Arabtec Holdings - Literature review Example

Arabtec holdings al Affiliation) \ Arabtec Holdings Industry and products Arabtec holdings is a limited liable company founded in 1975 that deals with construction. Arabtec holdings as a construction company deals with several services including residential developments, commercial developments, hotels, infrastructure, high rise development, super high rise development carried onshore and offshore projects in oil and gas industries. Arabtec holdings is also involved in the manufacture and transportation of ready mix concrete products, storage tanks, profiles, road tankers, switch gears, power distribution channels, precast panels and steel and structural buildings. Arabtec Holdings Company emerged in the market due to construction demands in 1970s (Zainab, 2013). MNE performance and globalization The company started as being specialized in high tech civil engineering and works of infrastructure. Expansion in Arabtec holdings leads them into involvement with gas and oil sectors in Abu Dhabi. Arabtec expanded its operation to become top constructors in Dubai through involvement in airport works. In expansion activities, Arabtec holdings ventured into villa and housing sectors leading to creation of Arabtec building which was a branch mainly concerned with housing and villas in the company (Zainab, 2013). First venture into high rise construction by the company was done as early as in 1976. Arabtec holdings in MNE performance has involved in Arabtec-Samsung engineering where they have projects in energy and power in North Africa and Middle East. The company through its global operations have involved in Egypt –Arabtec venture where they construct residential houses. Literature view Foreign operations of Arabtec Holdings Company Arabtec Holdings Company has been involved in several international construction activities. Some of the international activities and projects that the company has undertaken include Emirates Falcon Electromechanical Company. This company has been involved in provision of electromechanical building services that are required in building and construction in Middle East. Gulf Steel Industries has been developed by the company so that it is able to reach the increased demand for quality structural buildings globally. The company has been involved in Pakistan Private Limited so that the company could create positive impact on the under supplied construction market in different countries reaching the services globally. Polypod Middle East was formed by Arabtec Holdings Company to satisfy the increased demands for re-fabrication in the construction industry worldwide. This has been with design, development and installation of the devices. The construction of several companies and department by this company has enabled services that are provided by the company to reach several countries (Zainab, 2013). Expansion has also been planned by the company to reach the services in places such as North Africa. Joint ventures and subsidiaries have enhanced competition of Arabtec holdings in the economic market. Formation of a joint venture with Samsung Engineering of South Korea has enabled the company to get involved in large scale projects in oil, power, gas and infrastructure in the larger Middle East and North Africa. Arabtec holdings have been involved in several constructions including building of the tallest structure in the world. Financial and accounting data Arabtec holdings have established it to become the leader in real estate construction making it achieve successive profitability and a status for high quality workmanship. Strategies that have been put forward by Arabtec holdings have enabled the company to achieve success in competition with other construction companies. Growth strategies including expansion in oil and gas, infrastructure, power and affordable housing has enabled increased acceptance of the