Depa Limited has issued its third quarter and year-to-date (YTD) trading update for the nine month period ended September 30, 2014, showing an encouraging improvement in its net profit and backlog.

Net profit after non-controlling interest for the third quarter this year stood at AED 19 million compared to a loss of AED 22 million in Q3-13. “This significant increase came from higher contract profits despite slightly reduced revenues of AED 517 million, (Q3-13: AED 577 million). The current performance demonstrates the effectiveness of Depa’s current strategy to be more selective by signing contracts with low risk profiles and healthy margins”, a statement by DEPA revealed, adding that it reported a net profit after non-controlling interest for the nine-month period of AED 46 million (YTD Sept 2013: AED 11 million).

A major driver of this increase was Vedder - Depa’s German subsidiary specializing in the fit-out of luxury yachts and private jets. Over the last year, Vedder has successfully integrated the Loher acquisition into its business and as a result, generated a YTD Net Profit of AED 14 million compared to a YTD Net Loss of AED 5 million in FY-13.

Moreover, Depa’s Far East operations have continued to perform well, doubling the YTD profit from AED 16 million in FY-13 to AED 32 million in YTD 2014. Furthermore, Depa is streamlining its business by closing down loss making businesses and this has also contributed to the four fold increase in Net Profit as compared to YTD 2013. Depa has previously mentioned this in its Annual Report 2013.

Depa’s balance sheet remains strong with total assets of AED 3.17 billion as at September 30, 2014 against AED 3.21 billion in December 2013, and total equity of AED 1.49 billion against AED 1.46 billion in December 2013.

Commenting on Depa’s financials, Interim Group CEO Nadim Akhras stated “Our strategy to be extremely selective in what we bid for and how projects are priced is starting to see tangible results with contract gross margins in Q3-14 returning to healthy margins significantly higher than what we achieved in the first nine months of FY-13. We are seeing strong business generation coming from our overseas operations and an increase in hospitality sector work as the construction cycle starts to enter the interior contracting phase. We will continue to drive our diversification strategy which creates value and mitigates business risk during different market cycles as well as evaluate opportunities in new higher margin emerging markets.”

It is worth highlighting that Depa’s Backlog at September 30, 2014 totalled AED 2.63 billion, an 8.7% rise on the Backlog of AED 2.42 billion as at June 30, 2014, owing to a strong surge in business from Asia, moving from 30.3% of our total backlog at the end of June 2014 to over 36.3% at the end of September 2014 as the Company’s subsidiary, Design Studio Group, signed an AED 220 million contract with OUE Limited, a Singaporean real estate owner, developer and operator. “From a sector perspective, during the third quarter, the backlog saw a continued increase in interior contracting for the hospitality industry which started earlier in the year and at the period end accounted for 49.4% of the backlog (30 June 2014: 36.0%). In line with Depa’s current policy to be very selective in signing new contracts, the Company secured a AED 108m interior fit-out contract for Emerald Palace Kempinski Hotel at Palm Jumeirah in Dubai during the third quarter, in addition to other projects”, the statement concluded.