Annual Report 2017
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DAMAC PROPERTIES DUBAI CO PJSC Annual Report 2017 1 PUSHING BOUNDARIES ACCOMPLISHING MILESTONES TABLE OF CONTENTS CORPORATE 1 | CORPORATE OVERVIEW OVERVIEW 6 Chairman’s letter to the shareholders 8 Group Chief Finance Officer’s message 10 About us 14 Evolution of the Company 16 Performance highlights 2 | STRATEGIC REVIEW 20 Our strategy 22 Our corporate social responsibility 24 Our market place 28 Portfolio focus 30 DAMAC projects in Dubai 3 | BUSINESS REVIEW 54 Our performance over the year 56 DAMAC’s people and organisational divisions 62 Risk management 4 | CORPORATE GOVERNANCE 70 Board of Directors 72 Corporate governance 77 Statement of directors’ responsibilities 78 Shareholder information 5 | CONSOLIDATED FINANCIAL STATEMENTS DAMAC PROPERTIES DUBAI CO PJSC 83 Director’s report 84 Independent auditor’s report 90 Consolidated statement of financial position 91 Consolidated statement of profit or loss and other comprehensive income 92 Consolidated statement of changes in equity 93 Consolidated statement of cash flows 95 Notes to the consolidated financial statements NEW LAUNCHES BILLION CHAIRMAN’S ACROSS DIRHAMS LETTER TO THE 27 DUBAI 7. 5 SALES BOOKED BILLION DIRHAMS BILLION DIRHAMS SHAREHOLDERS DIVIDEND OVER RECOMMENDED 4.5 THREE YEARS 1.5 DIVIDEND PAYOUT to 2017 performance. refer Note: Figures HUSSAIN SAJWANI CHAIRMAN DEAR SHAREHOLDERS, multi-tower development located right on BUSINESS HIGHLIGHTS MARKET HIGHLIGHTS destination have not changed. Dubai is we have seen since 2014 and 2015 in the Sheikh Zayed Road and overlooking the still widely considered a safe haven with secondary market seem to have bottomed 2017 has been another milestone year for Dubai Canal. AKOYA Oxygen is our second During 2017, we achieved over AED 7.5 As stated earlier, the market has cooled off a secure investment environment driven out and stabilised, while demand for mid- your Company, DAMAC Properties. After a master development in Dubailand, which billion (USD 2 billion) in booked sales, above since its previous peak in 2014, and this is by a robust regulatory framework. It is a market off-plan sales has clearly increased. very successful 2015 and 2016, in our two we launched late in 2014, and have sold our guidance for the year. As I mentioned partly because of new regulations in Dubai hub for tourism and international travel, We remain cautiously optimistic on our maiden years as a listed Company on the over AED 12 billion (USD 3.5 billion) in last year, the market has been softer overall, that were implemented late 2013 to stabilise and the Dubai government is extremely near-term outlook. Dubai Financial Market (DFM), we have properties there since then. This is another but transaction volumes are healthy and the market, which included the doubling of supportive with world-class, well-directed further established ourselves as a leading testament to our constant innovation, with have actually improved versus 2016, while registration fees and a revision of mortgage infrastructure programmes. The young I would like to thank the visionary leaders of real estate developer in the Middle East, with the ultimate goal of bringing the right volatility dropped slightly. Over the year, caps. This, combined with macro-economic and vibrant population, growing at five the UAE, for their leadership and ambitious Dubai being our home base, and by far our product to the market at the right time. we delivered more than 2,300 units across factors, has brought the market into a more per cent annually, creates a diversified aspirations that have laid the foundations most important market. After a successful our various projects, which includes those I stable and consolidated phase since late economy that is clearly outpacing the rest for success and excellence. Our sincere move to the DFM in early 2015, we have In terms of our international developments, mentioned earlier in DAMAC Hills, Amman 2015. In terms of demand, off-plan sales of the region. This set of advantages should gratitude also goes to all government strengthened our position as one of the we continue to make steady progress with and Riyadh. Once again, we are pleased remain strong, especially in our core continue to drive incremental demand of bodies and regulators whose relentless top 10 largest Companies on the exchange. the delivery of our first project in Amman, with the additional deliveries in our first areas. However, the challenging market approximately 20,000 units per year in the support is valued, as well as our stakeholders Another testament to our position on the Jordan, in addition to delivering our flagship master development, DAMAC Hills, where environment creates opportunities for well- medium to long term. Deliveries in recent who contributed to our success over this capital markets was our inclusion in the twin tower project in Riyadh, DAMAC we have now handed over more than 3,100 capitalised and experienced Companies like years have fallen short of this number. challenging year. I thank our employees, leading MSCI UAE index in June 2017. Exclusiva, with one tower by Fendi Casa and units and have welcomed over 900 families, ours with a strong 15 year-plus track record, partners, contractors, suppliers, and our the second by Paramount Hotels & Resorts, who now call DAMAC Hills their home. to pick up development opportunities at the Ultimately, developers who have the customers for their patronage. 