13th May 2014
DAMAC REAL ESTATE DEVELOPMENT LIMITED
FIRST QUARTER RESULTS SHOW CONTINUED STRONG PERFORMANCE IN 2014
DAMAC Real Estate Development Limited (LSE: DMC) (“DAMAC” or the "Company"), a leading developer of high-end and luxury residential property in the Middle East, announces unaudited interim results for the three months ending 31 March 2014.
FINANCIAL HIGHLIGHTS . Recognized revenue grew by 94% to $436 million in Q1 2014 (Q1 2013: $225 million) primarily comprising income attributed to the completion and handover of Cosmopolitan and Water’s Edge, as well as from the land portion of villa sales in AKOYA of $173 million.
. Gross profit increased by 89% to $268 million (Q1 2013: $142 million), with a 79% growth in net profit to $210 million (Q1 2013: $117 million); both driven by the growth in recognized revenues. Gross margin remained strong at 61.4%.
. Operating profit increased by 76% to $205 million (Q1 2013: $117 million). This reflects the growth in general and administrative expenses to $50 million (Q1 2013: $24 million), as well as selling expenses and brokerage and commissions to $14 million (Q1 2013: $2 million) due to the increase in sales activities and number of staff as business levels expand.
. Cashflow generated from operations grew to $308 million (Q1 2013: $41 million) driven mainly by higher booked sales resulting in increased cash collection from customers during the quarter.
. Total assets stood at $3,526 million as at 31 March 2014, representing growth of 16% compared to 31 December 2013, primarily led by an increase in cash and bank balances.
. The development portfolio stood at $1,916 million, as at 31 March 2014, having reduced marginally from 31 December 2013 due to the handover of units during Q1 2014.
. Total shareholder equity increased by 32% from 31 December 2013 to $869 million at 31 March 2014.
. Net cash position stood at $829 million as at 31 March 2014 (31 December 2013: $493 million), net of gross debt of $150 million (31 December 2013: $85 million). Increase in gross debt resulted from an increase in short term bank borrowings.
. Advances from customers stood at $1,860 million as at 31 March 2014, compared to $1,715 million as at 31 December 2013. The increase was mainly due to higher booked sales and cash collection from customers in Q1 2014.
. Successful closing of $650 million Sukuk in April 2014 (5 year note at a fixed coupon of 4.97% per annum).
OPERATIONAL HIGHLIGHTS . Booked sales increased 153% to $864 million (Q1 2013: $341 million). Sales remain strong at AKOYA by DAMAC and DAMAC Towers by Paramount.
. 577 units completed and delivered during the period, with estimated total deliveries for 2014 of between 4,000 to 5,000 units.
. Good construction progress is being made across the portfolio. At DAMAC Towers by Paramount (almost 2,000 keys) all upper ground floor slabs for all four towers are cast and the core walls are up to level podium 3.
. At AKOYA by DAMAC, main contractors are working on villas and low rise apartments, ongoing construction on the 132KV substation and site infrastructure work. The Trump International Golf Course is also progressing well; shaping and grading is underway and it is expected that the course will be fully grassed by Q1 2015.
. New projects launches during the quarter including: - The Trump Estates in AKOYA by DAMAC, a limited collection of 104 villas and mansions - Celestia, a development of luxury serviced apartments in Dubai World Central - Subsequent to the period end, DAMAC launched the Downtown at AKOYA development and Constella, which is in Jumeirah Village and comprises the first officially certified Sharia compliant hotel apartments in Dubai, in May 2014 - DAMAC also introduced a new hotel brand, ‘NAIA by DAMAC’, as a high quality, complementary brand to its DAMAC Maison Hotels and Hotel Apartments business. It is expected that NAIA by DAMAC will ultimately manage c. 3,800 units of the company’s hospitality offering of c. 10,000 keys.
* All Dollar figures in this statement are United States Dollars
Hussain Sajwani, Executive Chairman and Chief Executive Officer of DAMAC, commented: “The continued economic recovery in our core market of Dubai has supported strong sales in the first quarter of 2014, contributing to another good performance from DAMAC and a highly profitable start to the year, as well as substantial growth in net assets. We continue to see solid levels of demand in the luxury market, which is reflected in the growth in rental levels and residential values. We continue to look for suitable new land parcels ensuring we can provide supply to meet demand.
“Dubai is forecast to see continued economic growth as stated by the International Monetary Fund (IMF) anticipating that the economic growth in the UAE is expected to remain strong at 4.5% in 2014. This growth will sustain demand for further residential property, both from owner occupiers and in the rental market, as well as for hotel and leisure space.
