Q2 2026 Emaar Properties PJSC Earnings Call
Speaker #1: 14. In respect to his remarks in that context. Then you go to Permanent. Permanent.
Speaker #2: Thank you. Okay. Good afternoon from Dubai to everyone who is there on the call. let me start with our priorities and our perspective on the operating environment, because it is what has shaped most of what you will see in these results.
Speaker #2: On the regional situation, we want to be clear and balanced: we are operating in a dynamic environment, and continue to monitor the developments closely.
Speaker #2: At the same time, UAE has consistently demonstrated the characteristics that matter the most in such times, which is stability, institutional continuity, high-quality infrastructure, and a long-term economic vision.
Speaker #2: Dubai and the wider UAE have a consistent track record of recovering quickly after such periods of disruption. For Emaar, this matters because our business is anchored in one of the region's most resilient markets.
Speaker #2: The clear impact has actually been on the real estate sales, from March onwards as the regional conflict weighed on the sentiments, cross-border travel, and buyer decision-making, new sales activity slowed, property sales were down compared to prior year.
Speaker #2: This largely deflects a deliberate decision to moderate the pace of new launches, as the regional picture evolved. Rather than a structural change in the underlying demand of our product, importantly, it is not— it does not affect the revenue we are recognizing today, which is generated by executing on our large backlog.
Speaker #2: Our recurring business showed the same diversification at work, contractual base rents kept our malls business growing even as hospitality, entertainment absorbed the impact of weaker international travel.
Speaker #2: Together, the first half reflects strong earnings growth and disciplined execution, delivered despite a more difficult operating backdrop. The strength of our balance sheet positions us to navigate near-term volatility while continuing to focus on long-term value creation.
Speaker #2: We are monitoring developments closely, and we will continue to calibrate our pace of activity as conditions evolve. I will hand over to Abay, who will take you through the financial results in more detail.
Speaker #1: Thank you, Perman. Again, the backdrop that Perman has just described: first, I mean, numbers were— I mean, our sales numbers were down until— and our tourism business, business linked to the tourism, has not performed as expected.
Speaker #1: Obviously because of the reasons. First half was period of a strong earning growth and disciplined executions, achieved despite more difficult operating backdrop, as Perman mentioned.
Speaker #1: Our group revenue grew 21% year-on-year to 823.9 billion. This growth was driven primarily by our UAE development businesses, where excel— — accelerated construction progress against the larger backlog lifted revenue recognition.
Speaker #1: By our— and by higher turnover rents in our malls portfolio during Q1 that this was partly offset by lower revenue from our hospitality and entertainment business.
Speaker #1: Gross profit was 813.4 billion, up 20% year-on-year. This gross margin holding steady at 56%, in line with H1 2025. EBITDA grew by 24% to almost 13 billion, and with EBITDA margin improving to 54% from 52% earlier year.
Speaker #1: This improvement reflects operating leverage in our development business, a higher contribution from associates and joint ventures, notably Emaar South and Umlad. And continued cost discipline with SG&A in check despite the growth in revenue.
Speaker #1: I would also note that our results for the period include one-off donation of 8200 million to national community initiatives, which is reflected in reported costs.
Speaker #1: The profit before tax increased 23% despite— to 812.8 billion, and net profit attributable to shareholders was 8.7 billion, up 22%. Translating to EPS of 0.98 dirham per share.
Speaker #1: Coming to sales backlog and UAE development, group property sales totaled 26.6 billion in H1 2026, down 42% year-on-year. This decline was concentrated in Q2.
Speaker #1: Sales during the conflict period from March to June 2026 has dropped, significantly. This reflects a deliberate management decision to moderate the pace of new launches as the regional picture still evolving.
Speaker #1: Rather than it's mentioned. It is important to note that this slowdown in new sales does not affect the revenue we are recognizing today because that revenue is generated by executing on all existing backlog.
Speaker #1: Our revenue backlog today stayed at almost 165 billion dirhams, which is up 13% year-on-year, and of which 8136 billion relates to UAE. This backlog converts to revenue over the next 4 to 5 years and giving us a strong visibility on future earnings regardless of near-term sales volatility.
Speaker #1: Construction progress across our master plan community is continued uninterrupted, and with the majority of our projects running ahead of the schedule. Emaar development, our core UAE development business, launched 11 new projects.
Speaker #1: In the first half of— and announced— we have announced also 8200 billion dirham master plan. Under scoring, our continued confidence in Dubai's long-term story.
Speaker #1: Property sales reached 22.4 billion, and underpinned by strong start of the period. Emaar development recorded revenue of 13.3 billion, up 34%, and profit before tax increased 41% to almost 8 billion.
Speaker #1: Including other UAE development businesses, in UAE, total revenue of the development businesses almost 18 billion, 17.7 billion, up 30%. Our customer collection remains healthy overall, though default rate remained controlled well within 1% of the sale value.
Speaker #1: We are monitoring this closely at current level; we do not consider it a cause of concern. Recurring revenue: turning to our recurring revenue business, our malls retail and commercial leasing portfolio again demonstrated the strength of our predominantly base rent structure.
