Struggle predicted for Renaissance Services

What's Down: Renaissance Services,an Omani oilfield services company, failed to capitalise on high oil prices last year and might struggle to increase its profit this year.

Renaissance Services, an Omani oilfield services company, failed to capitalise on high oil prices last year and might struggle to increase its profit this year.

Full-year profit at Renaissance last year dropped 93 per cent to 2.3 million rials, while revenue rose more than 14 per cent to 290m rials.

The company was hit by one-off items amounting to 11.4m rials arising from financial misconduct and fraud cases at its UAE subsidiary Topaz Energy and Marine.

"2011 was a challenging year for them. The Topaz Group, particularly the engineering division, struggled and in our view continues to struggle," said Abid Riaz, an analyst at EFG-Hermes.

Topaz's engineering division had struggled to win regional contracts to develop new offshore oilfields.

"By their own admission, they took the eye off the ball in what seems to be quite a challenging market. Despite oil prices being where they were in 2011, anecdotally we didn't see the increase in new development work that one would have envisaged," said Mr Riaz.

Renaissance believes that it has wiped the slate clean and is now able to start afresh.

"In 2011, we addressed a series of one-off operational challenges and we are now well placed to move forward and progress the company's dynamic growth strategy," said Stephen Thomas, Renaissance's chief executive.

In the fourth quarter of last year, business for the engineering division picked up as the unit won offshore contracts. But analysts say the increase in revenue last year was achieved at the expense of margins and that the one-off charges are not the only factor behind the profit decline.

"The boost in revenue seems to have come from some lower margin business," said Mr Riaz.

Legal issues surrounding Topaz and an unfavourable investment climate led Renaissance to cancel an initial public offering of its subsidiary in London.

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