“We have responded to this by reweighting our development portfolio to include a greater proportion of hotel and serviced hotel apartment projects, which now represent c.40% of our total pipeline.
“Having successfully closed a $650 million Sukuk we are well capitalised to increase our land bank, allowing us to capitalise on the strength of the Dubai market. The outlook in our markets remains positive, and we are well on track to deliver strong results to our shareholders.”
-end- NOTES TO EDITORS: DAMAC is a leading developer of high-end property in the Middle East, with a strong track record in Dubai and a growing presence in other markets in the Middle East. Its award-winning developments include some of the most iconic buildings in Dubai's luxury property sector, and its brand is widely recognised throughout the region. DAMAC operates primarily in the residential segment of the luxury property sector but has also developed a limited number of mixed-use and commercial properties. DAMAC continually adapts its product offering in response to its customers' demands and is currently expanding the appeal of and demand for its residential units by adding to its products on offer (i) fully serviced apartments and villas; (ii) apartments and villas that are co-branded with premium brands such as FENDI Casa, Versace Home and Paramount Hotels & Resorts; and (iii) villas and apartments in luxury lifestyle community developments such as its AKOYA by DAMAC project.
Damac Real Estate Development Limited, DIFC Dubai - United Arab Emirates
Interim condensed consolidated financial information and review report for the three month period ended 31 March 2014
Damac Real Estate Development Limited, DIFC Dubai, U.A.E.
Table of contents Pages
Report on review of interim condensed consolidated financial information 1
Interim consolidated statement of financial position 2
Interim consolidated statement of comprehensive income 3
Interim consolidated statement of changes in equity 4
Interim consolidated statement of cash flows 5
Notes to the interim condensed consolidated financial information 6 - 19
Damac Real Estate Development Limited, DIFC 3 Dubai, U.A.E.
Interim consolidated statement of comprehensive income For the period ended 31 March 2014
1 January to 1 January to 31 March 2014 31 March 2013 (3 months) (3 months) (Unaudited) (Unaudited) Notes US$ Million US$ Million
Revenue 14 435.8 224.6 Cost of Sales (168.3) (82.9) ------Gross profit 267.5 141.7 Other operating income 2.2 1.7 General, administrative and selling expenses (49.9) (23.7) Brokerage and commission (13.9) (2.2) Depreciation (1.0) (0.8) ------Operating profit 204.9 116.7 Other income 2.5 2.0 Finance income 3.0 0.4 Finance costs (0.8) (1.7) ------Profit for the period 209.6 117.4
Other comprehensive income Items that will not be reclassified subsequently to profit or loss - - Items that maybe reclassified subsequently to profit or loss - Revaluation reserve recycled to disposal of financial investments 0.5 -
------Total comprehensive income for the period 210.1 117.4 ======
Earnings per ordinary share Basic and diluted (US Cents) 17 32 N/A ======
The accompanying notes form an integral part of these interim condensed consolidated financial information.
Damac Real Estate Development Limited, DIFC 4 Dubai, U.A.E.
Interim consolidated statement of changes in equity For the period ended 31 March 2014
Group Investment Share Statutory restructuring revaluation Retained capital reserve reserve reserve earnings Total (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) US$ Million US$ Million US$ Million US$ Million US$ Million US$ Million
Balance at 1 January 2013 (audited) 86.4 41.0 - - 12.5 139.9 Profit for the period - - - - 117.4 117.4 Other comprehensive income for the period ------Balance at 31 March 2013 86.4 41.0 - - 129.9 257.3 ======
Balance at 1 January 2014 (audited) 650.0 41.3 (566.7) 0.5 534.0 659.1 Profit for the period - - - - 209.6 209.6 Other comprehensive income for the period - - - (0.5) 0.5 ------Balance at 31 March 2014 650.0 41.3 (566.7) - 744.1 868.7 ======
The accompanying notes form an integral part of these interim condensed consolidated financial information.
Damac Real Estate Development Limited, DIFC 5 Dubai, U.A.E.
