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Depa Limited: Interim Results 2009

Net Profits up 65% 

Dubai, 26 August 2009 - Depa Limited (ticker DEPA) ('DEPA' or 'the Company'), the world's largest interior contractor today reports results for the six months ended 30 June 2009.

Highlights

Financial performance

• Net profit after minority interests up 65% at AED 91.7m (H1 2008: AED 55.6m) driven by significant contract wins and robust financial performance.

• Contract income up 49% at AED 1,107.6m (H1 2008: AED 741.1m) .

• Profit margin increased to 8.3% (H1 2008: 7.5%) after minority interest.

• On target to achieve approximately 30% revenue and profit growth for full year 2009.

Backlog / LOUs

• Current backlog now stands at a total of 190 projects.

• Backlog reached AED 2.6bn (H1 2008: AED 2.5bn).

• No client or contract accounts for more than 8% of the current backlog.

• Backlog consists entirely of projects that are already at the advanced construction stage. Being at the end of the development chain, Depa typically moves on site to finish the building for occupation and hence, at a stage where the project is extremely unlikely to be cancelled.

Diversification strategy

• In line with its strategy, Depa continues to diversify revenues by adding market niches and geographies to reduce reliance on Dubai and the hospitality sector. Increasing focus on countercyclical industries such as infrastructure.

  • Huge growth in infrastructure with Lindner Depa's net profit up to AED 35.6m (H1 2008: AED 1.5m) and revenues reaching AED 212.8m (H1 2008: AED 23.2m). Depa is on track to complete fit out works for Dubai Metro's red line stations.

  • Singapore: moved into profit with net profit reaching AED 4.4m and revenues reached AED 54.3m

  • Abu Dhabi: significant increase in net profits to AED 16.2m (H1 2008: AED 0.2m). Revenues reached AED 97.0m (H1 2008: AED 21.0m)

  • Saudi Arabia: moved into profit with net profit reaching AED 3.7m (H1 2008: loss of AED 0.4m) and revenues of AED 20.2m (H1 2008: AED 4.8m)

• Since period end, Depa entered another new market; Angola, through an initial AED 9.2m contract 

Reducing seasonality 

• Traditionally, interior contracting is a highly seasonal business with a substantial portion of contract income being recognised in the second half of the year as the end of the fiscal year is usually used as contract deadline by clients. In line with its previously stated aim, Depa has successfully reduced this cyclicality realising 43% of revenues in the first half of 2009 compared to 37% in the same period last year and 31% vs. 25% of profits respectively. 

Commenting on the results Mr Mohannad Sweid, CEO of Depa, said:

'Depa's strong performance in terms of revenue and profit growth is driven by prestigious contract wins across target markets and our backlog has increased significantly compared to the same period last year. We have been highly successful in reducing the seasonality of the business as we promised by securing early payments to safeguard our revenue streams. We continue to diversify revenues away from Dubai and the hospitality sector and focus on infrastructure which is countercyclical. Depa is very much on track to reach its target of approximately 30% profit and revenue growth for the full year.'

The full set of Interim Results can be found on Depa's website: www.depa.com 

-Ends-

Enquiries:

Depa Ltd                                                +971 4 224 3800

Noor Sweid, Managing Director, Strategy

Brunswick Gulf Ltd                            +971 4 365 8260

Edward Moore / Said Elbanna 

About Depa Limited:

Depa Limited is the largest interior contractor in the world. Operating principally in the luxury fit-out industry, its main areas of business cover hospitality, high-end residential properties, retail outlets, yachts, as well as public sector amenities such as airports, hospitals and transport systems. Depa is listed on the Dubai International Financial Exchange (ticker DEPA) and has Global Depositary Receipts on the regulated market for listed securities of the London Stock Exchange plc (ticker DEPA and DEPS).

The range of business activities performed by Depa comprises: 

• Interior contracting: which focuses on luxury interior fit-out services, which include installation and finishing of floors, walls, ceilings and fixed joinery;

• Manufacturing: which comprises a network of factories and joineries which produce customised furniture, fixtures and equipment (FF&E) for Depa itself and the wider market;

• Procurement: which involves the procurement of supplies and materials from third parties to support and complement Depa's interior contracting and manufacturing operations as well as third party procurement contracts for specific FF&E projects. 

