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Dubai / WAM
Tecom group on Friday announced a 12% year-on-year (YoY) increase in revenues to AED1.97 billion and a record 28% YoY increase in net profit to AED725.62 million for the financial year ended December 31, 2022 (FY 2022).
The results showed strong demand for the Group’s commercial and industrial properties, supported by Dubai’s strong macroeconomic environment and buoyant business and consumer confidence.
Malek Al Malek, Chairman of Tecom group, said, “Since our successful IPO in July 2022, Tecom group continued to realise unparalleled achievements, demonstrating solid results and rewarding shareholders with attractive returns.
“As per our declared dividend policy, we have distributed AED200 million in cash dividends to our shareholders in November 2022. Following our exceptional FY 2022 performance, the Board of Directors recommended an interim dividend payment of AED200 million to be distributed in April 2023, which will bring the total dividend to AED400 million for the second half of 2022.
“We remain committed to distributing a total dividend of AED800 million per annum in our first three years of being a listed company, subject to the Board of Directors and General Assembly required approval.”
Abdulla Belhoul, Chief Executive Officer of Tecom group, said, “The strong growth in our occupancy rates in 2022 indicates a sharp return in demand for quality commercial and industrial real estate assets in Dubai and reflects the attractiveness of Tecom group’s specialist real estate offerings.
“I am encouraged by the progress we have made this past year, particularly in increasing the value of our investment property portfolio by nearly 10 percent, as well as increasing and enhancing our high-quality customer base to reach more than 9,500 including companies and freelancers, which represents a 22% YoY growth.”
As of December 31, 2022, the occupancy level for commercial and industrial assets was 86%, registering the fourth quarter of sequential growth and a substantial increase from the year-end 2021 occupancy level of 78%.
Customer retention rates stood at 92 percent, surpassing market expectations and reaffirming the unparalleled customer offerings provided by Tecom group. Over the year, more than 1,700 new customers joined the business districts that cater to six different strategic sectors – Technology, Media, Education, Science, Design and Industry – with high demand for both ‘built-to-suit’ and ‘built-to-lease’ properties.
Earnings before interest, taxes, depreciation and amortisation (Ebitda) increased by 15% year-on-year to AED1.35 billion and the Ebitda margin expanded to 68% in FY 2022, compared to 66% in FY 2021. The higher Ebitda and Ebitda margin was due to improved revenue quality from all the different business segments and enhanced
operating expenses management.
Net profit grew by a record 28% year-on-year to AED725.62 million, in line with the top-line positive performance, which was also supported by the resilience of the economic environment in Dubai and the upward trend in its real estate market.
Funds from operations (FFO) stood at AED1.20 billion, representing a 19 percent year-on-year increase, a testament to enhanced operational efficiency across all income-generating assets.
Recurring free cash flow increased to AED964 million, up 21 percent year-on-year, on the back of healthy accounts receivables and effective cash conversion. Tecom group has a well-balanced portfolio of assets with short- and long-term contracts, supporting the predictability of cash flow.
At the end of 2022, Tecom group maintained a highly controlled cost of debt and healthy debt profile with a loan-to-value (LTV) ratio of 14.5 percent and net debt of AED3.08 billion.
The robust performance and overall positive real estate market sentiment resulted in an increase in the fair value of our investment property portfolio by 9.7 percent since March 2022 from AED19.41 billion to AED21.29 billion.
An attractive annualised dividend yield of 7.1 percent (based on closing share price on 30th December 2022) is among the top returns for shareholders who have invested in companies listed on the Dubai Financial Market (DFM).
The company also released the fourth quarter (Q4) 2022 results. It reported an increase in revenues by four percent YoY to AED493.66 million due to a rise in new customers and growth in occupancy rates which saw an eight percent increase from the same period in 2021.
Tecom group’s high-quality customer base saw many new high-profile organisations join one of its specialised business parks and existing customers taking additional space to expand operations.
Ebitda for the quarter stood at AED260 million and net profit at AED87 million, impacted primarily by increased depreciation expense following the delivery of new built-to-suit projects and additional capital expenditure (Capex) on the enhancement of existing assets and higher operating costs as a result of the return to normal activity levels compared to last year.
Tecom group provides real estate solutions across three main segments: Commercial Leasing, Industrial Leasing and Land Leasing. The company also offers a range of value-added services to facilitate the creation of unique ecosystems in its ten business districts for its customers.
FY 2022 revenue for the commercial segment increased by 17 percent year-on-year to AED1.06 billion, driven by a sustained increase in occupancy rates to 85 percent and strong above-target retention rates across all clusters of 92 percent.
Dubai’s expansionary economy and strong demand from manufacturing customers drove higher occupancy and retention rates for both the commercial and industrial leasing segments.
Land leasing continues to enjoy the same level of Ebitda margin at 84 percent, while revenue marginally decreased by 2.7 percent in FY 2022. However, the Group maintained a high retention rate of over 95 percent, expecting this segment to grow further over the coming years in line with Dubai’s economy.
FY 2022 revenue for the Services and Others segment increased by 19 percent YoY to AED216 million, driven by a strong increase in demand for government and registration services (axs) due to the easing of Covid-19 restrictions and a subsequent increase in new business established in Dubai.
Higher Ebitda and Ebitda margins for the Services & Others segment are owed to an improving top-line and lower general and administrative expenses due to operational efficiency enhancement.
As per the dividend policy set out in the IPO prospectus, Tecom group is committed to paying a total dividend amount of AED800 million per annum over the first three years of being a listed company.