Abu Dhabi developer Aldar's profit buoyed by rental business

Abu Dhabi's Aldar Properties reported a 36 percent rise in first-quarter net profit on Thursday as costs fell and earnings from its rental business surged.

Aldar, like other developers in the UAE such as Dubai's Emaar Properties, has diversified its income away from property sales and into recurring revenue businesses - such as residential, office and retail rentals, plus hotels and hospitality.

This has helped mitigate volatility in the country's real estate sector  and Aldar has now reported rising profits in seven out of the last eight quarters.

It made a net profit of Dh618 million ($168.3 million) in the three months to March 31, it said in a bourse statement. That compared with a profit of Dh453.4 million in the corresponding period of 2014.

Analyst SICO Bahrain had forecast Aldar - builder of Abu Dhabi's Formula One circuit - would make a quarterly profit of Dh509.2 million.

Aldar's first-quarter revenue fell 19.5 per cent to Dh1.38 billion, year-on-year, but its quarterly gross profit margin rose to 47 per cent, from 20 per cent.

The higher margin was due to "a significant improvement in the quality of our earnings", Chief Financial Officer Greg Fewer said. "This is set to continue," he added.

Quarterly gross profit from recurring revenue jumped 61 per cent to Dh368 million.

Debt cut

Aldar's first-quarter revenue included Dh579 million from property development and sales, Dh453 million from investment properties - residential, office and retail rentals - and Dh157 million from its hotel business.

Direct costs dropped to Dh737.5 million, from Dh1.37 billion in the prior-year period.

The company's borrowing costs fell to an average of 2.75 per cent, from 5 per cent a year earlier, Fewer said, after it paid off some debt and ratings agencies upgraded the company.

This enabled finance charges to fall 59 per cent quarter-on-quarter, Fewer said.

The company booked property sales and reservations of Dh1.2 billion in the first quarter.

Aldar reduced its gross debt to Dh8.2 billion, from Dh9.2 billion at the end of 2014. This helped cut its net debt-to-equity ratio to 16 per cent from 25 per cent at the end of last year.

State-owned fund Mubadala Development Co owns 30 per cent of Aldar, Thomson Reuters data shows.

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