Arabtec Holding to build on new growth strategy

In the few months since his appointment, Hasan Abdulla Ismaik, the managing director and chief executive of Arabtec Holding, has overseen a strategic reorientation at one of the UAE's most important companies. He explains the changes to Frank Kane.

Arabtec has been through a period of transition, corporately and financially. How would you summarise its current strategy?

Arabtec has established itself as a leader in real estate construction, achieving 37 years of consecutive profitability and a reputation for high-quality workmanship. While the construction industry has returned to growth, which we expect to continue for the next seven to 10 years, Arabtec is pursuing a growth strategy that also includes opportunities for expansion in oil and gas, power, infrastructure, as well as affordable housing. The company will continue to look for new markets with strong potential, such as India. Arabtec also aims to build on its strong presence in the areas of high-rise buildings and airports. [Saudi Arabia] is our fastest growing geographic region by revenues - we are winning large contracts away from our competitors.

Will the future focus be more on Abu Dhabi than on its traditional market in Dubai?

Both markets remain very important for Arabtec. As the construction industry continues to grow after three years of recession, confidence in the sector is rising, with the region seeing the restart of projects stalled due to the financial crisis. There have been some key announcements of projects that were on hold and have now been resumed, for example, Louvre Abu Dhabi. Arabtec's current Dh22 billion [US$5.99bn] backlog includes works on the Dubai World Central, and the recent contract award for the Midfield Terminal Building at Abu Dhabi International Airport. Arabtec is very well positioned to bid for projects in both cities.

Can you explain the regional strategy outside the UAE?

For the next two years in the GCC the construction market in Saudi Arabia, Kuwait, Qatar and the UAE are forecast to grow at rates between 6 and 8 per cent. Arabtec is already a construction leader in these core markets with iconic projects such as Burj Khalifa, Emirates Palace and the Louvre Abu Dhabi and Msheireb Downtown in Doha, Qatar.

There is a big recapitalisation planned. Can you explain the rationale?

The board has approved a detailed growth strategy for the next five years, which is underpinned by organic as well as acquisitive growth, and the formation of significant joint ventures. With increasing competition in Arabtec's traditional construction markets, competitiveness for new contracts is intensifying. Therefore, it is necessary to focus on higher-margin sectors and new geographic areas in order to achieve growth.

The strategy is focused on expanding Arabtec into new high-margin sectors and markets with significant growth opportunities. ESCA has granted regulatory approval for the rights issue, and we shall be seeking shareholder approval at our extraordinary general meeting that will take place shortly.

We plan to raise up to $650 million in the first tranche in May/June and if needed, up to $650m in the second tranche next year. The capital raise has been structured to enable shareholders to participate as we implement our expansion plans and to provide the capital we need at the right moment in the execution of our growth strategy.

Does Arabtec expect shareholders to take up rights in any equity cash call? Will there be contingency plans for any rights not taken up?

The rights issue is an opportunity for shareholders to participate in these exciting growth plans. As with any rights issue, there are contingency measures in the event that not all of the rights are taken up by existing shareholders. However, due to the compelling growth opportunities in the market, we see no reason why shareholders won't take up their rights.

The executive team has also been transformed. What does this signify? Why does a contractor need a head of mergers and acquisitions?

Arabtec is expanding its business significantly in order to capture the growth opportunities available to the company. At the same time, we are also expanding our management team accordingly to ensure that we have the requisite skills and international experience in place to drive our growth and achieve the optimum returns for our shareholders. We have appointed our head of M&A and a new CFO for our construction business. We also have some new members we will announce as soon as we are in a position to do so.

fkane@thenational.ae

Terror attacks in Paris, November 13, 2015

- At 9.16pm, three suicide attackers killed one person outside the Atade de France during a foootball match between France and Germany- At 9.25pm, three attackers opened fire on restaurants and cafes over 20 minutes, killing 39 people- Shortly after 9.40pm, three other attackers launched a three-hour raid on the Bataclan, in which 1,500 people had gathered to watch a rock concert. In total, 90 people were killed- Salah Abdeslam, the only survivor of the terrorists, did not directly participate in the attacks, thought to be due to a technical glitch in his suicide vest- He fled to Belgium and was involved in attacks on Brussels in March 2016. He is serving a life sentence in France

THE BIO: Martin Van Almsick

Hometown: Cologne, Germany

Family: Wife Hanan Ahmed and their three children, Marrah (23), Tibijan (19), Amon (13)

Favourite dessert: Umm Ali with dark camel milk chocolate flakes

Favourite hobby: Football

Breakfast routine: a tall glass of camel milk

How the bonus system works

The two riders are among several riders in the UAE to receive the top payment of £10,000 under the Thank You Fund of £16 million (Dh80m), which was announced in conjunction with Deliveroo's £8 billion (Dh40bn) stock market listing earlier this year.

The £10,000 (Dh50,000) payment is made to those riders who have completed the highest number of orders in each market.

There are also riders who will receive payments of £1,000 (Dh5,000) and £500 (Dh2,500).

All riders who have worked with Deliveroo for at least one year and completed 2,000 orders will receive £200 (Dh1,000), the company said when it announced the scheme.

UAE currency: the story behind the money in your pockets

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India squad

Virat Kohli (captain), Rohit Sharma, Mayank Agarwal, K.L. Rahul, Shreyas Iyer, Manish Pandey, Rishabh Pant, Shivam Dube, Kedar Jadhav, Ravindra Jadeja, Yuzvendra Chahal, Kuldeep Yadav, Deepak Chahar, Mohammed Shami, Shardul Thakur.

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”