Speaker #1: H1 revenue grew 9% to 3.5 billion, and EBITDA grew by 10% to 3.1 billion. Given its tenant sales across our portfolio declined around 13% amid shorter softer footfall, our average occupancy of a mall remains strong at approximately 98%.
Speaker #1: This shows the confidence of retailer still in the UAE business, UAE. This is a diversification working as intended, contractual base rents continue to grow even as discretionary tenant spending moderated.
Speaker #1: Our expansion program of grand drive in Dubai Mall and the new Dubai Square Mall at Dubai Creek Harbor is progressing on schedule. Our hospitality leisure and entertainment business were the segment most directly affected by the regional conflict, given their dependence on the international travel.
Speaker #1: Hospitality revenue declined by 22% to 81.6 billion, with average occupancy across UAE hotels falling to 60% from 80% a year ago. As international visitor volumes to the region were disrupted, our entertainment attraction also saw similar decline in footfall, and where we recorded one in the entertainment businesses, we also recorded one-off impairment of 135 million relating to the strong coaster ride in Dubai Hills Mall.
Speaker #1: We have maintained a tight cost discipline across this businesses through the period, and we believe that they will remain well positioned. Recover as regional conditions stabilize at.
Speaker #1: International diversification: our international development business continued to lead by India and Egypt, and they contributing almost 4.2 billion in the sales, revenue increased 8% to 11.1 billion, today international revenue backlog stands at 29.2 billion.
Speaker #1: Coming to our balance sheet, in an environment like this, financial strength matters most than ever. We ended H1 with 73.6 billion in total cash, gross debt at mere 9.4 billion, resulting in net cash of around 64 billion.
Speaker #1: Including which includes our escrow balance of 44 billion. Our debt-to-equity ratio is 0.09, and the interest cover remained robust at 32 times. Under scoring, the strength of our balance sheet relative to our financial obligations.
Speaker #1: We also maintained excess to approximately 2.5 billion dollar of undrawn credit facility, providing further flexibility should we need it. On capital allocation, our 5-year capex plan between 2026 to 2023 stands at approximately 70 billion, covering land acquisition, our mall expansion, residential leasing asset, and our international operations.
Speaker #1: We remain committed to funding these programs through entirely from our own balance sheet. This liquidity and access to capital give us the ability to, you know, continue to be flexible to continue executing our master plan, meet our capital commitments, and invest selectively without compromising on our financial discipline, regardless of how the external environment evolves.
Speaker #1: Coming to Outlook, looking ahead, our priorities remain clear and consistent. First, convert our 165 billion backlog into profitable growth through this discipline execution. Calibrate the pace of new launches to prevailing market condition while maintaining delivery and handover momentum.
Speaker #1: Protect the base rent structure that underpins our recurring income. And support our hospitality business as regional conditions stabilizes. Deploy our balance sheet selectively, investing where returns are highest, and continue investing in customer experience, talent, and sustainability to support our long-term competitiveness.
Speaker #1: In summary, H1 was a period of strong earning growth, disciplining discipline execution, delivered against the genuinely difficult regional backdrop. Our development business continued to convert backlogs into earnings.
Speaker #1: Our malls and leasing portfolio continue to grow, and our balance sheets remain one of the strong in our sector. While we retain mindful, we remain mindful of regional environment.
Speaker #1: We are confident in our positioning, disciplined in our execution, and focused on creating long-term value for our shareholders. Thank you so much. Operator, we will now open the line for questions.
Speaker #2: Thank you. If you would like to ask a question today, please press star followed by 1 on your telephone keypad. If you change your mind, please press star followed by 2 to remove yourself from the question queue.
Speaker #2: When preparing to ask your question, please ensure your device is unmuted locally. And if you've joined us online, you can submit a text question via the Q&A button on your browser.
Speaker #2: I'll hand back to you, Ilham.
Speaker #3: Thank you, Lucy. Thanks, Pawon and Adri. I'll maybe start with the first question. Which is on launch strategy and demand. Given the limited launches since the start of the regional disruption, how has demand for launches from March onwards tracked versus expectations?
Speaker #3: And if we were to look ahead, could you outline the second half of this year pipeline in terms of projects, units, and GDZ, including any projects deferred from 2Q?
Speaker #3: Thank you.
Speaker #1: Thanks very much for the question. So the launches, we had few launches over quarter to about 3 launches, even as we speak, we had a launch yesterday itself.
Speaker #1: So the launches are happening. As we had mentioned in the past, we wanted to make sure that these launches are kind of moderated and measured.
Speaker #1: We want to make sure that we do not carry too much of an inventory, and make sure that the timing is right for the absorption to happen.
Speaker #1: And the one that we had in quarter 2, we had good absorption. We had a couple of launches in Emar South, and the uptake was pretty good.
Speaker #1: Over 80% of what we had launched was sold. As of now, also, we are having a launch in Greek Harbor. And upon the market, we will continue to roll out.
Speaker #1: As I said, in the past also, the pipeline is there. We are ready with ready to go to market with a pipeline of launches pretty much historically, we had the ability and the capacity to launch a project a week.
Speaker #1: So that capacity and the pipeline is there. It will depend upon how the absorption is. We will be mindful that we do not keep launching if the absorption is lower.