company more than others. The company has increased in look out for new potential markets such as India enables it to build on its strong presence in areas of high rise buildings and airports. Arabtec holdings through its operations in Saudi Arabia has made the area to be the most growing region by revenues and enable winning of more contracts away from other company competitors. Formulation of strategies and growth plans much consider financial status of the company and contracts that it is already involved. Financial review that has been carried out by the company has brought out a number of factors that have contributed much overall strong performance of Arabtec holdings. At the end of 2013, the company has emerged well from construction sector leading to increase in projects totaling to 24 dollars at the end of 2013. The Company reported revenues up 30% to 7.4 billion in 2013, compared to 5.7 billion in 2012. Ratio analysis of finances of Arabtec holdings shows that revenues were driven by the Company’s growing backlog and continued strong performance in the UAE and Saudi Arabia markets, in addition to management’s influence on the project delivery organization (Zainab, 2013). Moreover, the Company’s gross margins enhanced, with an increment of 2% from 2012 to 2013 driven by a continued focus on project execution. Reports on financial positions of Arabtec holdings depends on factors including management’s responsibility for the consolidated financial statements. Management is responsible for preparation of financial statements which are according to International Financial Reporting standards and also according to articles of the company. The company has also been responsible in conducting the audits as per their audit. Opinions have also been involved in financial statements of the company. Excel as a tool has been used to record data in the company. Data that are analyzed in the company include stock statistics, company statistics and corporate earnings. Analysis tools that have been used by Arabtec holdings is share graphs. Share graph as an analyzing tool involves interactive tool used to view and analyses market performance by Arabtec holdings (Northrup, 2011). Using the graph, it has been possible to monitor company’s share price development. This tool also allows comparison of the share against chosen indices when available. Technical analysis tool have been used to identify price trends giving buy and sell signals to the company. It also indicates overbought and oversold conditions enabling adjustments by the company on sales (Elizabeth, 2013). Data obtained by the company through the use of BNC by its clients enable identification of research projects and companies. Through this, they are able to identify potential customers for the company. It also enables analysis of construction market. The tool enables obtain an informed overview of the regional construction market and analyses project trends enabling the company to stay ahead of other competitors (Elizabeth, 2013). Analysis tool has enabled interact effectively. Through this, there is identification of key contracts, tracking projects developments in the way they happen and staying up to date with mobile access to intelligence of projects. Statements of financial position of Arabtec holdings have been done including assets both non-current and current. Non-current assets have totaled to 2.7 million dollars. Current assets of Arabtec holdings have been recorded to a total of 10 million dollars. Equity and liabilities including bank borrowings, trade and other payables, due to related parties and income tax payable have totaled to 12.8 million dollars. Total current liabilities are 6.7 million dollars by value. Total liabilities total to 7.0 million dollars (Northrup, 2011). Statement of cash flow in Arabtec holdings has been analyzed with consideration of operational activities, net increase or decrease in