Cenomi Centers exhibits record footfall, occupancy rates: CEO

Alison Rehill Erguven, CEO of Arabian Centres Co. (Cenomi Centers)

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 enduring higher impairment losses this year as a result of adopting a more cautious credit loss approach.

She added that the uptick in occupancy 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. In addition, 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 their structural completion rates standing at 94% and 92%, respectively.

Here are details of the full 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. How do you see 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 worth noting that the 2024 net profits were not directly comparable to 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 losses this year on a more cautious credit loss approach. If adjusted, net profit showed a 12.3% year-on-year (YoY) hike, providing a more accurate view of our underlying performance.

Regarding Q4 2024, the company’s operating expenses dropped 25% YoY during the three-month period. The decline in net profit after minority interest was due to higher finance costs (FCs) and lower fair-value gains on our investment properties. The elevated FCs reflected our near-peak investment phase, with significant capital allocated to our two under-development flagship projects.

Overall, I am very pleased by our operating and financial performance. We delivered on revenue growth and footfall performance, underpinning our business versatility.

Q: Revenues increased by 7.5% year-on-year (YoY) in Q4 2024. What were key drivers of this growth?

A: Three main pillars contributed to this solid performance. The key growth drivers were higher media sales, other revenues, and robust occupancy. This is in addition to the 2.5% growth in net rental revenue, driven by our strategic focus on optimising the tenant mix and improving the overall customer experience which led to stronger performance in terms of leasing and footfall.

We remain confident that there is significant potential to further enhance the per-square-meter revenue across our investment portfolio.

Q: How did the surge in occupancy rate to 94.4% impact operational returns?

A: The acceleration 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 does not only drive more consistent cash flows but also supports leveraging future rental escalations, reduced reliance on incentives, and greater upsides from turnover-based rents, ultimately strengthening overall operational performance.

Q: What was the impact of higher occupancy rates on rental revenue?

A: Despite the higher occupancy rates in 2024, our rental revenue grew 0.7% to SAR 2.1 billion by year-end. This slight growth was attributed to the resilient approach we had adopted in setting rental rates during 2024 in order to improve occupancy rates, primarily in Class B and C malls. This approach is seen to positively impact rental revenues in 2025, given the annualization of deals signed during 2024. With a stronger occupancy base, improved tenant mix, and the potential uplift from turnover-based rentals, Cenomi Center’s revenue growth should pick up going forward. 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 2024-end?

A: Both Jawharat Jeddah and Jawharat Riyadh were making great progress by the end of 2024. The structural completion for both projects stood at 94.0% for Jawharat Jeddah and 92.0% for Jawharat Riyadh. These developments are on track, with Jawharat Jeddah expected to be finalized by December 2025 and Jawharat Riyadh by April 2026. These projects are set to become iconic retail destinations in their respective cities, driving significant footfall and revenues once operational.

Q: Net debt rose to SAR 11.5 billion in 2024. How does the company plan to address this amid ongoing expansions?

A: The wider net debt was primarily due to our ongoing flagship developments, Jawharat Riyadh and Jawharat Jeddah, which are currently in their peak investment phase. However, this is deemed necessary in our long-term growth strategy, as these projects are expected to generate significant EBITDA of SAR 650 million once they are breakeven, 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 cautiously manage our debts, balancing short-term financing needs with our long-term profitability goals.

Q: What is your outlook for the company’s performance in Q1 2025?

A: We will be providing forward-looking guidance during our 2024 earnings call, as this information should be shared first with our investors. Currently, we prefer to not offer any comments ahead of that discussion.