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

Hello, and welcome to United Development Conference Call. Please note that this call is being recorded. [Operator Instructions] Now I would like to hand the call over to Shahan, you may begin.

Thank you, and hello, everyone. I want to welcome you to UDC's fourth quarter and fiscal year 2024 financial results conference call. So on this call from management, we have Maher Naim, Executive Director of Financial Planning; and Karim Farhat, Executive Director of Finance. So as usual, we will conduct this call with first management reviewing the company's results followed by a Q&A session. I will now turn the call over to management. Please go ahead.

Hello, everyone. Nice to speak to you all. The financial statement for the year ended 31 December 2024 for United Development Company. The company has achieved a revenue of QAR 1 billion with a net profit of QAR 427 million. an overall net profit with profit attributable to the equity shareholders of QAR 426 million and earnings per share being QAR 0.12. The company's throughout the year 2024 focus was on the completion of Gewan project, the planned part, which is the residential, the mixed-use 15 building. And successfully, the company has completed such projects. . The Crystal Walk and the Crystal Residence were completed during late November, early December. And the company is now in the process of handing over to customers. as well as during the year 2024, the company has concluded the sale of its 40% share in Qatar Cool, as it was announced before to QIA, a subsidiary of QIA and the transaction was completed, like almost during the last week of November 2024 as being planned. So now the 2025, the company is continuing to work on the Gewan Island, whatever project is not completed yet, which are the villas and the hotel as well as operating the revenue generating and the operating assets in the Pearl Island, along with the subsidiaries that UDC have, which is complementing the business of UDC. So this is an overall view on the company's performance for the year 2024. As I stated, QAR 427 million on an overall net profit and profit attributable to the equity shareholders is QAR 426 million. So now should you have any questions, please do. Myself and Karim will provide the relevant answers.

[Operator Instructions] And your first question comes from the line of Adnan Muqeem with Al Rayan Investment.

I've got a couple of questions. Firstly, the -- as per your cash flow statements, your depreciation has increased, so what is the -- what will be the rationale for the increase in depreciation? That's the first question. Second question is regarding how will you -- in the 2024 statements, the profit from discontinued operations is the Qatar Cool. Going forward, in first quarter '25, how will that be reported? That will be reported as part of associate income or part of JV and associate income? How will the Qatar Cool be reported in the -- for example, in the first quarter of 2025?

Yes. Qatar Cool will be reported as investment in associates, as we have sold 40%, so it will not be consolidated. It will be investment in associates, as you have rightly said. As far as for the depreciation, there are a new -- like the hospital has launched its operation and then the depreciation for certain equipments and fit out and so forth, and other units as well, so the depreciation has increased accordingly.

It's because of new units and hospital and some other items, right?

Yes.

Okay. And could you -- one more question. Could you confirm the total number of units that are leased at the moment with you? Or the total number of units you have and how much is the leasing occupancy?

Yes, I can give you an overall occupancy, an average occupancy, if you want. And I hope this will provide a good information to you. We are in the magnitude of 70% occupancy on a residential point of view.

And retail would be?

Retail also would be 70% also taking into account the units are being under fit out, it would reach to 70% as well.

Okay. And just to confirm, your number of units -- residential units are about 1,400, right?

Maybe lower than 1,400. It could be 1,300.

You next question comes from the line of Seki Mutukwa with Ashmore.

Three questions, please, Maher. First one was just on the QAR 680 million revenue from urban development. Can you give us a sense of how much of that was rental income? My second question is, in your slide, you've talked about QAR 900 million CapEx for Corinthia and Gewan. I'm wondering what other sort of magnitude of CapEx you have, whether it be your contribution for Qatar Cool going forward, et cetera, just to get a sense of how much you're spending next couple of years? And then the final one is just on the Qatar Cool. Another sort of big picture type question. In 3 to 5 years, would you expect the asset base to be double of where it is today? Is that how aggressive one is thinking of it? Or it's a little bit more measured?

In respect -- and correct me if I have forgotten or did not address a question. So the leasing -- revenue from leasing on the urban development is almost 60%. And this covers the leasing operation, okay, within the urban development. Can you tell me what is the second question? I'm sorry?

No problem. It was just trying to understand how much CapEx you have aside from the QAR 900 million you've written is for the Corinthia Hotel?