Speaker #1: We'll make sure that we cross the threshold of our absorption before we make a new launch. We don't give forward guidance, so I would kind of stay short of giving you direction of the Q2 sales.
Speaker #1: But as far as readiness is concerned, we have been preparing over the last 3, 4 months. In getting our projects through to the design stage and ready for launch.
Speaker #3: Very clear. And do you anticipate any shift in the project mix from ultra-luxury towards more affordable segments?
Speaker #1: I do not anticipate any mix in the product. It continues to remain the apartments and the villas. What we have launched recently has been apartments and has been going well.
Speaker #1: Villa product is very, very resilient, even throughout in the primary and secondary market as we saw through. So currently, what we have launched is apartments.
Speaker #1: I think the mix continues to remain in the same proportion. As we have done in the recent years.
Speaker #3: Very clear. Lucy, over to you for the questions.
Speaker #2: Thank you. The first question today is from Raul Bajaj of Citigroup. Your line is now open. Please go ahead.
Speaker #1: Hello. Hi. This is Raul from City. Hi Pawon. Hi Adri. I have two questions mainly. The first one, as I understand the part of the reason for your reduced sales momentum, especially in 2Q, was launch sort of delays, whatever you just alluded to.
Speaker #1: Is it also fair to assume that a part of the reason for this has also been the pricing aspect, that competitors have been really more aggressive in terms of pricing and payment plans, which has impacted Emar's inventory sales?
Speaker #1: In 2Q. So is that a fair assumption, or you've not seen much of pricing or payment plan remain related pushback from customers? That's my first question.
Speaker #1: And second question, to what extent and you think that the run rate of sales that we've seen so far this year could impact dividends at the end of the year?
Speaker #1: Thank you.
Speaker #4: Hi Raul. Thanks for your question. Raul, let me give you why probably there was a bit moderation on the launches. If you look back, before March, right, Jan and Fab, it's a public number, we had about 17 billion of sales.
Speaker #4: Right? So we came the regional situation before it become unstable a little bit. Right? From a position of strength. And that continues to remain largely as far as Emar is concerned.
Speaker #4: But what as a company, we also wanted to be mindful is that preceding that, in the previous 5, 6 months, let's say from October until Feb, we had close to about 30 billion of sales.
Speaker #4: Right? Dropping the prices or giving those payment plans, which probably when you are comparing with some of the competitors with a 50-50 or a post-handover or price reduction, becomes detrimental to the quality of sales that you already have in your backlog.
Speaker #4: Right? Our first priority was to make sure that people, investors who have trusted in us, invested into us, they do not feel let down with us immediately after that, giving those kind of waivers to book sales.
Speaker #4: Second thing is also, it is important that what we believe what we book should be quality sales and that is exactly what is reflecting in our quarter 2 revenue numbers and quarter 2 cash flows where you see the revenue recognition has been very, very strong.
Speaker #4: And the cash flows also has been very, very strong. What we achieved in this quarter is that 96% of my backlog is at least 20% paid, which eventually in future becomes subject to revenue recognition.
Speaker #4: So we have locked in those customers. And a lot of my customers are greater than 30, 40% paid on an average, greater than 50% paid.
Speaker #4: So once these customers are deep into equity, my visibility of the future cash flows becomes more and more stronger. So that was one important thing.
Speaker #4: Second thing is, if you see our backlog, right, we have close to about in UA development business alone, we have about 145 billion odd backlog.
Speaker #4: Right? Look at 2025. We was one of our record years. We recognized about 35, 36 billion in the development business only. This backlog alone gives me a runway for the next 4 years to deliver at least the same numbers of 2025, even if hypothetically, if we say that no sales above, which is again very, very theoretical and hypothetical situation.
Speaker #4: Right? So there was no need or desperation for us to overreact to that situation. And it was important that we pace down and be measured into how we want to approach this situation.
Speaker #4: If you look and compare other major developers, right, major developers, none of them as far as I'm aware have actually had any significant change in the strategy.
Speaker #4: The ones that you see, I think I personally feel is a bit of an overreaction to book sales. How much that is a quality sale with those kind of payment plans and price reduction, how much that will reflect in the cash flows and in the P&L will remain a question.
Speaker #4: But the reason for our approach, I hope I've made it point, on the dividend, I think our cash flows are strong enough. Right? And as of now, I don't see any reason why the approach if there is any reason to take an approach different than what we have taken last year.
Speaker #4: But having said this is a board shareholder matter, I'll park it for them to decide. But I don't see any risk as far as the management is concerned.
Speaker #4: I hope I answered your question, Raul.
Speaker #1: This is very clear, Pawon. Thank you so much.
Speaker #4: Thank you.
Speaker #2: Thank you. The next question comes from Mark Mozzi of Bank of America. Your line is now open. Please go ahead.
Speaker #3: Thank you very much. Very good afternoon, everyone. So I have two questions. The first one is on the cash generation and liquidity. And the second one is on dividend policy.
Speaker #3: The first one is about the net cash decline we've seen in Q2 compared to Q1, about 4 billion dirhams. Could you help us understand where that comes from?
