Depa trading statement

Published February 16th, 2010 - 12:55 GMT

Depa Limited (ticker DEPA) (‘Depa’ or ‘the Company’), one of the world’s largest interior contractors, today issues the following update ahead of the announcement of its full year audited results, expected to be published on 29 March 2010.

Depa has continued to perform well across the sixteen countries in which it operates. The Company confirms that in 2009, it traded in line with market expectations and guidance and has achieved circa 36% revenue growth and circa 24% net profit growth for the full year (after tax and prior to adjusting for a maximum of up to AED7.5 million (USD2.04 million) impairments). Revenues stood at approximately AED2.7 billion (USD735.7 million) (vs 2008: AED1.97 billion (USD536.8 million)) and profits reached AED241 million (USD65.7 million) (vs 2008: AED194.5 million (USD53.0 million)), both after adjustments for additional contingencies. As of 31 December 2009, the Company’s backlog was AED2.1 billion ($USD572 million) (vs 31 December 2008: AED2.7 billion (USD736 million)).

Although Depa achieved strong performance in 2009, it was not immune to the global economic downturn, which impacted the emerging markets in which Depa operates, in particular the hospitality sector. 

Mr Mohannad Sweid, Chief Executive Officer, Depa Limited said:
‘2009 was an extremely challenging and difficult year worldwide. Despite this, we have managed to maintain our strong performance, as we anticipated the downturn ahead of time and prepared well for it by managing our cost base efficiently and diversifying our revenues geographically and by sector. Although we are seeing signs of recovery, we believe that 2010 will also 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.’

Looking ahead, despite these challenging markets, Depa is expecting revenue and profit levels in 2010 to be similar to those of 2009. There are still prestigious contracts to work on and Depa continues to win these due to its clear market leading position and unparalleled experience in hotel fit-outs in the UAE and worldwide. In 2009, Depa won contracts to fit out the Dubai Palm Royal Mirage, Conrad Hotel in Dubai and the Ghurair Hotel in Deira, Dubai.

In line with its long term growth strategy, Depa has continued to diversify revenues by geography and sector in order to reduce reliance on any one country or sector. In August 2009, Depa entered Angola and Jordan and strengthened its South East Asian operations. In 2009, Depa also saw particularly strong growth in Asia, where its joint venture Depa Design Studio has been involved in high profile projects, including the Marina Bay Sands Resort, Sentosa Island, and the refurbishment of the Meritus Mandarin hotel. The Company sees continued success in its Asia operations for the coming few years.

The Abu Dhabi market has a rapidly growing hospitality sector and continues to grow as a proportion of overall revenues. In November 2009, Depa handed over five hotels on Yas Island, Abu Dhabi, ahead of the inaugural Formula 1 Grand Prix. In the rest of the region, Depa has strengthened its operations in Saudi Arabia and Qatar in anticipation of strong growth ahead.

Depa also continues to focus on the infrastructure sector which is countercyclical in a downturn as governments, especially those in emerging economies, continue to invest in their country’s development. In December, Depa’s joint venture, Lindner Depa Interiors was awarded a second Dubai Metro contract worth AED245 million (USD66.76 million) for the fit-out of 11 Green Line stations. This is the joint venture’s second Metro contract win and Depa is currently in the process of completing the handover of the 13 Red Line stations, a number of which it already handed over ahead of the formal launch of the Metro in September. Last year, Depa also completed the fit-out of the Emaar Medical Centre in Dubai Mall, the largest out-patient complex in the region.

As with the infrastructure sector, refurbishment is also a countercyclical industry and as such, Depa is closely looking at opportunities to expand its presence in this area. In December, Depa won a refurbishment contract for three hospitals in Doha, Qatar, another key target market, with a total value of AED67 million ($18.4 million).

Depa continues to have a healthy contracted backlog which stood at AED2.1 billion (USD572 million) as of 31 December 2009 (vs 31 December 2008: AED2.7 billion (USD736 million)) and includes over one hundred projects, of which the top 37 account for 91% of the backlog. The United Arab Emirates accounts for 55.2% of this overall figure.  Depa has no project or client accounting for more than 11% of current backlog.