Interim consolidated statement of cash flows For the period ended 31 March 2014
1 January to 1 January to 31 March 2014 31 March 2013 (3 months) (3 months) (Unaudited) (Unaudited) US$ Million US$ Million Cash flows from operating activities Profit for the period 209.6 117.4 Adjustments for: Depreciation on property and equipment 1.0 0.8 Provision for employees' end-of-service indemnity 0.6 0.4 Loss on disposal of financial investments (Note 7) 0.3 - Finance costs 0.8 1.7 Finance income (3.0) (0.4) Reversal of impairment on trade receivables (3.8) ------Operating cash flows before changes in working capital 205.5 119.9 Increase in trade and other receivables (105.2) (19.0) Decrease in development properties 16.9 13.9 Decrease in due from related parties - 439.1 Increase/(decrease) in trade and other payables 210.8 (84.1) Decrease in due to related parties (1.2) (441.8) (Increase)/decrease in other financial assets (21.4) 14.6 ------Cash generated from operations 305.4 42.6 Finance costs paid (0.8) (1.7) Interest received 3.0 0.4 Employee end-of-service indemnity paid (0.1) (0.4) ------Net cash generated from operating activities 307.5 40.9 ------Cash flows from investing activities Purchase of property and equipment (2.1) (0.8) Increase in deposits with original maturity of greater than three months (4.3) (7.9) Proceeds from disposal of financial instruments 30.4 ------Net cash generated from/(used in) investing activities 24.0 (8.7) ------Cash flows from financing activities Net drawdown of bank borrowings 64.8 13.6 ------Net cash generated from financing activities 64.8 13.6 ------Net increase in cash and cash equivalents 396.3 45.8
Cash and cash equivalents at the beginning of the period 545.7 105.8 ------Cash and cash equivalents at the end of the period (Note 8) 942.0 151.6 ======
The accompanying notes form an integral part of these interim condensed consolidated financial information. Damac Real Estate Development Limited, DIFC 6 Dubai, U.A.E.
Notes to the interim condensed consolidated financial information For the period ended 31 March 2014
1. General information
DAMAC Real Estate Development Limited, DIFC (the “Company”) was incorporated on 31 October 2013 as a Company Limited by shares (registration number 1476) with the Registrar of Companies of the Dubai International Financial Centre (the “DIFC”) under the Companies Law, DIFC Law No. 2. The registered address of the Company is Office No. 206A, Level 2, Park Towers, Dubai International Financial Centre, P.O. Box 2195, Dubai, United Arab Emirates.
The Parent and its subsidiaries (collectively the ‘‘Group’’) are involved in the development of properties in the Middle East.
The Parent is controlled by Mr. Hussain Ali Habib Sajwani (the “Chief Executive Officer” and “Executive Chairman”).
2. Basis of preparation
Statement of compliance
The interim condensed consolidated financial information of the Group has been prepared in accordance with IAS 34 Interim Financial Reporting.
Functional and reporting currency
The interim condensed consolidated financial information is presented in United States Dollars (“US$”) which is the Group’s reporting currency. The individual financial information of each Group entity is prepared in local currency, being the currency in the primary economic environment in which these entities operate (the functional currency).
Basis of consolidation
The consolidated financial statements are prepared under the historical cost convention, except for certain financial instruments that have been measured at fair value. The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all periods presented.
The Company consolidated 100% of the operations, assets and liabilities of the subsidiaries listed below which in total are 83 (31 December 2013: 77) companies (together the “Group”).
Country of Principal Legal Economic Entity incorporation activities interest interest Global Properties Company Limited Dubai, U.A.E. Real estate 100% 100% development Middle East Properties Company Dubai, U.A.E. Real estate 100% 100% Limited development Damac Fortune Properties Company Dubai, U.A.E. Real estate 100% 100% Ltd development Damac General Trading LLC Dubai, U.A.E. Holding company 100% 100% Damac Properties Development Co. Dubai, U.A.E. Holding company 100% 100% LLC Damac Real Estate Development Limited, DIFC 7 Dubai, U.A.E.
