Dubai-based Depa will cut jobs as it embarks on a restructuring after posting a loss for the third quarter.
The fit-out contractor lost Dh22 million in the June to September period compared with a profit of Dh19m a year earlier. Third-quarter revenue also declined by 32 per cent year-on-year to Dh347m.
“Times are tough,” said Umar Saleem, the chief financial officer. “We are consolidating all of our contracting operations in the Middle East under our flagship company, Depa Interiors.”
He said the company had previously decentralised operations by building teams of estimators, designers and project managers in markets such as Saudi Arabia, Qatar and Abu Dhabi, but these will now be scaled back. This work will be carried out from Dubai with a skeleton staff maintained in each market.
He added that it was too early to say how many jobs would be affected, but said the restructuring would complete “by the end of this year or early next year”.
“We’re removing different layers within the organisation, because within the next couple of years you will have to be very lean and mean in your operations.”
The loss was blamed on the worsening state of the construction market, which is causing delays and payment issues.
“The moment projects stretch out beyond their standard duration, then you have prolongation costs kick in, you have unapproved variations, etc,” said Mr Saleem. “So although you’ve incurred the costs and you are going to get the money from the client once it gets approved, you cannot book the revenue.”
He added that it had also continued its strategy of targeting work with “with good paymasters, good main contractors and clients that do not have any financing problems”.
Despite the fall in revenue, Mr Saleem said Depa had done well in terms of new contract awards, with its backlog increasing to Dh2.3 billion by the end of September, compared to Dh2.1bn at the start of the year.
Awards so far in 2015 include the fit-outs of the W Hotel Dubai and Kempinski Hotel Palm Jumeirah, while its German subsidiary Vedder has just picked up a €15m (Dh58.4m) order for a new luxury yacht fit-out.
“Our factories in Germany are fully sold out until 2017 from a capacity standpoint,” said Mr Saleem.
Colin Timmons, general manager of Abu Dhabi-based Al Fara’a Contracting said 2016 “is going to be tough” for contractors in the UAE, especially for larger firms as they incur bigger overheads through making sure health and safety standards are properly implemented, and that workers are provided with good standards of accommodation and transport.
“From largest to the smaller contractors there’s a huge range in terms of the contractor capabilities, but the client only seeks to achieve the cheapest price. It’s very difficult for the larger contracting entities to compete with smaller businesses in the UAE,” he said.
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