Speaker #3: Is that working capital movement, land, construction, dividend, anything that could help us to have a clear view on what's going to happen according to you in terms of cash generation in Q3 and Q4, if things remain as they are on the market?
Speaker #3: Do you want my second question, or I wait for the answer for the first one?
Speaker #4: I will answer you the first one. That is less stress on my memory. Mark, thanks very much for your question. So from an overall cash, when you see it is largely because of the lower sales, the cash that we had, a lot of cash is put into the development that goes into your revenue recognition.
Speaker #4: Right? When you construct, you pay the bills to your contractors, and you recognize the revenue. Largely, a simple reason for that lower cash versus the previous quarter close is a result of lower sales.
Speaker #4: But let me add on to that, probably when you see, I think the dividend that we paid out was in April. Right? If you remove that dividend element of it, which was paid out in April when you compare March to June, actually the net cash would have increased because the dividend payout was close to about 9 billion.
Speaker #4: And what you referred to is about 4 billion. So net cash actually excluding dividend is an incremental of 5 billion.
Speaker #3: Yeah. Thank you very much. But there is an element of working capital requirement, as you said as well. Okay. On your dividend policy, it's interesting to note that you have clearly reiterated your dividend framework introduced late 2024, which has resulted in distribution of 1 dirham per share over the past 2 years.
Speaker #3: And you've been stating that it is 100% of the share capital issued and that's going to be for 24 and the following few years.
Speaker #3: Where are we on those few years according to you? And do you think that if your cash generation would be lower say 28, 27, because of the current level of sales, that would lead to a dividend adjustment according to your dividend policy, which is roughly if I do basic math, 50% coming from the net cash from the development activity and 50% from the recurring activity.
Speaker #3: So that's 50% of your earnings, by the way. Thank you. Up to 30 to 50. Sorry. Up to 50.
Speaker #4: Thanks, Mark. Good question. So Mark, if you see you rightly pointed out, 50, 60% of my activity is development business. Right? So the thing here is, if you see in development business spend alone, 98% of our cost is variable cost.
Speaker #4: So if I don't launch and I don't sell. I don't construct and spend either. Right? So that cash flow in the short term over the next 2 to 3 years has does not have any adverse impact on the free cash flow.
Speaker #4: Right? Which is then eventually gets linked to the dividend because free cash flow from any project comes towards the end of the project once it is about 80, 90% constructed.
Speaker #4: So those sales have no bearing in the short-term cash flows. And also that if we are not launching and selling, we are not spending on that either.
Speaker #4: As I said, 98% is a variable cost. Now, as far as the cash flows are concerned, again, taking the same explanation which I gave you a minute back in your previous question.
Speaker #4: Right? From quarter 2 to quarter 1 to quarter 2 end, so we saw a one full quarter of lower sales. Excluding dividend, my net cash actually went up than actually going down.
Speaker #4: Right? If we remove that element of dividend. The current collections on the backlog is very, very strong. On an average, we are about 50 to 60% collected.
Speaker #4: People are deep into equity. My default rate is less than 1% on sales value. So as of now, we do not see any reason for any change in what we had communicated.
Speaker #4: Over the next 2 to 3 years, unless there is very the regional situation changes very significantly, I think, which is not the case because I think we are the situation seems to be reversing on a lot of indicators that we are seeing.
Speaker #4: Of late in June and continuing to be in July, I don't see a reason why would we worry about any change in what we had communicated in the past.
Speaker #4: I trust that.
Speaker #1: Yeah. Further to add to what Pawan has mentioned, you initially alluded to I just wanted to clarify that there is no change in dividend policy that we have made at all.
Speaker #1: And what we have done currently is just included that dividend policy in our new traditional presentation. The dividend policy remains consistent with what we have announced in 2024 and disclosed on our website.
Speaker #1: The only change what happened in current time is that we have included that in investor relation presentation as well for a better so that everybody analysis analysts know about this.
Speaker #1: And in that, we cleared policy of ours. We did mention since 2024, which you also alluded to, that 81 dirham or 100% of share capital will be paid out as a dividend for few couple of years, 2024 onwards.
Speaker #1: And obviously, the stated policy remains the same.
Speaker #3: That's extremely clear. Thank you very much. I appreciate it.
Speaker #2: Thank you. We'll now move on to some text questions. So I'd like to hand back over to Ilham.
Speaker #5: Thank you. So we have a text question here. Asking on the launch plan for the second half of the year, assuming the property cycle in UAE is now normalizing from a boom phase to stabilization.
Speaker #5: One second. Stabilization as the chairman of Emaar ar stated in one of his interviews. What do you see as normalized through the cycle run rate for Emaar's UAE pre-sales on an annual basis as we think about 2027 and beyond?
Speaker #4: Thanks for that question. See, so we had absolute phenomenal last 3 years from 37 billion to 65 to 71 billion. Right? So I think this is where a bit of normalization is happening for the reasons which were out of control for all of us.
Speaker #4: I think it is summers. And it's very difficult to make any assumption now until we see how things evolve when the summers are over.
Speaker #4: They are slow anyways. Most of the time, if you compare all the previous Q3s. So I think the situation becomes a bit more clearer and evolved once we are in September or so, September, October, when things come back.