Notes to the interim condensed consolidated financial information For the period ended 31 March 2014 (continued)
2. Basis of preparation (continued)
Basis of consolidation (continued)
Country of Principal Legal Economic Entity incorporation activities interest interest Damac Properties Co. LLC Dubai, U.A.E. Holding company 100% 100% Marina Terrace Co. LLC Dubai, U.A.E. Real estate 100% 100% development Damac Gulf Properties LLC Dubai, U.A.E. Real estate 100% 100% development Lake Terrace Co. LLC Dubai, U.A.E. Real estate 100% 100% development Damac Star Properties LLC Dubai, U.A.E. Real estate 100% 100% development Island Oasis Properties LLC Dubai, U.A.E. Real estate 100% 100% development Damac Crescent Properties LLC Dubai, U.A.E. Real estate 100% 100% development Damac Development LLC Dubai, U.A.E. Real estate 100% 100% development Damac Heritage Properties Co LLC Dubai, U.A.E. Real estate 100% 100% development Damac Luxury Real Estate Dubai, U.A.E. Real estate 100% 100% Properties Co LLC development Damac Crescent Properties Co LLC Dubai, U.A.E. Real estate 100% 100% development The Waves FZ LLC Dubai, U.A.E. Real estate 100% 100% development Damac Real Estate Developers FZ Dubai, U.A.E. Real estate 100% 100% LLC development Damac Properties FZ LLC Dubai, U.A.E. Real estate 100% 100% development Damac Lake View Company Dubai, U.A.E. Real estate 100% 100% Limited development Damac Properties Company Limited Dubai, U.A.E. Real estate 100% 100% development Damac Park Towers Company Dubai, U.A.E. Real estate 100% 100% Limited development Damac Crown Properties Company Dubai, U.A.E. Real estate 100% 100% Limited development Damac Properties Company Limited Saudi Arabia Real estate 100% 100% development Damac Properties Qatar WLL Qatar Holding company 100% 100% Valencia Development Company Bahrain Real estate 100% 100% WLL development Damac Real Estate Development Limited, DIFC 8 Dubai, U.A.E.
Notes to the interim condensed consolidated financial information For the period ended 31 March 2014 (continued)
2. Basis of preparation (continued)
Basis of consolidation (continued)
Country of Principal Legal Economic Entity incorporation activities interest interest Damac Investment & Properties Jordan Real estate 100% 100% (Jordan) LLC development Damac Properties Lebanon SAL Lebanon Real estate 100% 100% development Alaam Al-Dariha General Trading Iraq Real estate 100% 100% Limited development Malak Al Rafidayn Properties Iraq Real estate 100% 100% Investment development Tilal Development Holding SAL Lebanon Holding company 100% 100% Luxury Facilities Management Co. Dubai, U.A.E. Facilities 100% 100% LLC management Luxury Owner Association Dubai, U.A.E. Facilities 100% 100% Management Services management Damac Properties Services Co. Shj Dubai, U.A.E. Sales office 49% 100% LLC Damac Real Estate Services Co LLC Dubai, U .A.E. Holding company 100% 100% Elegance Marketing Co LLC Dubai, U.A.E. Marketing and 100% 100% public relations Damac Homes LLC Dubai, U.A.E. Group treasury 100% 100% operation Damac Ocean Heights Co. LLC Dubai, U.A.E. Sales office 100% 100% Damac Star Properties LLC (Branch) Dubai, U.A.E. Sales office 100% 100% Morouj Rotana Royal Crown Properties Co. LLC Dubai, U.A.E. Holding company 100% 100% Frontline Investment Management Dubai, U.A.E. Shell company 100% 100% Co. LLC Damac Ocean Heights Co. LLC Dubai, U.A.E. Sales office 100% 100% (Branch) OH Damac Star Properties LLC (Branch) Dubai, U.A.E. Sales office 100% 100% Al Seef Ocean Pearl Real Estate Company Dubai, U.A.E. Real estate 100% 100% LLC development Middle East Dubai Qatar Shell Company 100% 100% Premier Vision Property Qatar Shell company 100% 100% Development Heritage Properties Qatar Shell company 100% 100% Al-Imaratieh Properties LLC Jordan Real estate 100% 100% development Damac Lebanon SAL (Holding) Lebanon Holding company 100% 100% Al Hikmah International Enterprises Qatar Project 49% 100% LLC development Damac Real Estate Development Limited, DIFC 9 Dubai, U.A.E.
