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Depa reports a 44% decline in H1 profit as projects hit by delays

The Dubai fit-out contractor Depa revealed a 44 per cent drop in net profit for the first half of the year to Dh15 million.

Revenue also fell back by 4 per cent to Dh841m in the same period.

The company blamed the lower profit figure on cost revisions on a few major projects, as well as extra costs incurred as a result of delays. Gross margins slipped to 10 per cent of revenue, down from 13 per cent in the first half of last year.

The decline in sales was due to a smaller backlog at the start of last year, which the firm attributed to its more selective approach in bidding for contracts.

The company added, however, that its project pipeline has since been replenished “with a number of high-quality contract wins”.

Although its backlog at Dh2.32 billion is 3 per cent lower than at the same time 12 months ago, it is almost 12 per cent higher than at the start of this year.

The group chief executive Nadim Akhras said the company had been encouraged by its performance both in mature European and Far Eastern markets and in emerging markets in Africa and South Asia.

“Following several challenging years for the industry in our core UAE market, we are also cautiously optimistic about the recent pick-up in fit-out activity, which we anticipate will continue in the second half of the year,” he said

“Despite global economic issues that had a negative impact on several of our key markets, the work we have done to further streamline and diversify the business in recent years leaves Depa well positioned over the coming period.”

The company finished work on 37 contracts during the first half of the year, including hospitality projects for Hyatt, Novotel, Sheraton and Ritz Carlton hotels. It also completed retail fit-outs for Dior, Louis Vuitton, D&G, Michael Kors and Pottery Barn.

According to a new report on the GCC’s retail construction market by Ventures Onsite, which tracks the construction industry, there are US$28bn (Dh102.8bn) worth of retail projects either planned or under way in the GCC.

The biggest new project is Dubai Holding’s $6.8bn Mall of the World on Sheikh Zayed Road.

The project will include a theme park, shopping malls, shopping precinct, wellness zone and hotels.

The next in size is the $1.65bn Doha Festival City in Qatar. Three of the top five new centres are in Doha, including the $1.37bn Place Vendome and the $830m Mall of Qatar schemes.

A number of existing mall operators are undertaking significant extensions.

The Kuwaiti developer Mabanee is spending $914m to add a fourth phase to its successful The Avenues project in Kuwait City, while Majid Al Futtaim Properties is planning a $500m extension of Mirdif City Centre Mall.

Emaar Malls Group is also spending $381m adding more space to its flagship property, The Dubai Mall.

“Retailers are expected to benefit from the Expo 2020, which will be instrumental in bringing an influx of more visitors to the country,” the Ventures report said.

“The Expo is expected to spur in economic activity and translate into a growth of over 33 per cent in the UAE’s retail sector by 2025.”

Depa’s shares are listed on the Nasdaq Dubai exchange. The shares last traded on Sunday, when they gained 2.2 per cent.

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