United Development Company Q.P.S.C. (UDCD) Earnings Call Transcript & Summary

Good day, and welcome to the United Development Company, UDCD, Q4 2021 Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Roy Thomas. Please go ahead, sir.

Hello, everyone. This is Roy Thomas from QNB Financial Services. I want to welcome everyone to United Development Company's Fourth Quarter and Fiscal Year 2021 Financial Results Conference Call. On this call from United Development Company, we have Maher Omar Naim, who is the Executive Director for Financial Planning; and Karim Farhat, who is the Financial and Business Planning Director. We will conduct this conference call with management first reviewing the company's results followed by a Q&A. I will turn the call now over to Maher. Go ahead, Maher.

Hello, everyone. I hope all is well and safe. It's my honor to give a brief on United Development Company financial results for the year 2021. The company has achieved a revenue of above QAR 2 billion compared to QAR 1.176 billion of last year, with an increase of 73%. And accordingly, the net profit of the company has increased as well to be QAR 356 million as compared to QAR 265 million of last year, with an increase of 34%. And the net profit attributable to the equity holder of the parent, the shareholders reached to QAR 326 million compared to QAR 226 million of last year, with an increase of 44%. And our EPS reached to QAR 0.092 compared to QAR 0.064, with an increase of 44%. And accordingly, based on the financial results and the achievement that the company has achieved this year, the proposed dividend for the year 2021, which is subject to the annual general assembly approval is 5.5% of the share capital, which is equal to [ QAR 5.5 ] share. So 2021 was a tough year, but [Foreign Language] UDCD managed to improve the financial results compared to year 2020. And hopefully, we are looking forward for the year 2022 with a lot of ambitions that things should be okay. And hopefully, the company plans all will be achieved. As you guys can see, we are -- if anyone is coming across to The Pearl Island, our development activity has not stopped, and we are working on completing the project as we have planned. And as a matter of fact, the Viva Bahriya, 2 twin tower, Al Mutahidah Tower have been completed in the year 2021 and the units been handed over to clients. The Pearl commercial showroom as well have been completed in the year 2021 and have been handed over to the tenants, which now they are doing the fit-out work. And likewise, we have a project as well. The school and other projects hopefully will be completed in the year 2021 in accordance with the plan. In addition to completing the work for -- the development work for our Gewan Island project, which we have a planned to finalize major assets or major development for the beginning of the World Cup. From an overall perspective, this is a small and a brief explanation about the company's financial performance for the year 2021. I leave now the floor to you, should you have any questions, please go ahead.

[Operator Instructions] We will now take our first question from Zohaib Pervez from Al Rayan Investments.

I've got 3 questions. Firstly, you just mentioned that there will be some deliveries on the Gewan Island. Could you elaborate more on what you're referring to with these deliveries that we're expecting this year? And second question is on some KPIs for occupancy? What will be your residential and retail occupancy, if you could give us some information on that? And third question is regarding your CapEx. What would be your CapEx requirements for '22?

To answer about Gewan. Gewan, we are working on completing the crystal work and retail arcade, we have approximately 11,000 square meter of retail area, and we are working to finalize or to complete all the development work prior to the World Cup and to have, hopefully, the retail and F&B operating by such time with the crystal work. And with respect to the -- we have also the mixed-use building, the residential apartment buildings. We -- the building might be, let's say, 80% to 90% completed, but there will be no planned handover to clients because still there will be some finishing work from inside to be completed. But the main thing that will be completed, as I mentioned, is the crystal work, the crystal work along with our retail area. And hopefully, such area will be operational. Now I'll answer our requirement for CapEx next year. It is still within our plan where we have clearly indicated that we have approximately investment value of QAR 5.3 billion. So we are working in accordance to such investment development and the funds will be allocated accordingly based on the value of work to be executed in the year 2021 -- 2022, sorry. I'll let Karim answer about the average occupancy for retail and residential in 2021. Go ahead, Karim.

2022, you mean?

Yes. They want as of 2021, so go ahead.