By integrating these services into a single package, Depa provides clients with comprehensive and customised interior contracting solutions. 

With more than 8,000 employees worldwide, the company operates through an integrated network of subsidiaries, affiliates and representative offices located in the UAE, Saudi Arabia, Qatar, Egypt, Jordan, Syria, Libya, Morocco, India, Malaysia, Thailand, China, Singapore, UK, the Netherlands, and the United States. Through this network, Depa has successfully executed large and complex projects in over 16 countries including the Burj Al Arab Hotel (Dubai), Emirates Palace (Abu Dhabi), the Museum of Islamic Art (Doha), Four Seasons Hotels (Sharm El Sheikh & Mumbai) and Atlantis Resort (Marrakesh).

 Results Overview

Depa is pleased to present its semi-annual results, illustrating the Company's continued growth and performance. Our H109 profits have increased by 65% over H108, and stand at AED 91.7 million compared to AED 55.6 million. Net revenues for the same period have jumped to AED 1,107.6 million in H109 from AED 741.1 million in H108, resulting in a 49% increase.  

We are on track for 30% revenue growth and 30% profit growth for the full year. This expected growth is regardless of the high earnings increase in the first half of the year, which is a result of the reduced seasonality in our earnings, which we committed to achieving in early 2008. Furthermore, we have enhanced our profit margins and increased our net margins to 8.3% in H109 from 7.5% in H108 (after minority interest) and our profit per employee to AED 11,999 per head from AED 6,697 per head for the same period.

Our diversified backlog of AED 2.6 billion for H109, as compared to AED 2.5 billion as of H108, illustrates our growth across geographies and market segments, and our reduced dependency on the UAE market and the hospitality industry as a whole. Given the current economic climate and the industry's players witnessing backlog deterioration, we consider our backlog growth of 4% as compared with the same period last year a good achievement.

In the first half of 2009, we have been successful in geographically diversifying our revenue stream and have witnessed substantial increases in revenues and profits from regions outside Dubai, such as Saudi Arabia and Abu Dhabi, and we have also continued to make excellent progress in Singapore. Additionally, our focus on counter-cyclical market segments, such as infrastructure, has resulted in growth for our joint ventures, Lindner Depa and Mivan Depa, which focus on non-hospitality market niches.

Revenues and Seasonality

Traditionally, interior contracting has been a highly seasonal business with a substantial portion of contract income recognized in the second half of the year as the end of the fiscal year is usually used as contract deadline by clients. In line with its previously stated intentions, Depa has successfully reduced this cyclicality, realizing 43% of targeted revenues in the first half of 2009 compared to 37% in the same period last year, and 31% vs. 25% of profits respectively. 

The Company has made significant efforts to reduce seasonality this year by clearing variations and claims with clients and subcontractors more evenly throughout the year.  

Furthermore, with respect to profit margins, the margins experienced in the first half of the year are typically lower than those for the full year, as exemplified by last year's figures of 7.5% vs. 9.8% for H108 vs. FY08 respectively. We expect a similar margin increase from H109 of 8.3% to FY09.

 

Sectors of Focus

Infrastructure

Infrastructure continues to be a key area of focus for Depa. We believe it to be a countercyclical sector, evidenced by the aggressive spending being carried out by regional governments amidst the downturn as a measure to boost the economy. GCC governments have heavily committed to major infrastructure projects such as the new Doha International Airport, Abu Dhabi Airport expansion, Prince Mohammad Bin Abdul Aziz Airport, Kuwait Metro and the New Muscat Airport, as well as numerous health centers around the region. During the past six years alone, GCC governments awarded USD 720 billion worth of infrastructure projects, ranging from airport construction, hospitals and metros to the development of entire new cities. 

