Nakheel profit soars despite fewer home completions for Dubai developer

Nakheel reported a 43 per cent increase in profits for 2014 as the developer delivered more than 1,000 homes to customers.

The Palm Jumeirah, Nakheel's flagship project. Courtesy Nakheel

Nakheel reported a 43 per cent increase in profit for last year as the developer responsible for some of Dubai’s most ambitious projects delivered more than 1,000 homes to customers.

Net profit at the government-owned developer rose to Dh3.68 billion in the year to the end of December, up from Dh2.57bn a year earlier.

The increase came despite a fall in revenue, which dropped by almost a quarter compared with 2013 to Dh7bn.

Nakheel attributed that to the completion of fewer homes than it had the previous year – with 1,117 units finished in 2014. Nakheel handed over about 3,150 in 2013 as it pushed through a glut of stalled homes sold before the global financial crisis.

The company said that the new homes handed over last year were sold off-plan after the crisis and were developed at higher margins.

Nakheel reported that its handovers included 132 homes at Palm Jumeirah’s Palma Residences and Palm Views, the first new projects it has launched since its restructuring.

Other handovers took place at Al Furjan, International City, Jumeirah Village, Jumeirah Park and Jumeirah Heights.

Fourth-quarter profit rose 35 per cent to Dh1.08bn from Dh800 million in the same period a year earlier, according to calculations by The National.

The private company is not required to post more detailed accounts.

“2014 was our biggest year yet in terms of financial performance and achievements,” the Nakheel chairman Ali Rashid Lootah said yesterday. “Not only did we clear all Dh7.9bn of our outstanding bank debt four years ahead of time, we also completed and delivered our first new project – Palma Residences – since restructuring.”

Nakheel was restructured and taken over by the Dubai government in 2011 after amassing total debt of Dh7.9bn. It reported last year that it had repaid all of its bank debt – four years earlier than planned.

In March, the company said that it was evaluating a possible share sale once it had cleared its debt. It still retains a Dh4.4bn trade creditor sukuk that falls due next year.

“Nakheel is one of the big three master developers in Dubai and so if it were to stage an IPO it would always attract investors,” said Sanyalak Manibhandu, a senior analyst at National Bank of Abu Dhabi.

“The company is backed by the Dubai government, has a known track record, and even if it has had a chequered history in the past, things have revived and you can go and see its projects.

“However, I think most advisers out there would say that the first half of 2015 is not the time to launch an IPO if you haven’t already got things started. With the uncertainty about the oil price and the slowdown in the UAE property market it would be better to wait until the second half of the year.” On Sunday, the property consultancy JLL reported that property prices and sales volumes in Dubai had flatlined during the final quarter of 2014.

But Nakheel insisted that it would continue to grow this year at the same rate.

“We are looking to maintain the same pace, at least, of growth in 2015 as we saw last year,” said Mr Lootah. “We will continue to build on the success of 2014 by releasing more units for lease, both on the residential and retail side.”

He added that the company planned over the next three years to push up its recurrent rental income to Dh7.5bn a year from 10 million square feet of shops and 30,000 homes.

In 2010 it said its recurring revenue was just Dh500m.

The company also expects to award about Dh7bn worth of construction contracts this year compared with Dh5.3bn last year.

Nakheel also said yesterday that its sister company Limitless had secured the agreement of 85 per cent of its creditors for a three-month extension to a US$400m debt repayment, which had been due on December 31, and for a restructuring plan.

Earlier this month it was reported that Limitless had failed to secure a new restructuring on its US$1.2bn debt pile after being in talks with creditors for nearly a year.

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