cash and cash equivalents. Changes have been made in accounting policies. These policies include joint arrangements, disclosure in interest in other entities, fair value measurements and first adoption of international financial reporting standards. Statement of financial position is as follows Financials Financials 2002-12 2003-12 2004-12 2005-12 2006-12 2007-12 2008-12 2009-12 2010-12 2011-12 TTM Revenue AED Mil — — — 2,566 2,810 4,273 9,722 7,665 5,464 5,003 5,158 Gross Margin % — — — 9.0 12.7 17.3 15.3 17.3 15.1 12.6 13.0 Operating Income AED Mil — — — 172 207 536 1,063 609 479 307 282 Operating Margin % — — — 6.7 7.4 12.6 10.9 7.9 8.8 6.1 5.5 Net Income AED Mil — — — 166 219 578 1,080 592 432 340 335 Earnings Per Share AED — — — 0.19 0.19 0.41 0.37 0.19 0.12 0.10 0.11 Dividends AED — — — — — — — — — — 0.03 Payout Ratio % — — — — — — — — — — — Shares Mil — — — 869 1,130 1,299 2,599 2,599 2,599 2,599 2,599 Book Value Per Share AED — — — — — — — — 1.19 1.30 — Operating Cash Flow AED Mil — — — 195 -5 1,511 70 397 361 492 164 Cap Spending AED Mil — — — -107 -166 -314 -868 -300 -222 -195 -215 Free Cash Flow AED Mil — — — 88 -171 1,198 -797 97 139 297 -51 Free Cash Flow Per Share AED — — — — — — — — 0.05 0.11 — Working Capital AED Mil — — — -12 220 102 276 1,016 1,050 1,134 Profitaility Ratios Margins % of Sales 2002-12 2003-12 2004-12 2005-12 2006-12 2007-12 2008-12 2009-12 2010-12 2011-12 TTM Revenue — — — 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 COGS — — — 90.95 87.29 82.70 84.65 82.69 84.86 87.42 87.01 Gross Margin — — — 9.05 12.71 17.30 15.35 17.31 15.14 12.58 12.99 SG&A — — — 3.93 6.26 6.85 6.03 5.84 8.22 6.95 8.00 R&D — — — — — — — — — — — Other — — — 0.06 — 0.17 0.10 4.44 — 0.23 0.22 Operating Margin — — — 6.69 7.38 12.55 10.94 7.94 8.77 6.13 5.48 Net Int Inc & Other — — — -6.69 -7.38 1.00 0.34 0.29 -0.76 0.71 1.05 EBT Margin — — — — — 13.55 11.27 8.23 8.01 6.85 6.53 Profitability 2002-12 2003-12 2004-12 2005-12 2006-12 2007-12 2008-12 2009-12 2010-12 2011-12 TTM Tax Rate % — — — — — 0.22 1.49 6.24 1.40 0.63 0.52 Net Margin % — — — 6.46 7.72 12.53 9.85 6.46 5.62 5.21 5.38 Asset Turnover (Average) — — — 1.36 1.33 1.19 1.36 0.83 0.61 0.57 0.61 Return on Assets % — — — 8.78 10.27 14.92 13.40 5.33 3.45 2.98 3.29 Financial Leverage (Average) — — — 3.29 2.88 3.49 4.47 3.34 2.80 2.61 2.50 Return on Equity % — — — 28.90 31.34 48.71 54.65 20.43 10.54 8.05 8.49 Return on Invested Capital % — — — 29.91 25.67 41.70 39.35 14.02 9.26 7.60 8.12 Interest Coverage — — — 29.46 171.13 159.81 46.06 — 11.50 11.36 11.97 Growth 2002-12 2003-12 2004-12 2005-12 2006-12 2007-12 2008-12 2009-12 2010-12 2011-12 Latest Qtr Revenue % Year over Year — — — — 9.52 52.08 127.52 -21.16 -28.72 -8.42 8.53 3-Year Average — — — — — — 55.90 39.73 8.54 -19.86 — 5-Year Average — — — — — — — — 16.32 12.23 — 10-Year Average — — — — — — — — — — — Operating Income % Year over Year — — — — 20.75 158.67 98.25 -42.75 -21.23 -36.02 -141.89 3-Year Average — — — — — — 83.63 43.19 -3.67 -33.92 — 5-Year Average — — — — — — — — 22.80 8.15 — 10-Year Average — — — — — — — — — — — Net Income % Year over Year — — — — 31.94 163.92 86.93 -45.18 -27.07 -21.15 — 3-Year Average — — — — — — 86.71 39.32 -9.25 -31.94 — 5-Year Average — — — — — — — — 21.08 9.23 — 10-Year Average — — — — — — — — — — — EPS % Year over Year — — — — 2.44 114.29 -11.11 -48.75 -36.59 -18.27 -152.50 3-Year Average — — — — — — 24.96 -0.80 -33.89 -35.72 — 5-Year Average — — — — — — — — -8.71 -12.74 — 10-Year Average — — — — — — — — — — — Cash Flow Cash Flow Ratios 2002-12 2003-12 2004-12 2005-12 2006-12 2007-12 2008-12 2009-12 2010-12 2011-12 TTM Operating Cash Flow Growth % YOY — — — — — — -95.36 465.15 -8.94 36.23 — Free Cash Flow Growth % YOY — — — — — — — — 44.24 113.11 — Cap Ex as a % of Sales — — — 4.15 5.90 7.34 8.93 3.91 4.06 3.90 4.16 Free Cash Flow/Sales % — — — 3.45 -6.08 28.04 -8.20 1.26 2.55 5.93 -0.99 Free Cash Flow/Net Income — — — 0.53 -0.78 2.07 -0.74 0.16 0.32 0.87 -0.15 Financial Health Balance Sheet Items (in %) 2002-12 2003-12 2004-12 2005-12 2006-12 2007-12 2008-12 2009-12 2010-12 2011-12 Latest Qtr Cash & Short-Term Investments — — — 4.97 5.52 20.61 8.99 9.01 6.78 9.49 5.84 Accounts Receivable — — — — 51.29 39.94 52.68 51.35 56.40 44.42 — Inventory — — — 5.05 9.21 3.80 10.75 7.11 4.25 3.63 3.07 Other Current Assets — — — 54.27 2.98 5.13 4.61 9.55 3.83 13.60 61.14 Total Current Assets — — — 64.29 69.00 69.48 77.02 77.02 71.26 71.14 70.05 Net PP&E — — — 17.54 17.81 15.49 14.60 14.96 14.66 13.43 14.01 Intangibles — — — 10.05 7.65 10.61 5.23 4.91 4.50 3.90 3.75 Other Long-Term Assets — — — 8.12 5.53 4.42 3.15 3.11 9.59 11.54 12.18 Total Assets — — — 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 Accounts Payable — — — — 52.28 61.30 60.98 55.28 49.57 50.52 48.09 Short-Term Debt — — — — 6.64 4.20 11.38 8.15 6.90 5.08 5.50 Taxes Payable — — — — — — 0.03 0.09 0.06 0.02 0.01 Accrued Liabilities — — — — — — — — — — — Other Short-Term Liabilities — — — 49.79 — — — — — — — Total Current Liabilities — — — 49.79 58.91 65.51 72.38 63.52 56.53 55.62 53.60 Long-Term Debt — — — — 0.03 0.40 1.59 1.98 1.22 0.60 0.49 Other Long-Term Liabilities — — — 26.91 6.75 6.21 4.16 5.62 8.11 7.21 7.80 Total Liabilities — — — 76.70 65.70 72.11 78.13 71.12 65.85 63.44 61.89 Total Stockholders Equity — — — 23.30 34.30 27.89 21.87 28.88 34.15 36.56 38.11 Total Liabilities & Equity 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 Liquidity/Financial Health 2002-12 2003-12 2004-12 2005-12 2006-12 2007-12 2008-12 2009-12 2010-12 2011-12 Latest Qtr Current Ratio — — — 0.99 1.16 1.03 1.04 1.17 1.20 1.22 1.24 Quick Ratio — — — 0.84 0.97 0.94 0.87 1.04 1.07 1.13 1.19 Financial Leverage — — — 3.29 2.88 3.49 4.47 3.34 2.80 2.61 2.50 Debt/Equity — — — — — 0.01 0.07 0.07 0.04 0.02 0.01 Efficiency Ratios Efficiency 2002-12 2003-12 2004-12 2005-12 2006-12 2007-12 2008-12 2009-12 2010-12 2011-12 TTM Days Sales Outstanding — — — 133.19 138.60 133.70 129.82 230.04 319.78 321.07 306.16 Days Inventory — — — 14.92 23.11 20.60 26.62 47.93 40.02 28.71 24.45 Payables Period — — — 191.89 183.13 221.35 198.62 320.40 382.80 382.03 354.17 Cash Conversion Cycle — — — -43.77 -21.43 -67.05 -42.17 -42.44 -23.00 -32.25 -23.55 Receivables Turnover — — — 2.74 2.63 2.73 2.81 1.59 1.14 1.14 1.19 Inventory Turnover — — — 24.46 15.80 17.72 13.71 7.62 9.12 12.72 14.93 Fixed Assets Turnover — — — 7.74 7.52 7.33 9.12 5.59 4.15 4.08 4.23 Asset Turnover — — — 1.36 1.33 1.19 1.36 0.83 0.61 0.57 0.61 Financial strength of Arabtec Holdings Company Financial strength of Arabtec holdings has been much affected by global financial crisis. The affection of financial position is due to expansion mode by the company after Abu Dhabi government increased its prize in Arabtec holdings in 2012 and became involved in the board of the company (Hamdy, 2010). Latest consideration of the company on its financial strength is after completion of Dh 2.4 billion rights that were issued in the previous year. The rights were to be used in expansion of operation in housing and oil and gas sector. This enables the company to expand from traditional construction activities that led to crash in its financial status. Financial strength in the company has also been boosted by setting its own property development company rather than depending on building schemes for developers. It enables development of affordable development housing projects (Hamdy, 2010). Financial strength has been enhanced after the company was awarded to build a massive 37 new tower in Dubai at a cost more that Dh 22 billion. Winning of other contracts such as building of a million low cost homes in Egypt brought to the company a total of 40 billion dollars. Strengthening of financial status has been enhanced after Arabtec holdings asked investors to forego a proposed cash dividend which aimed to making the company to