DUBAI (15 August 2013)

Arabtec Holding PJSC (the "Company" or "Arabtec"), a leading MENA construction company specialising in complex projects, has reported a net profit of AED 155 million for the first half of 2013, up 114% from a year earlier, driven by strong performance in its Saudi Arabia and UAE operations and continued realignment of its businesses.

First Half 2013 Key Points

·         H1 2013 net profit up 114% to AED 155 million driven by strong performance of its UAE and Saudi Arabia operations and continued realignment of businesses for future growth 

·         EBITDA rose 48% in H1 2013 to AED 363 million

·         SG&A expenses declined by 16% to AED 239 million due to cost savings and reallocation of overheads to the delivery organisation

·         Backlog rising by AED 7.3 billion (net) to AED 24.4 billion due to significant increase in new project awards and geographic expansion in H1 2013

·         AED 2.4 billion raised to fund growth strategy through the completion of a rights issue in July 2013 ("Rights Issue")

·         Good progress made on implementation of strategy across the business.

Hasan Abdullah Ismaik, Managing Director and CEO of Arabtec Holding commented:

"Our businesses have delivered a strong performance in the first half of 2013, particularly in the UAE and in Saudi Arabia, and our results are a clear indicator of the health of the industry and the potential for sustained growth in the medium term."

"We have realigned our businesses to ensure that we are properly organised for further growth in accordance with our five-year strategy.  In doing so, we have already achieved measurable efficiencies and cost-savings. Our financial position is very strong indeed, with healthy cash flow generation and the successful conclusion of our AED 2.4 billion Rights Issue which was 30% oversubscribed by our shareholders. All of this is supported by our geographic expansion and growing backlog, which now stands at AED 24.4 billion, giving us visibility over our earnings for the coming years."

"All these positive developments are precursors to a strong performance in 2013 and beyond, which will start to show enhanced returns from 2014 onward since profits are tied to progress of work. We expect that this substantial backlog will have significant positive impact on the Company's financial position and profitability during the next five-year period as well as in the long term."

"Our focus now is on refining our project management organisation and execution platform in order to help deliver more value and stronger results for our clients and stakeholders. Our ultimate aim will be on turning Arabtec into one of the most sought after shares in the region, providing superior returns to shareholders."

Financial Review
Net profit attributable to the Owners of the Parent grew by 114% to AED 155 million in H1 2013 compared to H1 2012. The Company reported gross revenues of AED 3.1 billion in H1 2013 and AED 1.6 billion in Q2 2013, up 20% and 21% respectively, compared to the same period in 2012.

The continuing strong performance of the Company's operations in the UAE and in Saudi Arabia, as well as the realignment of Arabtec's businesses, have contributed significantly to the Company's enhanced financial performance in H1 2013. 

Arabtec has maintained double digit gross margins with 12% in H1 2013 and 11% in Q2 2013. The stable double-digit margins reflect a return to growth in the construction industry in the Middle East, as the region emerges strongly from the global financial crisis. 

The Company is continuing to focus on the realignment of its businesses to enhance efficiency.  Earlier in 2013, Arabtec launched cost savings measures to optimise operational efficiency and project profitability.  The measures employed have started to reflect positively on the results with the selling, general and administrative expenses ("SG&A") down AED 45 million or 16% in H1 2013 and down AED 44 million or 29% in Q2 2013 compared to the same period last year.  The reduction in SG&A in Q2 2013 is partly due to the reallocation of related overheads to the project delivery organisation within the Company to improve the utilisation of resources and provide a more accurate indication of project profitability.  On a pro forma, like-for-like basis compared to 2012, SG&A fell 7% and 13% in H1 2013 and Q2 2013, respectively.  H1 2013 SG&A margin was 8% compared to 11% for the same period last year.

With the industry returning to growth, the Company has seen continued improvement in its collections cycle resulting in the reversal of certain bad debt provisions and other accruals no longer required, resulting in other income of AED 79 million in H1 2013. The improvements in the Company's operations are further highlighted by the significant increase in cash flow from operating activities from negative AED 2 million in H1 2012 to AED 98 million in H1 2013 as a result of the improved collections cycle and performance of the business.