 Project Name Country Backlog
1 Confidential - hotel  Egypt 306,862,500
2 Dubai Metro - Green Line UAE / Dubai 233,585,694
3 Conrad Hotel UAE / Dubai 203,473,845
4 Ferrari Experience - Yas Island UAE / AD 124,843,223
5 Mazagan Villas Morocco 122,912,093
6 Doha City Center  Qatar 97,785,402
7 Tiara Palm Hotel UAE / Dubai 71,394,679
8 East Hotel – MOE UAE / Dubai 69,146,583
9 Hamad Medical Corporation Qatar 65,822,088
10 Private Yacht Germany 60,379,342
11 Marina Bay Sands Resort Singapore 49,758,129
12 Private Yacht Germany 44,758,999
13 Centro Hotel UAE / Sharjah 37,914,256
14 Al Wahda Sport City UAE / AD 35,798,955
15 Al Wahda Sport City UAE / AD 32,708,084
16 Al Ghuriar City  UAE / Dubai 30,639,493
17 VIP Suites Marina Bay Sands Singapore 29,667,101
18 Conrad Hotel Project UAE / Dubai 27,577,631
19 Al Meydan Development UAE / Dubai 26,783,489
20 Retail experience- Welcome  Pavillion UAE / AD 22,247,416
21 Royal Mirage III UAE / Dubai 20,635,645
22 Private Residence UAE / Dubai 17,972,589
23 Capital Plaza UAE / AD 17,685,860
24 Private Yacht UAE / Dubai 17,125,543
25 MODA Accommodation Building Saudi Arabia 14,305,444
26 Private Yacht Germany 14,081,758
27 Ruwais Expansion UAE / AD 13,982,232
28 Crown Plaza  & Stay Bridge in Yas Island UAE / AD 12,989,883
29 Supply Only Sales  India 11,467,406
30 East Hotel UAE / Dubai 11,092,761
31 Amarante El Nile Hotel Egypt 10,153,270
32 Dubai Metro - Red Line UAE / Dubai 9,261,487
33 Doha City Center Qatar 9,184,013
34 Private Residence UAE / Dubai 9,116,426
35 Guardian Tower  UAE / AD 8,000,000
36 Arcapita Bahrain Bahrain 7,337,160
37 QIA Executive Level Qatar 7,264,663
  Total 1,905,715,142

It is important to note that given the current market climate and in order to maintain the Company’s conservative approach to estimates and expectations, Depa has continued to implement high levels of risk management measures. As a result, the management has, like last year, decided to increase the allocation of project contingencies over and above the norm for such events to AED30 million (USD8.17 million). In 2008, Depa also took a cautious approach to the anticipated downturn and took contingencies of AED30 million (USD8.17 million). However, only approximately AED20 million (USD5.45 million) was used for projects during the year, now bringing the total amount available for contingencies to AED40 million (USD10.9 million) for ongoing projects due to be completed in 2010 on a revenue accounting basis of percentage of completion. Additionally, Depa has taken approximately AED34 million (USD9.1 million) this year in provisions of doubtful debt due to the current global economic climate.

Prior to contingency, impairment and additional provision adjustments, net profits stood at AED305 million (USD83.1 million) at a 30% growth over 2008’s AED 234 million (USD63.8 million) figures. These contingencies are not allocated or related to any risk other than the current market. This is an increase of circa 1.0% over and above the conservative average allocated annually to the projects.  Thereafter, the net profits have been reduced, resulting in recognised growth of 24% for net profits for the fiscal year 2009, after the additional contingencies and impairments have been accounted for.

Closing the year, the Company maintained a strong cash position of AED548.7 million (USD149.5 million) (vs 2008: AED738.7 million (USD201.3 million)) and total debt (short and long term) on the balance sheet reached AED212.6 million (USD57.9 million) (vs 2008: AED395.4 million (USD107.7 million)), leaving Depa in a positive net cash position of approximately AED336.0 million (USD91.6 million) (vs 2008: AED 343.3 million (USD93.6 million)) as of the year end.  The Company is continuing its acquisition and investment strategy as planned and pursuing strategic expansion opportunities this year.

Finally, Depa is working closely with the NASDAQ Dubai in its efforts to merge with the DFM in order to improve liquidity for all issuers on the exchange. 

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