In line with our strategy, we have witnessed growth in our revenues derived from interior contracting projects within the infrastructure sector in the first half of the year. In H109, revenues for Lindner Depa, our infrastructure-focused joint venture, increased by 817% compared to the same period in 2008 and stand at AED 212.8 million compared to AED 23.2 million. The H109 net profit for this joint venture grew significantly over H108, and stands at AED 35.6 million compared to AED 1.5 million (before minority interest). Lindner Depa's revenues and profits are primarily from work on the Dubai Metro Red Line stations. The project is on schedule, progressing successfully and is nearing completion.

Looking forward, we continue to view infrastructure as a key area of focus and are targeting major infrastructure contracts around the region. We foresee continued growth in the sector and anticipate an increasing amount of government funding dedicated to hospitals and the development of infrastructure projects for the several years to come.  In the healthcare sector, regional governments have prioritized and committed to investing in projects such as Cleveland Clinic Al Suwwa Island development, Abu Dhabi; Mohammad Bin Rashid Al Maktoum Academic Medical Centre, Dubai; Sidra Medical and Research Centre, Doha; King Saud Medical City, Saudi Arabia; and King Hamad General Hospital, Bahrain. Other infrastructure projects which include the building of new airports and upgrading of existing airports are also in the pipeline.

Refurbishment

Another market niche in which we are seeing much recent activity, and in which we are increasingly active, is hotel renovation and refurbishment. This is also a counter-cyclical business as hotel renovation and refurbishment activities increase in times of economic slow-down. Hotel operators take advantage of the lower occupancy rates and reduced chargeable rates per room to close sections of their hotels for renovation. The funding for these works is also typically available since the property owner continuously reserves between 2 and 4 percent of the hotel's revenues in a fund dedicated for refurbishment works.

Since July 1st 2009, Depa has signed refurbishment contracts to the value of AED 44.3 million, indicating a rise in the volume and size of the refurbishment market.

Theming

We have also witnessed strong performance by Mivan Depa, our joint venture focused on museums and theming works, which fitted out the public areas of the Atlantis hotel in Dubai last year. Mivan Depa saw an increase in revenues of 40% in H109 to AED 50.7 million compared to AED 36.1 million in H108. Some of the projects undertaken include the Ferrari World theme park on Yas Island, Abu Dhabi and the Arcapita building in Bahrain. With the upcoming museum projects on Saadiyat Island, such as the Louvre Abu Dhabi and the Guggenheim Museum, we anticipate strong demand for theming projects in the near future.

Geographical Growth

Since 1999, we have focused on building a global business and have continuously explored opportunities outside the UAE. Depa now operates in seventeen countries and we see the Company as truly global with geographically diverse revenue streams. We are witnessing the strongest growth in markets which we identify as high-growth and in which we see major opportunities. 

In line with our geographic diversification strategy, we have increased our presence in these high-growth markets, in particular, Saudi Arabia and Abu Dhabi. Our H109 revenues for Depa Saudi Arabia, a Depa subsidiary, have increased by 321% in H109 compared to the same period last year and stand at AED 20.2 million as compared to AED 4.8 million. Depa Saudi Arabia has become a profit generating entity and recorded a net profit of AED 3.7 million compared to a net loss of AED 0.4 million in H108. We anticipate an increase in demand for hospitality and infrastructure projects in Saudi Arabia, which has a rapidly expanding youth population, and have geared up over the last year to cater to the growth in this market. In the long term, the country has taken an initiative to double its tourists from 47 million in 2008 to 88 million by 2020, and to increase the number of hotels rooms from 117,097 to 254,310.

Abu Dhabi is another market where we believe there are significant growth opportunities, and where we have been active for over eight years. Having delivered iconic projects in Abu Dhabi, such as the Emirates Palace Hotel four years ago, and the Shangri-La Hotel in 2008, we are now working on several key projects in this growing Emirate, including Al Wahda Sport City, Crown Plaza - Yas Island and Marina Hotel - Yas Island, and the Ferrari Theme Park. Depa Abu Dhabi's revenues increased significantly in H109 by 362% over H108, currently standing at AED 97 million compared to AED 21.0 million. In H109, the company posted a net profit of AED 16.2 million compared to AED 0.2 in H108. Looking forward, we will continue to grow in Abu Dhabi as the city undertakes numerous, major hospitality and infrastructure projects.

