Aldar Quarterly Profit Jumps on Boost From Sorouh Merger

Aldar Properties PJSC, Abu Dhabi’s biggest developer, said second-quarter profit tripled as falling costs and a gain from its takeover of Sorouh Real Estate Co. in June made up for plummeting revenue.

Net income climbed to 1.25 billion dirhams ($340 million), or 23 fils a share, from 418 million dirhams, or 9 fils, a year earlier, the Abu Dhabi-based company said in a statement today. Revenue dropped to 1.26 billion dirhams from 4.63 billion dirhams a year earlier.

Aldar completed the acquisition of Sorouh on June 30, creating a developer with $13 billion in assets. The company has about 14 billion dirhams of debt, of which about 12 billion comes due by the end of next year, Chief Financial Officer Greg Fewer said today on a conference call. Aldar is in talks to refinance a $1.2 billion bond that matures in May 2014, he said.

“The merger of the two companies is already delivering significant benefits,” Aldar Chairman Abubaker Seddiq Al Khoori said in the statement. “This includes a strengthened financial position as shareholders equity has almost doubled, gearing has more than halved and the business has a more balanced and diversified portfolio.”

Abu Dhabi’s government backed the combination of the two developers, which are both part of the state’s drive to diversify its oil-based economy through office and leisure projects. Aldar received more than $9.8 billion in bailouts from the government in 2011.

Lower Costs

Aldar reported a one-time gain of 2.6 billion dirhams from the merger in the second quarter. The figure reflects the difference between the shares issued to acquire Sorouh and the value of its assets, the CFO said. The long-term benefits of the takeover will start to show in the third quarter, when Sorouh’s recurring revenue is integrated with Aldar’s, he said.

Aldar will continue with its plan of reducing the debt-to-recurring revenue ratio “in the next couple of years,” bringing down total borrowings to between 4 billion dirhams and 5 billion dirhams, Fewer said.

“We’re actively engaged with the banks and have been for some time on the optimal financing structure of these debts,” Fewer said. “The banking community is strongly endorsing this story of a stronger merged entity.”

Costs fell to 776 million dirhams from 3.87 billion dirhams a year earlier, according to the statement. The company also booked provisions of 1.08 billion dirhams in the period compared with no provisions a year earlier.

Raha Beach

Aldar released the results while markets were closed for a public holiday. First-half revenue fell to 2.89 billion dirhams from 8.22 billion dirhams as the number of homes delivered dropped to 479 from 1,058 the year earlier. Aldar said the decline was due the high number of home completions at its largest Raha Beach development in the previous period. Recurring revenue from investment properties, hotels and schools rose 10 percent during the period.

The company plans to deliver about 7,400 housing units by the end of 2014 at developments including Gate Towers and Al Rayanna. Details about the delivery pipeline beyond 2015 will be made public once the company announces new development projects, Fewer said.

“In the coming months we’re going to be announcing a series of projects and developments that will fill,” the second half of 2015 and 2016, Fewer said.

Aldar has more than doubled in Abu Dhabi trading this year, giving the company a market value of 22.6 billion dirhams.

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