2017 was similar to 2016, in that it was and achieving close to 50 per cent sale of right value and the right time. Our healthy capabilities to target healthy pockets of another year of breakthroughs in the history our London project (AYKON London One). The Company honoured its commitment results demonstrate that we have adapted to demand, and who can offer a portfolio of As always, I am grateful to our shareholders of the Company. By the end of the year, we Moving east, we have further strengthened to pay a cash dividend of AED 1.5 billion market conditions with successful product diversified products to satisfy it, will fare for the faith and responsibility they placed had completed over 3,100 units in our first our focus on China over the last two years (USD 412 million) for 2016. The Board launches in the mid-level, higher volume better. We believe that DAMAC has excelled in me and my management team. ever master development, DAMAC Hills with our sales partners, 5i5j and Qfang, who recommended the same cash dividend market segment, to cater to evolving market at adapting to changing market conditions, (previously AKOYA by DAMAC). We have together give us a combined network of payout of AED 1.5 billion (USD 412 million) and consumer appetites. keeping a strong focus on margins and dramatically transformed 42 million square 70,000 sales agents across various Chinese (AED 0.25 per share) for the 2017 fiscal year execution, and uniquely positioning it ahead feet of desert land into a vibrant community provinces. We are pleased to note that in (subject to approval of the shareholders Once again, we would like to reiterate of the rest in this dynamic real estate market. in under four years – an achievement of 2017, more than four per cent of our booked in the forthcoming annual general that the current market environment in which we are exceptionally pleased. At the sales were from Chinese buyers, which assembly). If approved, the Company will Dubai is very different to the one we faced OUTLOOK same time, we had 27 new launches across was an increase on 2016. 2017 also saw have distributed cash dividends of close to in 2008 to 2010. Dubai’s real estate eco- Dubai. It was also the year of subsequent DAMAC working more closely with its agent AED 4.5 billion (over USD 1.2 billion) over system, which includes the government, Looking ahead to the rest of 2018, we HUSSAIN SAJWANI launches at our other large-scale projects, network both locally and globally, having three years. It is a strategic decision to its regulators, developers, providers anticipate the Dubai market to slowly build CHAIRMAN AYKON City and AKOYA Oxygen, both activated 226 new brokers in 2017. DAMAC position ourselves as a high yielding stock of capital and investors, has evolved a on its momentum and continue the positive in key locations in Dubai. AYKON City is conducted 524 roadshows across 107 cities for shareholders. great deal since then. The fundamental trends we have started to witness during a one-of-a-kind four-million-square-foot in 42 countries in 2017 alone. drivers that make Dubai an attractive the latter half of 2016. The price declines 6 7 GROSS BILLION GROUP CHIEF PROFIT OUR ORDER FINANCE OFFICER’S 48.8% MARGIN 13.2 BACKLOG INCREASE BILLION MESSAGE IN BOOKED ESCROW 7% SALES 5.9 BALANCES to 2017 performance. refer Note: Figures ADIL TAQI GROUP CHIEF FINANCE OFFICER stood at AED 7.5 billion (USD 2 billion) billion), after adjustments for the final 2016 the Dubai real estate market, we look GROUP PERFORMANCE SUMMARY over AED 4.8 billion (USD 1.3 billion) gross debt increased to AED 4.7 billion at the end of the year, a decrease of 10 cash dividend payout, fuelled by the net forward to the rest of 2018 with optimism received during the year, demonstrating (USD 1.3 billion), and we also issued our per cent over 2016. The resilient sales and profit of AED 2.8 billion (USD 751 million). and conviction in our ability to forge our Despite the challenges our region has the quality of our customer base as well as new USD 500 million Sukuk (five year collections performance of our projects way through the challenges ahead. faced in 2017, we have demonstrated our customers' faith in our brand, products duration), and made a partial repayment has resulted in escrow balances totalling THE YEAR AHEAD that we operate a solid, reliable business and the Dubai market overall.