TIDM44GO
RNS Number : 3297C
Dar Al-Arkan International Sukuk II
30 April 2012
Dar Al-Arkan publishes its audited consolidated financial
statement under IFRS for the year ended December 31, 2011.
Dar Al-Arkan today released its audited consolidated financial
statement under IFRS for the year ended December 31, 2011. A
detailed analysis of the Dar Al-Arkan's 2011 performance is
presented in its 2011 Board of Directors report, of which the key
highlights are mentioned below.
Key Highlights on Dar Al-Arkan's 2011 Directors Report
Independent valuation overseen by CMA shows 53% increase in
market value above book value for the majority of our real estate
assets.
The Capital Market Authority (CMA) oversaw an independent
valuation of a large sample of Dar Al Arkan's real-estate assets.
Selecting assets with a book value of SAR 9.7 billion, accounting
for 52% of the Company's total real estate portfolio of SAR 18.6
billion, the CMA asked the Company to have them independently
valued. Each property was evaluated by at least two by independent
local and international real estate valuators selected by CMA. The
sum of the average valuations amounting to SAR 14.8 billion for the
selected sample implies an inherent surplus of SAR 5.1 billion
above the value recorded in Company's books. Based on the valuation
methodology employed and the sampling done, the Company's
management believes that the market value of these assets which
equaled 153% of book value is reasonably indicative of the general
value improvement across the Company's total real estate portfolio
of SAR 18.6 billion. If this value improvement were to be captured
in the Company's books it would have a very significant positive
impact on its financial statements. However, in accordance with
SOCPA, the accounting standards applicable in the Kingdom, all real
estate investments are recorded in the Company's books at the lower
of cost or book value and cannot be recorded at market value. (See
page 8 of the report for details)
Dar Al-Arkan maintains profitability in 2011 at improved gross
margins.
Dar Al-Arkan has reported its financial results for the year
ended 31 December 2011. Revenues amounted to SAR 3,313 million
compared to SAR 4,142 million in 2010. Net income was SAR 1,088
million compared to SAR 1,456 million in 2010. Earnings per share
fell to SAR 1.01 versus SAR 1.35 in 2010. Notwithstanding the noted
decreases, the gross profit margin remained healthy exceeding 41%.
(See page 24 of the report for details).
Dar Al-Arkan Balance sheet growth maintained during 2011 (+7.6%
shareholder equity, +3.4% asset base).
Total assets at year-end grew to SAR 24.1 billion from SAR 23.3
billion year-end 2010, representing a 3.4% increase. Shareholder
equity at year-end grew to SAR 15.6 billion from SAR 14.5 billion
year-end 2010, representing 7.5% increase. Hence, Dar Al-Arkan
remains the number one real estate development company in Saudi
Arabia in terms of asset base. (See See page 25 of the report for
details).
111% Increase in cash.
Cash at year-end grew to SAR 2.5 billion, from SAR 1.2 billion
year-end 2010, representing 111% increase. This net increase was
achieved after meeting all debt obligations, including financing
costs of SAR 374 million and principal repayment of SAR 549
million. In addition, SAR 845 million was invested in Investment
Properties and an added SAR 1,003 million was invested in the
Company's projects (Shams ArRiyadh and Shams Al-Arous) as well as
in the Company's land portfolio. (See page 25 of the report for
details).
Delivering on Strategy - Rental income kicks off.
For the first time in the Company's history, the year 2011
witnessed the creation of a third source of income - lease and
property management revenues. Even though leasing revenues
represented a marginal contribution this year, it shows that the
Company is actively moving towards realizing returns from its
investment in constructing lease assets over the last two years.
With the majority of the leasable assets beginning to generate
revenues in 2012, a more substantial contribution from leasing
revenues can be expected in the coming years. (See page 6 of the
report for details).
Housing is a Government Top Priority.
