Arabtec's latest guidance on how it will provision against future delays in client payments has dampened enthusiasm among investors for the Dubai builder.
The emirate's largest construction company is owed more by clients than it posted in revenues last year.
At the end of the year, receivables stood at Dh5.7 billion. That is equivalent to more than a year of revenues, or 374 days of sales at the company.
Analysts say Arabtec has to increase its provisioning in case of further delays in payments.
At the end of last year, the company's provisions had decreased 11.4 per cent to Dh265 million, from Dh299m in 2009.
Speaking to reporters this week, Ziad Makhzoumi, Arabtec's chief financial officer, did not address analysts' concerns about the company's level of provisioning.
But he did address reverse provisioning, the practice of recording as earnings money a company had previously set aside as provisions.
"We're not doing reverse provisions yet," Mr Makhzoumi said. "With the market going the way it is, I think it is prudent to wait until possibly the end of the year."
Habib Sassi, an analyst who covers the company at Menacorp Alternative Investments brokerage, said it was not out of the ordinary for the company not to reverse provisions at this stage, given its Dh15bn backlog of projects. But he said investors were disheartened that Mr Makhzoumi did not commit to future provisioning.
"We knew they would not be doing this. What he is answering are questions about existing provisions, but what we want to know is about additional provisions. That is what matters," said Mr Sassi.
Since 2009, Arabtec has faced growing difficulties in being paid on time by multiple clients, including Nakheel and other major Dubai developers.
Mr Sassi said that on average the company had to wait a year to be paid for projects that had been sold.
Arabtec shares closed 1.5 per cent higher yesterday at Dh1.36 on the Dubai Financial Market.
fhalime@thenational.ae
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COMPANY PROFILE
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Total funding: Self funded
Thank You for Banking with Us
Director: Laila Abbas
Starring: Yasmine Al Massri, Clara Khoury, Kamel El Basha, Ashraf Barhoum
Rating: 4/5
RACECARD
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WHAT IS A BLACK HOLE?
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3. Large black holes can also be formed when smaller ones collide and merge
4. The biggest black holes lurk at the centre of many galaxies, including our own
5. Astronomers believe that when the universe was very young, black holes affected how galaxies formed
Company%20Profile
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Engine: 2.7-litre 4-cylinder Turbomax
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COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
Joker: Folie a Deux
Starring: Joaquin Phoenix, Lady Gaga, Brendan Gleeson
Director: Todd Phillips
Rating: 2/5
Company%20profile
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Artist: Coldplay
Label: Parlophone/Atlantic
Number of tracks: 10
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Michael Beckley, Cornell Press
TERMINAL HIGH ALTITUDE AREA DEFENCE (THAAD)
What is THAAD?
It is considered to be the US's most superior missile defence system.
Production:
It was created in 2008.
Speed:
THAAD missiles can travel at over Mach 8, so fast that it is hypersonic.
Abilities:
THAAD is designed to take out ballistic missiles as they are on their downward trajectory towards their target, otherwise known as the "terminal phase".
Purpose:
To protect high-value strategic sites, such as airfields or population centres.
Range:
THAAD can target projectiles inside and outside the Earth's atmosphere, at an altitude of 150 kilometres above the Earth's surface.
Creators:
Lockheed Martin was originally granted the contract to develop the system in 1992. Defence company Raytheon sub-contracts to develop other major parts of the system, such as ground-based radar.
UAE and THAAD:
In 2011, the UAE became the first country outside of the US to buy two THAAD missile defence systems. It then stationed them in 2016, becoming the first Gulf country to do so.
Tips for used car buyers
- Choose cars with GCC specifications
- Get a service history for cars less than five years old
- Don’t go cheap on the inspection
- Check for oil leaks
- Do a Google search on the standard problems for your car model
- Do your due diligence. Get a transfer of ownership done at an official RTA centre
- Check the vehicle’s condition. You don’t want to buy a car that’s a good deal but ends up costing you Dh10,000 in repairs every month
- Validate warranty and service contracts with the relevant agency and and make sure they are valid when ownership is transferred
- If you are planning to sell the car soon, buy one with a good resale value. The two most popular cars in the UAE are black or white in colour and other colours are harder to sell
Tarek Kabrit, chief executive of Seez, and Imad Hammad, chief executive and co-founder of CarSwitch.com