Market mover

Already one of the largest MEP contractors operating across the Gulf region, Drake & Scull is about to become even bigger and more recognised. Executive director Khaldoun Tabari outlines the firm's next moves to Alison Luke.

ANALYSIS, MEP

2008 is going to be a big year for Drake & Scull Group.

With over 40 years' experience in the Middle East behind it, the firm is making several moves to prepare for its future operations in the region.

 

We have already filed for our IPO and are currently seeking approval from ESCA.

Before the year is over, the firm plans to undertake a range of expansions and diversifications that will make it an even bigger force in the regional MEP sector.

 

Spearheading these changes is executive director Khaldoun Tabari. Jordanian Tabari's first involvement with Drake & Scull was in 1987, when his firm Test Mechanical Services carried out a project in a joint venture with Drake & Scull UK.

Drake & Scull Test Jordan was subsequently created as a joint venture in 1992. Six years later, Tabari entered into business with Drake & Scull in the UAE, buying 50% of the firm's operations, which was followed by a 100% buyout in 2005.

"Drake & Scull was heavily involved in Dubai, they had done Wafi City and the Jumeirah Beach Hotel, but with the changing times they needed to have proper local support," explains Tabari.

"Instead of working from the UK they needed to have a base here."

Regional developments

The offshore holding company Drake & Scull Group now has subsidiaries in several local markets, with offices established in Dubai, Abu Dhabi, Qatar, Bahrain, Kuwait, Egypt, Jordan and, most recently, Saudi Arabia.

"We just entered Saudi Arabia about six months and we have now gone full circle and purchased the company that I started," states Tabari, "[The division] will be called Drake & Scull International Saudi," he adds.

The firm will undertake a few small contracts that formed part of the acquisition, but have also already won two large deals in its own right.

It has signed a US $163 million (AED600 million) contract for MEP works in the King Abdullah University; plus a further $54.5 million (AED200 million) contract for a district cooling plant.

"In 2008 we expect Saudi Arabia to be the biggest growth area," states Tabari.

In addition to Saudi, the firm plans to increase its operations in Oman and Bahrain during 2008.

"Drake & Scull was [operating] in Oman for many years, then about eight years ago we pulled away because there wasn't much business, but we would like to be there so it is on our agenda this year to restart Drake & Scull International Oman," states Tabari.

"We have a registered company and we have a very good partner and everything is in place."

The Bahraini business is also set to begin contributing turnover to the Group in 2008, with contracts for water treatment and district cooling plants already signed.

Diversifying markets

Although best known as an MEP contractor, the firm has several business streams and has just added another.

In addition to MEP contracting, divisions already successfully operating are Industrial Water and Power (IWP), which primarily focuses on the district cooling sector; TCC, a civil contracting operation that is managed separately; and facilities management, which is chaired by owner firm Emcor.

With an aim to eventually offer a one-stop-shop for construction projects, the firm has now added real estate as its fifth business stream. "We have a land bank," states Tabari.

"We have purchased land near the new airport, Jadaff and Dubailand and we are about to construct two buildings in Jumeirah Village."

Ground-breaking on its first project is planned for February 2008.

A four-storey residential building, this was offered to Drake & Scull employees at subsidised rates and, unsurprisingly, sold out within two weeks.

"We started thinking about [this project] a year ago, it was to help our employees find places to stay," Tabari explains.

"We want to be in real estate and I think that will be an area in which we will grow, but we will go there in a measured fashion," he adds.

Seeking a niche market, the firm plans to target middle-income earners who want to substitute renting for ownership.

Barriers to targets

One of the biggest problems that the firm faces in achieving its goals is common to the industry worldwide - staff recruitment. "HR is a major problem. We are recruiting as fast as we can," stresses Tabari.

With all other MEP contractors in the market also seeking reliable, well trained staff, Tabari stresses that a different approach is sometimes needed and many people must be involved in the process.

"I keep saying to my managers that if they don't spend 20% of their time on hiring people then we will have a problem," states Tabari.

"We cannot just leave it to the HR manager and it becomes very cold using group agents and advertising." Offering potential staff more than financial rewards is key, he stresses: "It's really important to be appreciated for what you do."

"Good engineers here can always get that extra 5% [salary]; we want them to come because they like you [as a firm]."

Industry labour shortages are across the board, with the scale as well as volume of projects playing their part: around three years ago the firm's largest project had around 600 workers at peak, whereas today it has over 4,000 working on Dubai's Palm Jumeirah alone.

At operative level the firm has recruiters in India virtually year-round seeking trained staff.

"It's not about having an agent and saying ‘we want so many people'...we usually have a partnership with a technical college, our team goes there and we examine the people and bring only those qualified to work as technicians," stresses Tabari.

Meeting project targets

Tabari's previous experience heading a UK-based firm that exported electro-mechanical products to the Middle East has set him in good stead for his current role.

"The electro-mechanical business is perhaps 60% procurement, so having the ability to procure properly is 60% of the story," he states.

Procurement is a key factor in a successful business stresses Tabari and enables fast project deadlines to be met.

"It is a case of making sure that your relationship with your partners is effective," he states. The firm is seeking to develop partnering through its supply chain, seeing this as good business practice.

"If the client recognises this methodology it reduces risk and as such it reduces mark-up," stresses Tabari. "Contractors are not there to gamble; although there is a lot of risk, they want a controlled risk."

"In the initial stages [of a contract] it would serve justice; it would be a good thing for the client and contractor because the contractor would be willing to give a reduction on their price and the client would take advantage of that, but the risk is shared," he adds.

Entering the market

The most significant sign of Drake & Scull's future growth is its aim to enter the Dubai stock market.

"We have already filed for our IPO (Initial Public Offering) and are seeking approval from ESCA (Emirates Securities and Commodities Authority," Tabari stated.

Such a move would bring several benefits to the firm, including an increased ability to take on larger projects, a higher capital base and a raised profile.

The firm hopes to gain approval for listing on the Dubai stock market by Q2 of 2008.

The firm is currently expanding at around 25% annually. "We're looking at our 2008 turnover to be around 1.5 billion dirhams for the UAE," states Tabari.

"Our projections for the coming years is 1.5, 2 billion, and 2.6 billion dirhams for the UAE alone." And with plans to back up the ambitions, you can be sure that you'll hear even more about the firm in the future.

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