Depa's H1 net profit plunges 68% as fit-out firm's expenses climb

Dubai-based company remains positive on outlook for the year as it invests in organic growth and considers acquisition opportunities

Revenue was up 5 per cent to Dh1.3 billion over the period, and Depa had a backlog of work valued at Dh2bn Delores Johnson / The National

Depa, the fit-out firm behind the world's tallest tower Burj Khalifa, said first-half net income plunged by more than two-thirds as expenses increased, but it maintains a positive outlook with plans for expansion. 
Depa's group net income declined 68 per cent to Dh35.8 million in the first six months of the year compared to Dh113.3m in the prior-year period when the recovery of two major long-outstanding receivables impacted earnings positively, it said in a statement to Nasdaq Dubai. First-half sales grew two per cent to Dh852.2m year-on-year.

"Depa has continued to deliver both sound financial and operational performance in the first half of 2018," said Hamish Tyrwhitt, Depa’s group chief executive. "The outlook for the group remains positive with Depa continuing to invest in organic growth, while evaluating opportunities for inorganic growth through value-accretive acquisitions."

A three-year slump in oil prices has weighed on contracting firms in the Middle East who have struggled to maintain growth amid weaker economic conditions. Depa turned a corner in 2017 when its annual net profit jumped 200 per cent as it managed to recover long-outstanding receivables and implemented a business restructuring plan.

First-half expenses grew to Dh799.5m from Dh704m a year ago and included a Dh3.7m impairment loss for an associate that it disposed of. Depa's associates generated a loss of Dh2.8m in the first half of 2018 from Dh0.9m year on-year.

Its backlog for the six months grew five per cent to Dh1.89 billion from the year-earlier period and outlook to win more work remains positive with opportunities to grow all four key business units.

The group "will continue to pursue the recovery of its remaining long-outstanding receivable balances and de-risk its balance sheet," Mr Tyrwhitt said.

Depa plans to move ahead with disposal plans for non-core assets identified during the last year's company-wide strategic review, it said. It completed a disposal of an associate for Dh7m in the first half of this year.

Depa plans to make a dividend payment of  2.6 fils per share for the six months ended June 30, a four per cent increase on the year-earlier period, it said.

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The company's strong backlog, a solid pipeline of prospective work and a strong balance sheet means that Depa is "well placed to succeed in its core markets" and navigate risk, it said in an investor presentation.

Depa flagged Dubai's Expo 2020, super yacht orders and growth in core markets as factors that will provide tailwinds.

"We are now well on the path to achieving our goal of maximising long-term sustainable shareholder value," Mr Tyrwhitt said.