The positive outlook is further strengthened by the Royal
Decrees announced in March, 2011 to address the housing needs for
the Saudi population. In this context, the government has created
the ministry of housing, with an independent budget of SAR 4
billion (US$1.1 billion). For the first time the Real-Estate sector
will have its voice in the ministerial council. The government
announced the Injection of SAR40billion (US$10.7billion) of new
capital to the REDF, in addition to SAR15bn (US$4bn) injected
previously in 2010. The Saudi Government raised the ceiling of the
REDF loan program to Saudi citizens from SAR 300,000 (US$80,000) to
SAR 500,000 (US$ 133,000). It also eliminated the prerequisite of
owning land in order to qualify for the REDF loan. The Government
authorized the REDF to lend money to buy constructed housing units,
allowing the REDF applicants to use their REDF loan towards the
purchase of a constructed unit from a developer. The REDF also
signed agreements to guarantee additional loans requested by REDF
applicants with the local commercial banks. (See page 4 of the
report for details).
Development Projects.
Infrastructure works continued - Shams ArRiyadh.
The first phase of Shams ArRiyadh project stands at a 56%
completion at 2011 year-end (SAR 1.8 billion) from total estimated
investment of SAR 3.2 billion. The National Water Company commenced
works in 2011 for the water supply and the construction of the main
storage cistern to serve the entire project area. (See page 19 of
the report for details).
Value creation continued for Shams Al Arous.
Palestine road extension was completed in August 2011 and
inaugurated by the Deputy Mayor of Jeddah City in the attendance of
the Company's Chairman. This fully operational road opens a new
access to the East of Jeddah city and our project. Also the floor
area ratio (FAR) was raised increasing the built-up area for Shams
Al Arous by 100%. (See page 20 of the report for details).
Land sales started at Al-Tilal.
Within the project development activity, Dar Al-Arkan is
shifting the emphasis towards plots rather than properties as a
result of the changes in the market's dynamics. The focus on
individual land plot sales is intended to effectively capture value
from property market growth as result of the great financial
stimulus program for the sector adopted by the Government. During
2011 retail sale of developed land parcels were initiated. (See
page 20 of the report for details).
Leasing continued at Al-Qasr.
The leasing of the residential units continued for Al-Qasr
Master planned community (1,375 residential units as rental
properties) at year-end grew to 52%. The majority of lease
contracts for these units are long-term, ranging between 3 and 5
years signed with government agencies and private entities. This is
in line with the Company's goal of focusing on long-term contracts
with good profit margins compared to lease contracts with
individuals. Furthermore, the steady cash flow source generated
from these long-term contracts will allow the Company to ease the
process of obtaining financing facilities guaranteed by the
income-generating leased assets. (See page 18 of the report for
details).
Al Qasr Mall - 75% leased out.
98% of the Mall's construction work has finished as of 2011 year
end. 75% of the Mall's leasable space has been rented and it is
projected to reach 85% by the time of the Mall's inauguration. The
Mall opening is expected during Q2 2012. The Mall has attracted a
large renowned tenant mix which includes such as, Carrefour, Al
Othaim Company, Dar Al Bander Co./Land Mark Group (Centre Point,
City Max, Iconic, Shoe Express, Carpisa, Bossini, New Look &
Koton), Red Tag, SACO, Al Shaya (H&M, Peacock, Payless, Next,
Vision Express, Pink Berry, Claire's, Castania Nuts, Mother Care,
Boots, Dorothy-Parkins, MilanoEvans, Victoria), Dana for Trading
Co. (Mango, ADK, Blanco, Fridays Project), Anwal for Trading Co.
(Cache cache, Etam & Etam Lingeria, Prafios & Marrow) (See
page 18 of the report for details)
Qasr Khozam Area Development Project.
Qasr Khozam project is the largest regeneration project for
scattered developments in the city of Jeddah and the first Public
Private Partnership project (PPP) of its kind. The properties
survey and valuation sheets were completed, the project master plan
has been approved by the Ministry and Municipality and Rural
Affairs the compensation mechanism, the plans and designs of the
project's infrastructure are in progress. Permissions required for
processing land title deeds were obtained for the first phase (the
land delivered to Khozam Development Company by Jeddah Development
and Urban Regeneration Company, with an area of 250,000 square
meters); demolition work has already been completed for this phase
and preparation for the next stage of work is underway. (See page
21 of the report for details).
PIF approves Finance for Qasr Khozam Project.
Public Investment Fund PIF issued its initial approval to
participate in financing the project. The remaining amount shall be
financed by commercial banks and other financial institutions. The
PIF commitment is a key strategic step supporting the Company's
efforts to appeal to other government agencies and commercial banks
to secure additional financing required for the project. (See page
23 of the report for details).
