Dubai: Damac recorded a dent on both revenues and net profit for the first three months, totalling Dh896 million and Dh31 million, respectively. That compares with Dh1.9 billion and Dh484 million from a year ago.
But Damac has reasons to feel relatively upbeat about two key numbers from Q1-19 – first, it totalled sales of Dh1.2 billion, and also managed to pay down its outstanding sukuk of Dh1 billion. In what remains an operationally challenging market, a strong sales pipeline and reduced debt should bode well. (In the three months to end December, Damac recorded sales of another Dh1 billion.)
Hussain Sajwani, Chairman of Damac Properties, in a statement issued to Dubai Financial Market says as much. “We started the year strong with sales of Dh1.2 billion, but remained conservative in our approach, to ensure that we are financially agile to take on new opportunities. Backed by positive cashflow, we recently paid down the outstanding sukuk, and continue to invest heavily in our communities and on streamlining operations.”
On whether the gradual decline in revenue and net profit over recent quarters was become worrisome, Amr Aboushaban, Head of Investor Relations at Damac Properties, said: “Let’s not forget these numbers are as dictated by IFRS (International Financial Reporting Standards) accounting. What I care more for is the cash that Damac continues to generate – we have Dh1.8 billion in free cashflow and another Dh5 billion in escrow.
“In Q1-2019, we got Dh1.2 billion in sales revenue and between September 2018 and April, we managed to pay off $400 million in debt at a time when the market has been quite challenging. Those are the numbers I care about.” (As of March 31, gross debt stood at Dh5 billion, cash and bank balances at Dh6.6 billion and development properties stood at Dh9.3 billion, largely unchanged from December 2018.)
Market sources were expecting Damac to deliver more than the 743 apartments it did in the first three months. But Aboushaban says there is no reason to be perturbed. “Last year, we delivered 4,100 units and which was the higher ever we ever did in a year. We are looking at another strong delivery year and more or less around the numbers as in 2018.
“It often happens that we have a quarter or two with limited handovers and then make up towards the end of the year.”
Of the Dh1.2 billion it sold in the first quarter, the homes at Damac Hills and Aykon City contributed the most in value terms, while those Akoya Oxygen came up trumps on volumes.
And as Sajwani said in his statement, the emphasis is on being “conservative” with new launches and deploying capital. “The last land acquisition we made was in November 2015 and the fact that in three-and-a-half years we haven’t made any more shows we can be patient. There is no reason to rush to pick up more - land is not going to run out any time soon. When the market picks up, we can easily get back to picking up land where needed.
“I don’t think there is a need to rush out new projects to prove a point - we wouldn’t be selling Dh4 billion to Dh5 billion of property a year if we didn’t have the sort of property that buyers want.”
“Moreover, in times like these, holding cash is the best asset you can have.”
“At the end of the day, Dubai still represents 90-93 per cent of the Damac portfolio,” said Amr Aboushaban. “Even in the London project we have, Damac’s direct equity is 20 per cent and the rest comes under the Chairman’s (Hussain Sajwani) private investment vehicle.
“Now, even if we were to have three to five projects in London, Dubai would still make up 80 per cent of our books. That’s how we will keep it.”
As in Dubai, Damac will not be making haste in launching new projects overseas, even if it means adding to its current development in London.
“At the end of the day, Dubai still represents 90-93 per cent of the Damac portfolio,” said Amr Aboushaban. “Even in the London project we have, Damac’s direct equity is 20 per cent and the rest comes under the Chairman’s (Hussain Sajwani) private investment vehicle.
“Now, even if we were to have three to five projects in London, Dubai would still make up 80 per cent of our books. That’s how we will keep it.”
