Jabal Omar Development Company Announces Q3 2021 Financial Results

Jabal Omar Development Company (“JODC” or the “Company”) (Tadawul: 4250), one of the largest real estate developers in Saudi Arabia, today announced its financial results for period ending 30 September 2021.

Financial Highlights 

Revenue for Q3 2021 witnessed a significant year-on-year improvement, surging to SAR 43.12 million from SAR 1.93 million in Q3 2020. However, the effect of considerably reduced income from retail and hospitality operations in the first half of the year continues to put downward pressure on revenue, as compared to income generation pre-pandemic. Revenue for the nine-month period of 2021 saw a small decline, compared to same period last year, as the strict Covid-19 restrictions continue to impact the Company’s operations. 

For the three-month period ending 30 September 2021, net losses widened to SAR 270.04 million, compared to a net loss of 236.95 million in Q3 2020, largely due to an increase in our expenses following the expiry of waivers on financial charges on Alinma Fund offered in 2020 because of the global pandemic, in addition to provision for Zakat recognized during the current period. However, overall, the Company managed to narrow its net losses by over half to SAR 344.77 million in the nine-month period ending 30 September 2021, versus a net loss of SAR 917.78 in the same period last year, largely supported by proceeds generated from the sale of land plots that took place on 13 December 2020.

Khalid Al Amoudi, CEO of Jabal Omar Development Company, said: 

“The highly challenging operating environment for our business persisted throughout the past period. With the Government prioritizing the health and safety of its citizens, residents and visitors, the stringent Covid-19 related restrictions on travel and tourism in the Kingdom have had a severe impact on Makkah’s real estate, retail, and hospitality sectors. As such, our core operating assets continue to be severely impacted by low occupancy and footfall levels. In order to lessen the impact of the business environment on our operating assets, we introduced a number of measures to control costs and spending.

Nevertheless, we used the opportunity to refocus our efforts on executing our capital structure optimization program, which we kicked off in early summer. It is a program grounded in a clear purpose – to stabilize our financial position and enable us to complete the outstanding phases of our masterplan. To that end, I am pleased with the significant progress we have made. We expect the majority of the program to be completed by the first half of 2022, after which we will begin to see its positive impact reflected on our financial performance. 

We are optimistic about the improving operating environment and our performance in the coming year will be determined by the return of pilgrims to Makkah and pace of development. The early signs are positive as steps taken by the Government to ease travel restrictions, social distancing guidelines and other controls specific to Hajj and Umrah are lifted.”

Wael El Turk, CFO of Jabal Omar Development Company, said:

“One of our key priorities has been to resolve some of the outstanding financial liabilities and to manage our cost base as a direct result of the pandemic, as we work towards completing the outstanding phases of the masterplan. We are currently in the middle of restructuring more than SAR 15 billion in liabilities, with the aim of decreasing our total liabilities and improving our liquidity by reducing our debt servicing levels by over 50%.”

Capital Structure Optimization Program

In the beginning of 2020, the Company engineered a plan restructuring over SAR 15 billion worth of liabilities to help towards deleveraging our balance sheet and put the Company on a more stable financial footing. Year to date, the Company has taken considerable steps towards the completion of the plan:

1. Banque Saudi Fransi Facility: Through negotiations with various lenders, the Company managed to secure a SAR 1.6 billion financing facility from Banque Saudi Fransi. This SAR 1.6 billion credit facility, with a tenor of 15 years, will be used to complete the remaining work of Phase 3 within Jabal Omar project, which is 87% complete and expected to be delivered by end of 2022. The Minister of Finance’s guarantee of this facility reinforces the Government’s commitment to supporting the Company’s strategic project. 
2. Alinma Makkah Real Estate Fund: On 13 September 2021, the Company made a non-binding offer to the Alinma Makkah Real Estate Fund, to convert unitholders’ stake in the Fund into shares in Jabal Omar via a new share issuance. If this proposed deal is approved, it will have a substantial positive impact on the Company’s financials, reducing its liabilities by SAR 5.3 billion. Moreover, the income generated from those assets, which are currently being used to settle the SAR 540 million annual rental income owed to the Fund, will go towards more value-enhancing uses which will enhance return on equity, such as completing the outstanding phases of the project. The direct impact on the income statement will be the removal of SAR 451 million in cash commitments annually, after deducting JODC’s ownership in the fund, which amounts to about 16.42%.
3. Land Sales: On 15 December 2020, the Company announced the sale of a 2,572 SQM land parcel, valued at 323,000 per SQM, generating SAR 830 million in proceeds that have been reflected on our financial statement in 2021.  On 30 September 2021, the Company announced the sale of a 2,600.32 SQM land parcel, at SAR 199,000 per SQM, within its masterplan via a public auction, generating SAR 517 million in proceeds. The funds from the sale will go towards deleveraging Jabal Omar’s balance sheet and the completion of phases 2 and 4 of its masterplan.
4. Syndicated Loan Restructuring: In early October the Company announced the restructuring of an existing SAR 5.9 billion syndicated loan with SABB and SNB, and given access to SAR 1.2 billion credit limit to be drawn down. JODC also secured a step-down profit rate based on progress made in phases 2 and 4.
5. Debt Deferrals: The Company managed to secure the deferral of over SAR 130 million in debt repayments of facilities with local and regional lenders.

Masterplan Development Progress

The expected delivery date of phases 2 and 3 is December 2022. An update regarding the completion date of phase 4 will be shared in due course.