E-mail Article
Printer Friendly
Share Article
Down but not out
Khaldoun Tabari, the vice chairman and CEO of MEP specialists, Drake & Scull International, tells Claire Ferris-Lay why the economic crisis hasn't resulted in a contractor's hell.
"We are living in a contractor's paradise," Khaldoun Tabari told one journalist on the eve of his company's multimillion-dollar share sale last July. "I don't see an end if the price of oil keeps going the same way," he added.
Like most people, Tabari, the vice chairman and CEO of Drake & Scull International, didn't see an end to the UAE's insatiable appetite for construction. During the firm's July initial public offering (IPO), the mechanical, electrical and plumbing (MEP) specialist received bids worth $33.8bn, 101 times the amount it sought.
Banks were falling over themselves to dish out cash, the price of oil was rising almost daily and the construction industry was riding high on the crest of a real estate wave.
But when it came to listing those shares - around 55 percent of the firm - on the Dubai Financial Market in March, the situation had changed dramatically. On its first day of trading, Drake & Scull International shares dropped 26 percent from a sale price of AED1 to 0.84. Two months down the line and those shares are still trading at similar prices.
"The timing when we went to the market was excellent. The market was flush with cash, we had a lot of interest - we were oversubscribed 101 times - and it was great," Khaldoun tells CEO Middle East. "When you list it is an automatic thing... it was not the best timing, but it lists when it lists,"
he shrugs.
Today's share price might not be as high as Tabari would like it to be - "I'd like it to be above AED1" - but that doesn't mean he regrets his decision to list the 173-year old company when he did. It will, after all, allow him to snap up a few bargain companies in a spending spree totalling $500m as he seeks expansion abroad.
"[Our IPO] gave us all of this cash. The cash right now is in treasury and we have AED1.2bn ($326m), which is a lot of money. [Now] is the right time to acquire," he says confidently.
Tabari hasn't wasted any time in taking advantage of the strong position of the dirham, and says he is looking to make announcements on acquisitions of four regional companies - two from Saudi Arabia, one in Kuwait and another in Qatar - by the third quarter of 2009.
"Three will be MEP contractors and one will be civil, which will compliment our Gulf Technical Construction Company brand. These companies will of course add revenues," he says. "Right now we are doing legal and financial valuations, [which] will take some time."
Solid foundations
Tabari has been leading Drake & Scull International since 1998, when he first bought a stake in the firm. However, his association with the originally British company dates back to 1982, when he started work installing a network of eighteen radar stations and underground command centres in Saudi Arabia. These were later used in the 1990 Gulf War. The firm was wholly owned by a consortium of investors, including Tabari, before its 55 percent IPO last year.
Today Drake & Scull has around 12,000 employees and, in addition to providing MEP services, which perhaps it is best known for, it also generates a large proportion of its revenues from water treatment works and building district cooling plants.
Despite the global downturn and the crash in oil prices, which fuelled the five-year real estate boom in the region, Tabari remains optimistic for Drake & Scull's growth this year. He predicts profits and revenues will grow "organically" by around 25 percent this year. Much of this growth, he says, will come from markets outside of the UAE, where investment in infrastructure is still desperately required.
In October 2007 Drake & Scull won its first contract in Sudan; a $21m deal to provide MEP services for a new building development in the capital city of Khartoum. This was followed by a March announcement that the company would set up a Libyan unit, its second venture in Africa. Libya, which has a population of five million, has one of the biggest oil reserves in Africa.
Most importantly for Tabari, the country is also in the midst of undertaking a $126.5bn, five-year infrastructure redevelopment plan to modernise water and sanitation facilities, and build airports, houses and schools.
"I think North Africa is a tremendous area of growth. When we talk about roads, bridges and cooling plants, Libya doesn't even have five percent of what we have [in the UAE]," he says.
Quick Links(Residental)
Filter by address:
No Comments