Speaker #4: Hopefully, by then, there is more clarity on the regional situation. So it's very difficult for us to give a number. But the thing here is what I can say is, over the quarter, over the months, through quarter 2, we are seeing an improving trend across the businesses.
Speaker #4: Be it hospitality, be it malls, including the real estate sales.
Speaker #5: Great. Very clear. Let's see if we can move to audio questions, please. Thank you.
Speaker #2: Thank you. The next question comes from Mohammed Haider of Arkham Capital. Your line is now open. Please go ahead.
Speaker #3: Thank you, hello, gentlemen. Maybe an update on the CAPEX strategy, please, if it's changing from what you communicated before. Especially on land payments. You were a bit aggressive in your guidance before for Emaar Dev.
Speaker #3: Would you still adopt this strategy in this environment, in the sense that you will continue to acquire land every year as a mandate? And what's the update on the CAPEX deployments on the recurring income as well?
Speaker #3: Because we haven't seen much deployed in H1. On either investment properties or the buildup of hotels. Thank you.
Speaker #4: So largely, there is no directional change on the strategy. Right? However, we are reviewing our strategy as of now and probably in subsequent quarter will come up with the update on the strategy.
Speaker #4: Having said that, as far as land is concerned, that's the fundamental business we are into development. So that remains as is. But we will be opportunistic and mindful of what we are buying and with our ability to monetize it quickly.
Speaker #4: So it would not be buying any land at any price. And given the current situation, I think we would also want to make sure that we enter at any deal at the right price.
Speaker #4: As far as the recurring income is concerned on the for example, the Creek Mall, we are progressing with it. The works have already started.
Speaker #4: On some other businesses, I think we had public announcement as well in recent times. We would need to be mindful on the construction cost and only enter when we see that the costs are moderated and right cost for us to get started on those projects.
Speaker #4: We would not want to carry something 15, 20 percent at a higher price on a balance sheet for the rest of future years. So largely, direction remains the same.
Speaker #4: But we will be mindful and moderate the way we are going to spend the cash.
Speaker #3: Very, very clear, Pawan. And one follow-up on the impairment in Q2, the 135 million. What was it related for again, please?
Speaker #4: This is basically one of our asset in the way Hills Mall. It's an entertainment attraction. The storm coaster. Right? It was revalued and based on that, the carrying value was higher than the revaluation.
Speaker #4: So that's the 135 million impairment that we had taken.
Speaker #3: Very clear. Thank you.
Speaker #4: Thank you.
Speaker #2: The next question comes from Athea Safiandine of JPMorgan. Your line is now open. Please go ahead.
Speaker #3: Yes. Hi. Good afternoon, gents. It's Tahir from JPMorgan. There's maybe two questions, if I can. Gents, just on the UAE development. Just in terms of strategy, I mean, there is around 16 billion worth of inventory, give or take.
Speaker #3: That's unsold. Clearly, you've taken a more cautious approach on launches. You're not willing to maybe negotiate on payment plans and pricing. But I just want to understand, why is there a slow traction on inventory sales?
Speaker #3: And when would you be considering maybe a more aggressive approach on payment plans? I mean, you're already at 80/20, which is one of the best in class across the market.
Speaker #3: But is there a way, assuming maybe the geopolitical situation drags on for some time, you will start thinking about the ability to maybe change on the payment plans and so on to drive sales back again to higher levels from where we are on Q2?
Speaker #3: I just want to understand just the view. Are you giving yourself till September, October, or how should we think about it? Because the inventory is there.
Speaker #3: Right? The unsold inventory is there. And you've just mentioned that you've progressed well on cash collection and construction costs on most of these already launched projects.
Speaker #4: Thanks, Tahir. On the inventory sales, yes, 15 billion odd is there. So if you see between let's say, if I pick up March including March to June, we had about 5 billion of sales.
Speaker #4: And that is all inventory that we have sold. So we actually reduced our inventory by a quarter. Percentage over the last three months. Right?
Speaker #4: So I think as you said, we will give ourselves a couple of months' time to really understand how things get better. Right? And as I said, I think we've already started to see the trend reversing in the recent months.
Speaker #4: In the last couple of months. So at this stage, we don't see a need for us to reverse that. Anytime soon. But we'll have to see how situation evolves.
Speaker #4: If it continues and persists for a duration longer than you and I can expect, it could be a different thing. But at this stage, I think we are pretty confident and comfortable with the way we are progressing.
Speaker #4: And again, I think there is no urgency because any of these sales that we do today is not going to impact the cash flows or revenue recognition for the next 18 to 20 months.
Speaker #4: Right? And Emaar has the execution ability to have fast track the launches. Like launches as fast as we can, a week a launch a week.
Speaker #4: And even fast track the construction design, everything. Right? But at this stage, I think it is important that we protect the backlog. We make sure that people who have invested in us remains comfortable and continue to honor their commitments with the current investments.
Speaker #4: But yeah, we'll see how situation evolves over the next couple of months. Having a look at it.
Speaker #3: Sorry. So inventory as of quarter end is around 15 billion. Right? In UAE.
Speaker #4: Approximately, yes. That's correct.
