Arabtec has undergone a couple of major restructuring exercises since the departure of Hasan Ismaik in June 2014. Silvia Razgova / The National
Arabtec has undergone a couple of major restructuring exercises since the departure of Hasan Ismaik in June 2014. Silvia Razgova / The National

Property

Arabtec names Saeed Al Mehairbi as acting chief executive

Dubai-listed company's board accepts resignation of current acting chief executive Mohamed Al Fahim.

Michael Fahy
Michael Fahy

November 24, 2015

The embattled UAE contractor Arabtec has announced that its acting chief executive, Mohamed Al Fahim, has stepped down from his position citing “other commitments”.

Mr Al Fahim, who took on the role following the departure of Arabtec’s former chief executive Hasan Ismaik in June 2014, will remain on the board, however, and will be replaced as acting CEO by fellow board member Saeed Al Mehairbi.

Mr Al Mehairbi also holds management positions at Abu Dhabi National Oil Company and at International Petroleum Investment Company (Ipic) – the Abu Dhabi Government-owned investment company that owns more than 92 per cent of Arabtec's biggest stakeholder, Aabar Investments.

Arabtec has undergone a couple of major restructuring exercises since the departure of Mr Ismaik, including a shake-up of its management team.

It has also been forced to recognise losses on a number of contracts, which led to the firm declaring a third-quarter net loss of Dh944.7 million this month as revenue dropped 24 per cent to Dh1.6 billion.

This brought its accumulated losses for the nine months to September 30 to Dh1.94bn, compared to a profit of Dh309m in the same period last year.

Nishit Lakhotia, the head of research at Bahrain’s Securities and Investment Company, said the current environment was difficult for all contractors, as they are all having to contend with project delays and payment issues. “With Arabtec, things obviously got aggravated because it’s undergone a phase of transition again after it went through one under the previous CEO, Ismaik.

“The new management has changed the strategy.

“Because of the transition, their costs shot up,” said Mr Lakhotia.

“This was like a double whammy. So costs had to be brought down, but that doesn’t happen overnight. It still seems that they don’t have a clear-cut, stable management, with the new [acting] CEO also being temporary. So the transition phase is not yet over in my opinion.”

The company’s shares fell 4.3 per cent to Dh1.11 yesterday, which is 83 per cent lower than the Dh6.84 per share peak it was trading at in mid-May 2014.

mfahy@thenational.ae

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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.”