Arabtec Holding reported on Wednesday Dh39.8 million in net profit attributable to owners for the second quarter of 2017, marking a jump from the Dh186.4 million in losses recorded in the same period in 2016.
The figure marks the second consecutive quarter of profits for the construction giant following over two years in the red, during which the company accumulated around Dh4.6 billion in losses.
Second quarter results brought profits in the first half of this year to Dh57.4 million, up from the Dh232.8 million in losses recorded in the first half of 2016. The rise was supported by lower costs that fell nearly 10 per cent in the second quarter of 2017, the company said in a statement. It added that the profits so far this year come as Arabtec completed in June a recapitalisation programme aimed to turn around financial performance.
Arabtec’s revenues, however, in the second quarter were nearly 6 per cent lower year-on-year, reaching Dh2 billion. Revenues for the first six months of the year were Dh4.2 billion.
“We will also remain on track to optimise the delivery of our Dh17.4 billion backlog, and continue to work on turning risks into opportunities through the resolution of legacy claims and collecting receivables,” Hamish Tyrwhitt, Arabtec’s group chief executive officer, said in a statement.
He added that the completion of the recapitalisation programme leaves the company to “focus on risk management and business transformation.” The programme included a Dh1.5 billion rights issue and a capital reduction measure to extinguish losses.
In a presentation to the Dubai bourse website on Wednesday, Arabtec said that over the rest of 2017, it plans to dispose of non-core investments, recycle capital to generate cash and sustainable returns and implement an action plan on legacy claims.
Arabtec said it has already refocused on its core competencies and key geographies, and established a treasury plan, among other steps.
The rebound to profitability and the updates on the company’s plans, however, failed to excite investors, with Arabtec’s share prices falling 2.26 per cent to close at Dh3.46 on Dubai Financial Market on Wednesday.
“The new management set out a vision with the start of the year, and so far, they’ve delivered, but the problem is that the value now is a bit too rich … Is it reasonable to be buying at three times the book value and 50-odd times earnings?,” said Sanyalaksna Manibhandu, director of research at the National Bank of Abu Dhabi Securities.
Arabtec’s share prices spiked overnight in late June from less than Dh1 to Dh3 as shares were repriced to reflect the reduction in the company’s capital, a move that took 4.6 billion shares off the bourse. However, even with the reduced number of shares, Manibhandu said prices were still rich considering the company’s earnings.
“The actual results today [Wednesday] were better than my estimates, and because of that, I’ve had to adjust my estimates for the second half,” Manibhandu said. “There’s now tighter control over costs, and I think the revenue they are bringing in is perhaps more sustainable than before. But still, the question that investors have to ask is: are they going to pay multiples at this current price?”
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