Depa swings to H1 net profit
Dubai, August 24, 2011
Depa, a leading interior contracting company, returned to a first half net profit of Dh48 million ($13 million) this year after posting a Dh103.7 million loss during the same period in 2010.
Annoucing the results on Wednesday, Depa CEO Mohannad Sweid, said that excluding the Mena region, the company's revenue surged 42.9 per cent to Dh297.5 million compared to Dh208.2 million last year.
'This highlights the success of the company’s diversification strategy,' said the chief of the Dubai-based group.
But, overall the revenues dropped 11.4 per cent to Dh748.9 million from Dh845.5 million during the same period last year, he noted.
This 11.4 per cent drop in H1 revenues was due to delayed starts and slow progress on certain projects in the Mena region, especially in countries currently facing political turmoil, he added.
Commenting on the results, Sweid said, “Overall performance was strong on many fronts. Our successful diversification strategy reduced the impact of the global macroeconomic and regional geo-political environment on our results and backlog growth.'
'Encouragingly, we are witnessing large and mega-projects that were originally delayed finally coming on-stream.'
'We recently signed a Dh222 million contract for work at the King Abdullah Petroleum Studies & Research Centre in Riyadh and we anticipate signing other delayed projects in the latter half of 2011 and on-going into 2012,' the top official said.
'The company continues to diversify internationally and this will underpin financial performance and backlog growth and allow Depa to capitalise on the market’s momentum in the near future.”
As of 30 June 2011, the company’s backlog stood at Dh2.3 billion, and had increased by a further Dh420 million as of 20 August 2011. Over the course of 2011, the company has won a total value of Dh1.47 billion of new projects, resulting in 24 per cent backlog growth, said Sweid.
The UAE, he said, now represents only 21 per cent of backlog, down from 30 per cent at FY 2010, Mena is up to 30 per cent from 28 per cent at FY 2010 and the rest of world rose to 49 per cent from 42 per cent at the end of 2010.
Following two years of stagnating backlog as a result of delayed projects and more stringent project selection requirements, Depa is beginning to witness backlog growth as some anticipated large and mega-projects as well as many other projects, have begun to come on stream in the GCC and as increased diversification efforts have started to bear fruit, he added.
'For example, we recently signed for interior contracting work at the King Abdullah Petroleum Studies and Research Center in Saudi Arabia. This Dh222 million contract for Depa will see the company work on all architectural finishes of the Zaha Hadid-designed project.'
Depa had originally anticipated signing this contract in late 2010, he added.
According to Sweid, the results of the company’s diversification strategy, outside its home market of the UAE, have become increasingly apparent over the last few years.
We have seen continued significant revenue stream from Asian projects, with the wider region and in particular South East Asia, continuing to play an important role in the Company's revenue stream.
Azerbaijan and Saudi Arabia have both proven to be significant contributors to revenue and backlog in the first half.
According to Sweid, the Dubai group saw 100 per cent growth in revenues and 564 per cent growth in backlog from Azerbaijan specifically, with projects underway including Port Baku, Baku Flame Tower and JW Marriot.
With regard to Saudi Arabia, the scope of work for interior contracting is picking up, with projects comprising King Abdullah Petroleum Studies and Research Center, Al Turki Business Park and Princess Noor University.
In terms of market segmentation, the Company has experienced significant increases in both infrastructure and government-funded projects such as hospitals and medical centres as well as airports.
Depa recently begun work on Mumbai’s international airport, valued at Dh112.8 million. Overall these sectors now account for 20 per cent of backlog compared to 8 per cent on December 31, 2010.
'Looking forward, based on our understanding of the current market trends, we continue to expect large project wins in the GCC region over the coming year as momentum begins to pick up and projects near the interior contracting scope of work, Sweid remarked.
'We believe that a second growth run, namely in government-related spending in the GCC and CIS countries may be the around the corner, allowing us to leverage our already-existing operations to further grow in these markets,' he added.