Construction in Abu Dhabi takes hit

Atkins, the engineering and design firm that works on the Dubai Metro, continued to grow its Middle East business, despite a slowdown in Abu Dhabi

Atkins, the UK engineering and design company, works on the Dubai Metro. EPA

Construction delays in Abu Dhabi are crimping the earnings of regional construction companies, which had hoped work in the capital would replace revenue lost from cutbacks in Dubai.

The Middle Eastern division of Atkins, the UK engineering and design company working on the Dubai Metro and the Etihad Rail line, pointed to "a slowdown in the release of projects" in Abu Dhabi when it reported yesterday a 3.7 per cent drop in profit for the first half of its fiscal year.

Atkins's revenue in the Middle East increased 10.9 per cent to £78.2 million (Dh452m) for the six-month period ending September 30 compared with the same period last year. But operating profit fell to £7.8m from £8.1m for the six-month period.

Several large projects in Abu Dhabi, including the Zayed National and the Guggenheim museums on Saadiyat Island, have recently been delayed.

"While certain programmes are being reviewed [in Abu Dhabi], I am confident Abu Dhabi is going to remain a strong market for us in the future," said Richard Barrett, the managing director of Atkins's office in the Middle East.

The company's Abu Dhabi projects include the water park on Yas Island, the Central Market, the headquarters for the International Petroleum Investment Company and the Rocco Forte Hotel.

"We are fortunate that we have several long-term projects" in Abu Dhabi, Mr Barrett said.

"Those projects are doing well. I do not have concerns."

In its public filing, the company reported "making some progress with our outstanding-debt recovery across the region".

Many construction companies have reported problems getting paid, particularly for delayed projects in the UAE.

Mr Barrett declined to discuss how much Atkins was owed.

The company also reported that its profit had been hurt by "more onerous contract payment terms on some of our current government and infrastructure work". The Middle East division's operating margin shrank 1.5 per cent from a year earlier to 10 per cent.

"It's a client's, buyer's market worldwide," Mr Barrett said.

"The payment terms are slightly longer than we enjoyed in the boom times of property."

The company has been diversifying its operation in the Middle East, Mr Barrett said. Its staff in the region has grown 8.1 per cent in the past year to 1,770 employees.

In the 2008-09 fiscal year, property projects accounted for 61 per cent of Atkins's business. Those included the Burj Al Arab and the Address Hotel in Dubai.

By 2015, property is expected to represent only 25 per cent of the company's regional business.

And the percentage of transportation projects is expected to double in the next four years.

Atkins's current workload includes the Lusail light rail project in Dohathe Mecca metro and the King Abdulaziz International Airport in Jeddah.

The company is also in the midst of a geographic shift. In 2008-09, 75 per cent of its regional business was in the UAE.

By 2015, the company expects to derive only 25 per cent of its revenue from the Emirates, with 30 per cent in Saudi Arabia and 20 per cent in Qatar. Atkins's underlying operating profit before tax rose 11.3 per cent to £46.4m, up from £41.7m in the same period a year earlier.

The company's bottom line was boosted by the acquisition of PBSJ, a US service company that has been renamed Atkins North America.

Revenue for the six-month period increased 26.9 per cent to £842.9m from £664.2m a year ago.

Atkins's regional strength helped to offset a 20.4 per cent drop in the company's UK profitfor the six months ending September 30.