have a place in top 10 best builders in the world jumping from its ranking of 187 in 2012. Share price of the company has risen from Dh 2.08 to Dh 7.4 between January and May. Ratios Profitability ratio of Arabtec holdings is attained through division of net income of the year and total assets at the beginning of the year and score obtained is 1 if positive and 0 if negative. Current net income for the company is 340 making the score to be a positive ratio. Cash flow return on assets ratio is obtained by dividing net cash flow divided by total assets at the beginning of the year. Current cash inflow from operations of the company was 429 bringing a positive ratio with a score of 1. Gearing ratio compares the year’s long term debt with average total assets that were from the previous year gearing. When gearing of the year is high, the score obtained is 0. Gearing in current year =long term debt divided average total assets = 55.65/8738.063 = 0.00636869 Liquidity ratio of the company is obtained from dividing current assets by current liabilities. When the score is 1, current ratio is higher Liquidity ratio of the current year = total current assets divided by total current liabilities = 6185.205/5135.275 = 1.20445 Assets turnover ratio for the current year obtained by dividing revenue with total assets at the end of the year = 5003.468/8680 =0.576430 Gross margin ratio of the company is obtained by dividing gross profit and revenue = 629.312/5003.468 = 0.12577516 Arabtec holdings company profile and summary findings An Arabtec holding formally known as Arab Technical Construction Company was created in 1975. Projects that are carried out by the company span from higher education, hotels, and residential building and distribution facilities. An Arabtec holding is known for expertise in infrastructure and industrial facilities (Elizabeth, 2013). It has also been known to be a giant in technology and innovation in construction sector for a period of more than three decades. An Arabtec holding was the first private construction company to go public in Dubai after being listed on the Dubai Financial Market in 2005. Arabtec holdings consist of several subsidiaries. Recent operation base of Arabtec holdings is in Abu Dhabi, Saudi Arabia, Qatar, Russia, Jordan, Syria and Dubai. There is plan by the company to extend its operation to international market with focus on North African countries including Egypt, Algeria and Libya. Arabtec holdings has recognized their operations to have several challenges its growth but have remained consistent in opportunities that is has. Several findings have occurred in Arabtec holdings. A finding has been on Dubai shares taking a hit on profit- taking in the market. The finding has enabled the company to adjust on strategies and growth it undertakes in Dubai. Another finding of the company is that UAE shares rises as prices of oil rebound. Since Arabtec holdings is involved in oil and gas production, they have much taken keen consideration in oil prices to control UAE shares (Hamdy, 2010). An Arabtec holding has found out to end 2014 on a downward movement. This has made reconstruction of activities and choice on contracts that it undertakes so that the company can be able to pick up and strengthen its financial base. There has been a closer look at secret trading in UAE. This secret trading follow up is done by Arabtec holdings so that it can also be able to control market shares. Arabtec holdings shares have fall after Hassan Ismaik stake sale to Aabar. Reference Elizabeth, B. (2013). Arabtec profile: Rising from ashes. Oxford University Press Zainab, F. (2013). Arabtec and Samsung Engineering joint venture. Project Management Institute. Hamdy, K. (2010). The essential role of leadership in managing mega projects. Newtown Square, Pa.: Project Management Institute. Northrup, C. (2011). The American economy. Santa Barbara, Calif.: ABC-CLIO. Read More