Depa braces for 'extremely tough' 2010

Depa worked on the fit out of the Burj Khalifa.

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Depa, the Dubai based outfitter for the Burj Khalifa, is bracing itself for an ‘extremely tough’ 2010 in order to cope with difficult market conditions, its CEO has said.

Mohanned Sweid, said: “Although we are seeing signs of recovery, we believe 2010 will be extremely tough and we are further streamlining our business to strengthen our ability to cope with difficult market conditions and further diversifying our revenue base, as we have been doing over the last decade.”

In 2009, the company traded in line with market expectations and guidance, and managed to achieve 36 percent revenue growth and 24 percent profit growth for the full year, after tax and prior to adjusting for a maximum of $2.04 million in impairments.

Its revenues stood at approximately $735.7 million, which compared favourably to 2008’s $536.8 million, while profits for the year reached $65.7 million as compared to $53 million in 2008, both after adjustments for additional contingencies.

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As of December 31 2009, Depa’s backlog included over one hundred projects worth $572 million, as compared to $736 million on the same date in 2008. Projects based in the UAE accounted for 55.2 percent of the backlog.

In order to maintain its conservative approach to estimates and expectations, Depa has continued to implement high levels of risk management measures.

As a result, its management has increased the allocation of project contingencies over and above the norm for such events to $8.17 million.

In 2008, a similar approach was taken, with only $5.45 million of the allocated $8.17 used for projects during the year, leaving a total amount of $10.9 million available for contingencies in 2010.

In addition, approximately $9.1 million has been taken in provisions of doubtful debt due to the current global economic climate.

Despite the challenging market conditions in 2010, the company is expecting revenue and profit levels for the year to be similar to those of 2009 as there are still a number of prestigious and high profile contracts to work on, both in the UAE and worldwide.

In line with its long term growth strategy, Depa has continued to diversify its revenue by geography and sector in order to reduce its reliance on any one country or sector. In August 2009, it entered Angola and Jordan while strengthening its South Asian operations.

The company’s operations in Saudi Arabia, Qatar and the UAE were also strengthened.

In the Middle East, the company focused on the infrastructure sector, with its joint venture, Lindner Depa Interiors being awarded a second Dubai Metro contract worth $66.76 million for the fit out of 11 Green Line stations.

The company is currently in the process of completing the handover of 13 Red Line stations. In 2009, Depa also completed the fit out of the Emaar Medical Centre in Dubai Mall, the largest outpatient complex in the region.

As with the infrastructure sector, Depa is paying close attention to expanding its presence in the refurbishment area, in December it won a contract to refurbish three hospitals in Doha, Qatar, another key target market, worth a total of $18.4 million.