Al Habtoor-Specon MD Thrasos Thrasyvoulou
Turnkey MEP contractor Al Habtoor-Specon is showing strong growth despite the downturn. MD Thrasos Thrasyvoulou explains why.
The company doubled its turnover from 2008 to 2009, and has enough projects in hand “to grow 50% this year as well. Our strategic planning for the next three years is based on a growth rate of 25% a year, based on our projections and the specific jobs we are being called to tender on. This is reasonable growth under the circumstances,” says Thrasyvoulou. “Our aim is to get involved in projects with other major contractors in the region and abroad, and to have exposure to a broader client base.”
An indication of just how fast the market has changed is that when MEP Middle East spoke to Thrasyvoulou in July 2009, he was confident that the company was well on its way to an impressive AED2 billion target. “We have not achieved this level because of the downturn, especially in Dubai, where a lot of projects have been postponed or redesigned, which will affect cash flow for a long period. In the interim we have become an AED1 billion company, and our immediate plan is to reach the AED1.5 billion level,” says Thrasyvoulou.
Al Habtoor Engineering and Specon Limited signed a memorandum of understanding (MoU) in October 2005, with the partnership registered officially in July 2007. Both parties were already highly credible and experienced players in the market, so it was an auspicious beginning for the new company. The immediate result was “tremendous growth within a short period of time,” says Thrasyvoulou.
This was due to the complementary nature of the two parties, together with their well-established presence. “The second factor that contributed to quick growth was the pipeline of projects available to us immediately through Al Habtoor Engineering. This was a boom time for contractors, who were in search of reliable and qualified MEP specialists to do an almost impossible quantity of work in terms of the timeframes and demands of the industry,” says Thrasyvoulou.
The initial success was also largely due to the vast experience in MEP of the combined core team, which had garnered 20 to 25 years’ experience prior to Al Habtoor-Specon arriving on the scene.
“Most of the senior personnel were part of an earlier establishment led by myself,” says Thrasyvoulou. This also helped to mitigate the impact of the global downturn in late 2008. “In fact, due to the pipeline available with our partners, the downturn in the area, and specifically in Dubai, has not affected the growth of Al Habtoor-Specon as much, though the growth would have been higher if there had been no downturn, of course.”
Thrasyvoulou says diversification was a conscious strategy right from the beginning. “Even though our project pipeline was big enough to sustain us during the immediate shock of the downturn in this area so that we kept on growing, I have always been a firm believer in not keeping all your eggs in a single basket. So at the time of the downturn we only had about 20% of our business in Dubai, and were not heavily affected.”
This was due to geographic diversification, as “you do not want to be in one area only.” As a result the company “expanded cautiously and steadily,” moving into Abu Dhabi and Qatar. “Geographically we are now tendering for projects in Saudi Arabia, Kuwait, Bahrain and Oman as well, and other areas where we hope to get business in order to diversify our portfolio.” Then there is diversification of specialisation. “We began as an A-Z turnkey contractor, with the traditional scope of HVAC, plumbing and sanitary, electrical and BMS. We also had a lot of experience in MV and HV substation work and transmission lines.”
Hence an energy and power division was formed, culminating in the signing of a MoU to enter into a consortium with VINCI Energies of France “to participate in and execute projects in Qatar for MV and HV substations. The prequalification and representations to the relevant ministry have been completed, and we are in line to obtain documents for the first tender. This three-billion Qatari Riyal project will increase our works in hand substantially,” says Thrasyvoulou.
“Our diversification also covers the infrastructure, MV and external facilities in projects like Sheikh Zayed University, Paris Sorbonne University and Khalifa Port and Industrial Zone that the company is currently carrying out. We also have qualified engineers and designers in-house who are LEED-accredited, which is another trend in terms of green building and sustainability. Needless to say, within MEP we cater for complex systems like ELV, audio-visual, CCTV, fire alarm and fire fighting, for example,” says Thrasyvoulou.
Commenting on the current state of the market, he says: “Personally I believe that after the initial shock of the downturn in late 2008, the market in general has absorbed this and stabilised. I do not foresee a much bigger downturn; I cannot say we have reached the absolute bottom either, because there are so many factors involved.
“From a personal point of view, I do believe we are nearly at the bottom. One thing I am sure about is that the liquidity, the availability of money through the banks, is better than a year ago.
During the downturn, finance for projects was largely unavailable, as banks were in a more difficult position than contractors even. These days I am optimistic that even if we are not at the bottom, we are nearly there and that the liquidity is getting better.
“I believe that opportunities are good in areas like Qatar, Kuwait, Saudi Arabia and Bahrain for an MEP contractor of our quality and depth. Weaker companies have closed down or merged, and the number of major competitors capable of executing big projects has been reduced,” says Thrasyvoulou.
However, increased competition for a diminished pool of projects has placed increased pressure on pricing. “I have recently seen a drop in prices. A lot of MEP contractors, in order to sustain themselves, are becoming more competitive. I hope they will not go to the extreme of dropping prices to the level where quality is sacrificed and projects cannot be executed properly. This is a dangerous thing in my opinion. Clients must be very cautious in this respect.
Dubai has suffered most
“Certainly the global economic recession has affected all countries. In the UAE, Dubai, due to the previous unsustainable boom and the sudden global downturn, has suffered more than other areas in the Gulf in terms of growth, fewer new projects, a slowdown in existing projects, especially hotels and residential/commercial developments. I believe that, after the initial shock in 2008 and the sustained recession in 2009, 2010 will still be a low-growth year – specifically in Dubai, but even in general in the Gulf region.”
Thrasyvoulou says this view is reflected in a shift in the market. “In terms of work, there is a definite shift from the residential/commercial sector to education/healthcare and industrial/infrastructure work – what I call the traditional sectors.
“Our recent success in carrying out two of the major educational projects in the area – Sheikh Zayed University (in a joint venture with Hastie) in the magnitude of AED540 million and Paris Sorbonne University (in the magnitude of AED240 million) – is itself evidence of this shift. “Both of these projects include related infrastructure works and complex specialised systems. In addition, the Khalifa Port and Industrial Zone project we secured recently, in the magnitude of AED320 million, verifies this further.
“There are many other projects in the pipeline, like New York University, Tawam Hospital, Al Ain University and the Abu Dhabi Airport. At present we are participating in almost all of these tenders, and are optimistic that some major projects will be secured,” says Thrasyvoulou.
Such optimism is based on the company’s good engineering background and in-house design capability.
A big problem to date has been the time constraints demanded by clients in order to enable them to capitalise speedily on their returns.
“Often the design is not completely finished and the scope is not very well defined. Then if the MEP contractor does not have the capability to check the design in terms of system workability, the end result will be a project with problems. MEP is the biggest single element after the main contractor in a building project. Buildings suffer if the air-con does not perform properly or there are plumbing problems at the end. We are a major part,” concludes Thrasyvoulou.