Notes to the interim condensed consolidated financial information For the period ended 31 March 2014 (continued)
2. Basis of preparation (continued)
Basis of consolidation (continued)
Country of Principal Legal Economic Entity incorporation activities interest interest Al Aman Investment Management Dubai, U.A.E. Holding company 100% 100% Co. LLC Damac Properties International Ltd. Mauritius Holding company 100% 100% Excel Operations Company Limited Dubai, U.A.E. Holding company 100% 100% Damac Hotels Management LLC Dubai, U.A.E. Hotels 100% 100% management Namaa Properties Development LLC Dubai, U.A.E. Real estate 100% 100% development Damac Properties Company Limited Saudi Arabia Sales office 100% 100% (Branch) Quality Investment Co LLC Dubai, U.A.E. Shell company 100% 100% Luxury Facilities Management Co. Dubai, U.A.E. Facilities 100% 100% LLC (Branch) management Maksab Holding Limited BVI Holding company 100% 100% Kings Valley Investment Co LLC Dubai, U.A.E. Shell company 100% 100% Blue Eagle Investment Co LLC Dubai, U.A.E. Trust arrangement 100% 100% Majara Investments Limited BVI Investment 100% 100% company Star Luxury LLC Russia Sales office 99% 100% Damac FC Holding Co Ltd Dubai, U.A.E. Holding company 100% 100% Damac TR Holding Co Ltd Dubai, U.A.E. Holding company 100% 100% Damac Tuscan Residence LLC Dubai, U.A.E. Holding company 100% 100% Prosperity Trading WOFE China Trading company 100% 100% Daman Holding Limited* BVI Shell company 100% 100% Arjann Holdings Limited BVI Shell company 100% 100% Damac Ocean Heights Company Dubai, U.A.E. Real estate 100% 100% Limited development Bright Gulf Investments Limited BVI Shell company 100% 100% Accredited Holding Limited BVI Shell company 100% 100% Ali Habib Kukar's Real Estate Office Saudi Arabia Sales office 100% 100% Damac Enterprises & Management Dubai, U.A.E. Trade marks 100% 100% Co. LLC Damac Enterprises Co. Ltd Mauritius Trade marks 100% 100% Damac Media And Marketing LLC* Dubai, U.A.E. Marketing and 100% 100% public relations Sadaf Investment Limited Dubai, U.A.E. Holding company 100% 100% Damac Ocean Heights Co. LLC Dubai, U.A.E. Real estate 100% 100% (Branch) - Signature Tower* development Damac Properties Company Limited Saudi Arabia Real estate 100% 100% - (Dammam Branch)* development Damac Real Estate Development Limited, DIFC 10 Dubai, U.A.E.
Notes to the interim condensed consolidated financial information For the period ended 31 March 2014 (continued)
2. Basis of preparation (continued)
Basis of consolidation (continued)
Country of Principal Legal Economic Entity incorporation activities interest interest Damac Ocean Heights Company Maldives Hotels 100% 100% Limited* management Damac Maison the Summit Hotel Dubai, U.A.E. Hotels 100% 100% Apartments LLC* management Priority Holding Limited* Cayman Islands Holding company 100% 100% Alpha Star Holding Limited* Cayman Islands Holding company 0% 100%
* These are newly incorporated entities that became part of the Group during the period ended 31 March 2014.
Business combination under common control
On 3 December 2013, the Company became the legal holding company of DAMAC Properties Development Co. LLC, DAMAC General Trading LLC, Kings Valley Investment Co. LLC, DAMAC Tuscan Residences LLC and DAMAC Properties International Limited, Mauritius, together with their underlying subsidiaries. As explained in Note 2 of the consolidated financial statements of the Group for the year ended 31 December 2013, this transaction falls outside the scope of IFRS 3 Business Combinations, therefore the pooling of interests method was applied and the interim condensed consolidated financial information of the Group is presented as a continuation of the “Combined Group”. The following accounting treatment was applied: a) the assets and liabilities of the “Combined Group” were recognised and measured in the consolidated financial statements at the pre-combination carrying amounts, without restatement to fair value; b) the retained earnings and other equity balances of the “Combined Group” immediately before the business combination, and the results for the period from 1 January 2013 to the date of the business combination are those of the “Combined Group” as the Company did not trade prior to the transaction; and c) comparative numbers presented in the interim condensed consolidated financial statements relating to the three month period ended and as at 31 March 2013 are those of the “Combined Group”.
Significant accounting policies
The accounting policies adopted, methods of computation, critical accounting judgments, key sources of estimation uncertainty and financial risk management objectives and policies are consistent with those followed in the preparation of the Group’s annual consolidated financial statements for the year ended 31 December 2013, except for the adoption of new standards and interpretations effective as of 1 January 2014, which are detailed below. The application of these new standards and interpretations did not have a material impact on the amounts reported for the current and prior periods.
Damac Real Estate Development Limited, DIFC 11 Dubai, U.A.E.
Notes to the interim condensed consolidated financial information For the period ended 31 March 2014 (continued)
2. Basis of preparation (continued)
Significant accounting policies (continued)
IAS 32 Amendments to IAS 32 Financial Instruments: Presentation IAS 36 Amendments to IAS 36 Impairment of Assets: Recoverable Amount Disclosures IAS 39 Amendments to IAS 39 Financial Instruments: Recognition and Measurement, Novation of Derivatives and Continuation of Hedge Accounting IFRS 10, IFRS 12 & IAS 27 Guidance on Investment Entities
The Group has not applied any of the new and revised IFRS that have been issued but are not yet effective. The Group anticipates that these new standards will be adopted in the Group's consolidated financial statements in the year of initial application and that the application of such standards may have significant impact on amounts reported in respect of the Group's statements. However, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed.
