Dubai: Arabtec Holding, the Dubai-listed contractor, reported a 24 per cent jump in its 2018 second quarter profits on Thursday, as revenues climbed.
Net profit attributable to the parent company reached Dh49.4 million for the quarter. This brings profits in 2018’ first half to Dh113 million, nearly doubling from the Dh57.4 million profits recorded in the same half of 2017.
Revenues were also higher, rising 16 per cent year-on-year in the second quarter of 2018 to reach Dh2.39 billion. Revenues for the first half of this year reached Dh4.8 billion, up 13 per cent year-on-year.
Hamish Tyrwhitt, group chief executive officer of Arabtec, said the company has now delivered six consecutive quarters of profitability. This follows restructuring moves that saw the company reduce its capital and hire new management to extinguish nearly two years’ worth of losses.
“It is also pleasing that we are now seeing a reduction in trade receivables and debtor days reflecting the group’s ongoing efforts to improve the resolution and collection of receivables,” the CEO said in a statement.
During the second quarter, Arabtec improved its receivables collection to 168 days from 185 days in the first quarter of the year, as the CEO said the company is focusing on liquidity.
“We continue to make good progress on simplifying our business model through better tools and processes and outsourcing non-core business activities, as well as applying innovative approaches to enhance our work and delivery capabilities,” he said.
Growth turnaround
In an investor presentation, Arabtec said higher contribution from new contracts is the primary driver of consistent improvement in margins, with profit margins now at 2.3 per cent, up 100 basis points. It added that it expected to see growth in the UAE’s construction market.
The company said the sector is estimated to see a compound annual growth rate of 9.1 per cent in line with a ramp up on projects connected to Expo 2020.
The turnaround follows a capital restructuring programme implemented in 2017 that saw Arabtec reduce its capital to Dh1.5 billion to extinguish Dh4.6 billion in accumulated losses. It was followed by a rights issue.
At the end of June 2018, Arabtec’s backlog stood at Dh16.1 billion. In an interview with Bloomberg TV, Tyrwhitt said that the backlog was heavily weighted towards Dubai, followed by Abu Dhabi and Saudi Arabia respectively.
“After Expo 2020, I could see that shift so that Saudi becomes the largest component of our backlog and revenue in the future,” he told Bloomberg TV.
Discussing the company’s long-term plans, the CEO said the primary market outside the UAE is Saudi Arabia, followed by Egypt, and then Bahrain, adding that Arabtec is focusing on “countries that offer a strong, sustainable pipeline of construction and infrastructure opportunities.
“Furthermore, Arabtec is actively pursuing a number of infrastructure opportunities through its operating companies, evidenced by the recent award of the strategic sewerage and drainage infrastructure project in Jebel Ali from Dubai Municipality,” a statement from Arabtec said.
The company’s share prices ended 1.53 per cent lower on Thursday at Dh1.93.
