Arabtec is on 'top of risks', says firm's chief

Hamish Tyrwhitt, the chief executive of Arabtec, which has about Dh6 billion worth of trade and other receivables owed to it, expects the company to be “on top” of its risks as the builder pursues outstanding payments and prepares to raise Dh1.5bn in a rights issue as it seeks to wipe out accumulated losses.

Mr Tyrwhitt said on Wednesday he believes that the company now has a handle on its accounts, with regards to further deterioration in its balance sheet.

The company, whose audited accounts on Wednesday showed that it had written off last year Dh1.9bn worth of debt owed to it – a major contributor to a Dh3.4bn annual loss – still has about Dh6bn worth of trade and other receivables owed to it. Mr Tyrwhitt said he does not expect to have to announce significant further write-downs.

“I’ve spent a lot of time going through the business to really understand where the receivables are, where the work in hand is, what the state of the business is.

“Yes, things change and I don’t know if something catastrophic might happen to one of our clients but if I look at where the bulk of where our risks are, we’re on top of [them],” said Mr Tyrwhitt, who was appointed in November.

“Going forward, I can see more opportunities for improvement than I can see risks for further deterioration,” said Mr Tyrwhitt, who also serves as chief executive of fit-out company Depa.

“Once we get a few more people, which we need, once we continue to strengthen the way we do business, and once we get the Dh1.5bn injection so we have cash to pay our subcontractors and suppliers to work on rebuilding our reputation, I see us turning things very quickly around.”

The rights issue is the first step of a recapitalisation. The second step, involving a reduction of Arabtec’s share capital, will allow the company to reduce liabilities and wipe off accumulated losses of Dh4.6bn.

The company is planning to pursue more aggressively claims for outstanding debts owed, the bulk of which are in Saudi Arabia and the UAE.

“The Saudi receivables are spread over different projects and the issue there is very well known,” Mr Tyrwhitt said, referring to the Saudi government’s decision to halt payments for most of last year before recommencing them towards the end of the year – albeit seriously delayed.

“We’re putting the resources there to manage those issues one by one,” Mr Tyrwhitt said.

In the UAE, he said there were outstanding claims that stretched back for years, adding that a claim between Arabtec, the Belgium-based construction company Besix and Korea’s Samsung C&T joint venture that built Burj Khalifa has only recently been resolved.

The company also plans to revive its historic Dh1.4bn dispute over the construction of Dubai’s Meydan racecourse after the Dh2.8bn joint-venture contract was cancelled in December 2008. Its partner, the Malaysian builder WCT, took its claim to arbitration and won in 2015.

“Certainly with Meydan, that’s one of our largest legacy issues,” said Mr Tyrwhitt.

“The plan there is that we are going to pursue this. I’ve got a team that is working on that at the moment to ensure that we get to the client and start chasing this.

“For quite some time it was on hold for some reason. We will pursue it the same as our joint venture partner WCT [following its arbitration claim] pursued it.”

Allen Sandeep, the head of research at the Egypt-based investment bank Naeem Holding, said the issue around the collectibility of the remainder of Arabtec’s receivables is “critical”.

“In my opinion, there are still a lot of receivables outstanding on the balance and a question remains about what happens to those.

“If they can address that issue, and move ahead with no more surprise impairments, then it is going to be more positive.”

Arabtec on Wednesday said that it is pricing its rights issue at Dh1 per share, which is a premium of 14 per cent on the Dh0.86 closing price on Tuesday.

However, given the face value of its shares is Dh1, this is the lowest price under UAE law at which the issue could be set.

This recapitalisation has effectively been guaranteed by the company’s biggest shareholder, Aabar Investments, which holds a 36.11 per cent stake in Arabtec. It has agreed to take up all of its allocation in the rights issue, as well as subscribing to any shares that are not taken up by current shareholders.

Shareholders who decide against taking up their entitlement face a potential 24.5 per cent dilution of their holding.

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