Arabtec Holding’s Q1 net profit soars by 121% to Dhs138m
Arabtec Holding PJSC announced its financial results for the first quarter of 2014, reporting a net profit attributable to parent of Dhs138m, marking an increase of 121% on Q1 2013 Dhs62.5m net profit. The results were driven by strong delivery, improved commercial review of contracts, and growth of UAE and GCC business.
The Company’s Board of Directors, which approved the Q1 results at its meeting, welcomed the growth in financial indicators, which will translate into more progress in the business and higher rewards for shareholders.
The results showed a 39% growth in revenues in Q1 2014 to Dhs2.152bn, compared to Dhs1.545bn in Q1 2013, while net income (before minority interest) grew 52% to Dhs152m, from Dhs100m.
The first quarter also saw the gross profit margin growing from 12% to 15%, while the net profit margin increased to 7%, from 6% in Q1 last year. The Board lauded the Executive Management’s efforts and achievements, as manifested in the financial results, backlog growth, and geographical expansion. The Board noted with satisfaction that Arabtec is firmly on track to become a global leader. Today, it enjoys a strong financial position, with a huge and versatile backlog, and is well positioned to diversify into higher margin sectors.
The Board also reviewed the results of the Annual Ordinary General Assembly Meeting held on April 30, which unanimously approved the distribution of 40% dividends as bonus shares, which effectively increased the capital to Dhs4.439bn, from Dhs3.139bn. The Board also vowed full support for the Executive Management’s efforts to implement ‘Arabtec Vision 2018′ which will see the Company grow into the rank of the top 10 global companies, through diversifying into higher margin strategic sectors.
Hasan Ismaik, Managing Director and CEO of Arabtec Holding, commented, “We continued to achieve high growth in profits and revenues, driven by our growing business in the UAE and the Region, and more focus on delivery and profitability of projects.”
Arabtec has already completed acquisition of Target Engineering, furthering its ability to bid for small to medium-scale EPC contracts in MENA’s oil and gas, power and related infrastructure. It has also expanded its MEP division, through the acquisition of the remaining minority stake in its subsidiary, EFECO, raising Arabtec’s ownership to 100%.
“We are planning a series of acquisitions and mergers in the forthcoming period. We are targeting global players in such high margin sectors as oil and gas, power plants, infrastructure, and facility management of huge industrial plants,” Ismaik announced. “In four years’ time, Arabtec will grow from a medium-scale regional player into a global leader in specialised segments of the construction industry. The planned acquisitions and mergers will lead to significant synergies, in terms of accumulated experience, enhanced cash flow and stronger brand,” he added. “Today Arabtec is in a good standing, with strong financial position and strong brand value. It has attracted high caliber experts to lead its foray into the strategic sectors targeted by Vision 2018,” Ismaik pointed out.
Through its Vision 2018, Arabtec aspires to grow from a medium-scale regional contractor to the ranks of the top 10 firms in the world. This leap is envisioned through expansion into specialized construction, oil and gas, infrastructure, property development, facility management, franchises, and health care. This expansion will lead to higher profit margins and better returns to shareholders. It will also allow the Company to maintain influence on these sectors and to have stable, recurring returns and will enable the Company’s value to grow many folds. During 2013, Arabtec jumped to the 117th position in ENR ranking, from 187th in 2012. The Company expects to achieve far better ranking in the current year, and to join the top ten by 2018.
With its expanding business in the Region, Arabtec won Dhs26.2bn worth of contracts in the first quarter of 2014, a growth of 28% over the Dhs20.4bn registered in Q1 2013.
The implied total direct and indirect value of projects by the end of Q1 jumped to Dhs215bn. This includes Dhs26.2bn worth of projects in progress. In addition, the Company has signed a Memorandum of Understanding with Aabar for construction of 36 towers in Abu Dhabi, for Dhs21.8bn. It has also signed another MoU for construction of the Red Sea Astrarium in Aqaba, the first of its kind in Jordan, at a value of Dhs5.7bn. The pipeline also includes the onem housing units in Egypt, for Dhs147bn, and Dhs14bn worth of property development projects announced at Cityscape Abu Dhabi last month.
During the quarter, Arabtec launched five new subsidiaries, to expand the Company’s reach into new sectors, and in line with the Company’s strategy. Two of the subsidiaries will focus on infrastructure projects inside and outside the UAE, and a third will be engaged in property development. The other two will focus on education and training of nationals on construction-related disciplines, and on financial services, respectively.
The Company launched ‘Arabtec Properties’ as its dedicated arm in the development of residential, commercial, and hospitality projects in the UAE and the Region, with special focus on affordable housing. Arabtec Real Estate- is currently undertaking five high quality, world-class residential, hospitality and mixed use developments in Abu Dhabi and Dubai, with a total value of Dhs14bn. In the UAE, Arabtec signed a MoU valued at Dhs21.8bn to build 36 towers in Dubai and Abu Dhabi, an agreement which will be one of the largest in the real estate sector in the region and Arabtec’s biggest project by value in the UAE.
Arabtec also won an Dhs1bn contract to build 1,500 Emaar townhouses in Dubai as part of the Mira community in the first phase of the Reem development. Arabtec is further contributing to Abu Dhabi’s infrastructure development as its MEP subsidiary, EFECO, was awarded an Dhs263m contract to provide mechanical, electrical and plumping work at the Midfield Terminal building in Abu Dhabi as part of a joint venture.
The year 2014 also opened doors to new opportunities for Arabtec to expand across other growing markets. The Company announced its plans to open its first office in the Iraqi capital of Baghdad, to capitalise on the country’s high potential, particularly in the oil, and gas and infrastructure sectors. Arabtec also announced its plans to launch its regional headquarters in Belgrade, Serbia, to drive and diversify the operations of the Company and its subsidiaries in countries of the wider Balkan region. In Jordan, Arabtec Construction signed an MoU valued at Dhs5.7bn contract to construct the country’s first themed entertainment resort, the Red Sea Astrarium, in Aqaba, Jordan. The 74-hectare entertainment park will host four hotels providing 2,000 rooms in total.
Expanding further into the North African market, Arabtec signed a historic MoU with the Egyptian Ministry of Defence to develop and construct onem mid-income homes across thirteen locations in Egypt, with total development value of Dhs147bn, the biggest project of its kind in the region and the first project for Arabtec Real Estate outside the UAE. The project, which is expected to create up to onem jobs for Egyptian people, is set to be completed over a five-year span, providingms of Egyptians with affordable access to full-fledged communities, with public amenities such as schools, hospitals, parks and places of worship.
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