Face-to-face: Tawfiq Abu Soud of Drake and Scull
Tawfiq Abu Soud talks about the challenges
Tawfiq Abu Soud, managing director of Drake and Scull MEP and Water and Power, talks about the challenges of leading an industry behemoth and how it plans to reach new heights
Of the various contractors that make up the Middle East’s MEP market, there are some that stand out from the crowd. For sheer size and presence, Drake & Scull is up there with the biggest and boldest.
While its success is intrinsically linked to Dubai and the growth of the city over the last 15 years, the post-boom period has seen the company and its MEP division become a truly international operation spanning several continents.
The charge into these new territories has been led by the ubiquitous Khaldoun Tabari, Drake & Scull International’s (DSI) CEO, but it has been more than ably abetted by a man who has been operating in the upper echelons of the company for the last 17 years.
Gifted with directing the MEP business which has driven Drake & Scull’s growth and represents the jewel in its crown, Tawfiq Abu Soud is part of the company’s fabric.
As managing director of both the MEP and Water and Power divisions, he is a man in demand and, as he arrives at MEP Middle East’s office half an hour early, it is safe to presume that he is keen to crack on with the job in hand – even if his cheery demeanour suggests a more relaxed approach.
Abu Soud’s sunny disposition may well lie in the company’s recently announced results for 2012. The interim figures show that DSI’s net profit for the year was $34.9m, helped by record revenues in the fourth quarter of $326.7m – a 97% increase on 2011 Q4.
Across the board, figures indicate that the last twelve months for DSIl have been largely positive, and Abu Soud says the MEP division has made a healthy contribution to this.
“Revenues for the fourth quarter were around AED 1.2bn for the whole company, which was almost double that of the third quarter. For MEP, the figures are on the same level as previous years, but we expect an improvement this year.”
The MEP division’s strong figures have been maintained by numerous contract wins across the GCC in the period, but it has also secured work in India and further afield. This international presence often finds Abu Soud in transit as he prefers to take a hands-on approach to managing the division’s development.
“I have two approaches to management,” he says. “I manage by integration and by wandering around. The wandering around is a scientific approach which allows me to get acquainted with everyone in the company and be familiar with their roles.
I promote authority down the line and decentralisation with second, third and fourth level thresholds. I have always been this way. I don’t like to retain all authority as people need authority if they have responsibility.”
This approach has served him well since 1996 when he joined Drake & Scull to set up its Fertile Crescent office in Jordan. He was quickly promoted to regional director for the Gulf in 1997 and then joined Tabari when he acquired Drake & Scull UAE in 1998.
The growth of the company since then has been something of a phenomenon.
“Back in 1998, in the early years, there were two executives in the organisation, Mr. Tabari and I,” says Abu Soud.
“He was based in Dubai and I was based in Abu Dhabi and we grew the company from that point. Now we have at least 20 to 30 executives in the company.
There were a few key project milestones in the growth of the company such as the Jumeirah Beach Residences district cooling plant and the Dubai Festival City district cooling plant.
These were the largest projects for Drake & Scull up until that time. They were design and build projects and helped to transform the company into the size of organisation it is today.”
Riding the wave of the UAE construction boom, particularly in Dubai, the company’s growth facilitated the establishment of an Infrastructure, Water and Power division in 2006 and the acquisition of Gulf Technical Construction Company in 2007.
However, the real game-changer for the company came in 2008 when it made an initial public offering (IPO) of 55% of its shares that was 101 times oversubscribed.
The move to a public limited company (plc.) has enabled DSI to establish divisions in construction, oil and gas, rail, a separate division in Water and Power, as well as secure several other acquisitions which have swollen its size and widened its international reach.
Of course, with this change in ownership structure, management had to adapt. Abu Soud says that, while the company’s new status curtailed his and other executive’s powers to an extent, it was key to achieving the growth that it has been enjoying.
“The level of authority changes when a company becomes a plc.. Now, our authority comes through committees, boards, mini-boards and ex-coms. It is governance-driven, not entrepreneur-driven.
But the governance is a benefit of being a plc., as well as the ability to grow. As a limited liability company it is very difficult to grow but as a plc. it is a lot easier due to the project funding and facilities for projects.
As a limited liability company it is very difficult to grow but as a plc. it is a lot easier due to the project funding and facilities for projects.”