The interim condensed consolidated financial information does not include all the information required for full annual consolidated financial statements and should be read in conjunction with the Group’s audited consolidated financial statements as at and for the year ended 31 December 2013. In addition, results for the three-month period ended 31 March 2014 are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2014. The interim condensed consolidated statement of comprehensive income for the three month period ended 31 March 2014 is not affected significantly by seasonality of results.
3. Segmental analysis
Information reported to the Board for the purpose of the resource allocation and assessment of performance is primarily determined by the nature of the different activities that the Group engages in, rather than the geographical location of these operations. The Group currently comprises a single reportable operating segment, being property development.
Geographic information for the Group is split between operations in the UAE “Domestic” and operations in other jurisdictions “International”. 1 January to 1 January to 31 March 2014 31 March 2013 (3 months) (3 months) (Unaudited) (Unaudited) US$ Million US$ Million
Revenue Domestic 435.8 224.6 International - -
------Total revenue 435.8 224.6
======
Damac Real Estate Development Limited, DIFC 12 Dubai, U.A.E.
Notes to the interim condensed consolidated financial information For the period ended 31 March 2014 (continued)
3. Segmental analysis (continued)
31 March 31 December 2014 2013 (unaudited) (Audited) Development properties Domestic 1,319.6 1,358.1 International 596.2 574.6
------Total development properties 1,915.8 1,932.7
======
4. Development properties
31 March 31 December 2014 2013 (Unaudited) (Audited) US$ Million US$ Million
Balance at the beginning of the period / year 1,932.7 1,565.4 Additions 150.3 745.6 Transfer to cost of sales (167.2) (434.8) Transfers from a related party - 29.4 Impairment reversal - 27.1 ------Balance at the end of the period / year 1,915.8 1,932.7 ======
The development properties balance includes land plots for future development, properties under development and completed units held in inventory. The balances above are split into these categories as follows:
31 March 31 December 2014 2013 (Unaudited) (Audited) US$ Million US$ Million
Land held for future development 97.5 83.8 Properties under development 1,615.2 1,650.4 Completed properties 203.1 198.5 ------1,915.8 1,932.7 ======
Damac Real Estate Development Limited, DIFC 13 Dubai, U.A.E.
Notes to the interim condensed consolidated financial information For the period ended 31 March 2014 (continued)
5. Other financial assets
31 March 31 December 2014 2013 (Unaudited) (Audited) US$ Million US$ Million
Escrow retention accounts 92.7 72.8 Margin deposits 6.0 4.9 Other deposits 0.6 0.2 ------99.3 77.9 ======
In accordance with applicable laws, the Group holds funds under escrow in bank accounts managed by approved agents. These funds must be held in these escrow accounts for a fixed period of one year after completion of the relevant development properties, at which point they are released to the Group. These funds carry interest at commercial rates.
At 31 March 2014, margin deposits are held by banks under lien against credit facilities issued to the Group and carry interest at commercial rates.
6. Trade and other receivables
31 March 31 December 2014 2013 (Unaudited) (Audited) US$ Million US$ Million
Trade receivables 428.3 329.8 Provision for doubtful debts (26.0) (29.8) ------402.3 300.0 Advances and deposits 109.5 104.4 Prepayments and other receivables 6.7 5.1 ------518.5 409.5 ======
Trade receivables represent amounts due from customers at the point of handover. The outstanding balance represents the total amount which is yet to be collected at the reporting date. Customers are allowed 30 days from each invoice date to settle outstanding dues.
Concentration of credit risk is limited due to the customer base being large and unrelated.
Damac Real Estate Development Limited, DIFC 14 Dubai, U.A.E.
Notes to the interim condensed consolidated financial information For the period ended 31 March 2014 (continued)
7. Financial investments
During the period, the entire financial investments portfolio was disposed for a consideration of US$ 30.4 million. The resulting loss on disposal of US$ 0.3 million was recorded in profit or loss. The related investment revaluation reserve of US$ 0.5 million was recycled through profit or loss.