In Jordan, we have established a presence in the interior contracting market and have worked on several mock-up rooms in order to pursue contracts there. We believe that this market will show compelling potential in the coming few years.

 

Our new joint venture in Singapore, DDS (Depa Design Studio), which was founded early last year, became a profit generating company in H109 and posted revenues of AED 54.3 million and net profits of AED 4.4. Our projects included the fit-out works of an entertainment venue at Resorts World 'RWS' and Marina Bay Sands. These landmark projects signed to-date in Singapore provide sufficient backlog for the coming periods and we expect to secure other prestigious projects in the near future. Combined, our net income from our Asian operations, including Design Studio and Royal Thai Carpets, have increased by 562% to AED 8.6 million compared to AED 1.3 million in H108. We continue to focus on the Asian markets, as demand for our services continue to grow in countries such as China, Singapore, Vietnam, and Thailand.

Our experience in India has been challenging as we have found that the area has been significantly affected by recent economic events. Amongst the Group's 24 companies, very few did not meet their targets for H109, of which Depa India is one. This subsidiary lost AED 6 million in this period, but we are not expecting any further losses going forward. Despite this setback, we still believe that the country has potential and we are revising our strategy for the Indian market in order to pursue future growth opportunities there.

As a long term strategy, we have begun expanding our presence in the African market. Historically, we have completed projects in Egypt, Sudan and Morocco, and more recently entered the Angolan market. In line with past practice and experiences where we typically sign a small project upon entering any new market in order to understand local practices and customs, and build strong local relationships prior to signing large projects, we have signed a small project in Angola to establish our presence in this new market before undertaking larger works. 

 

Backlog and New Contracts

As of the end of June 2009, Depa's backlog remained strong, experiencing 4% growth as compared with the same period last year. This reflects the Company's market leading position ahead of its peers who have experienced deterioration in backlog. Our backlog as of H109 stood at AED 2.6 billion as compared with the H108 figure of AED 2.5 billion, excluding an additional AED 270 million in signed contracts since June 30th, 2009. Our backlog consists entirely of projects where we are already working on site and does not include projects where we have not begun interior works. Since our backlog constitutes of projects that are at the advanced construction stage and where we are already on site, we have not seen any deterioration in payments from clients as we are near completing their projects.   The average duration of our backlog is approximately 15 months, within the Company's historical average of 12 - 16 months, and provides strong visibility for works to be completed over the next 12 months. By the end of the year, we expect to have stronger visibility as contracts materialize.  

In order to mitigate risk of project cancellations and client non-payment, we have, for several years, been taking the following precautionary measures:

• We thoroughly assess client concentration and no client or contract accounts for more than 8% of our backlog;

• We only commit to projects with low-risk clients who agree to payment terms that we find fair and favorable;

• We are selective in undertaking projects, and focus on those that are prestigious, thereby reducing cancellation risk;

• We usually sign with the international main contractor/international consortium.

The key projects, accounting for 90% of our backlog, are listed below. The remaining 10% of our backlog consists of 152 projects with an average value of AED 1.7 million per project, totaling 190 projects when all ongoing works are combined. 

