Tecom's Q3 profit soars a record 70% on strong commercial property demand

Revenue in the three months to the end of September increased by an annual 12.5% to about $134m

The Tecom Group, whose 10 holdings include Dubai Internet City, has benefitted as occupancy levels at its commercial properties rose in line with the expansion of Dubai's economy. AP

Tecom Group, the operator of business districts that are home to more than 7,800 companies, reported a record 70 per cent surge in its third-quarter profit, driven by solid demand in the commercial property market and the strong growth of the emirate's economy.

Profit for the three-month period to the end of September rose to Dh211.5 million ($58m), from the same period last year, Tecom said in a statement on Wednesday to the Dubai Financial Market, where its shares are traded.

Third-quarter revenue increased by an annual 12.5 per cent to Dh490m ($134m), driven by rising occupancy levels across the group's portfolio, especially office, warehouse and worker accommodation.

Earnings before interest, taxes, depreciation and amortisation (ebitda) for the three-month period jumped about 27 per cent to Dh364m in the third quarter, compared with the same period a year earlier, driven by top-line growth and lower operational expenses.

“The increase in occupancy rates across our portfolio reflects the sharp rise in demand in the commercial real estate market, underpinned by Dubai’s economic expansion and the government’s pro-growth initiatives to further improve the ease of doing business and attract top global talent and foreign direct investment,” said Tecom chief executive Abdulla Belhoul.

“Improvement in commercial rental rates and strong occupancy levels will continue to drive revenue growth across our commercial leasing properties while structural medium-term tailwinds in the industrial, construction and logistics sector will bolster our industrial, land leasing and value-add service segments.”

Tecom comprises 10 business districts that include Dubai Internet City, Dubai Media City and the Dubai Design District. Nine of Tecom's 10 business districts are located in free zones that permit 100 per cent foreign ownership, with tenants including Meta, Google, Visa, BBC, CNN, Unilever and Dior.

Net profit in the first nine months of the year grew 51 per cent to Dh639m from the same period a year earlier, underpinned by strong growth in revenue, lower operational expenses and prudent financial management.

Revenue in the same period increased 15 per cent to Dh1.48 billion, driven by strong growth across all business segments.

Nine-month ebitda increased an annual 24 per cent to Dh1.09bn, compared with same period a year earlier, owing to revenue growth and improved revenue quality from all business segments and lower operational expenses.

As of the end of September 2022, the company had registered an occupancy level for commercial and industrial assets of 83.5 per cent, compared with 78.3 per cent at the end of 2021.

The company attributed the sustained growth momentum in occupancy to strong customer retention rates, an increase in new customers across the portfolio and Dubai’s continued economic growth and diversification.

New customers include Motorola Solutions, Rakuten, Dubatt and M-Glory.

Dubai's economy has made a strong rebound from the coronavirus-induced slowdown, supported by the travel and tourism sector and its rapidly improving property market.

The emirate's economy grew by 6.2 per cent in 2021, according to preliminary data from the Dubai Statistics Centre. In the first three months of this year, the emirate's gross domestic product expanded 5.9 per cent, according to government data.

Business activity in Dubai's non-oil private sector economy maintained a “robust” rate of expansion in September, with the emirate's headline seasonally adjusted S&P Global purchasing managers' index reading coming in at 56.2 as new orders rose sharply despite an increase in input costs.

A reading above the neutral 50 level indicates economic expansion while one below points to a contraction.

“With a well-balanced portfolio and complementary comprehensive service offering, we remain optimistic in our ability to maintain a robust financial performance in light of global market uncertainty and will continue to contribute to strengthening Dubai’s position as an attractive global business and talent hub,” Mr Belhoul said.