8. Cash and cash equivalents 31 March 31 December 2014 2013 (Unaudited) (Audited) US$ Million US$ Million
Cash on hand 0.1 5.7 Cash held in escrow 799.2 497.7 Bank balances 142.7 42.3 Fixed deposits 36.8 32.5 ------978.8 578.2 Less: Fixed deposits with an original maturity of greater than three months (36.8) (32.5) ------Cash and cash equivalents 942.0 545.7 ======
Cash held in escrow represents cash received from customers which is held in escrow bank accounts managed by approved escrow agents. Use of this cash is restricted to the specific development properties to which the cash receipts relate and, hence, considered as cash and cash equivalents.
9. Share capital 31 March 31 December 2014 2013 (Unaudited) (Audited) US$ Million US$ Million
Authorised, issued and fully paid 650,000,000 shares of US$ 1 each 650.0 650.0 ======
10. Group restructuring reserve
On 3 December 2013, the Company completed its GDR listing on London Stock Exchange and issued an additional 649,950,000 shares at a par value of US$ 1 each. The group restructuring reserve arises on consolidation under the pooling of interests method used for the group restructuring which took place on 3 December 2013. This represents the difference between the share capital of the “Combined Group” and DAMAC Real Estate Development Limited, DIFC at the date of the group restructuring. This reserve is not distributable.
Damac Real Estate Development Limited, DIFC 15 Dubai, U.A.E.
Notes to the interim condensed consolidated financial information For the period ended 31 March 2014 (continued)
11. Bank borrowings 31 March 31 December 2014 2013 (Unaudited) (Audited) US$ Million US$ Million
Bank loans 128.1 71.4 Overdrafts 22.0 13.9 ------150.1 85.3 ======
Banks loans
The Group has borrowings under various loan arrangements with a number of banks and financial institutions. These institutions provide the Group with term loans and overdraft facilities.
The bank loans include the following: 31 March 31 December Name of the borrowing entity 2014 2013 (Unaudited) (Audited) US$ Million US$ Million
Facility 1 Damac Properties Development LLC 3.5 3.7 Facility 2 Damac Properties Development LLC - 6.2 Facility 3 Damac Properties Development LLC 4.0 20.1 Facility 4 Damac Properties Development LLC 95.2 - Facility 5 Damac Properties SAL Holding 25.4 25.3 Facility 6 Majara Investments Limited - 16.1 ------128.1 71.4 ======
Repayment profile
The repayment profile of bank borrowings is as follows: 31 March 31 December 2014 2013 (Unaudited) (Audited) US$ Million US$ Million
On demand or within one year 134.1 59.6 In the second year 13.1 23.5 In the third to fifth year inclusive 2.9 2.2 ------150.1 85.3 Less: Amount due for settlement within 12 months (134.1) (59.6) ------Amount due for settlement after 12 months 16.0 25.7 ======
Damac Real Estate Development Limited, DIFC 16 Dubai, U.A.E.
Notes to the interim condensed consolidated financial information For the period ended 31 March 2014 (continued)
11. Bank borrowings (continued)
At 31 March 2014, bank borrowings carry interest rates based on EIBOR/DIBOR/LIBOR plus agreed commercial margins.
Security arrangements
At 31 March 2014, bank facilities (including overdrafts) were secured by: a. Personal guarantee
The Chief Executive Officer has provided personal security over borrowings totaling US$ 102.8 million. b. Corporate guarantees of Group entities
Corporate guarantees for the borrowings from Facility 1, Facility 3 and Facility 4 are provided by the borrowing entities in the Group. In certain instances additional corporate guarantees are provided by the operational subsidiaries of the borrowing entities or by other entities not within the Group but under the control of the Chief Executive Officer. c. Mortgages over plots of land
Loans from Facility 1, Facility 3 and Facility 5 totaling US$ 32.9 million as of 31 March 2014 are secured by plots of land. The carrying value of these plots of land totaled US$ 55.5 million as at 31 March 2014.
12. Related party transactions
The Group enters into transactions with companies and entities that fall within the definition of a related party as contained in IAS 24 Related Party Disclosures. Related parties comprise entities under common ownership and/or common management and control, their partners and key management personnel. Management decides on the terms and conditions of the transactions and services received/rendered from/to related parties as well as on other charges. Pricing policies and terms of all transactions are approved by the management.
At the reporting date, balances with related parties were as follows: 31 March 31 December 2014 2013 (Unaudited) (Audited) US$ Million US$ Million Due to related parties Balances due to the Chief Executive Officer - 1.2 ======
Damac Real Estate Development Limited, DIFC 17 Dubai, U.A.E.
