Arabian Centers profits jump 171% during Q2 to SR246.4 mln

Arabian Centers Company revealed that the net profit after zakat and tax in the second quarter increased to SR246.4 million, compared to SR90.8 million in the same quarter of last year, at a rate of 171.3%.
This came after announcement on Thursday of the preliminary financial results for the period ending on September 30, 2022 (six months).
The operational profit amounted to SR350.2 million in the second quarter, compared to SR183.1 million in the same quarter of the previous year, a growth of 91.2%.
The net profit after zakat and tax in the 6-month period amounted to SR374.1 million, compared to SR217.1 million in the same period last year, an increase of 72.3%.
The gross shareholders’ equity “without minority rights” amounted to SR5.80 billion in the current period, compared to SR5.78 billion in the same period last year, an increase of 0.38%.
Profits per share in the current period reached 0.78 riyals, compared to 0.46 riyals in the same period last year.
The reason for the increase (decrease) in the net profit during the current quarter compared to the same quarter of the last year is:
Net profit increased by 171.2% to SR246.4 million in Q2-FY23 compared to SR90.8 million in Q2-FY22. The increase in net profit for Q2-FY23 compared with Q2-FY22 was mainly driven by the following:
• Revenues, which grew by 15.4% y-o-y to book SR573.7 million for Q2-FY23. Top-line growth during the current quarter was driven primarily by an increase in net rental revenue, reflecting a sustained decrease in the Company’s weighted average rental discount rate, an increase in occupancy, and secondarily by an expansion in media sales and utility revenue. Conventional discounts have maintained the downward trend observed since FY2018, while the amount of nonrecurring, COVID-19-related discounts amortized during Q2-FY23 was down by 43.5% y-o-y.
• Gross profit, which rose by 32.8% y-o-y to book SAR 354.3 million during Q2-FY23. Arabian Centres recorded a gross profit margin (GPM) of 61.7% in Q2-FY23 against a GPM of 53.7% for Q2-FY22. The absolute increase in gross profit was driven by the growth in revenues and a decrease in direct costs for the period, led by a decrease in depreciation of right-of-use assets.
• Other income, which increased to SR 86.0 million in Q2-FY23 compared to SR 3.2 million in Q2-FY22. The increase in other income during the period was driven by a gain on the sale of a land plot in the Olaya district of Riyadh as part of Arabian Centres’ overall program for the sale of non-core land assets.
The reason for the increase (decrease) in the net profit during the current quarter compared to the previous quarter of the current year is:
Net profit increased by 92.9% to SR246.4 million in Q2-FY23 compared to SR127.7 million in Q1-FY23. The increase in net profit for the current quarter was driven mainly by the following:
• An increase in gross profit, which grew by 15.7% q-o-q to book SR354.3 million for Q2-FY23. Gross profit growth was driven primarily by a decrease of 9.4% q-o-q in the cost of revenue, as well as a decrease of 5.7% q-o-q in depreciation expenses on right-of-use assets.
• An increase in other income, which grew to SR86.0 million in Q2-FY23 compared to SR1.3 million in Q1-FY23. The increase in other income during the quarter was driven by a gain on the sale of a land plot in the Olaya district of Riyadh as part of Arabian Centres’ overall program for the sale of non-core land assets.
• A decrease in general and administrative expenses, which declined by 17.9% q-o-q to book SR 51.3 million in Q2-FY23 compared to SR62.5 million in Q1-FY23.
• A decrease in interest expense on lease liabilities, which declined by 11.3% q-o-q to book SR35.4 million in Q2-FY23 compared to SR39.9 million in Q1-FY23.
The reason for the increase (decrease) in the net profit during the current period compared to the same period of the last year is:
Net profit increased by 72.3% to SR374.1 million in H1-FY23 compared to SR217.1 million in H1-FY22. The increase in net profit for the six-month period was driven mainly by the following:
• An increase in revenues, which grew by 12.8% y-o-y to book SR1,136.7 million for H1-FY23 compared to SR1,007.7 million in H1-FY22. Top-line growth for the period was driven primarily by an increase in net rental revenue, reflecting a sustained decrease in the Company’s weighted average rental discount rate, an increase in occupancy, and secondarily by an expansion in media sales and utility revenue.
• An increase in gross profit, which rose by 19.5% y-o-y to book SR660.4 million during H1-FY23. Arabian Centres recorded a GPM of 58.1% in H1-FY23 against a GPM of 54.8% for H1-FY22. The absolute increase in gross profit was driven by the growth in revenues and a decrease in direct costs for the period, led by a decrease in depreciation of right-of-use assets.
• An increase in other income, which grew to SR87.3 million in H1-FY23 compared to SR5.3 million in H1-FY22. The increase in other income during the period was driven by a gain on the sale of a land plot in the Olaya district of Riyadh as part of Arabian Centres’ overall program for the sale of non-core land assets.
• A decrease in general and administrative expenses, which declined by 3.3% y-o-y to record SR113.8 million in H1-FY23 compared to SR117.7 million in H1-FY22.
• A decrease in interest expense on lease liabilities, which declined by 11.2% y-o-y to book SR75.3 million in H1-FY23 compared to SR84.8 million in H1-FY22.
Certain comparative figures have been reclassified to conform to the current period’s presentation.
Other Operational KPIs:
• Like-for-like period-end occupancy recorded 94.2% at the close of H1-FY23, up significantly from the rate of 91.9% reported for H1-FY22. The growth in occupancy rates during the period marks a full recovery exceeding pre-COVID levels, with the Q2-FY23 occupancy rate surpassing the figure of 93.1% booked at the close of FY2020. Sustained expansion in occupancy rates reflects a solid recovery in commercial activity during the period and marks significant progress towards management’s strategic objective of attaining an occupancy rate of 94-95% by end-FY2023.
• Visitor footfall came in at 29.8 million for Q2-FY23 up by a strong 38.6% y-o-y from 21.5 million visitors in Q2-FY22. Footfall increased 41.6% y-o-y on a six-month basis, to reach 57.1 million visitors in H1-FY23. Footfall for FY2023 is approaching the levels seen during the last full pre-COVID year
Recent Corporate Developments:
• On 25 October 2022, the Board of Directors of Arabian Centres Company approved a program for selling an identified portfolio of non-core landbank assets. This portfolio has a total book value of SR 1.2 billion and an estimated market value of over SR 2 billion. The first sale from this portfolio was of a land plot measuring c.18,000 sqm in the Olaya district of Riyadh, with a final price of SR 230.5 million, yielding a profit of SR 75.5 million reflected in Arabian Centres’ financial results for Q2-FY23.
• Earlier in 2022G, the Company signed two agreements with Riyad Capital to establish two new real estate investment funds for its newly launched Jawharat projects in Riyadh and Jeddah. As such, funding for the projects is now complete. Under the funding agreement, the equity portion of total assets under management for both projects are valued at SR 4.4 billion. The remaining non-equity financing of SR 2 billion has now been secured through a group of local banks.