Speaker #3: Yeah. Okay. And just maybe just a follow-up. You did mention some numbers, but I missed them. 96 percent of the backlog is at least what?
Speaker #3: You said 20 percent above 20 percent construction completion and more than 50 percent cash collected. Is that right?
Speaker #4: No. What I said was at least 96 percent of my backlog is at least 20 percent paid. So what I have to do is I only need to construct to recognize revenue and keep collecting money.
Speaker #3: Okay.
Speaker #4: And overall backlog is at least 50 percent paid.
Speaker #3: You mean collected? Cash collected?
Speaker #4: Yeah. Yeah. Yeah.
Speaker #3: Yeah. Okay. So at least okay. All right. So in terms of just if we think about the existing backlog, this can actually keep you running for the next four years in terms of revenue recognition, in terms of margins of 50 percent.
Speaker #3: Clearly, you seem to be comfortable on that. And also in terms of free cash generation. Right? I mean, just to think about it, in terms of the existing backlog, things are moving business as usual.
Speaker #4: Absolutely. See, if you see again, I'll repeat myself on this. Last year, we did about 35 billion revenue recognition on UAE development business. 145 billion for me next four years can keep me at the same level as 2025.
Speaker #4: Right? My net cash, excluding the dividend of quarter two, is in excess of quarter one cash. Right? That demonstrates the quality of sales backlog and the commitment of the customers who are continuing to honor and significantly control defaults.
Speaker #4: So I don't see a reason why we should worry on the P&L.
Speaker #3: Okay. And the free cash flow yeah. And the free cash flow should definitely pick up because if I look at your unit delivery schedule, 27, 28, 29, it's an upwards trend in terms of unit handover.
Speaker #3: So naturally, free cash out of escrow should increase quite significantly over the next three years. Right?
Speaker #4: Your analysis is good.
Speaker #3: Thank you.
Speaker #4: Your approach is good.
Speaker #3: Okay. Very clear. Thank you. All right. Thanks.
Speaker #2: Thank you. The next question comes from Evgeny Anankov of Jefferies. Your line is now open. Please go ahead.
Speaker #5: Hi. Hi, Bowen and Amber. Thank you so much for taking my questions. I have two. First, is on your new launch in Dubai Creek Harbor called Valea.
Speaker #5: Please correct me if I'm wrong, but in some marketing materials, I can see that starting price is around 2 million dirhams, implying an average price per square foot of around 2.5, 2.6 thousand.
Speaker #5: This looks quite below your last launches in the community from Q4, like Creek Haven and Creek Bay, that were around 3.2K. I'm just trying to understand if there is any change in your pricing strategy or maybe it's not fair to compare the pricing of Valea with this early launches as this is a new retail cluster of Creek and maybe less premium.
Speaker #5: And my second question is on dividends. As for Emaar development dividend, is there still an expectation of progressive dividend compared to EP given the free cash flow of development we'll be picking?
Speaker #5: And additionally, on dividend, has the management considered or might consider switching to interim dividends to enhance the marketing confidence in commitment in your commitment to shareholder returns?
Speaker #5: Thank you.
Speaker #4: Thank you very much. On Valea, I think that's probably would be a little bit different way to analyze it. What happens is the starting price is not the average price.
Speaker #4: Right? So 2,500, when you see or 2 million when you see, is actually the apartment which is the on the starting of the building, on the lowest floor, and the one without any views, etc.
Speaker #4: So it will be probably the one most compromised in terms of view and the location within that building. Right? So the average price there is no change.
Speaker #4: We have had the average price is much higher. And in line with the recent launches, compared to what probably you would have inferred, having said that, between the master plans, between the zones in a master plan, the prices will vary because let's say, for example, the island district, which we launched earlier.
Speaker #4: So that is with a water view. Or the Creek Beach, which is a low-rise low-density apartment, versus this is a new zone that we have activated.
Speaker #4: So some price differential will always be there, which is always there even in the previous launches when we start a new zone. But no, it's not 2,500.
Speaker #4: It's much higher than much higher than that.
Speaker #5: Thank you. That's clear. If I can ask on dividends.
Speaker #4: Yeah. Sure. On the dividends, so on the dividends, as far as Emaar development is concerned, Emaar development has is a cash generation machine. The dividend is, again, something which is a board matter.
Speaker #4: What I can leave you with is that for us to honor the commitment of the dividend at the parent level, there's always pressure on Emaar development to support it.
Speaker #4: Right? And the cash flows are strong. So numbers is something I cannot comment on. But yeah, I think the outlook is very positive.
Speaker #5: Great. Thank you so much, Bowen.
Speaker #4: And there is no question on the interim dividend. It's something which is not being discussed as of now. I think historically, we have always been the annual dividend.
Speaker #4: And I don't see any such proposal that is around.
Speaker #5: That's clear. Thank you so much. Thank you.
Speaker #2: Thank you. We'll now go back to text questions. So I'd like to hand over to Ilham.
Speaker #6: Thank you. So the next question is as follows. Can you talk about the impact of higher construction costs on the outlook for your margin?
Speaker #6: We understand your contracts are fixed price with contractors, but is there a risk that contractors are under pressure and therefore will be passing on costs to you?