Yes. Our occupancies currently are at an average of 70% between our properties, and there's room for expansion as well in 2022 to this one. We do not give guidance on precinct occupancies per precinct, but this is the average on our retail. When it comes to residential, it is as well between -- as well 70% average accordingly. Other than that we don't give specific on our portfolio, but this should give you an idea where we are now and where we want to achieve next year as we enhance our occupancies as such.

And just on the occupancy, this, I'm assuming, has improved during '21. Could you give us an idea what was it last '22? And what is that improved to?

Well, we have improved on average of 6% in our occupancies after COVID of 2020 and which is hard there, and this is the increase.

[Operator Instructions] We will now take our next question from Gunjan Gupta from Juma Al Majid Group.

I just have 1 question about your EBITDA margins. Your EBITDA margins have declined from 42% to 29% in 2021. So if you could just give some brief about it, what's the reason? And what kind of EBITDA margin you're expecting for the year ahead? And also, if you could talk about like specific outlook in like World Cup impact on your portfolio specifically? I already saw that you have already have some agreement with the special committee and you're leasing 318 units. So other than that, any more impact you have directly?

Can you go ahead and answer about, please, the EBITDA margin?

Well, our EBITDA margin went down basically due to the type of properties that we do sell. Even though our revenues went up, it's stemming from our gross margin. Definitely, we do have sales. We do have sales of different type of properties with different margins. And this changes year-on-year plus our retail, which is somehow constant. So it is stemming from there. It's not stemming from a reduction of revenue or an increase in cost. It is just amalgamation of different properties that have been recognized during the year with different margins. This is the nature of our business.

As for the -- any additional, as of now, we have, as you rightly said, 318 units leased to the Supreme Committee for legacy and heritage. As of now, this is what we have. And should there be anything else is executed, of course, we will clearly disclose this, and we'll make it public. But as of now, it is only the 318 units -- residential units being leased to the Supreme Committee.

We will now take a follow-up question from Zohaib Pervez from Al Rayan Investment.

This is Akber from Al Rayan. I just had a question on the, I guess, traffic management and roads. You are adding lots of -- you're adding a new island. You're adding new developments. You're adding new population. Is there any discussion yet about another access to and from the island because otherwise, there is a potential for congestion issues? That's my first question.

Well, with respect to this, if you come to The Pearl Island, you see there is the Gewan bridge, this is an access directly to Gewan Island. So this will -- to avoid any congestion and traffic for entrance to the Gewan Island. As having another access to The Pearl Island, no, whatever is -- the access will remain the same. And adding additional population or having more people or having more projects, now we have a project, we are upgrading The Pearl infrastructure to cater for such additional numbers. So this is being already worked out, and it's already been work in progress. So this is well take care of that. So there is no additional access. As for Gewan, as I mentioned, there is the Gewan bridge where entrance, they can go directly from such bridge to Gewan Island.

So that bridge is only for entrance. For exit, it's -- is that only for the entrance or also for the exit?

It's only for entrance, yes.

Right. And my other question just relates to margins. You were talking about -- Karim was talking about just now that it's a function of what's sold and et cetera. So going forward, do you -- is the margin that we had this year likely to be the margin -- a good reference for margins going forward? Or is it likely to go back to where it used to be?

As Karim rightly said, it depends about the projects and the time we are being sold throughout the year. So let us see what would be the year 2022 sales volume and type of item being sold, and accordingly, the EBITDA margin will be known. But we should be fine on all levels. But as Karim clearly said, it depends on the type of product being sold.

That's right. That's kind of what I'm asking about is what are you expecting in terms of the product that will be sold? It will be the higher margin type or the lower margin type?

I will get to know when we have the conference call for Q1 financials, Q1 2022. So save this question for Q1 2022?

[Operator Instructions] There are no further questions. I'd like to turn the conference back to the host for any additional or closing remarks.

If there are no further questions, we would like to thank United Development Company's management for the results update and look forward to speaking to you all for the first quarter 2022 results.

Thank you very much. It is appreciated. And yes, we will be looking forward to speaking to you again for the Q1 2022 results. Thank you.

This concludes today's call. Thank you for your participation. You may now disconnect.