Cautious Emaar cuts costs despite first quarter 'surprise'

Emaar Properties has embarked on a cost-cutting drive to meet more challenging market conditions.

Speaking to reporters after the company’s annual general meeting in Dubai yesterday, the chairman Mohamed Alabbar said that it had “severely” cut costs, but maintained that this was not because of its performance.

“We are really scared of 2016,” he said. “If you look at our cost budget, it went back two years. So we went to a cost budget base of two years ago just to be cautious.”

Despite this, he said that he had been “pleasantly surprised” by the company’s sales activity during the first quarter.

“We’re still cautious about 2016/17, but maybe we are too cautious and too careful.

“I would say the first quarter was good for us. But I will tell you that we are working so much harder than before.”

Mr Alabbar said that it was unlikely that the anticipated flotation of its hospitality business would take place this year.

“You know the market – I don’t think it’s the time now.

“We are not rushing because we want to cash something out. We want to do genuine business. When the time is right, the time is right.”

Last week, Emaar said it was ending its joint venture with India’s MGF.

Mr Alabbar yesterday said that the company “is just starting” the process of demerging its Indian business from its joint venture partner and building its own operations in the country.

“I believe in India. Is it easy to do business in India? I don’t think it’s easy to do business anywhere. But we will have to move on, carry our own flag and put in our own people. Every time you have to move out of your own territory, it’s always difficult but we’ve been in India for eight years. We know it quite well.”

A dividend payment of 15 per cent – or Dh1 billion – was approved by shareholders yesterday after a successful trading period last year, as net operating profit grew by 18 per cent to Dh4.4bn and revenue climbed by 33 per cent to Dh13.7bn.

The growth was mainly a result of a 39 per cent increase in revenue at its UAE property-development business.

Earlier this week, the consulting firm ValuStrat said its price index (VPI) that logs residential values in 16 apartment and 10 villa communities across Dubai recorded a 3.5 per cent decline over the past 12 months, but had actually risen slightly in February and March, showing an improvement for the first time in two years.

However, Phidar Advisory reported a 2.2 per cent drop in demand during the first quarter, with apartment prices falling by 1.9 per cent and villa prices softening by 1.6 per cent.

Emaar’s shares are more than 15 per cent higher that they were at the start of this year.

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