TECOM Group

1. Company Overview & Earnings Context

TECOM Group PJSC is a Dubai-based real estate and business-district operator whose principal activities are property leasing, development, facilities management and services. The Group operates entirely in the UAE. It is ultimately owned through Dubai Holding, with the Government of Dubai as the ultimate shareholder. TECOM listed 12.5% of its ordinary shares on the Dubai Financial Market in July 2022. 

For the nine-month period ended 30 September 2026, TECOM delivered another period of earnings growth, driven primarily by its core leasing business. Revenue increased to AED 2.35 billion, gross profit reached AED 1.59 billion, and net profit rose to AED 1.22 billion. 

The operating backdrop included continued regional geopolitical uncertainty. However, management stated that occupancy levels and rental performance remained stable, while the overall increase in revenue was primarily supported by leasing operations. Visa-service revenue was weaker, but management identified no material adverse impact on the carrying value of investment properties or trade receivables as of September 2026. 

The results are contained in TECOM's condensed interim consolidated financial statements for the nine months ended 30 September 2026.  PwC reviewed the statements under ISRE 2410 and issued an unmodified conclusion, stating that nothing came to its attention indicating that the statements were not prepared, in all material respects, in accordance with IAS 34. 

2. Financial Performance Snapshot

• Revenue: AED 2.349 billion vs. AED 2.113 billion (+11.1% YoY)

• Direct Costs: AED 759.9 million vs. AED 711.8 million (+6.8%)

• Gross Profit: AED 1.589 billion vs. AED 1.402 billion (+13.4%)

• Gross Margin: approximately 67.6% vs. 66.3%

• Other Operating Income: AED 35.9 million vs. AED 73.7 million (-51.3%)

• Operating Profit: AED 1.443 billion vs. AED 1.309 billion (+10.3%)

• Net Finance Costs: AED 179.7 million vs. AED 164.9 million (+9.0%)

• Profit Before Tax: AED 1.264 billion vs. AED 1.144 billion (+10.4%)

• Net Profit: AED 1.221 billion vs. AED 1.111 billion (+10.0%)

• EPS: AED 0.24 vs. AED 0.22

• Total Comprehensive Income: AED 1.238 billion vs. AED 1.031 billion

Underlying-performance note: Earnings growth was fundamentally supported by the core property-leasing franchise rather than non-recurring income. Operating lease income increased to AED 2.10 billion from AED 1.84 billion, or approximately 14.3%, while service income declined to AED 249.2 million from AED 276.1 million. 

This is particularly notable because other operating income fell by nearly half to AED 35.9 million, mainly reflecting lower liability write-backs and lease-termination/penalty income. Despite this reduction, operating profit still increased by more than 10%. 

Q3 2026 also remained strong, with revenue of AED 808.6 million (+11.7% YoY), gross profit of AED 533.9 million (+15.4%), operating profit of AED 493.0 million (+12.1%) and net profit of AED 416.6 million (+11.6%). 

3. Operating Performance & Major Programs

TECOM's leasing portfolio remained the principal engine of growth. Operating lease income increased by approximately AED 262.5 million YoY to AED 2.10 billion, representing roughly 89% of Group revenue. 

Management specifically stated that occupancy and rental performance remained stable despite regional geopolitical developments, supporting the resilience of the portfolio. Leasing strength more than compensated for lower revenue from visa-related services. 

The Group is simultaneously making substantial investments to expand its property portfolio. Investment property increased to AED 16.19 billion from AED 15.17 billion at December 2025. During 9M 2026, additions to investment property amounted to approximately AED 1.42 billion, including AED 846.7 million of land additions and AED 468.7 million of capital work in progress. 

Capital work in progress reached approximately AED 2.72 billion at September 2026 versus AED 2.31 billion at December 2025, demonstrating a significant ongoing development pipeline. 

A major transaction during the period was the acquisition of investment property from a related party for AED 839.95 million. This formed part of a land acquisition agreement with total consideration of approximately AED 1.56 billion. A further AED 305.93 million remains committed under that agreement. 

TECOM's portfolio investment therefore remains substantial, with the Group deploying significant internally generated cash flow and additional borrowing into new land, buildings, improvements and infrastructure.

4. Key Performance Drivers

The principal positive earnings driver was leasing revenue growth. Operating lease income increased 14.3% to AED 2.10 billion, more than offsetting the approximately 9.7% decline in service income. 

Revenue growth also outpaced direct-cost growth. Revenue increased 11.1% while direct costs rose only 6.8%, resulting in gross profit growth of 13.4% and gross-margin expansion to approximately 67.6% from 66.3%. 

One headwind was the sharp decline in other operating income to AED 35.9 million from AED 73.7 million. Liability write-backs declined from AED 30.2 million to AED 9.4 million, while lease termination and other penalties fell from AED 13.2 million to just AED 0.6 million. 

