17-03-2025
Cenomi Centers sees strong footfall, occupancy rate: CEO
Alison Rehill Erguven, CEO of Arabian Centres Co. (Cenomi Centers), said the company continues to maintain a positive momentum, having experienced an outstanding period overall with record-level footfall, increased occupancy and revenue growth, and improved profitability.
Erguven told Argaam that the decline in Q4 2024 net earnings was due to one-time transactions, such as land sale gains realized last year, as well as an increase in impairment loss this year from a more cautious credit loss approach.
She added that the increase in the occupancy rate to a record 94.4% positively impacted the company's operational returns. This reflects solid demand for retail spaces, enhances footfall, and supports an improved retail mix with high-quality tenants.
Revenue growth is expected to accelerate in the communing period, and the high occupancy rate would boost the company's asset quality and evaluation, supporting stronger long-term performance.
Both Jawharat Jeddah and Jawharat Riyadh are making great progress, with the structural completion rates stand at 94% and 92%, respectively.
Here are details of the interview:
Q: Cenomi Centers' profits declined to SAR 350 million (after minority interest) by the end of Q4 2024, compared to SAR 506.5 million in the same period of 2023. What is your comment on these results?
A: We continue to maintain a positive momentum, having experienced an outstanding period overall with record-level footfall, increased occupancy and revenue growth, and improved profitability.
It is important to note that full year 2024 net profit are not directly comparable to the same period in the previous year due to certain one-off transactions. Specifically, the SAR 238.7 million land sale gain in 2023 and the one-time SAR 87.5 million increase in impairment loss this year from a more cautious credit loss approach. When we adjust for these, our net profit actually grew by 12.3% year-on-year, providing a more accurate view of our underlying performance.
Regarding Q4 2024, our operating expenses dropped 25% compared to Q4 2023. The decline in net profit after minority interest is due to higher finance expense and lower fair-value gains on our investment properties. The increase in finance expense reflects our near-peak investment phase, with significant capital allocated to our two flagship development projects.
Overall, I am very pleased by our operating and financial performance. We delivered on revenue growth and footfall performance, which highlight the resilience of our business.
Q: Revenue increased by 7.5% year-on-year in Q4. What were the key factors driving this growth?
A: There are three elements to this solid performance. The main drivers of growth were the increase in Media sales , Other revenues, and the increase in occupancy. However, I'd like to emphasize the 2.5% growth in net rental revenue. That is the result of our strategic focus on optimising the tenant mix and improving the overall customer experience which led to stronger performance in leasing and footfall We remain confident that there is significant potential to further enhance revenue per square meter across our portfolio.
Q: How did the increase in occupancy rate to 94.4% impact operational returns?
A: The increase in our occupancy rate to a record 94.4% positively impacted our operational returns.. It reflects solid demand for our retail spaces, enhances footfall, and supports an improved retail mix with high-quality tenants. This not only drives more consistent cash flows but also positions us to benefit from future rental escalations, reduced reliance on incentives, and greater upside from turnover-based rents, ultimately strengthening overall operational performance.
Q: What was the effect of higher occupancy rates on rental revenue compared to the previous year?
A: Despite the higher occupancy rates in 2024, our rental revenue grew 0.7% to SAR 2.1 billion. This slight growth is attributed to the resilient approach that we adopted in setting rental rates during 2024 to improve our occupancy rates, primarily in B and C malls. This approach will positively impact rental revenues in 2025 through the annualization effect of the deals signed during 2024. With a stronger occupancy base, improved tenant mix, and potential uplift from turnover-based rents, revenue growth should accelerate in upcoming periods. Additionally, higher occupancy enhances asset quality and valuation, supporting stronger long-term performance.
Q: What is the current development status of the Jawharat Jeddah and Jawharat Riyadh projects as of the end of 2024?
A: As of the end of 2024, both Jawharat Jeddah and Jawharat Riyadh are making great progress. The structural completion levels for both projects stand at 94.0% for Jawharat Jeddah and 92.0% for Jawharat Riyadh. These developments are on track, with Jawharat Jeddah expected to be completed by December 2025 and Jawharat Riyadh by April 2026. These projects are set to become iconic retail destinations in their respective cities and are expected to drive significant footfall and revenue once they are operational.
Q: Net debt rose to SAR 11.5 billion in 2024. How does the company plan to manage this amid ongoing expansions?
A: The increase in net debt is primarily due to our ongoing flagship developments, Jawharat Riyadh and Jawharat Jeddah, which are currently in their peak investment phase. However, we view this increase as a necessary step in our long-term growth strategy, as these projects are expected to generate significant EBITDA of SAR 650mn once stabilized, contributing an additional 40% to Cenomi Centers' current EBITDA. We are confident that the returns from these developments will more than justify the increased debt levels.
In the meantime, we continue to manage our debt carefully, balancing short-term financing needs with our long-term profitability goals.
