Depa issues trading statement ahead of full year audited results

The date reflects the time needed to consolidate 26 companies for the first time as a public reporting entity.

Depa operates across sixteen countries and is performing well. The Company confirms that it is trading in line with market expectations and has achieved circa 37% revenue growth and circa 40% net profit growth for the year ended 31 December 2008. Given the current market climate and as the Company has historically been conservative with estimates and expectations, implementing high levels of risk management measures, the management has decided to increase the level of cautiousness and risk management around existing projects and clients' payments.

Accordingly, the management has decided to increase the allocation of project contingencies over and above the ordinary provisions for such events by between Dhs30-33m ($8.17m) for projects that are ongoing and are to be completed in 2009 on a revenue accounting basis of percentage of completion. These contingencies are not allocated or related to any risk other than the current market.

This is an increase of 250% over and above the conservative average allocated annually to the projects. Accordingly, the net profits have been reduced, resulting in recognized growth of 20-22% for net profits for the fiscal year 2008, after the additional contingencies have been accounted for.

Going forward, the Company is expecting revenue and profit growth of between 30 - 35% in 2009 (excluding the above Dhs30m contingencies) and continued growth in 2010. To this effect, Depa has received orders for 17 projects to the value of Dhs1.05bn ($286m) in the first quarter of 2009 between Morocco, Egypt, Saudi Arabia and the UAE. This includes prestigious works such as the fit-out of Palazzo Versace Hotel in Dubai and the refurbishment of the Minister Office of Defense and Aviation in Saudi Arabia and Depa has begun immediate work on these projects.

This is in addition to the backlog of Dhs2.7bn ($736m) as of December 31st, 2008, which includes, but is not limited to; Burj Dubai, Dubai Metro, Mazagan Resort in Morocco and Marina Bay Sands Resort in Singapore. As always, the strong contracted backlog of projects encompasses only those projects where Depa is on site, and currently totals Dhs3.75bn ($1.02bn).

Being at the end of the development chain, Depa typically moves on site to finish a building as a last stage before occupation and hence, at a stage where the project is extremely unlikely to be postponed or cancelled.

Additionally, the business continues to successfully negotiate Letters of Understanding and has secured several significant works in the last quarter of 2008 and since the beginning of 2009. Although these are at a less advanced stage, they have been carefully selected due to their certainty of being completed; often as a result of their iconic nature. The majority of these are outside the UAE and those within the UAE are within the infrastructure sector and are expected to contribute positively to revenues during 2009.

Depa continues to be selective over the projects it works on and the clients for which it works. Depa's clients are typically reputable international companies such as Obayashi Corporation on the Dubai Metro project (JV) and Samsung on Burj Dubai (JV). Importantly, Depa has a very low level of project and client concentration risk, as no project or client accounts for more than 8% of current backlog.

The Company maintained a strong cash position of Dhs726m ($198m) and total debt on the balance sheet reached Dhs373.8m ($102m), leaving Depa in a net cash position of approximately Dhs352.2m ($96m) as of the year end.

In line with its strategy, Depa continues to diversify revenues and reduce dependence on the UAE market and the hospitality industry and focus on counter-cyclical sectors such as infrastructure and refurbishment. In 2008, Depa completed Dhs176m ($48m) in infrastructure contracts in 2008 compared to Dhs60m ($16m) in the previous year, including the complete fit out work of 13 Dubai Metro stations, and expects the 2009 growth in infrastructure works to be as significant as prior year's growth.

The Company recently completed the refurbishment of the Bustan Rotana Hotel, on which it did the interior fit out twelve years ago, and is currently engaged in refurbishment projects in Saudi Arabia and in Egypt. Since 1 January 2009, Depa has signed refurbishment contracts to the value of Dhs200m ($54.5m), indicating a significant rise in the volume and size of the refurbishment market. The Company also continues to hold discussions with hotels which are considering refurbishment plans and expects a significant number of these to contribute positively to revenues in 2010 and 2011.

Depa has also made strong progress on its entry into new markets. 2008 saw its joint venture Depa Design Studio successfully win two prestigious contracts in Singapore; the Marina Bay Sands Integrated Resort and an entertainment venue at Resorts World, an integrated holiday resort on the popular island of Sentosa. In line with the firm's strategy of vertically integrating manufacturing and procurement, we increased our positions in Design Studio in Singapore and in Jordan Wood Industries in Jordan.

We also continued our horizontal expansion strategy and acquired Vedder, a German yacht fit-out company. These acquisitions continue to strengthen the Company's core manufacturing support and establish its position internationally and in new markets niches.