Dubai: Dubai developer Union Properties eked out a marginal Dh285,000 net profit during the April-June period against net losses of Dh12 million in the first quarter, offering the first glimpse that a turnaround strategy might be at work. Some of the subsidiaries also managed to turn in ‘healthy performance improvements’, UP said.
The biggest improvements also came by taking a drastic approach to saving costs, with expenses down 42 per cent year-on-year to Dh17 million in Q2-2022.
The developer, with projects such as Motor City and Green Community, had been through an extremely tortuous 2021, seeing to a new Board of Directors coming in and trying to work out a revival strategy.
We remain laser focused on driving growth and delivering cost efficiencies, particularly at a subsidiary level. Of note, we have launched a number of initiatives to optimise performance across the business, including the consolidation of three of our business units into Edacom Asset Management, which is expected to deliver significant cost savings over the remainder of the year. The work underway lays a solid foundation for future growth and value creation for our shareholders.
- Amer Khansaheb, Board Member and Managing Director of Union Properties
Banking on land
UP still retains a substantial land bank in a ‘fast-developing location’. “Looking ahead, we are cautiously optimistic as we explore a number of development options that we expect to generate long term value for our investors,” the MD added.
Status on arbitration claim
In October last, Union Properties confirmed one of its subsidiaries had initiated sizeable arbitration claim, which is still under review by the arbitration tribunal.
The accumulated losses to capital ratio works out to 68.55 per cent.
In the first-half of 2022, the developer recorded a net loss of Dh12.19 million against Dh32.38 million a year ago.
Through it all, debt restructuring will remain the single most pressing matter for the developer. Any longer term turnaround will require this to be completed at the earliest. UP has not given an indication on when this might happen.
It was recently that Union Properties merged three business units - Edacom Owners Management Association, Uptown Mirdiff Mall, and Al Etihad Cold Store - into a single entity, Edacom Asset Management. “The consolidation is expected to improve profitability by driving efficient resource and asset utilisation, economies of scale and cost rationalisation,” the statement said.
And in actual numbers would generate additional one-off cost savings of Dh7 million over the next 12 months from the reorganisation. Consequently, operating profit was up to Dh3 million in Q2-2022 from a loss of Dh36 million for the same period last year.
In the second quarter, UP also had to put up with finance costs related to a legacy debt of Dh16 million, which made up 14 per cent of the total consolidated costs.