	Project Name	Country	Backlog
1	Dubai Metro - Green Line *	UAE (Dubai)	208,000,000
2	Dubai Metro - Red Line *	UAE (Dubai)	191,940,191
3	Mazagan Villas	Morocco	179,308,055
4	Marina Bay Sands Tower 1	Singapore	139,075,623
5	Ferrari Experience - Yas Island	UAE (Abu Dhabi)	130,378,646
6	Sentosa Island Resort	Singapore	112,045,458
7	Palazzo Versace Hotel	UAE (Dubai)	110,690,341
8	Al Wahda Sport City1 - Fit out	UAE (Abu Dhabi)	96,712,456
9	Burj Tower	UAE (Dubai)	81,030,476
10	Tiara Palm Hotel	UAE (Dubai)	77,247,266
11	Mazagan Resort	Morocco	75,466,356
12	East Hotel - MOE	UAE (Dubai)	70,664,074
13	Crown Plaza & Stay Bridge in Yas Island	UAE (Dubai)	65,356,036
14	Private Yacht	Germany	64,937,973
15	Al Meydan Development	UAE (Dubai)	57,259,974
16	Private Yacht	Germany	52,786,476
17	Private Yacht	Germany	49,978,610
18	Arcapita Bahrain	Bahrain	49,442,215
19	Rotana & Centro in Yas Island	UAE (Abu Dhabi)	46,760,379
20	Al Wahda Sport City1 - FF&E	UAE (Abu Dhabi)	45,992,141
21	Centro Hotel	UAE (Sharjah)	44,329,848
22	Amarante El Nile Hotel -	Egypt	40,342,566
23	Marina Bay Sands - Package 2	Singapore	35,957,746
24	Marina Hotel - Yas Island	UAE (Abu Dhabi)	31,201,839
25	VIP Suites MBS	Singapore	30,202,733
26	Centro Hotel Barsha	UAE (Dubai)	26,433,230
27	Ferrari F35	UAE (Abu Dhabi)	25,604,737
28	Private Yacht	Germany	25,332,736
29	Private residence	UAE (Dubai)	24,871,391
30	Ministery of Defense and Aviation	Saudi Arabia	24,242,518
31	Private Yacht	UAE (Dubai)	19,918,230
32	City Center-Doha	Qatar	19,489,602
33	Hard Rock Café	UAE (Dubai)	18,000,000
34	Burj Dubai Medical Center - Emaar	UAE (Dubai)	17,473,345
35	Qatar Robotic Surgery Centre	Qatar	16,197,051
36	Meritus Mandarin	Singapore	13,514,073
37	Ferrari F30 Scenic Fabrication	UAE (Abu Dhabi)	13,500,049
38	Private residence	UAE (Dubai)	12,132,883
		Total	2,343,817,322

*Although the Green Line and Red Line for the Dubai Metro are contracts with the same client, we do not anticipate significant revenue generation from the Green Line prior to the end of the year, upon which the Red Line will be complete.

 

Our backlog reflects our efforts to diversify revenues across sectors and geographies. As such, and in line with our strategy, we continue to reduce dependence on both the Dubai market as well as the hospitality sector and increase our focus on refurbishment and infrastructure projects. As a result, Dubai constitutes only 33% of our backlog in H109 compared to 62% in H108.

The growth of our backlog, particularly given the current economic climate, illustrates the strength of the company and our focus on long-term sustainable growth. Whereas the market opportunities for our backlog to grow more quickly are available, we have always sought to ensure that projects which we sign have a healthy margin and are signed with the right clients. As such, we continue to be selective about projects that we sign and geographies which we enter.  

 

Industry Dynamics 

Whereas the industry at large is experiencing difficult times due to the current economic crisis, Depa continues to lead the industry in terms of revenue diversification, and global reach and breadth of sectors it operations in including hospitality, retail, residential, yacht, theming, museums, government, hospitals, airports, metros and other private and public facilities.  

We remain one of the largest interior contractors in our industry and continue to experience growth and forecast growth for several years to come. This compares with many in the industry which are experiencing stagnation or negative growth.  Our top line growth of 48% for H109 and our growing net profit margins are unmatched by our closest peers, as is our profit per head of AED 11,999.  

The size and prestige of many of the projects on which we are working, and the stability of our clients, as well as our diversified backlog, where no single project accounts for more than 8%, all add to the strength of the Company and ensure that it remains strong in these times, particularly as many smaller peers with smaller project sizes face significant challenges.

In addition to the Company's operational strength, Depa maintains its strong cash position and liquidity levels, ensuring the ability to bid for projects and grow the Company.

Capital Expenditure

Organic Growth

The Company's growth this year has been predominantly organic, with a strategic focus on geographical diversification. We have revised our strategy regarding aggressively establishing new factories and manufacturing entities and are focusing efforts on growing our manufacturing entities to capitalize on synergies between our geographic growth and the capacity of these facilities. Additionally, we are utilizing capital to geographically diversify the business further and to enhance performance efficiencies.   As such, our net capital expenditure excluding CAPEX from acquired subsidiaries stands at AED 48 million in H109 as compared with AED 69.9 million in H108.