Speaker #6: And is Emaar more flexible in terms of those contracts? Thank you.
Speaker #4: Well, it's a fair quite a fair question. The thing here is now, four months into what happened since March, we have not seen any slowdown in our construction activity.
Speaker #4: Though supply chain has had its challenges, but our contractors were able to find a way out to get or replace the required materials on site and continue with the production.
Speaker #4: Having said that, large part of the construction equipments and construction materials were already contracted and sourced in. And plus, there were alternative options available within the country as well to reduce the impact of those cost increases.
Speaker #4: So on the existing contracts, we do not have those impacts. It's been now four months since we are seeing this challenge. But no, as of now, we don't see any impact on our margins.
Speaker #4: The contractors are able to absorb it. And we are pretty much good on this. On the newer contracts, we are having watch on the prices and contracts.
Speaker #4: And we are able to negotiate quite strongly with the contractors a lot of contractors want to work with us. And during these times, I think there's always flight to where they see the cash is.
Speaker #4: And where they see that they can continue to get newer projects. So we are able to there are some cost increase which is there, but I think large part of it, the margin is strong enough to be able to absorb it.
Speaker #4: But on the existing backlog and the current awarded contracts, no, there is no impact.
Speaker #6: Okay. Very clear. Which brings me to a question on margin, actually. So how sustainable is the current gross margin? Your presentation shows backlog has a gross margin of 48%, but you keep delivering over 55%.
Speaker #6: How should we be thinking about the trajectory of gross margin from here? Thank you.
Speaker #4: So 90% of our backlog is already contracted. And which is what is reflecting. I don't see any significant change in these margins as far as the backlog is concerned.
Speaker #6: Okay.
Speaker #4: And that is what is reflected in quarter two as well. Right? We have seen a full quarter of heightened logistics restriction. Right? And now, probably as we compare it with those early months, I think people have found a way to get those shipments.
Speaker #4: And it is far more I say accessible and resolve the logistics issues versus what it was in March and April. So I don't see anything that should make us worry.
Speaker #4: It comfortably should remain above the 50%.
Speaker #6: Very clear. Lucy, over to you for all your questions.
Speaker #2: Thank you. The next question is from Mark Mosse of Bank of America. Your line is now open. Please go ahead.
Speaker #5: Thank you, Rita. Very quick follow-up for me on the dividend. The first one is around to what extent does the current regulatory framework allow you to allocate your cash in escrow account in a dividend?
Speaker #5: Is it something you can do or not? And the second one is about the $50 billion cash you have in bank right now for $51 billion in cash right now.
Speaker #5: How much is effectively available for potential cash distribution or dividend distribution? And the follow-up question around this is, how much of that amount of money is effectively located physically at the top co-parent company?
Speaker #5: So technically, in the position to be paid out to shareholders because from my understanding, it can be spread in many subsidiaries or joint ventures.
Speaker #5: Thank you.
Speaker #4: If I understood the question right, I think of the overall cash, I think it's mentioned in our financial results. Close to about 45 odd billion is restricted cash, which is in escrow account.
Speaker #4: And a large part of other cash is free cash flow between Emaar Development and Emaar Properties.
Speaker #5: And my question is, are you allowed regulatory speaking to use that cash in escrow account to pay a dividend?
Speaker #4: Again, as I said, dividend is a shareholder matter. I mean, but that is a free cash flow that is available as far as decision on dividend is concerned.
Speaker #4: I think I cleared that question in previous several questions as well.
Speaker #5: Thank you.
Speaker #4: Thank you.
Speaker #2: The next question comes from Mohamed Heda of Arkham Capital. Your line is now open. Please go ahead.
Speaker #5: Thank you. So you abandoned a new large master plan, 200 billion dirhams. Obviously, a lot of it will come with large ticket prices. Do you think it's time to launch this master plan?
Speaker #5: And also, we have seen maybe the units that were sold in Q2 were of lower ticket sizes. Between 3 to 4 million. Is this what the market wants today?
Speaker #5: And will you be launching the waterfront products anytime soon?
Speaker #4: So as far as Q2 is concerned, the average is average ticket size lower because there were Emaar South launches. And Emaar South launch the average ticket size are lower.
Speaker #4: Compared to previous quarters where the villas or the large villas are launched, the that's why they are about 5, 5 and a half million on an average because an average ticket size of villa is 3X the average ticket size of an apartment.
Speaker #4: And hence this queueness. Right? As far as Dubai Estate is concerned, again, as I have been saying, that we are it's currently in the design phase.
Speaker #4: And we will also watch the market and how situation evolves. And accordingly, decision will be taken on the launch of it.
Speaker #5: Very clear. Thank you.
Speaker #4: Thank you. Thank you.
Speaker #2: The next question comes from Ataya Safiuddin of JP Morgan. Your line is now open. Please go ahead.
Speaker #5: Yes. I'll start again. Sorry, just a follow-up. Just to cover the recurring portfolio maybe. I mean, just on the mall, portfolio, just to simply understand, the base rent things are going as planned.
