Arabtec Holding's board to meet on Tuesday to review results

Arabtec Holding’s board is set to meet on Tuesday to discuss the company’s financial results for 2016, a year in which it reported a preliminary loss of Dh3.4 billion.

Subject to the board’s approval, the company should then publish its audited financial accounts and details of the pricing of the rights issue it is embarking on as part of a wider capital reorganisation plan. That plan aims to clean up its balance sheet by expunging historical losses.

When announcing the structure of its recapitalisation plan last month, the company said it intends “to finalise the key terms” of the rights issue in conjunction with the publication of its audited accounts towards the end of this month.

The company is planning to initially raise Dh1.5bn from investors in a move that would increase its current share capital from Dh4.6bn to Dh6.1bn. Its biggest shareholder, Aabar Investments, has already effectively agreed to underwrite the process by taking up its full allocation in the issue as well as mopping up shares not claimed by other investors.

Following this, Arabtec is proposing to cancel up to 4.5bn shares, leaving about 1.6bn in circulation.

Cancelling the shares will allow the company to offset accumulated losses of Dh4.6bn that have accrued over the past two years. Arabtec’s chairman, Mohamed Al Rumaithi, last month said this would “provide the foundation for building a successful and sustainable future for the group”.

The company has also presented a three-point turnaround plan for investors, know as “Stabilise, Prepare, Grow”. This involves stabilising the business in the current year, as well as resolving legacy contract claims and disposing of non-core assets.

The “prepare” phase next year involves securing its backlog, bringing costs under control and ensuring it delivers projects on time and on budget. The “growth” phase starting from 2019 onwards involves developing its three main operating entities involved in general, oil & gas and mechanical, electrical and plumbing (MEP) contracting – Arabtec, Target and Efeco, respectively.

Publication of its audited accounts should also give more details on the fate of its joint venture with the Saudi Binladin Group, which had been listed as a discontinued operation since 2015 as the company has attempted to divest its interest in the business.

The carrying value of this investment was Dh1.4bn in the nine months to September last year, but a note by analysts at investment bank Naeem Holding recently pointed out that this had been excluded from its preliminary results. It said this “could mean de-consolidation or a write-off as part of the larger impairment drive”.

Arabtec said when publishing preliminary results last month that it had incurred impairment charges of Dh2.8bn on “high-risk items” last year.

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