x Abu Dhabi, UAESaturday 20 January 2018

Depa balance sheet set for a makeover

Depa is seen to have weathered the economic storm of 2010 to begin the year with a clean slate

Depa, which boasts that it is the world's largest interior contractor, was hurt badly during the recession but appears on the verge of boosting itst balance sheet.

This month, the provider of furnishings for hotels and yachts said it lost Dh198.2 million last year, following a profit in 2009. Much of the loss was caused by project delays, high provisions and impairment charges.

The company, based in Dubai, had previously warned investors that net profit last year would be "significantly impacted" due to problems in getting paid for some of its work on the world's tallest tower Burj Khalifa.

But analysts at Nomura say the company, armed with a new chief financial officer, is now in a position to benefit as revenue from contracts starts coming through.

"In terms of revenues, these will be better than last year because you're going to get revenue recognition from handovers," said Chet Riley, a property and construction analyst at Nomura.

Mr Riley said Umar Saleem took a red pen to Depa's balance sheet at the end of last year after taking over as chief financial officer, "which gives a fresh starting point" for the year.

Although it has meant the backlog has shrunk and about Dh500m of new orders are required this year to meet targets, Mr Riley said "quality should over-arch quantity". He retained his "buy" rating on the stock, but cut the price target to 99 US cents from $1.02.

The company's shares, which trade on Nasdaq Dubai, yesterday closed 5.3 per cent higher at 60 cents. Mr Riley said the company should benefit from "rolling provisions" this year, as opposed to lump-sum payments against bad debts last year, easing pressure on Depa's balance sheet.

The company's contracts cross over into different sectors, with 51 per cent coming from hospitality projects, 26 per cent from residential developments and 9 per cent from infrastructure, according to a recent note from Alembic HC Securities.

Its diversification away from Dubai has also stood the company in good stead, decreasing its exposure to regional unrest. Its latest deals were in Malaysia, Angola and Syria.