Emaar The Economic City announces its Interim Financial Results for the Period Ending on 2019-09-30 ( Nine Months )

2019-11-07 16:01:51

Element ListCurrent QuarterSimilar quarter for previous year%ChangePrevious Quarter% Change
Sales/Revenue 16311245.535210-22.38
Gross Profit (Loss) 12-18-71-83.098
Operational Profit (Loss) -131-150-12.666-9932.323
Net Profit (Loss) after Zakat and Tax -202-15034.666-11575.652
Total Comprehensive Income -210-13555.555-12568
All figures are in (Millions) Saudi Arabia, Riyals
Element ListCurrent PeriodSimilar period for previous year%Change
Sales/Revenue 71963712.872
Gross Profit (Loss) 22217626.136
Operational Profit (Loss) -244-2229.909
Net Profit (Loss) after Zakat and Tax -303-19654.591
Total Comprehensive Income -331-17787.005
Total Share Holders Equity (after Deducting Minority Equity) 7,5467,835-3.688
Profit (Loss) per Share -0.36-0.23
All figures are in (Millions) Saudi Arabia, Riyals
Accumulated LossesCapitalPercentage %
966,000,0008,500,000,00011.3
All figures are in (Millions) Saudi Arabia, Riyals
Element ListExplanation
Increase (Decrease) in Net Profit for Current Quarter Compared to the Same Quarter of the Previous Year is Attributed to - Increase in financial charges as a result of increase in loan balances and lower capitalization of borrowing costs due to slow down in development activity. - Decrease in the Group’s share of results of investee (Ports Development Company-PDC) mainly due to loss on revaluation of Interest Rate Swap arrangements made by PDC. The above-mentioned impacts are partially offset by the change in infrastructure cost estimates of industrial projects. Despite hte above, there is an increase in the revenue and gross profit during the current quarter as compared to the corresponding quarter mainly due to the increase in order intake of industrial projects. The gross profit on projects has increased from SR 17.5M (Q3 - 2018) to SR 43.8M (Q3 - 2019), representing an increase of circa 151%, and gross loss on operations has reduced from SR 35.3M (Q3 - 2018) to SR 31.9M (Q3 - 2019), representing an improvement by 9.4%.
Increase (Decrease) in Net Profit for Current Quarter Compared to the Previous Quarter is Attributed to Increase in financial charges as a result of increase in loan balances and lower capitalization of borrowing costs due to slow down in development activity. - Increase in impariment loss on outstanding trade receivables. - Decrease in the Group’s share of results of investee (Ports Development Company-PDC) mainly due to loss on revaluation of Interest Rate Swap arrangements made by PDC. - Increase in marketing, general and administrative expenses. There is an increase in the revenue and gross profit during the current period as compared to the corresponding period mainly due to the increase in sales. The gross profit on projects has increased from SR 284M (YTD 2018) to SR 316M (YTD 2019), representing an increase of circa 11.1%, and gross loss on operations has reduced from SR 108M (YTD 2018) to SR 94M (YTD 2019), representing an improvement by 13%.
Increase (Decrease) in Net Profit for Current Period Compared to the Similar Period of the Previous Year is Attributed to - Decrease in sale of residential projects due to seasonality factors. - Increase in impariment loss on outstanding trade receivables. - Increase in financial charges as a result of increase in loan balances and lower capitalization of borrowing costs due to slow down in development activity.
Basis of the External Auditor's Opinion Unmodified opinion
Reclassification of Comparison Items 'Certain comparative amounts have been reclassified to conform to the current period's presentation.
Additional Information The real estate industry performance during 2019 have remained subdued as highlighted by the lower activity levels, while operational activity volumes been under pressure across most asset classes leading to a gradual softening of rental and sale results. While we consider that this current situation would prevail in the short term, we remain optimistic for the longer term due to the various government initiatives aimed at stimulating the real estate market whilst encouraging the private sector to take a key role in this process, as part of the recently introduced strategic reforms. In addition to on going real estate market challenges being faced by the company, Emaar the Economic City is an economic city developer whereby the Company has to invest a substantial amount on the development of city infrastructure such as city roads, bridges, sub-stations, water & sewage plants, telecom infrastructure etc. Furthermore, the Company also invests in the city essentials such as education, healthcare, hospitality, leisure and entertainment to serve the growing needs of the city population. This naturally results in considerable amount of depreciation along with the initial operating losses related to these assets which affect the Company’s profitability in shorter term. Furthermore, the Company also incurs expenses on account of civic services such as safety & security, city cleaning, city landscape, etc., which are heavily subsidized by the Company to facilitate customers affordability as these services are typically provided by municipalities in the base economy. From a value perspective, Emaar the Economic City has invested approximately SR 18 billion since inception which has created at least 12x value to the investment properties as disclosed in the latest preceding audited financial statements for the year ended 31 Dec 2018. This value will be unlocked by additional investment on strategic projects both by the Company and the third party developers, to create jobs and footfall, upto a certain point beyond which the city will have organic growth and hence yield long awaiting great returns for its shareholders.