Builder Arabtec posts 24% increase in second quarter net profit

Faster resolution of receivables behind profitability, according to the contractor

Arabtec had a backlog of Dh14.8bn as at March 31. Silvia Razgova / The National

Arabtec, the UAE’s biggest listed contracting group, posted a 24 per cent increase in second quarter net profit thanks to faster collection of receivables.

Net profit attributable to equity holders in the three months ending June 30 reached Dh49 million from a year earlier, it said in a statement on Thursday to the Dubai Financial Market, where its shares are traded.

The group’s six consecutive quarters of profitability was down to "a reduction in trade receivables and debtor days", which was a result of the company’s efforts to improve "resolution and collection of receivables", said Arabtec group chief executive Hamish Tyrwhitt.

Current trade receivables were Dh223m lower compared to the first quarter of this year with a 17-day improvement in debtor days, producing a positive net cash from operating activities of Dh206m in the second quarter, it said, without providing comparable figures for the second quarter of last year. Revenue for the second quarter rose 16 per cent to Dh2.39 billion from the same period in 2017.

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Arabtec, in which Mubadala Investment Company unit Aabar Investments holds a 37.7 per cent stake, has been able to clock up profit after undertaking a recapitalisation programme last year to extinguish Dh5bn in losses accumulated due to the slump in construction activity during the oil price plunge that started in 2014. It also started in 2017 a three-year restructuring programme, which included divesting non-core assets and investments.

“The Group continues to focus selectively on countries that offer a strong, sustainable pipeline of construction and infrastructure opportunities including the UAE, Saudi Arabia, Bahrain and Egypt,” it said. “Furthermore, Arabtec is actively pursuing a number of infrastructure opportunities through its operating companies.”

The company, an infrastructure projects developer in the UAE, Saudi Arabia, Bahrain as well as Egypt, had a backlog of Dh16.1bn at the end of June this year, compared with Dh17.4bn at the end of June last year.

Some of the contracts it won this year include a Dh424m award from real estate developer Damac Properties, a Dh433m infrastructure project from Dubai Municipality and a Dh157m award from Emaar Misr, the Egyptian unit of Emaar Properties.

Arabtec is aiming to consistently secure between Dh8bn-9bn in new projects at group level annually, according to its 2018 targets featured in an investor presentation posted on DFM.

The contractor is targeting growth in Mechanical, Electrical and Plumbing projects, Engineering, Procurement, Construction Management infrastructure and special construction and expanding its capital base in 2019.