Geographical Diversification of Real Estate Portfolio.
Dar Al Arkan diversifies its Real-Estate portfolio risk across
the major cities in Saudi Arabia, which contains 70% of the
population and 70% of the wealth concentration as well. At
year-end, the portfolio concentration risk was (45% Riyadh, 41%
Jeddah, 6% Makkah, 5% Medinah, and 3% Eastern Province). (See page
26 of the report for details).
Dar Al-Arkan Look Back (2007-2011).
Worldwide economic uncertainty commenced in Q3 2008; first, the
global financial crisis; then the Euro zone sovereign countries
crisis and lastly the social and political unrest across much of
the Middle East countries. These events triggered major investors'
upheaval. Consequently, this negative socio-economic environment
limited the financing opportunities all over the world. Dar
Al-Arkan was not immune to this negative environment, particularly
during the last three years where raising new financing became
exceptionally difficult.
Despite this challenging economic environment, Dar Al-Arkan due
to its robust business, was able to honor its financial obligations
without any delay. During the past five years Dar Al-Arkan has paid
its loans, service its interest costs, finance charges and paid-out
dividends. Payments totaling SR 9.3 billion, of which SR 4.3
billion were paid as dividends during 2007, 2008 and 2010, and SR 5
billion repaid as maturing loan principal, finance installments and
finance charges. Additionally, DAAR delivered more than 4,000
residential units, and continued with the development of its
projects (SAR 6 billion remarked to projects under progress), built
investment properties asset (SAR 2.8 billion of finished rental
asset) and acquired SAR 4 billion as new land (recorded at
historical cost or market value, which is lower).
It is clear that net cash outflows during the past five years is
about SAR 20 billion, of which SAR 5 billion repaid as maturing
loan principal, finance installments and finance charges and SR 4.3
billion were paid as dividends distributions, SAR 6 billion spent
in the development of the company's projects, SAR 4 billion were
the net positive increase on the Company's land bank.
Acknowledging that during that period the Company was able to
raise SAR 10 billion of debt, in the mean time there was no cash
injections from equity. This despite the last five years period,
containing a period of three and half years which the world
suffered the worst financial crisis in the history of mankind. This
demonstrates the extent of sophistication and strength of the
company as the total external cash inflows was SAR 10 billion while
the net cash outflows were SAR 20 billion. (See page 30 of the
report for details).
Dar Al-Arkan financing cost trending down.
The average financing cost during the years 2007, 2008, 2009,
2010 and 2011 was 7.5%, 6%, 4%, 5% and 4.9% respectively. Due to
the noticeable decrease in interest rates over the past few years
in response to the global financial crisis, the average financing
cost decreased from 7.5% in 2007 to an average of 4.9% in 2011; a
decline of 34.7%. (See page 31 of the report for details).
Dar Al-Arkan Sukuk attracts investor interest across the most
prominent international financial centers.
Dar Al-Arkan Sukukholders' geographical distribution analysis
showed that Dar Al-Arkan Islamic Sukuk issuance attracts attentions
of debt investors across the most prominent and international
financial centers around the world. i.e. (London, Dubai, Bahrain,
Singapore, Malaysia, Switzerland, USA, Hong Kong, Luxemburg
...etc). (See pages 33-35 of the report for details).
GOSI maintains 4.05% ownership in Dar Al-Arkan.
General Organization for Social Insurance maintained its 4.05%
ownership stake in Dar Al-Arkan. GOSI is represented on Dar
Al-Arkan Board by their General Manager for real-estate investments
Mr. Abdul Rahman Bin Abdul Aziz Al Hossain. (See page 41 of the
report for details).
Dar Al-Arkan attracts institutional and foreign investor
attention.
Ongoing dialog and communication with investors, analysts and
the financial community is a key strategic objective to Dar
Al-Arkan. During 2011 Dar Al-Arkan Management met a variety of
local and international investors (165) including institutional
investors from the buy side and sell side and individual investors.
(See pages 44 of the report for details).
To download 2011 BoD report, please click on the following
link.
2011 Board of Directors Report
http://www.rns-pdf.londonstockexchange.com/rns/3297C_-2012-4-30.pdf
This information is provided by RNS
The company news service from the London Stock Exchange
END
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