Retal’s project portfolio hits SAR 17B; demand outlook positive: CFO

Logo of Retal Urban Development Co. 

Retal Urban Development Co.’s 2024 revenue growth was primarily driven by higher unit sales and the launch and development of new projects, with more than six ongoing projects added during the year, CFO Ammar Al-Ghoul said.

In an interview with Al Arabiya TV, Al-Ghoul explained that Retal’s project portfolio currently exceeds SAR 17 billion, covering the development of 10,000 residential units.

Additionally, the company manages around 10 real estate funds, valued between SAR 10 billion and SAR 10.5 billion, serving as a developer and sometimes as an investor.

He also pointed to Retal’s exit of a real estate development fund in Riyadh last year. Consequently, this generated around SAR 45 million in cash returns and profits, which positively impacted the company's income statement.

Al-Ghoul further explained that revenues on investment in these funds primarily come from development, marketing, and sales fees. While the revenue volume may not be substantial, the profit margin in this segment is high, reaching 40-50%, since most costs are related to Retal’s human capital.

Al-Ghoul highlighted that the Saudi mortgage market grew by 17% last year, reaching SAR 91 billion, compared to SAR 77 billion in 2023. In parallel, Retal’s revenues increased by 51% year-on-year (YoY), with 70-80% of sales being financed through mortgages.

The CFO expressed optimism about the company’s performance in 2025, particularly given interest rate reductions.

"Lower interest rates will have a positive impact on customers' ability to purchase homes through mortgage financing, as well as on our existing debt portfolio and its costs. We currently have SAR 1.7 billion in project-related debt, and a 1% reduction in interest rates would lower our costs by SAR 17 million annually," Al-Ghoul said.

He added that a portion of the company's debt is allocated to land acquisitions, while most sales are conducted off-plan, reducing the need for large financing before project initiation. However, additional debt is sometimes required to complete projects and settle land payments.

Al-Ghoul emphasized that Retal maintains a healthy debt-to-equity ratio, with bank debt 2x below equity. The company’s current financing obligations for its ongoing projects range between SAR 300-400 million, with loan terms aligned with project durations.

He stated that Retal’s direct development portfolio includes 22 projects, comprising 10,000 residential units, which will be delivered over the next three to four and a half years. Around 55 to 60% of these units have been sold, while 50% of the projects are under construction. Revenues from these projects is being recognized over the development period.

Regarding dividend distributions, Al-Ghoul explained that Retal had historically distributed 80% of net profit, an exceptionally high dividend payout compared to regional and global standards.

However, the company reduced the payout ratio to balance equity and debt in financing future expansions while continuing to deliver profit growth.

He confirmed that Retal remains committed to its official dividend policy, which includes semi-annual payouts, ensuring that shareholders continue to benefit from the company’s financial success.

According to data available on Argaam, Retal’s net profit surged by 32% to SAR 266.1 million in 2024, compared to SAR 202.4 million in 2023. The fourth-quarter bottom line also jumped by 63% to SAR 91.6 million.