RAK Properties said yesterday net profit for the second quarter declined 33.78 per cent to Dh73.3 million from Dh110.7m in the same period.
First-half net profit declined 36.38 per cent to Dh143.31m from Dh225.27m the same period last year, while net assets were at Dh3.12bn, including Dh485m in cash, the company said in statement on the Abu Dhabi Securities Exchange.
Second-quarter earnings per share fell to Dh0.037 from Dh0.055. "The liquidity crisis led to various financial disturbances and created low level of consumer confidence. The general market tendency towards capital spending has dropped drastically and some changes are expected in the second half of the year," said Mohammad Sultan Al Qadi, CEO of RAK Properties, in the statement.
The developer has Dh1.21bn in liabilities as of June 30, including Dh787m in customer instalments shown as payable until projects are delivered.
According to Al Qadi, the developer is focusing on delivering three projects – Julfar Towers, RAK Towers and Mina Al Arab Precinct 4 – by end of Q4 and expects to recognise revenue from the developments this year.
Julfar Towers in Ras Al Khaimah and RAK Towers in Reem Island are likely to be completed in the fourth quarter of 2009. The first lot of 93 villas and townhouses in Mina Al Arab, is expected to be delivered in the fourth quarter. Another 213 villas and town houses are under construction and progressing well. The construction of apartments is expected to start in the second half.
RAK Properties has approached its relationship banks and other financial institutions for financing future projects as well as to extend the mortgage facilities to the customers.
"We have conducted business strategy review through a renowned management consulting company and the outcome is being reviewed and necessary actions will be taken in the due course of time," said Al Qadi.
Shares of RAK Properties closed at Dh0.68, up 1.49 per cent on te Abu Dhabi bourse.
"RAK Properties has reported second-quarter numbers largely consistent with our expectations. The key revenue drivers are the non-cash 'government grants', which are based on the management's best estimates. Much of the risk for RAK is concentrated on the Dh9bn Mina Al Arab development where sales are currently stagnant, collections are probably falling and capex is being maintained," said Chet Riley, Equity Research, Middle East, Nomura International, in a client note.
He said: "This may lead to an impending cash crunch at the year-end and into the next, and strategic options for the company appear to be dwindling. Unless capital markets reopen or a strategic partner can be added, the sustainability of the current model could be at risk. We think the 'pinch point' is the year-end, when management has indicated it will need to tap capital markets."
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