The UAE-based contractor Habtoor Leighton Group (HLG) owes its Australian partner A$1.2 billion (Dh3.13bn) even as it received an equity injection of A$33.5 million from shareholders last year.
HLG was meant to be “IPO-ready by 2016”, according to previous statements made by its partners. However, newly filed accounts by co-owner Cimic Group, formerly Leighton Contractors, show that HLG still has liabilities of almost A$1.2bn in receivables, letters of credit, guarantees and shareholder loans.
Cimic owns 45 per cent of HLG, and it said the carrying value of its investment increased to A$444.7m in 2015 from $383.4m.
These gains were largely a result of a stronger dollar, which added A$42.1m and the $33.5m equity injection from the partners. Cimic initially paid A$870m for its stake in September 2007.
The accounts show that A$726.3m of loans mature in September 2017, but these loans are subordinate to debts owed to other, external funders. On top of this, they have accrued a further A$116.4m of unpaid interest.
This quantum of debt seems unlikely to be repaid from income generated by HLG’s own activities. The accounts show that although HLG’s revenue climbed by 56 per cent in 2015 to A$1.2bn, pre-tax profit fell by 38 per cent to A$17.9m.
The company did not give any indication on whether it was still pursuing its IPO plans and declined to comment when contacted by The National.
The remaining 55 per cent share of HLG is owned by Dubai-based Al Habtoor Group. In November, its chairman Khalaf Al Habtoor reportedly told the Al Arabiya network that several local and international firms were interested in acquiring it. It also declined to comment on its plans for HLG.
According to its website, HLG employs more than 21,000 people in the UAE, Oman, Qatar and Saudi Arabia. It has a project pipeline of A$5.3bn.
Selling or floating a stake in such a major, Middle East-focused construction company may prove to be challenging in the current environment.
The Tunisian broker AlphaMena’s index of five quoted Middle East contractors, four of whom operate in the GCC, fell by 81 per cent in value from its peak in May 2014 to the end of 2015.
Moreover, new research from the credit rating agency S&P states that funding for infrastructure projects required by Gulf governments is likely to be severely constrained as a result of lower oil prices and tighter bank liquidity.
It is projecting a funding gap of about US$270bn between the spending required by Gulf sovereigns in the run-up to 2019 and the value of projects awarded.
It estimates that GCC countries require US$604bn of capital spending – of which US$100bn will be on infrastructure projects, but that states are only likely to invest US$330bn, of which $50bn will be on infrastructure.
“This is one reason why Gulf countries are starting to look at alternatives such as public-private partnerships,” said the S&P credit analyst Karim Nassif.
mfahy@thenational.ae
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How to wear a kandura
Dos
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- Always ask for the dress code if you don’t know
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Don’ts
- Wear hamdania for work, always wear a ghutra and agal
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ROUTE TO TITLE
Round 1: Beat Leolia Jeanjean 6-1, 6-2
Round 2: Beat Naomi Osaka 7-6, 1-6, 7-5
Round 3: Beat Marie Bouzkova 6-4, 6-2
Round 4: Beat Anastasia Potapova 6-0, 6-0
Quarter-final: Beat Marketa Vondrousova 6-0, 6-2
Semi-final: Beat Coco Gauff 6-2, 6-4
Final: Beat Jasmine Paolini 6-2, 6-2
Sui Dhaaga: Made in India
Director: Sharat Katariya
Starring: Varun Dhawan, Anushka Sharma, Raghubir Yadav
3.5/5
Keane on …
Liverpool’s Uefa Champions League bid: “They’re great. With the attacking force they have, for me, they’re certainly one of the favourites. You look at the teams left in it - they’re capable of scoring against anybody at any given time. Defensively they’ve been good, so I don’t see any reason why they couldn’t go on and win it.”
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A QUIET PLACE
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Director: Michael Sarnoski
Rating: 4/5
Top 10 most competitive economies
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SPECS
Engine: 4-litre V8 twin-turbo
Power: 630hp
Torque: 850Nm
Transmission: 8-speed Tiptronic automatic
Price: From Dh599,000
On sale: Now
Director: Nag Ashwin
Starring: Prabhas, Saswata Chatterjee, Deepika Padukone, Amitabh Bachchan, Shobhana
Rating: ★★★★
The specs
Engine: 6.5-litre V12
Power: 725hp at 7,750rpm
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Transmission: 8-speed dual-clutch auto
On sale: Q4 2023
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Confirmed bouts (more to be added)
Cory Sandhagen v Umar Nurmagomedov
Nick Diaz v Vicente Luque
Michael Chiesa v Tony Ferguson
Deiveson Figueiredo v Marlon Vera
Mackenzie Dern v Loopy Godinez
Tickets for the August 3 Fight Night, held in partnership with the Department of Culture and Tourism Abu Dhabi, went on sale earlier this month, through www.etihadarena.ae and www.ticketmaster.ae.
6.30pm: Al Maktoum Challenge Round-3 Group 1 (PA) | US$95,000 | (Dirt) 2,000m
7.05pm: Meydan Classic Listed (TB) ) | $175,000) | (Turf) 1,600m
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8.15pm: Nad Al Sheba Trophy Group 3 (TB) ) | $300,000) | (T) 2,810m
8.50pm: Curlin Handicap Listed (TB)) | $160,000) | (D) 2,000m
9.25pm: Handicap (TB)) | $175,000) | (T) 1,400m
10pm: Handicap (TB) ) | $135,000 ) | (T) 2,000m
Top financial tips for graduates
Araminta Robertson, of the Financially Mint blog, shares her financial advice for university leavers:
1. Build digital or technical skills: After graduation, people can find it extremely hard to find jobs. From programming to digital marketing, your early twenties are for building skills. Future employers will want people with tech skills.
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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.”
COMPANY PROFILE
Company name: Almouneer
Started: 2017
Founders: Dr Noha Khater and Rania Kadry
Based: Egypt
Number of staff: 120
Investment: Bootstrapped, with support from Insead and Egyptian government, seed round of
$3.6 million led by Global Ventures
RESULT
Deportivo La Coruna 2 Barcelona 4
Deportivo: Perez (39'), Colak (63')
Barcelona: Coutinho (6'), Messi (37', 81', 84')
