Emaar Properties, a global property developer, posted first quarter 2009 revenue AED 1.546 billion (US$ 0.421 billion), compared to first-quarter 2008 revenue of AED 2.522 billion (US$ 0.687 billion) and fourth quarter 2008 revenue of AED 1.833 billion (US$ 0.499 billion) calculated in accordance with revised accounting policy for revenue recognition.
The profits for the first three months of the year stood at AED 0.237 billion (US$ 0.065 billion), compared to profits in the first quarter of 2008 of AED 0.896 billion (US$ 0.244 billion) and net operating loss of AED 0.658 billion (US$ 0.179 billion) in the fourth quarter of 2008.
As of January 1, 2009, Emaar has revised its revenue recognition policy based on the new recommendation of the International Accounting Standard Board (IASB) relating to the International Financial Reporting Interpretations Committee (IFRIC) 15 - Agreements for the Construction of Real Estate, to recognize revenue based on completed contract method.
In the case of completed contract method of revenue recognition, the revenue and related profit for a project sold can only be recognized when the project is handed over to the customers. The percentage completion method of accounting requires that the revenue be calculated based on proportion of project construction completed for units sold and a minimum level of non refundable deposit collected. Until 2008, Emaar had adopted the percentage of completion method of revenue recognition for its developments as it results in better reflection of operational results and level of development carried out by a real estate company on a periodical basis.
However, under the completed contract method of accounting, the revenue and profits are only recognized on handover of projects, and this can result in fluctuations in quarterly revenue and profits recognised by the Group, i.e. revenue will be higher in quarters with higher value of units delivered as compared to quarters with lower deliveries.
Mr. Mohamed Alabbar, Chairman, Emaar Properties stated that Emaar has always followed a prudent and conservative accounting method for reporting its results. The land bank and the assets in Emaar books are also recorded at cost and not adjusted to market value depicting a conservative approach to the presentation of Company’s results and balance sheet.
The revenues and profit for the first quarter 2009 are lower than same period of 2008 due to lower deliveries and also lower sales of completed units.
In the first quarter of this year, Emaar committed its resources to completing its existing project pipeline in Dubai and international markets, and also strengthened operations of its hospitality, shopping malls and education subsidiaries. The company introduced several customer service policies and procedures aimed at supporting investors to meet the challenges that exist in the current global financial climate.
Mr. Alabbar said that the company’s growth strategy for 2009 is focused on strengthening investor confidence by completing existing projects, while simultaneously exploring growth opportunities in new markets. “The tough economic environment globally calls for tough measures and a strategic approach to ensuring sustained growth,” he said. “We have therefore streamlined our efforts to shore up consumer confidence while implementing stronger measures internally to optimize resource utilization.”
Mr. Alabbar said the company has leveraged the efforts of the Government to boost investor sentiment. “Under the leadership of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, UAE Vice President & Prime Minister and Ruler of Dubai, Dubai has implemented a range of initiatives to strengthen liquidity levels and boost consumer confidence. These initiatives are now yielding results, and we expect the real estate sector to demonstrate greater stability in the coming months.”
During the first quarter of 2009, the company strengthened its presence in Egypt with the launch of Mivida, a master-planned community in New Cairo City. The launch was well received by Egyptian and international investors.
In Saudi Arabia, Emaar, The Economic City (Emaar.E.C) continued its development momentum on King Abdullah Economic City, the region’s largest private-sector project. The first homes, offices and industrial plots in the 168 million square metre mega-project will be handed over this year.
In the first quarter of this year, Emaar.E.C launched sales of additional residential units in Bay La Sun Village, the first fully-integrated community, meeting with strong investor response. The company also offered land plots in a total area of 250,000 square metres in the Bay La Sun Village to third-party developers, who can enjoy full ownership of land to develop residential, commercial and multi-purpose buildings.
Emaar’s hospitality & leisure subsidiary won its first international contract in the first quarter of the year, highlighting the company’s strategy to strengthen its business portfolio. The Address Hotels + Resorts, the five star hotel brand owned by Emaar Hospitality Group, signed the management agreement with Azmi Abdelhadi (AAH) Group, a leading Saudi Arabia-based business conglomerate, to operate a luxury property within Jnan Amar Retreat, a premium mixed-use development in Marrakech.
In a strong statement of the brand appeal of The Address Hotels + Resorts internationally, its flagship hotel, The Address, Downtown Burj Dubai won the “New Hotel 2008” award at the World Hotel Awards. Emaar Hospitality Group will open two new properties this year – The Address, Dubai Mall and The Address, Dubai Marina.
In other business highlights during the first quarter of the year, Emaar Education opened two new educational institutions in Dubai, while Emaar Malls Group strengthened the retail portfolio of The Dubai Mall, its flagship project, with the opening of over 900 outlets as at the end of first quarter 2009, including Armani/Casa to be managed by Emaar Retail LLC.
Emaar also highlighted the appeal of Downtown Burj Dubai, its 500-acre mega project, as the new heart of the city by adding several tourist attractions, including The Dubai Fountain, the world’s tallest performing fountain. Emaar Boulevard also became the new lifestyle hub for the city and hosted the first Burj Dubai Classic Car Show that attracted thousands of visitors.
Mr. Alabbar said: “Emaar’s core strength has always been creating integrated lifestyle communities, while also adding value to the economy in all the markets in which we are present. Moving ahead, despite current challenging financial conditions globally, we will continue to focus on our overall growth strategy in all our projects across the world.”