The financial backing garnered by this move has allowed the company’s MEP operations to extend well beyond the GCC to India, Egypt, Algeria, Libya and Jordan. Abu Soud says that this has been essential in mitigating the effects of the slowdown in the UAE market over recent years.
“Our business is very cyclic so that’s why we have to open new markets and products, and continue to do this in order to compensate for any country that is on a downturn. Every country can’t be on a downturn so we have to maintain a steady growth for the organisation by opening new markets and products. If we were an LLC (limited liability company) we would not do that of course.”
While Drake & Scull’s MEP division has ventured further afield than most to secure new business, it has not taken its eye off the low-hanging fruit the GCC market still has on offer. In Saudi particularly, the company’s presence is significant, representing around 49% of the company's 2012 fiscal backlog.
Having secured the MEP works on the $800m+ (King Abdullah Petroleum Studies and Research Centre) project in Riyadh and the Jabal Omar Development in Makkah, Abu Soud is confident of building on Drake & Scull’s success there.
As for Qatar, Abu Soud says that this year will be crucial. “Qatar has just started to move. Last year there weren’t that many projects awarded but this year it will be different. We put a lot of bids in last year but they are still open, awaiting an outcome. We are hoping to win a few projects there.
Qatar is a small country but the projects in it are huge. It needs infrastructure to build the infrastructure. They need the labour camps, power, water, roads. There will be an influx of a few hundred thousand into the country to build what is needed and work is needed to accommodate them.”
In its thirst for growth, it would be easy to assume that Drake & Scull simply bids for every project available. The reality is somewhat more clinical and studied, even if Abu Soud’s remark that “the time of bidding for everything is gone” suggests that it was once the case.
"We have a presence in the whole MENA region so we don’t need to bid for everything – we are being more selective,” he says. “Our risk appetite is much lower than in previous years.”
With this, Drake & Scull’s approach seems to have been simplified, forsaking that which may be deemed superfluous and unquantifiable for the more simple matter of healthy numbers.
“We do not need the prestige from projects as we already have that,” says Abu Soud. “We need to grow the top line, bottom line, and backlog – the three major elements of any public joint stock company. We need to meet the shareholders’ expectations and exceed them in most instances.”
As with much of what Abu Soud says, this could be applied to the company as a whole rather than the MEP division specifically.
DSI is now a publically-owned multi-divisional mammoth and it is easy to get the impression that its roots as a privately-owned MEP contractor will soon be a quaint and distant memory, eclipsed by the burgeoning triumphs of the other divisions and the company’s desired status as a multi-discipline construction powerhouse.
However, Abu Soud says that MEP is still very much at the heart of the company and he will give his utmost to ensure it remains so. “The MEP division still has the best status in the company – it’s leading in margins and growth. I will try my best to keep it that way.” Chuckling, he adds: “If I cannot do it, it means I’m no good.”
In good company
The MEP division of Drake & Scull contributed to a good year for the company as a whole. with 37%of the overall $2.5bn 2012 fiscal backlog. DSI full-year sales for the year climbed by 6.5% to $898.5, helped significantly by a fourth quarter which saw a 97% revenue growth to $326.7m. Net profit for the year was $34.9m.
The company also said that it won $1.47bn worth of new work during 2012, which brought the size of its total backlog to $2.48bn. This is a 30% increase on the size of its project backlog at the end of 2011.
It said the growth in revenues reflected the increased momentum in Saudi Arabia, which had been quiet during the previous quarter as a result of holidays and seasonal trends.
CEO, Khaldoun Tabari, said: “We are satisfied with our strong earnings performance for both the fourth quarter and the full year across our operating segments and look forward to continued improvements in our key markets in 2013”.
“Our commitment to growth, leverage and returns continues to improve value for our shareholders as we have successfully managed in 2012 to add to our service portfolio Rail and Oil & Gas - and to expand our operations reach into Iraq, Algeria and India while maintaining profitability”
“The GCC continues to be our growth engine, and we expect in 2013 accelerated growth for DSI in emerging markets and particularly KSA and Qatar," he added.
Chief finance officer Osama Hamdan said: “Our fundamentals are strong, and we are well positioned to continue with the same with the same momentum in Q1.
"Despite current economic conditions, we continue to produce solid revenues and healthy profitability for fiscal 2012."