As the largest company in its sector in the world, Depa has completed over 1,000 projects in 60 countries. Its interests continue to expand beyond the opulent Gulf market to regions that promise diversification and returns over time as much as the chance of immediate, lucrative reward.
Depa United has undergone rapid growth since its formation in 1996. How has this been achieved?
The interior contracting industry is very fragmented, not only regionally but globally. When we started the idea was to establish a company that would consolidate [and] change the norm of the industry.
It's still a challenge. There are a few other companies - in Germany, the UK as well as Asia - that have embarked on the same mission.
The question at that time was: do we go ‘horizontal' or ‘vertical' [integration]? We went into hotel/hospitality, which still produces 50 per cent of our revenue. Interiors and now infrastructure are taking over. The decision was not to focus on [just] one segment, because of the possibility of downturn; it proved to be the right strategy. Having started with only five people, today the company has over 10,000. There is plenty of room still to consolidate. In Asia we are pushing hard for growth.
You have been involved in many landmark projects. What have been the features of that work?
Very few companies have ventured into large-sized or iconic projects as one main interior contractor; usually it's split between ten or a dozen. The reason for that is they cannot support taking on such a big project. By default the client has to break it into pieces. We have been fortunate - from Burj Al Arab in Dubai to Emirates Palace in Abu Dhabi, and Burj Khalifa, and now in the Far East as well, such as Marina Bay Sands in Singapore. The beauty of these projects is what we learnt - how we can benefit the company by developing different approaches.
The logistics elements of Burj Khalifa gave a huge benefit for the company. Now we know how to move people around in vertical projects more efficiently.
With the Museum of Islamic Art in Qatar we learnt how to deal with issues such as humidity, temperature control and the safety of displays.
Can you give us some idea of the characteristics of the interior contracting industry in the Mena region? How has it performed during the current phase?
Our industry is like any other; we are in the same global cycle. What we have seen recently in Mena is a lot of movement from Dubai to Abu Dhabi, then to Qatar, and then to Saudi Arabia. Egypt was flavour of the month two years ago, not now. If you are prepared you stand a much better chance. If you look at our history, we opened in Egypt, for instance, ten years ago, not two or three; we started in Saudi Arabia five years ago, [and] we were building the Four Seasons when nobody was talking about Qatar.
We are not jumping [around] in survival mode. We have to pick up the right business. There is still potential in Qatar, Saudi Arabia and Kuwait - we are there. Where business has changed because of the Arab Spring or other reasons, we are adapting, but we are not losing market share as a totality.
In fact, Depa has achieved a broad geographic spread beyond Mena into Europe and Asia. Can you expand on the strategy, for instance considering the eurozone's evident troubles?
The demand for our service and industry is global, [and] from day one we have wanted to be a global company. Ten years ago we looked at Asia. From our research we decided on Singapore, and through acquisition. We started with a small stake in Design Studio, and slowly we built the trust, worked together and decided on a strategy together. Today we have almost acquired the company, with a more than 90 per cent share.
In parallel we have established another company in Singapore, DDS, to replicate what we are doing here [in the Gulf] as a fit-out contractor. They have done iconic projects there as well, and in Malaysia. We are going to have a presence and grow in five countries: Singapore, Malaysia, Thailand, Indonesia and China.
We opened our office in Malaysia last year. This year we are doing the Grand Hyatt and other projects, entering the country ‘big time'. A couple of hotels in Thailand as well. We opened a woodwork factory in China in late October. We are putting a big showroom in China to tackle hospitality as well as the retail industry.
I believe it is the right time to enter Europe - you can pick and choose your people much better than during a boom. We can even pick better projects, believe it or not. Lots of competitors are stretched financially, so they cannot do ‘this or that'.
We started actively in Europe in March this year. We have secured a number of projects in the UK, and have further plans for expansion but are taking things cautiously. Germany will be our next destination. We are working now in Eastern Europe too, quite heavily involved in Baku and other places.
One of the major issues last year was the contract dispute with another contractor on Burj Khalifa. Depa has said it would take two to three years to sort out the unresolved claim. What's the status of that issue now?
You cannot eliminate the risk of a project being delayed or changes being made; that's the industry. So how to deal with it? We were very prepared when we entered Burj Khalifa. We have done our homework 100 per cent, and we are going after it. But from experience we know it's not going to be resolved in a month or two.
Are we on track? Yes. We have always prepared our company to be financially strong and cash rich - let's put it that way.
How will full-year results be impacted by the softening of business and the disturbances in parts of Mena?
We have decided to take the Burj Khalifa cost in our books. It's accounting treatment, not an operational loss. This year in June we reported better results, and next year looks quite good. As we have just announced, we have the highest ever backlog, to the tune of $3.9 billion. We see that as growing; so that's a very healthy indicator.
There has been a re-ignition of several projects which had lost momentum. That is not happening in just one city; regionally we are seeing pick-up. We have two projects in Syria. One [hotel project] in Damascus - surprisingly enough it's business as usual there. The other one, in Homs, has stopped, but we have been told by the owner Rotana Group that they want to restart it. The project in Yemen we finished, and that's a closed chapter.
Last year you paid no dividend. Will you be considering resuming dividends this year?
It doesn't make sense to distribute dividends when we have a ‘loss year'. Inshallah, if we deliver good results and good profit we will [return] to our policies of the past.
What is your view of the type of order flow; where it might lead in terms of your goals?
The past was hotels after hotels - we had to capitalize on that. At other times the government would pump money into the country, and we had to capitalise on infrastructure, very successfully.
Recently infrastructure has been taking a good part of the backlog, from Morocco all the way to India. We are doing Mumbai airport, Qatar airport, and Abu Dhabi airport. We are just finishing the Green Line (Metro) here, and we are doing hospitals in three countries.
We don't have lots of infrastructure in Asia now, [which] is going through natural growth of private money. [But] in the CIS we are doing very well in Azerbaijan. We have been in Turkmenistan for a long time, too. Now we are looking at four countries in that region. The way it looks [going] forward, Mena will be about half our business. We have always managed to acquire one company a year, and enter one or two different countries a year. We have to sustain that policy. It will not be that acquisitive in Mena; organic growth will be in Europe; Asia will have both organic growth and acquisition.
On the challenges, such as slowdown in China or in Europe, we are flexible - we can grow and we can shrink as the situation demands. More important than that, we are mobile. China might slow down from 9 per cent to maybe 7 or 6 per cent, but that is still ‘dream' growth. They want to build 2000 hotels. Even if they build half or a quarter of that - that's still a lot of hotels.
There are lots of countries that will slow down, but there will be other countries that start. We don't have to be in a country with a boom to have a project. This is what we are trying to focus on: finding projects scattered around, whether in Africa, Asia, or Europe.
If there is a ‘double dip' in this world, it's a double dip for everybody. We have to take as it comes; but we are prepared for it.
The writer is Financial Features Editor, Gulf News