Capitalisation
Following the success of the AED 2.4 billion Rights Issue, which was oversubscribed by 30%, the Company is well capitalised and is now positioned to adequately fund and implement its growth strategy.  The Company will start deploying the funds in H2 2013 in line with its five-year growth strategy focused on expanding into higher-margin areas of construction, particularly oil and gas, power and infrastructure, and affordable housing, in addition to extending the Company's footprint across the Gulf Cooperation Council ("GCC") countries.

Operational Overview
As the regional construction industry continues to return to strong growth, Arabtec maintained a steady stream of new contract awards throughout the first half of 2013.  The Company, responsible for seven of the world's 150 tallest towers, won significant new contracts in Kazakhstan, Saudi Arabia, Egypt, Jordan as well as in the Company's home market, the UAE, emphasising the continued geographical expansion of Arabtec's business.  As a result, the Company's backlog of new and on-going projects increased to AED 24.4 billion, reflecting a backlog-to-revenue ratio of 3.9 times and providing visibility of the Company's earnings for the coming years.

Regional Drivers of Revenue
The Company continues to implement its strategy of diversifying across the countries of the GCC and other selected markets.

In Saudi Arabia, Arabtec maintained the expansion of its business in this high-growth market, which complements Arabtec's existing operations at El Hasa in the Eastern Province, where the Company is building a large-scale residential project comprising 5,000 villas.

UAE continues to be a major market for Arabtec, accounting for roughly 60% of the Company's revenues.  The UAE real estate sector is experiencing strong growth once again, and Arabtec's leading position has enabled it to win a significant number of new contracts in H1 2013 including: The Louvre Abu Dhabi, Fairmont Abu Dhabi, as well as residential projects at Arabian Ranches and Silicon Oasis.

In Jordan, Arabtec is leading the joint venture that has been awarded the AED 2.3 billion contract to construct the Saraya Aqaba project, comprising 634,000 m2 of master planned development that will be built around a man-made lagoon; adding approximately 1.5 km of beachfront to the Gulf of Aqaba.

In Kazakhstan, an Arabtec-led joint venture was awarded an AED 4 billion construction contract during H1 2013 for the Abu Dhabi Plaza in Astana, which is being developed by Aldar Properties.

Earned Value
As Arabtec engages in larger, more complex projects such as The Louvre Abu Dhabi, airports and hospitals, which by their nature involve a longer enabling works period prior to attaining peak construction period, the earned value related to such projects will be weighted towards the later period of the project life cycle which is when the Company will realise the peak cash flow impact of these projects on its results.

Strategy for Growth
In February 2013, the Board of Arabtec approved a detailed growth strategy, which is underpinned by organic as well as acquisitive growth, and the formation of significant joint ventures to take advantage of higher-margin, specialised construction opportunities.

The Company is currently implementing this ambitious growth strategy, which was approved by its shareholders at the annual ordinary general meeting earlier this year.

In April 2013, Arabtec announced the signing of a Memorandum of Understanding to form a joint venture with Samsung Engineering, Korea's largest engineering company.  The new company, Arabtec-Samsung Engineering will exclusively undertake large-scale projects in the sectors of oil and gas, power and related infrastructure in the Middle East and North Africa.  The joint venture is in the process of being finalised.

The Company continues to build and strengthen its senior management team to deliver its ambitious growth strategy and successfully deliver construction projects. Further senior appointments will be made in due course.



- Ends -

ABOUT ARABTEC HOLDING PJSC
Arabtec is a UAE-based construction company specialising in complex projects, including high-rise commercial and residential development, infrastructure and oil and gas.

The Company delivers demanding projects, ranging from iconic buildings such as the world's tallest building, the Burj Khalifa in Dubai and Abu Dhabi landmark, the Emirates Palace Hotel, to technically challenging work on airports and oil and gas installations.

Arabtec's strong track record and commitment to timely and cost-efficient delivery have contributed to rapid growth in recent years and a reputation for quality that has often translated into a market-led pricing premium for completed projects.

The Company is currently working on some of the most prestigious projects in the Middle East, such as the Louvre Abu Dhabi and a regeneration project in the centre of the Qatari capital, Doha, and is also expanding into other regions.

For more information, please visit us at www.arabtecholding .com or follow us on twitter: @arabtecholding

For further information, please contact:
Brunswick Group for Arabtec Holding PJSC
Alex Blake-Milton
Email: ablakemilton@brunswickgroup.com
Phone: +971506947589

Assheton Spiegelberg
Email: aspiegelberg@brunswickgroup.com
Phone: +971505572633

© Press Release 2013