Investments and Acquisitions

Depa's history as an acquisitive company, coupled with our current cash resources, has enabled the Company to be opportunistic in these current economic times. As such, we are currently monitoring the industry and market and are negotiating several potential investments focused on expanding horizontally into new geographies, as well as continuing to strengthen our base and supply of resources by vertically integrating our business. Furthermore, we are increasing our stakes in companies in which we own minority interests but in which a larger shareholding would benefit us further and which are performing very well and have significant potential for future growth.  

We have also found that the current market environment presents an opportunity to focus on post-acquisition integration and synergy creation through the many business units within the Group. Accordingly, our efforts are also focused on leveraging current acquisitions, as well as bringing potential opportunities to the Group.  

Our acquisition of German Vedder last year has added significant value to the Group as the company outperformed expectations for the first half of this year, and has diversified our income more than was anticipated. Furthermore, our minority interest in DecoLight, an investment made last year, has also demonstrated a significant return by significantly surpassing revenue and profit expectations for H109.

Share Buyback

In accordance with company's Annual General Meeting, held on November 5, 2008, we continue to progress our share buyback program as we believe that our shares are undervalued. We have cancelled the 12,024,768 shares repurchased between November 27, 2008 and June 30, 2009.  The previous free float was 454,059,264, and following the share cancellation it now stands at 442,034,496. Total shares outstanding are now 614,726,448.

 

Liquidity and the NASDAQ Dubai

Our liquidity on NASDAQ Dubai remains a concern to us and we continue to evaluate all options and approaches to resolve this situation. The Company is planning to take necessary action regarding this matter in due course.

Financial Results   

In addition to increasing our top line by 49%, we have streamlined our business and decreased our expenses as a percentage of revenues. In H109, the Group's G&A expenses increased by only 15% to AED 84.8 million compared to AED 73.6 million for the same period last year. Therefore as percentage of our revenues, G&A decreased to 7.7% in H109 from 9.9% in H108.  

Our days receivable in H109 increased by 6.1% to 192 days (including unbilled revenues) compared to 181 days in H108 and our days payable decreased by 1.7% to 66 days compared to 78.7 days inFY2008. However, these numbers include unbilled revenues. Unbilled revenues are identified as work that has been completed, but for which we have not yet, billed the client or not yet certified by client. For example, if we produce an item which is considered 'completed' we may have incurred costs (and recognized revenues) for all work related to creating and delivering this item to site, but we do not bill for it until it is placed in its final position in the project. As such, it is categorized as unbilled revenue.  

In order to accurately assess client payments and the impact of the current economic situation on accounts receivable, we evaluate the days receivable excluding unbilled revenues. Reviewing these trends and figures, we are pleased that the majority of our client payments remain within contractual terms despite the current economic conditions.

Unbilled revenues generally increase significantly as a project nears completion. Accordingly, and since we anticipate completing eight hotel and infrastructure projects by Q309, our current unbilled revenues are quite high.  

Selected Income Statement Data

	H1-2009	H1-2008 AED million
Contract Income	1,107.6	741.1
Contract Cost	(931.3)	(610.5)
Contract Profit	176.3	130.6
General & Administrative expenses	(84.8)	(73.6)
Gain on acquisition of Subsidiary
Other Income / (expense)	10.0	6.1
Finance income / (cost) net	8.2	(0.5)
Share of profit / (loss) from associates	6.1	3.4
Net profit before tax	115.8	66.0
Income Tax	(2.5)	(1.3)
Net profit	113.3	64.7
Attributed to:
Equity holders of parent	91.7	55.6
Minority Interest	21.6	9.1

 

Selected Balance Sheet Data

	H1-2009	H1-2008 AED million
Property, plant and equipment	327.8	220.2
Total current assets	2,283.2	2,093.6
Total assets	3,342.9	2,915.3
Total equity	1,827.4	1,674.8
Total liabilities	1,515.5	1,240.5