General and administrative expenses increased 18.1% to AED 157.5 million. A notable contributor was a AED 12.1 million net provision for loss allowances on receivables, compared with an AED 11.5 million reversal in the prior-year period. IT charges also increased to AED 16.3 million from AED 13.9 million. 

Finance costs remained elevated at AED 190.3 million, while lower finance income caused net finance costs to increase to AED 179.7 million from AED 164.9 million. 

The higher finance burden needs to be considered alongside TECOM's investment program. Borrowings increased following an AED 850 million additional drawdown during 9M 2026, supporting general corporate purposes and ongoing investment activity. 

5. Balance Sheet, Backlog & Cash Flow

• Total Assets: AED 18.188 billion vs. AED 17.163 billion (+6.0%)

• Investment Property: AED 16.194 billion vs. AED 15.167 billion (+6.8%)

• Capital Work in Progress: AED 2.721 billion vs. AED 2.305 billion

• Cash & Cash Equivalents: AED 180.9 million vs. AED 223.6 million

• Bank Deposits: AED 228.8 million vs. AED 217.5 million

• Total Equity: AED 8.240 billion vs. AED 7.883 billion (+4.5%)

• Bank Borrowings: carrying value of approximately AED 5.788 billion vs. AED 4.929 billion

• Undrawn Borrowing Facilities: AED 1.80 billion

• Advances from Customers: AED 1.638 billion vs. AED 1.598 billion

• Project Liabilities: AED 1.186 billion

• Dividends Declared in 9M 2026: AED 880 million

Liquidity deserves some attention because current liabilities exceed current assets. However, a significant portion of current liabilities consists of non-financial items such as operating lease and contract advances, and management states that available committed facilities provide sufficient liquidity for at least 12 months. The accounts were therefore prepared on a going-concern basis. 

Cash generation remained strong:

• Cash generated from operations: AED 1.785 billion vs. AED 1.573 billion

• Net Operating Cash Flow: AED 1.709 billion vs. AED 1.533 billion (+11.5%)

• Net Investing Cash Flow: AED (1.555) billion vs. AED (882.6) million

• Net Financing Cash Flow: AED (196.2) million vs. AED (960.8) million

• Investment-property cash expenditure: approximately AED 1.546 billion

• Borrowing proceeds: AED 850 million

• Dividends paid: AED 880 million

• Closing Cash & Cash Equivalents: AED 180.9 million

The substantial investing outflow therefore reflects portfolio expansion rather than weak operating cash generation.

For backlog, TECOM does not disclose an industrial-style order book. However, there are several useful forward indicators. Unsatisfied service performance obligations stood at AED 50.2 million, expected to be recognised over one year.  More importantly for a property company, the AED 2.72 billion CWIP balance, ongoing investment-property expenditure and land acquisition commitments provide stronger visibility into the development pipeline.

Customer advances of AED 1.64 billion also provide evidence of contracted/advance cash receipts, although these should not be interpreted as equivalent to a conventional backlog. 

6. Investor Takeaway

TECOM's 9M 2026 results show a strong core operating performance, with revenue increasing 11%, gross profit 13% and net profit 10%. Importantly, the improvement was driven primarily by the recurring leasing franchise rather than unusually high other operating income.

The quality of growth is therefore supportive. Operating lease income increased approximately 14%, gross margin expanded, and net operating cash flow rose to AED 1.71 billion. This occurred despite lower service income, substantially lower other operating income, higher receivable provisions and higher net finance costs.

The balance sheet is simultaneously moving through a significant investment and development cycle. Investment properties reached AED 16.19 billion and CWIP rose to AED 2.72 billion, while AED 1.55 billion of investment-property cash expenditure was made during the nine-month period. Borrowings consequently increased to approximately AED 5.79 billion.

Higher leverage is therefore an important monitoring point. However, the Group had AED 1.8 billion of undrawn borrowing capacity, complied with all financial covenants and reported no defaults. Its facility includes a minimum debt-service coverage ratio of 1.20x and minimum net worth requirement of AED 3.673 billion. 

Shareholder distributions also remain substantial. TECOM declared AED 880 million of dividends during 9M 2026, equivalent to AED 0.18 per share across the final 2025 and interim 2026 distributions, versus AED 800 million during the comparable prior-year period. 

The key investor monitoring points are therefore leasing and occupancy resilience, rental growth, conversion of the AED 2.72 billion development pipeline into income-producing assets, capital expenditure, leverage and finance costs, service-income recovery, receivable quality, and the ability to sustain strong operating cash generation while funding both development and dividends.

PwC's unmodified IAS 34 review conclusion provides additional comfort on the interim financial reporting. 

Overall, TECOM's 9M 2026 performance reflects a resilient and expanding recurring-income property platform: leasing-led revenue growth, improving gross profitability and strong operating cash flow are being reinvested into a sizeable development pipeline. The principal trade-off for investors is that this expansion is increasing capital deployment and borrowing, making the returns generated from the new assets and the evolution of leverage increasingly important to future earnings quality.