Notes to the interim condensed consolidated financial information For the period ended 31 March 2014 (continued)
12. Related party transactions (continued)
Remuneration of key-management personnel
The remuneration of the directors, who are the key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures.
I January to 1 January to 31 March 2014 31 March 2013 3 months 3 months (Unaudited) (Unaudited) US$ Million US$ Million
Short term employee benefits 0.6 0.5 Termination benefits - EOSB 0.1 0.1 ------0.7 0.6 ======
13. Trade and other payables 31 March 31 December 2014 2013 (Unaudited) (Audited) US$ Million US$ Million
Advances from customers 1,859.6 1,715.3 Accruals 138.8 101.6 Other payables 214.4 142.3 Retentions payable 104.3 99.3 Deferred consideration for land payments 184.7 232.5 ------2,501.8 2,291.0 ======
14. Revenue 1 January to 1 January to 31 March 2014 31 March 2013 3 months 3 months (Unaudited) (Unaudited) US$ Million US$ Million
Constructed apartments 262.4 224.6 Sale of land 173.4 ------435.8 224.6 ======
Damac Real Estate Development Limited, DIFC 18 Dubai, U.A.E.
Notes to the interim condensed consolidated financial information For the period ended 31 March 2014 (continued)
15. Contingent liabilities 31 March 31 December 2014 2013 (Unaudited) (Audited) US$ Million US$ Million
Bank guarantees 113.3 79.8 ======
The Group has contingent liabilities in respect of bank guarantees issued in the normal course of business from which it is anticipated that no material liabilities will arise as at the above dates.
16. Commitments
Commitments for the acquisition of services for the development and construction of assets classified under developments in progress:
31 March 31 December 2014 2013 (Unaudited) (Audited) US$ Million US$ Million
- Contracted for 764.4 846.5 - Committed but not contracted for 2,718.5 2,728.2 ------3,482.9 3,574.7 ======
Future instalments receivable from customers under contracts for sale of properties directly related to the Group’s commitments for the development and construction of assets related to these future receivables amounted to US$ 2.8 billion as of 31 March 2014 (31 December 2013: US$ 2.5 billion).
17. Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
1 January to 1 January to 31 March 2014 31 March 2013 3 months 3 months (Unaudited) (Unaudited) US$ Million US$ Million
Profit for the period (US$ million) 209.6 N/A Number of ordinary shares (million) 650.0 N/A ------Earnings per ordinary share - basic and diluted (US$) 0.32 N/A ======
There were no instruments or any other items which could cause an antidilutive effect on the earnings per share calculation. The Group was restructured on 3 December 2013 and as the transaction falls outside the scope of IFRS 3 Business Combinations, the pooling of interests method was applied and the interim condensed consolidated financial information of the Group is presented as a continuation of the ‘‘Combined Group’’. If the share capital had been consistent in 2013, the comparable EPS would have been US$ 0.18 per share. Damac Real Estate Development Limited, DIFC 19 Dubai, U.A.E.
Notes to the interim condensed consolidated financial information For the period ended 31 March 2014 (continued)
18. Fair value of financial instruments
As at the period end date, the financial instruments of the Group are classified as at amortised cost. The carrying value of the financial assets and financial liabilities also approximate to their fair value. The entire portfolio of financial investments was classified as level 1. After the disposal of the financial investments (Note 7), the Group does not have any financial investments being classified at fair value.
19. First time interim condensed consolidated financial information
This is the first interim condensed consolidated financial information presented by the Group.
20. Approval of the interim condensed consolidated financial information
The interim condensed consolidated financial information for the period ended 31 March 2014 was approved by the Board and authorised for issue on 12 May 2014.
21. Subsequent event
On 9 April 2014, the Group issued US$ 650 million SUKUK TRUST CERTIFICATES (the “Certificates”) maturing in 2019. Alpha Star Holding Limited is the Issuer with the Company as Guarantor. The Certificates are listed on the Irish Stock Exchange and NASDAQ Dubai. The Certificates confer on the holders of the Certificates from time to time (the ‘‘Certificateholders’’) the right to receive certain payments arising from an undivided ownership interest in the assets of a trust declared by the Trustee pursuant to the Declaration of Trust (the ‘‘Trust’’) over the Trust Assets (as defined in the Prospectus) and the Trustee will hold such Trust Assets upon trust absolutely for the Certificateholders pro rata according to the face amount of Certificates held by each Certificateholder in accordance with the Declaration of Trust and the terms and conditions of the Certificates.