with the completion of construction works.
- Al Murjan was completed in June 2011 and the 252 unit residential tower is now being leased, with 65% of the residential units in the tower already leased. Al Murjan will also be another significant source of recurring income for Sorouh.
- The development is progressing well, with infrastructure development at an advanced stage. The construction of the residential buildings is moving at a fast pace and has reached the second floor and roof slab levels. The development is on track for completion at the end of 2012.
BOUTIK Al Ain Mall
- The development is substantially complete and is scheduled for full completion in the first quarter of 2012. The anchor tenant for the property has been signed up and an aggressive leasing programme is currently being pursued.
Tilal Liwa Hotel
- Tilal Liwa, the hotel located in the Western Region, has been profitable and cash flow positive throughout 2011 with an average occupancy of 84% for the month of December 2011. The hotel achieved an average occupancy rate of 73% for 2011, and a profit of AED7.9 million during the year.
Master-planned communities for Emirati families
- Continued progress is being made at Watani. Phases one and two of the project are progressing well and on track for delivery in 2012.
- Full Construction works has also commenced on the other two national housing projects in Al Ain Ghuraiba and Al Sila’a Western Region.
Abubaker Seddiq Al Khouri, Managing Director, Sorouh, added:
“I am pleased to report that the management team has yet again delivered a strong performance, reporting another year of profit for shareholders. This outcome reflects the strength of the business and our ability to deliver over 1,700 high quality units to market while diversifying our earnings through construction income from our prestigious national housing developments, revenue from subsidiary companies, a significant land transaction and rental income from investment properties. This mix of revenue contributors has helped strengthen the earnings profile of Sorouh, building a more sustainable business for the future.”