Game for growth

As contracts dry up for most Gulf builders amid the construction slowdown, the UAE's Al Habtoor Leighton Group is bucking the trend with multibillion dollar orders on its books and further expansion on the cards in 2009.

Across the gulf, building sites are falling silent as delays and cancellations hit projects, forcing contractors, reduced to scratching around for ever scarcer contracts, to shed staff and scale back growth forecasts.

Amid the malaise it's tough to find a builder with anything but a glum expression - after all, it's a far cry from just four months ago, when the region's construction sector seemed on an unstoppable upward curve, builders filling their swollen order books thanks to a seemingly endless list of ambitious real estate projects.

However, with contracts valued at $8.2bn under his belt and growth of at least 30 percent expected in 2009, David Savage, managing director of Al Habtoor Leighton Group (AHL), has every reason to look to the future with considered optimism.

"We are confident that we will come through this stronger," insists Savage, who shakes his head at the suggestion that the year ahead will be make-or-break for the struggling industry.

"As the market comes off the levels that were difficult to sustain, the stronger companies will always perform better than some of the newer companies," he continues. "These newer companies perhaps don't have the depth or strength of an AHL, and will fall by the wayside or return to their natural bases."

This strength and depth was ensured through a September 2007 merger between UAE company Al Habtoor Engineering and the Gulf operations of Leighton International, a subsidiary of the biggest construction conglomerate in Australia. The result was the formation of one of the largest contractors in the UAE, blending expertise across building, civil engineering, services, steel fabrication and interiors.

And overseeing the merger was Savage, who was immediately able to draw upon his 20-plus years of experience in the building industry in Asia, including 10 with Leighton, to help secure key contracts including the $2.4bn Dubai Pearl, $1.3bn Dubai International Airport Concourse 3, and the $817m Zayed University campus project in Abu Dhabi.

The group's healthy outlook is all the more marked given the shuddering halt in the region's real estate boom that has sent ripples through the construction sector. A recent report by market research firm Proleads revealed that more than half of the UAE's 1,289 projects, worth $582bn, have been suspended.

But Savage, who is also an associate director of Leighton Holdings, does not see the market as in its death throes, but rather at a more measured stage in the real estate business cycle.

"There's obviously been a change as some markets have been impacted in the short term more than others but, significantly, going forward this region still has huge potential and opportunities for growth," he points out.

"2009 will see a reversion to a more normal level of business, where the business out there will be more keenly sought, which will bring conditions and some of the ways that contractors and developers work back to a more normal level," Savage analyses.

Savage strongly believes the government, especially in Dubai, can play a part in helping to revive the sector.

"Construction is the lifeblood of Dubai and a healthy construction industry is a healthy Dubai," he insists. "We think the government should join hands with the industry and do everything it can to keep the industry healthy.

"We would certainly like to see the government put an emphasis on ensuring any disputes and claims [between developers and contractors] are dealt with quickly."

AHL's promising pipeline might be of some relief to parent company Leighton Holdings. The Aussie firm, which owns a 45 percent stake in the group, announced this month its first half profits in the six months to Dec 31, 2008 had plunged 56 percent, after writing down the value of listed investments in Australia due to the global economic downturn.

And AHL has not escaped entirely unscathed from the fallout caused by the contraction in the real estate market. It suffered its biggest hit in December when the firm's contract to build the prestigious $790m Trump Tower on the Palm Jumeirah was suspended, with developer Nakheel citing easing market conditions for its decision to delay the scheme.

Nevertheless, this blow was softened when AHL learned on the same day that it had secured the contract to build Dubai International Airport's Concourse 3, and so Savage is able to brush off the loss - at least in public.