Interiors contractor Depa yesterday said it increased its provisioning by 250 per cent, or Dh30 million, for financial year 2008.
It expects to report 37 per cent revenue growth and 40 per cent net profit growth without accounting for bad debts. Depa operates across 16 countries and its contracted backlog of projects totals Dh3.75bn, it said in a pre-results update.
"The management has decided to increase the level of cautiousness and risk management around existing projects and clients' payments. Accordingly, the management has decided to increase the allocation of project contingencies over and above the ordinary provisions for such events by between Dh30m and Dh33m for projects that are ongoing and are to be completed in 2009 on a revenue accounting basis of percentage of completion," Depa said.
"These contingencies are not allocated or related to any risk other than the current market. This is an increase of 250 per cent over and above the conservative average allocated annually to the projects.
"Accordingly, the net profits have been reduced, resulting in recognised growth of 20-22 per cent for net profits for the fiscal year 2008, after the additional contingencies have been accounted for," it said. Full-year audited results are expected on March 30, Depa said, because it needs time to consolidate 26 firms as a single reporting entity.
The cash on Depa's balance sheet is expected to be Dh726m and total debt Dh373.8m, leaving Depa in a net cash position of approximately Dh352.2m, it said.
"Depa continues to diversify revenues and reduce dependence on the UAE market and the hospitality industry and focus on counter-cyclical sectors such as infrastructure and refurbishment," it said.
In 2008, Depa completed Dh176m in infrastructure contracts compared to Dh60m in 2007, including the fit-out of 13 Dubai Metro stations. The company said it expects 30 to 35 per cent revenue and profit growth this year, excluding the contingencies, and "continued growth" in 2010.
Depa has orders for 17 projects worth Dh1.05bn in the first quarter of 2009 from Morocco, Egypt, Saudi Arabia and the UAE. This includes the fit-out of Palazzo Versace Hotel in Dubai and the refurbishment of the Minister's Office of Defense and Aviation in Saudi Arabia.
These are in addition to the backlog of Dh2.7bn as of December 31, which includes Burj Dubai, Dubai Metro, Mazagan Resort in Morocco and Marina Bay Sands Resort in Singapore. "The company has secured significant works in the last quarter of 2008 and since the beginning of 2009," the statement said.