Sorouh Real Estate announces its 1st quarter results for the period ended 31 March 2009

Results highlights

Net profit for the 1st quarter 2009 was Dhs130.4m representing an increase on 4th quarter 2008 (Dhs45.9m) but a decrease against 1st quarter 2008 (Dhs361.5m). Earnings per share for the period were 5 fils per share (Q1 2008: 14 fils).

Revenues for the 1st quarter 2009 were Dhs335.6m (Q4 2008: Dhs532.6 m / Q1 2008: Dhs623.7m).

The results reflect the Company's strategy to develop its earnings profile by increasing recurring income for long term profitability. This will be achieved by retaining more property for development and subsequent sale and lease, despite the short term impact on the income statement.

The results also reflect the decision to sell less land which is currently not reflective of its intrinsic value.

The Company maintains a strong balance sheet with net assets as at the end of the 1st quarter 2009 of Dhs5.7bn (FY 2008: Dhs5.9bn). Notably the business has seen strong growth of 63% in its investment properties to Dhs1.4bn.

The Company has low gearing and retains Dhs5.9bn of cash on its balance sheet. Cash collection continued to be strong in the period at Dhs732m (1Q 2008: Dhs893m). Total bank borrowings are Dhs160.5m, representing a debt to equity ratio of 2.79%, this excludes the outstanding amounts of the asset-backed Sukuk Certificates issued in the 3rd quarter 2008 which is a non-recourse facility.

2009 Outlook

Over the course of the year Sorouh expects to see gradual quarter on quarter improvement as the Company starts to realise unit sales on the handover of Golf Gardens 1 and an increase in recurring income from the rental developments of Sas Al Nakhl, Khalidiya Village and Al Oyoun Village.

Abubaker Siddiq Al Khouri, Managing Director, Sorouh commented, "In the context of difficult market conditions we are pleased to report earnings progression quarter on quarter. This reflects our decision to retain land to develop more property ourselves for future sale and lease, generating sustainable earnings and to not revalue land. The business is in good financial health thanks to our cash conservation and cost management initiatives. This, combined with Abu Dhabi's strong market fundamentals, makes us well-placed to capitalise on our position when markets recover, delivering significant long term value to our shareholders."

Projects Update

All of Sorouh's launched Abu Dhabi developments remain on track with the core focus being on maintaining delivery schedules:

- Golf Gardens 1 is largely complete with 395 villas undergoing final inspections
- Sun Tower, at the entrance to SHAMS Abu Dhabi on Al Reem Island has topped out 100 days ahead of schedule. Sky Tower is due to top out shortly and construction has started on other elements of the Gate District
- alghadeer, the sustainable commuter town located between Abu Dhabi and Dubai, is progressing onto the construction phase following the completion of the final mock-up villas and completion of the site offices and access infrastructure
- Lulu Island is still in the master planning stage with infrastructure due to start next year

Customer Focus

Recognising the current financial climate Sorouh has been developing solutions to help customers continue to finance their investments. This includes developing 'memorandums of understandings' with 19 banks in UAE giving customer's increased financing flexibility and passing on savings in raw material and construction prices.

Sorouh recently announced important new customer initiatives at alghadeer including reducing selling prices, rescheduling of payment plans and a re-phasing and consolidation of the development.

Sorouh also recently announced the launch of Khidmah, in conjunction with Capital Investment LLC, a comprehensive services management company to best service our customers when developments complete and handover.