x Abu Dhabi, UAETuesday 23 January 2018

Sorouh profit falls 42% but improved profitability expected as Reem Island homes handed over

Sorouh Real Estate, Abu Dhabi's second largest developer, posted a five per cent rise in revenue in the first quarter, aided by the sale of two penthouses on Reem Island and rentals of its property portfolio.

Sorouh Real Estate, Abu Dhabi's second-largest developer, is gearing up for improved profitability this year as it begins handing over hundreds of homes and offices on Reem Island.

The company yesterday posted profits of Dh131.6 million (US$35.8m) for the first three months of this year, down 42 per cent from the first quarter last year, as it saw its revenue mix shift from selling land to deliveries.

Long-awaited handovers of 1,150 residential units in the Sun and Sky Towers in the Shams Abu Dhabi project on Reem Island are expected to begin on Tuesday.

The company has already delivered 58 offices, about a quarter of the total in the Sky tower. Sorouh expects to hand over at least 450 units a month for the next six months, said Richard Amos, the company's chief financial officer. "As we hand over, customers make their final cash payments, normally about 40 per cent," he said. Sorouh does not report revenues on property sales until delivery.

The company said it did not expect a large number of defaults because buyers would have to walk away from a 60 per cent payment.

In the wake of the global financial crisis, prices in the capital have fallen by more than half in some areas and rental rates have been on a downward trajectory.

"I think the key message is they have very strong revenue growth," said Chet Riley, an analyst at Nomura Securities.

The risk that remains is whether they can collect money due from buyers on time over the coming quarters, he said.

Sorouh's shares dropped 4.05 per cent yesterday to Dh1.42. They are down 12.8 per cent for the year.

Earnings per share for the first quarter dropped to 0.02 fils a share from 0.05 fils in the same period last year, according to Sorouh.