The QAR 900 million is the estimated overall project value. So this is now the Corinthia resort. And if you've seen it was before 3.9 including Gewan and now Gewan is over. So this is now what we currently have from a development project. And this is the overall project. There, of course, has been -- work has been completed, and it is not the QAR 900 million will be paid in the year 2025. This is the full value of the project. So major amounts, if you can come and see the hotel and the villa and so they are in a stage where substantial work has been completed. And hopefully, the target will be within this year, maximum beginning next year, okay, it will be complete. And if your third question is about Qatar Cool?

Yes.

Qatar Cool, as we stated and we made the appropriate disclosure that when we had the discussions with QIA, the plan was to sell 40% of UDC share of 91% to QIA, and this has been concluded in the year 2024. And due to control being shared between us and QIA and its subsidiary, the accounting treatment for the investment is investment in associate, investment in joint venture, and this will be the way forward 2025 onwards.

Yes, I suppose my question is, how big do you and QIA think that business will be over the next couple of years? Is this a doubling? Is this sort of single-digit growth? How does one think of it?

Well, this is -- there is potential definitely for growth, and we are trying to expand outside the state of Qatar as much as we can. And the growing business, the growing Gewan demand, you are introducing 586 units out of Gewan. And we have as well as retail, we have 54 villas. So there is always a continuous revenue stream that is growing and growing. And whatever development is completed, where a project is completed, the business of Qatar Cool is growing. So the expectation that there is a growth factor, and we are looking for overseas as possible.

Your next question comes from the line of Adnan Muqeem with Al Rayan Investment.

This is Zohaib again. So I want to know a few things. Firstly, how many units in Gewan have you handed over already? And have all the land plots been handed over also? Because I think as I understand, once you hand over, then you record the revenue from these, correct?

Yes. The land plots all handed over, all handed over. And the customers, if you come to see the Gewan, customers, they are building their own villas and their own development is being carried already. So from a land perspective, it's all handed over. As the units, it is in the progress, and we will be witnessing throughout the year 2025, the revenue recognition.

Okay. So all the units, 583 will be -585 will be.

It depends on whatever is sold. Of course, whatever is sold, whatever is sold, okay? And whatever the client is available to for handover. And whatever sold, we are very much ready for a handover, but the customer has to come, has to inspect, has to make the payment and so forth. And then an official handover will be made, but we are not expecting any delay in such a process because customers are eager to take their units, and we are ready from our side as well. All the revenue will be recognized in '25 onwards.

Perfect. How many units have been sold of the 585 .

In the magnitude of 40%.

40%?

Yes.

Okay. Okay. My other question is on the impairments. So you took some impairments in the fourth quarter for investment properties and you also made some impairment of receivables. So could you give us some idea of why -- what led to these impairments and this revaluation and which properties might be -- these are related to?

And there is always -- we do our investment in property valuation by reputed external valuer. And this is reflecting the market situation as of the year-end and the outlook going forward. So there was a need for additional revaluation or impairment in our investment into property, and this has been already accounted for. As for the impairment and receivable, this is -- you do the ECL, okay? And then this is depending on the collection. And so it doesn't mean that this will not be collected. But when it comes from an IFRS point of view, you have to take a provision at certain time elapse. And our impairment is almost like 4% of our portfolio, so which is quite reasonable.

Okay. But this is not related to any single client or any single project.

No, no, no. No it's an [indiscernible].

Okay. And my last question is on the general and admin expenses. So your general admin expenses have remained about QAR 300 million for the last 4 years, I can see, 2020 to 2023. This year, they have gone up to like QAR 360 million. Do you think QAR 360 million [indiscernible]

Yes, there are -- as I told you, the hospital launch, it is operation. So we had to hire doctors, nurses. When you have a hospital irrespective the level of services you are providing, we are -- it's a general hospital. So all doctors are on board, blah, blah, blah. So this creates -- warrants the increase in G&A, mainly to new businesses operating in the year 2024.

Okay. And the other -- the segment Other, that includes the hospital, right, in your segment of the segmental information.

Yes. But it is very immaterial because it opened during the fourth quarter of 2024.

[Operator Instructions] There are no further questions. I would now like to hand the call back over to Shahan for any remarks.

Okay. Great. So if there are no more questions, we can wrap this up. And I'd like to thank management for giving us an update on the quarter and the year, and we'll pick this up again next quarter. Thank you.

Thanks a lot. Thank you very much.

That concludes today's conference call. Thank you all for joining. You may now disconnect.