DRAKE & Scull International PJSC (DSI), a regional market leader in the integrated design, engineering and construction disciplines of civil contracting, mechanical, electrical and plumbing (MEP), water and power, rail and oil and gas, announced its preliminary financial results for the fiscal year 2014 ended Dec. 31 which revealed a net profit of AED110 million and revenues ofAED 4.83 billion. Earnings per share (EPS) reached AED0.047. Revenues recorded for the fiscal year were flat compared to last year and were primarily generated by the KSA and UAE markets each contributing 43% and 26% respectively. The General Contracting and Engineering businesses generated 40% and 51% of the cumulative revenues achieved in fiscal 2014. The Oil & Gas division and Waste Water division maintained their yearly contribution to the top line by 5 % and 3 % respectively.
Profitability for the fiscal year was impacted by the delays in the KSA market in the General Contracting sector and the UAE receivables provisions which affected the overall operating and net margins of the group. The Oil & Gas business delivered solid margins and consistent results throughout the fiscal year contributing 50% of the consolidate bottom line in 2014. DSI continued to increase its market share in the MENA region and managed to win AED5.34 billion worth of new projects across multiple sectors in fiscal 2014.The UAE market and particularly Dubai witnessed accelerated growth for DSI as total project awards in its home market reached AED1.4 billion in fiscal 2014.
The Order Backlog reached a record high of AED14.4 billion representing a year on year increase of 20 %. KSA and the UAE markets remain the largest contributors to the backlog accounting for 34 % and 18% respectively as of Dec. 31, 2014.
Commenting on the results, Khaldoun Tabari, CEO of DSI, said “the economic scenario in our region underwent a rapid change in the last few months which has had an impact on the regional construction industry. A cautious sentiment in the real estate sector has led developers to become more price conscious, which has lengthened the project development cycle in all our key markets. This has resulted in delays in our collections which created a slowdown in our revenue generation. The impact of this also affected our profitability margins.”
“Reviewing our performance in 2014, we had a strong start in the first half of the year, with a lot of positive momentum in the form of multiple project awards in our region and especially the UAE. In the second half of the year, the entire region experienced unforeseen global economic challenges and uneven geopolitical developments that had a far-reaching effect on the region's economy. From a corporate perspective, we experienced considerable delays in our operations, particularly in our biggest market KSA, which had a significant impression on our top line target for the year.
The magnitude of our operations in KSA meant that we devoted our synergies and efforts in overcoming continuous delays in receivables, which strained our liquidity and impacted our working capital for the year. We also dealt with provisions in the UAE market which influenced our bottom line in a significant measure.”
“Despite the recent decline in oil prices which has created a cautious economic environment in the MENA region, we remain confident in our ability to refine our efficiencies and deliver improved profitability in 2015. Our strategy of service diversification and integration, as well as our geographic footprint will help our versatile business model to ride through the current cycle of economic downturn in our region.
We continue to see the KSA and the UAE as the main drivers of the region's economic development and expect to derive a large share of our business from these two vital markets. We also hope to see an upswing in Qatar's real estate as the World Cup preparations gather momentum, while we anticipate Kuwait to continue its current levels of investment and development of infrastructure.
DSI will continue to focus on consolidating its position as a leader in the Engineering and General Contracting business in the GCC, while also gaining market share in the greater Levant region. We will concentrate on improving and strengthening our traditional high margin businesses like Engineering and Rail. We will devote our energies to consolidating our position in the civil business, in our key areas of UAE, KSA, Jordan and Algeria and lay emphasis on the delivery of our projects at hand. We will reinforce our high margin Oil & Gas business and empower it by increasing our services offering and capabilities to improve our eligibility to participate in and undertake large scale petrochemical projects across the GCC.
Our established market leader position in our regional industry gives us the leverage to be selective in our project bidding, focusing on key projects with a high potential to grow our core business. We will be selective in our tendering process and only focus on projects developed by select key clients with established track records. ”
Mukhtar Safi, CFO of DSI, added “we aim to complete the integration of our delivery systems and operations to reduce our operational costs and overheads and improve our margins. We will be cautious in managing the growth of our backlog and concentrate on improving the strength of our working capital which will boost our project delivery capabilities. We have managed in 2014 through the sukuk issuance to improve our capital structure to deliver on our backlog growth. We are confident that our experience, knowledge, substantial projects backlog, professional work culture, corporate governance driven structure and the region's most skilled workforce will hold us in good stead and help us deliver improved results in 2015.” — SG
