Dubai: Damac Properties recorded a marginal dip in revenues for the first nine months to Dh5.2 billion — from Dh5.8 billion — while net profit took a dent from Dh2.3 billion to Dh1.1 billion.
Booked sales also nearly halved, from Dh6 billion in the first nine months of 2017 to Dh3.2 billion in the corresponding period this year.
We always have a stock of properties that we sell on or near completion for better pricing. There is nothing alarming in our stock levels.
“Our medium- to long-term outlook remains optimistic, as we push forward with our landmark developments at full force,” Damac chairman Hussain Sajwani said in a statement.
Chief financial officer Adil Taqi said the current state of the market was “quite tough”.
35%Damac’s net margins during the period
“Sentiments are weaker and reflected in property prices for much of the summer,” Taqi said.
“There’s the overhang of higher interest rates, the geopolitical situation, etc.
“However, one has to realise there is still a significant buying interest out there. It shows in our net margins of 35 per cent. It’s not bad at all — and we all knew that margins upwards of 50 per cent were never sustainable. Overall, the fundamentals of this market are still good.
3800Homes delivered during the first nine months
“We have been aggressive in marketing, but our payment plans haven’t been so. Damac has never liked the implied and enhanced risks on the balance sheet that come with playing around with payment schemes.”
The developer is now ramping up on deliveries, having just announced handovers at three of its high-profile Paramount-branded residential towers in the Burj cluster.
In the first nine months the company completed 3,800 homes, significantly higher than the 1,900 units it did last year.
Of these, 70 per cent and more are sold units.
Dh4.9bDamac’s net debt, down from Dh5.4b on June 30
Going forward this will be key in stoking further growth, with buyers now leaning towards picking up ready homes rather than wait for off-plan launches to be delivered.
Through the first 10 months, ready home demand has been on par with 2017’s, while off-plan sales are down 30 per cent.
“When you have launched continuously, you build up a stock of finished and near finished properties and that means more products to offer than just off-plan,” said Taqi. “We always have a stock of properties that we sell on or near completion for better pricing. There is nothing alarming in our stock levels.”
Another plus for Damac is the paring down of its overall debt, to Dh4.9 billion as of end September from Dh5.4 billion on June 30.
“I’ve always been a conservative guy — in the real estate space, if you are in the right place, you always profitable,” said Taqi.
“Where things go wrong for developers is with liquidity. Developers who have struggled in the past wasn’t to do with profitability but their liquidity management.
“With interest rates going up, credit will get a lot tighter in the market. We haven’t acquired any land since October 2015. As a developer, we are focusing on operational cash generation and paying down debt. That’s just what we did in the third quarter.”
As of 30 September 2018, cash and bank balances were at Dh6.2 billion, while its portfolio of development properties is valued at Dh8.9 billion.35%