The building consultancy Atkins has reported a decline in revenue in its Middle East business in the six months to September 30, and tightening liquidity as clients continue to delay payments.
The UK-based company’s Middle East unit reported a 12 per cent year-on-year decline in revenue to £104.9 million (Dh481.2m), although on a constant currency basis it fell by 22 per cent, the company said today. Operating profit also declined by 41 per cent to £6.6m.
In a statement to the London Stock Exchange, the company said that it had “seen no improvement in the liquidity situation … as clients continue to extend payment terms, resulting in increased debt provisioning”.
“Cash collection remains a key focus across the region,” it said.
At the end of September, the average number of employees working for Atkins in the Middle East dropped by 5.4 per cent to 2,420, compared with 2,557 in the year-earlier period. Employee numbers have dropped by 1.6 per cent since March, the company said, reflecting “more challenging conditions in the transportation and infrastructure markets in particular”.
Atkins is working on the Doha Metro project, where it is project manager for construction of the Gold Line – one of four new lines being built under the first phase, which is due to complete in 2020.
In Saudi Arabia, it is project manager for three of the six lines being built for the Riyadh Metro, overseeing the Spanish-led FAST consortium building lines 4, 5 and 6. It is also advising the Economic Cities Authority in the kingdom on the development of four new cities.
The company was more upbeat on the property sector, especially in the UAE, where it delivered the Dubai Opera House for Emaar Properties. Its Faithful + Gould cost and programme management division is also managing the Dubai Creek Harbour project for Emaar, but has faced payment delays in Saudi Arabia and in Qatar.
Atkins said the “sustained low oil price and consequent changes to spending priorities are increasing uncertainty in the region”. However, at group level, it achieved strong revenue and profit growth in North America, and higher profits in the UK and Europe. Group revenue was 10 per cent higher at £994.7m and underlying net profit was 11 per cent higher at £47.7m, although when impairments and other one-off costs were added its reported net profit dropped by 58 per cent to £22.4m.
“Despite challenges in some markets, we have delivered good underlying profitability and the near-term outlook in our UK and North American businesses is particularly positive,” Uwe Krueger, the chief executive of Atkins said.
Earlier this week, US project management consultancy Hill International also reported a worsening financial performance in the three months to September, which it blamed on an increase in bad debts from Middle East clients. The Dubai-based contractor Drake & Scull also said it is planning a “real transformation” of its business, which could include retrenching its ambition of being a civil works contractor and “taking a more conservative stance” over the recoverability of outstanding debts.
Speaking at a British Business Group event in Dubai this week, Ben Hughes, a director at Deloitte’s Capital Projects division, said: “A lot of our focus at the moment is around distress. There’s a lot of distress in the market – both in terms of liquidity and balance-sheet positions for contractors, real estate companies and the whole supply chain.”
mfahy@thenational.ae
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