In the few months since his appointment, Hasan Abdulla Ismaik, the managing director and chief executive of Arabtec Holding, has overseen a strategic reorientation at one of the UAE's most important companies. He explains the changes to Frank Kane.
Arabtec has been through a period of transition, corporately and financially. How would you summarise its current strategy?
Arabtec has established itself as a leader in real estate construction, achieving 37 years of consecutive profitability and a reputation for high-quality workmanship. While the construction industry has returned to growth, which we expect to continue for the next seven to 10 years, Arabtec is pursuing a growth strategy that also includes opportunities for expansion in oil and gas, power, infrastructure, as well as affordable housing. The company will continue to look for new markets with strong potential, such as India. Arabtec also aims to build on its strong presence in the areas of high-rise buildings and airports. [Saudi Arabia] is our fastest growing geographic region by revenues - we are winning large contracts away from our competitors.
Will the future focus be more on Abu Dhabi than on its traditional market in Dubai?
Both markets remain very important for Arabtec. As the construction industry continues to grow after three years of recession, confidence in the sector is rising, with the region seeing the restart of projects stalled due to the financial crisis. There have been some key announcements of projects that were on hold and have now been resumed, for example, Louvre Abu Dhabi. Arabtec's current Dh22 billion [US$5.99bn] backlog includes works on the Dubai World Central, and the recent contract award for the Midfield Terminal Building at Abu Dhabi International Airport. Arabtec is very well positioned to bid for projects in both cities.
Can you explain the regional strategy outside the UAE?
For the next two years in the GCC the construction market in Saudi Arabia, Kuwait, Qatar and the UAE are forecast to grow at rates between 6 and 8 per cent. Arabtec is already a construction leader in these core markets with iconic projects such as Burj Khalifa, Emirates Palace and the Louvre Abu Dhabi and Msheireb Downtown in Doha, Qatar.
There is a big recapitalisation planned. Can you explain the rationale?
The board has approved a detailed growth strategy for the next five years, which is underpinned by organic as well as acquisitive growth, and the formation of significant joint ventures. With increasing competition in Arabtec's traditional construction markets, competitiveness for new contracts is intensifying. Therefore, it is necessary to focus on higher-margin sectors and new geographic areas in order to achieve growth.
The strategy is focused on expanding Arabtec into new high-margin sectors and markets with significant growth opportunities. ESCA has granted regulatory approval for the rights issue, and we shall be seeking shareholder approval at our extraordinary general meeting that will take place shortly.
We plan to raise up to $650 million in the first tranche in May/June and if needed, up to $650m in the second tranche next year. The capital raise has been structured to enable shareholders to participate as we implement our expansion plans and to provide the capital we need at the right moment in the execution of our growth strategy.
Does Arabtec expect shareholders to take up rights in any equity cash call? Will there be contingency plans for any rights not taken up?
The rights issue is an opportunity for shareholders to participate in these exciting growth plans. As with any rights issue, there are contingency measures in the event that not all of the rights are taken up by existing shareholders. However, due to the compelling growth opportunities in the market, we see no reason why shareholders won't take up their rights.
The executive team has also been transformed. What does this signify? Why does a contractor need a head of mergers and acquisitions?
Arabtec is expanding its business significantly in order to capture the growth opportunities available to the company. At the same time, we are also expanding our management team accordingly to ensure that we have the requisite skills and international experience in place to drive our growth and achieve the optimum returns for our shareholders. We have appointed our head of M&A and a new CFO for our construction business. We also have some new members we will announce as soon as we are in a position to do so.