Selected Financial Data and Ratios

	H1-2009	H1-2008 AED million
EBITDA	133.6	91.1
EBIT	112.2	75.8
Adjusted EBITDA	117.5	81.6
Adjusted EBIT	96.1	66.3
Net Capital Expenditure	48	69.9

Selected Cash Flow Data

	H1-2009	H1-2008 AED million
Net cash used in operating activities	(26.8)	173.2
Net cash used in investing activities	(4.2)	(116.3)
Net cash provided from financing activities	(156.0)	932.5
Cash and cash equivalents
Beginning cash and cash equivalents	738.7	0
Ending cash and cash equivalents	551.7	989.4
Net increase (decrease) in cash and cash equivalents	(187.0)	989.4

Indebtedness

	H1-2009	H1-2008 AED million
Cash and Bank balances (A)*	551.7	989.3
Bank Loans (B)	315.4	431.5
Current (C)	214.7	197.3
Non-current (D)	100.7	234.2
Total current net indebtedness (A-C)	337.0	792
Total non-current net indebtedness (A-D)	451.0	755.1
Total net indebtedness (A-B)	236.3	555.8

Corporate Governance

In line with historical practices, the Company continues to adhere to the highest standards of corporate governance. As such, Chairman and CEO duties continue to be segregated, the Board of Directors continues to include two independent non-executive directors, and the roles and responsibilities of the governing body remain delegated to committees such as the Nomination and Remuneration committees in order to ensure better focus and balance of power. Board of Directors remained unchanged from the previous year there were no criteria set this year for appointment to the Board, which met four times in 2008, as displayed in the following table. Furthermore, the Nomination Committee did not meet in 2008 as there were no changes in senior management or Board Directors. The remuneration for the Board of Directors has also remained unchanged at AED 240,000 per member per annum, as has the CEO's compensation of AED 100,000 per month. The CEO's bonus for 2008 remains undetermined. Compensation for management is set to match market and industry benchmarks and is structured in a manner that incentivizes good performance, sustainable growth and meeting performance targets.

	Meetings & Attendees
Board Member	Emirates Towers 25 / 02 / 08 10:00 am	Emirates Towers 30 / 03 / 08 10:30 am	Capital Club 17 / 09 / 08 10:30 pm	Emirates Towers 05 / 11 / 08 5:00 pm
Abdullah Al Mazrui	X	X	X	X
Mohannad Izzat Sweid	X	X	X	X
Riad Burhan Taher Kamal	X			X
Mohammed Al Hashimi		X	X
Marwan Shehadeh	X	X	X	X
Hilal Al Marri	X		X
Maha K. Al Ghunaim		X
Orhan Osmansoy	X		X	X
Faisal Al Matrook	X	X	X	X

Strategy, Risks and Uncertainties

Our strategy of remaining focused on interior contracting, while expanding our reach geographically and across market niches has continued to strengthen the Company and is the foundation of our expected growth in the future.  As such, the Company continues to identify growth opportunities in Saudi Arabia, Abu Dhabi and Qatar in the short term, Asia in the middle term, and in Africa in the long term. We are looking to tap into these opportunities through organic growth as well as by acquisitions and investments, focusing on a horizontal expansion acquisitions strategy.  

Whereas the global economy remains unclear, we believe that diversifying across market sectors and geographies provides us with a stable base from which to grow. We are also using this opportunity to attract and recruit high quality talent from around the globe.

Outlook

As demand for our services remains strong, we continue to believe that Depa is well positioned to exploit further market opportunities - across high growth geographies such as Asia and Africa, and across market niches such as infrastructure and refurbishment. The organization's structure and strong management team allows Depa to grow quickly and effectively in order to capture these opportunities. The Company is structured in a scalable manner, enabling growth when opportunities present themselves. However, the amount of growth we undertake is determined by management's evaluation of a sustainable level of growth, from an organizational, as well as financial perspective. In this manner, we ensure that any growth we experience is strong and can be built on in following years. As such, we are confident that we will experience 30% growth this year as a Group and will continue to deliver strong results in the coming few years.

 

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