Speaker #5: Clearly, I think the weakness, it's fair to assume it's mainly attributable to lower tenant sales and hence net turnover rent. Is it a fair thing going just to think about it that the downside risk to the mall segment is primarily lower net turnover rent?
Speaker #5: And I think along the same lines, I mean, the mall EBITDA margin at 89% is just impressive. Best in class. Do you see any risk to that EBITDA margin going into the second half of the year?
Speaker #5: Again, assuming that geopolitics don't improve significantly at this stage.
Speaker #4: Thanks. Thanks, sir, for the question. So on the malls business, when you're seeing that 5% reduction, that 5% is not as a result of the malls business.
Speaker #4: The mall business also has the entertainment combined with it. So that reduction is coming from at the top and entertainment, other entertainment attractions, which are largely linked to the inflow of tourism.
Speaker #4: So mall business standalone, which the retail assets, if you see, the retail rented assets, they are actually grown year on year and quarter on quarter as well.
Speaker #4: So there is no decline on that. And again, the thing is, a large part of that rental income, probably about if I were to say 93%, is fixed rentals.
Speaker #4: So it is not impacted by change in the turnover rent. Right? And the other 7%, which is a turnover rent are contracts are such that if somebody paid a turnover rent in the previous year, previous anniversary of his lease, for the subsequent year, it becomes a fixed rent for him.
Speaker #4: So probably we don't see any impact of it in the current year. Also, I want to say is the tenants who are paying turnover rent, I think those are really big brands, luxury brands, and the margin, even if their sales drop by few percentages here and there, they still significantly qualify for the turnover rent.
Speaker #4: So the 89% margin that you see, I don't see it changing any significantly because large part of it is secured through fixed rental contracts.
Speaker #5: Okay. And just a follow-up on the hospitality. I mean, yeah. Sorry, go ahead.
Speaker #4: And overall, the rent-to-sales are very, very strong for the malls. Even with marginal decline in sales, I'm 13, 14 percent decline in sales is not significant.
Speaker #4: It means you just simply go back to a year back. Right? Which is still was a record year. So it's pretty resilient and fine.
Speaker #4: The mall occupancy is 100% if you talk about Dubai Mall. Overall, 98%. We have not seen people walking out or leases not getting renewed.
Speaker #4: So that wouldn't happen if people are still not overall positive about Dubai and its story.
Speaker #5: All right. And just on the hospitality, I mean, clearly, this is linked to tourism flows, maybe a lot of it is out of your control.
Speaker #5: I mean, what is in your control is you've seem to have cut your optimized costs. I just want to understand hospitality going into the second half.
Speaker #5: I mean, the margin in Q2 was around 36% if I'm calculating it correctly. How should we think about hospitality? Is it purely linked to a pickup in international tourists?
Speaker #5: How are things maybe trending? May, June, July on occupancy, are you seeing some improvements? If you can just share some color on the hospitality portfolio would be super helpful.
Speaker #4: Sure. So look, overall, hospitality has been improving month on month. Right? Every month, I am seeing that from April onwards, it is improving. It has improved quite a lot.
Speaker #4: Having said that, I think a full recovery would need the tourism to come back. Right? Staycations are very, very strong. Domestic takeaway has been very, very strong.
Speaker #4: But I don't think it can fully substitute for the international tourist that has to come. So I think that full recovery will depend upon how the tourism plays out.
Speaker #4: But what we see is the three stars, etc., are doing exceptionally well with very high occupancies. And overall, for things to recover, I think the tourism has to come back.
Speaker #4: But otherwise, still, month on month, we are seeing a strong recovery that is there.
Speaker #5: Okay. Thank you very much.
Speaker #4: Thank you.
Speaker #2: Thank you. I'd now like to hand back to Ilham for more tech questions.
Speaker #3: Sure. We have a question.
Speaker #4: We have the two minutes, so if you think we can maybe limit it to another next three, four, two, three minutes, that would be great.
Speaker #4: Thank you.
Speaker #3: Of course. So just one last question then before we move to closing remarks. Could you please share some color on your residential leasing strategy?
Speaker #3: And how much capital have you deployed till now? And when do you expect it to start contributing to the P&L? This is a question from Indaprit from SICO.
Speaker #4: So residential strategy is intact. We are progressing. We are currently into design stage of a lot of projects. The P&L impact of that is probably first earliest we will see is 29.
Speaker #4: But any material impact or addition to the P&L will be 2030 onwards.
Speaker #3: Great. Very clear. So maybe thank you very much for all the color maybe power you would like to give any concluding remarks before we close the call, please?
Speaker #4: Sure, sure. Thank you so much. I really appreciate everyone who joined the call. And I hope we were able to give you a proper guidance on the results that we have had.
Speaker #4: We are very, very positive about the overall Dubai story and the vision of the government and the leadership of Dubai. I think it is what we have seen is a temporary shock, not a structural thing.
Speaker #4: We are very, very positive. We have seen the market has been relatively very resilient to otherwise what probably the initial impressions were in March.
Speaker #4: So overall story remains very, very positive. And we believe your company will continue to do very, very well. Thank you very much. Until we see you again in the next quarter.
Speaker #2: This concludes today's call.
Speaker #3: Thank you for joining.
