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Recent results for Dubai Holding provide a sunnier outlook for the emirate and its creditors. Antonie Robertson / The National
Recent results for Dubai Holding provide a sunnier outlook for the emirate and its creditors. Antonie Robertson / The National

Dubai Holding offers investors an indicator for a positive outlook

Company is leaving stormy seas behind to reach calmer waters as financial results show that cash is flowing again.

It seems to be all coming together for Dubai Holding.

There are still debt restructuring issues to be overcome at Dubai Group, the financial arm of the conglomerate, but financial results from the commercial operations group (known as DHCOG) show that, in the emirate, business is booming and cash is flowing again.

The headline figure - a near six-fold increase in net profits to Dh1.2 billion (US$326.7 million) - is impressive enough. It is the first major breakthrough on the profit front since the effects of the global financial crisis hit in 2010. But the fact this result was achieved on a mere 4 per cent increase in revenue - to Dh9.2bn - shows that costs are being cut effectively and margins optimised.

Perhaps most important of all, an end is in sight to the savage impairment charges of the bad years, when DHCOG was writing off billions of dirhams on plummeting property values. Charges for last year came to just Dh7 million, almost a rounding margin for a company the size of DHCOG.

Within that revenue figure there were some quite chunky one-offs from the sale of land and other property sales, accounting for nearly Dh3bn of the increase. But as DHCOG has a major property business, Dubai Property, at its heart, that is not surprising. And it seems to augur well for land values going ahead, after a period in the doldrums.

The drive for recurring revenue, a priority for the whole business, is especially the focus of the property unit. On the residential side occupancy levels reached 98 per cent, and there is more to come with the launch of villa and apartment developments in some of the emirate's fastest-growing areas.

Tecom Investments, now under the management of the chief executive, Amina Al Rustamani, continues to demonstrate the resilience of the business parks strategy. The free zones such as Internet City, Media City and Knowledge Village achieved occupancy rates of 95 per cent, up from last year's 88 per cent and way above Dubai's average occupancy of 69 per cent for similar properties.

Jumeirah, the hotels and leisure business, had a very good year as tourism and travel grew in Dubai. Average occupancy was 73 per cent throughout the year, but this covered several periods of full occupancy, and 80 per cent for the most recent festive quarter. A respectable 3.8 per cent increase in revenue per available room demonstrates that the days of deep discounts are well behind Jumeirah.

Dividends from du and Axiom added to the return at the mobile business Emirates International Telecoms, highlighted as a separate "vertical" line of the DHCOG to reflect its growing importance.

This cash inflow allowed DHCOG to continue the process that has preoccupied it the past few years: deleveraging. In the course of the year, it paid down a $500m bond, trade payables decreased by Dh4.2bn, and debts to contractors were cut by Dh1.4bn.

The debt situation looks much improved. Overall current liabilities were down 20 per cent, and total DHCOG debt was Dh11.7bn, down by Dh1.1bn. Set against this, total assets amounted to Dh86bn. In theory, DHCOG has sufficient asset cover for its own debts and those of Dubai Group (some $6bn), its sister company within the Dubai Holding structure.

That will not happen, because the two arms, while linked at holding company level, have no financial linkages. A separate process is still under way over restructuring of Dubai Group debt, and some issues are still to be resolved with creditors.

But the fact that one side of the business has pulled itself out of the post-crisis recession, is paying its way and, more importantly, repaying its debts, must give negotiators confidence in ongoing talks with creditors.

It must also give creditors added confidence in their investment in Dubai.

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