Depa returned to the black again yesterday as the company benefited from a flurry of hotel building in Dubai and closed down loss-making parts of the business.
The Nasdaq Dubai-quoted interiors company, which is 24 per cent owned by Dubai's largest contractor Arabtec, reported a net profit of Dh19 million in the three months to September – up from a Dh22m loss the year before. Depa said that it was benefiting from its strategy to be more selective by signing contracts with low-risk profiles and healthy margins while also gaining from a spate of hotel construction in Dubai in the run-up to the World Expo 2020.
The third quarter profits hike came despite a 10.39 per cent decline in revenues, which slipped to Dh517m from Dh577m a year earlier.
“Our strategy to be extremely selective in what we bid for and how projects are priced is starting to see tangible results with contract gross margins in third quarter of 2014 returning to healthy margins significantly higher than what we achieved in the first nine months of 2013,” said Nadim Akhras, Depa’s interim group chief executive.
Rarely traded Depa stocks remained unchanged on the news, at $0.59 yesterday.
The company reported that its order backlog at the end of September stood at Dh2.63 billion – an increase of 8.7 per cent on the Dh2.42bn it reported in June.
Depa said much of this came from a continued increase in interior contracting for the hospitality industry, which at the end of September accounted for 49.4 per cent of its work – up from 36 per cent at the end of June.
This included a Dh108m interior fit-out contract for the 100,000 square metre Emerald Palace Kempinski Hotel on the Palm Jumeirah signed in September.
Depa also reported a surge in its Asian business, which accounted for 36.3 per cent of the company’s total backlog at the end of September – up from 30.3 per cent in June.
The results also boosted Depa’s nine-month figures where net profits quadrupled to Dh46m from Dh11m the year before.
Depa said that the biggest driver of this increase was a return to profitability at its German subsidiary Vedder, where net profits for the first nine months of the year rose to Dh14m from a net loss of Dh5m in the whole of 2013.
Vedder acquired German superyacht and private jet outfitting specialist Loher Raumexklusiv in August 2013, rescuing the embattled 82-year old company from bankruptcy proceedings and providing Depa with its first entry into the private jet interiors market. Vedder has spent the past year integrating the new company into its business.
The upbeat results follow a lacklustre start to 2014 as the company faced increasing competition from regional rivals.
The company suffered the knock-on effects of the Arabtec crisis this summer when majority owner Arabtec's shares collapsed in value after the shock departure of the chief executive Hasan Ismaik (who was also chairman of Depa). This left markets wondering whether Arabtec's key financial backer Abu Dhabi fund Aabar would continue to support the company.
In September Depa shares were briefly suspended from trading after it was accused of breaching market rules for failing to appoint a new chairman to replace Mr Ismaik.
“Depa’s investor base is very shallow and that the stock has very little liquidity,” said Tariq Qaqish, the head of asset management at Al Mal Capital. “Since Arabtec has been involved in the company we have seen very little communication from Depa about its strategy.”
lbarnard@thenational.ae
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