Muscat: Galfar Engineering and Contracting Company has decided to implement a rigorous transformation programme in the next one to one-and-a-half years to revamp its operations, in an attempt to drive the company to achieve sustainable profit.
The whole scheme will be implemented with the help of an international consultancy agency — Roland Berger. Roland Berger will help the company achieve a sustainable improvement in financial performance and operational efficiency.
Building on its strong market position as Oman’s largest construction company with more than 20,000 employees and its reputation for delivering high-quality construction projects across various sectors, Galfar has a confirmed order book of around OMR640 million by the end of 2015. “Accordingly, Galfar’s revenues for 2016 are expected to be at par or above 2015 levels despite an increasingly challenging market environment,” noted the statement.
The company’s board is also in the process of appointing a financial advisor.
“In the short-term, a special emphasis is on unlocking liquidity which includes addressing receivables. A new organisational structure has already been defined and an international recruitment firm is being hired to strengthen the management team and improve overall effectiveness,” the Galfar statement noted.
Galfar's board of directors is fully committed to the rigorous implementation of the transformation programme over the next 12-18 months. First tangible results are already expected in the second quarter of 2016.
Roland Berger has been provided a long-term mandate to achieve a sustainable improvement of Galfar's financial performance and operational efficiency. For this purpose, a holistic transformation roadmap with detailed operational improvement levers has already been developed, and is now being cascaded into the organisation. “Key building blocks of this programme include organisational transformation and enhanced talent management, enhanced liquidity management and assets optimisation, overhead cost reductions, productivity improvement and lean on-site execution, supply chain management optimisation, and information technology transformation.”
Galfar suffers loss
Galfar Engineering said the group has incurred a loss of OMR26.63 million for 2015, against a net profit of OMR197,000 for the previous year. The loss was mainly due to a provision for receivables to the extent of OMR30.18 million (mainly for Muscat Expressway and Central Corridor project). The total revenue of the group stood lower at OMR345.23 million for 2015, against OMR372.51 million for the previous year.
Total expenses of the group were lower at OMR344.69 million last year, against OMR371.59 million for the previous year. However, provision for receivables stood at OMR30.18 million for 2015.
The provision for impairment of receivables is made in line with International Financial Reporting Standards requirements and company's accounting policies. Out of the total provision amount, the major portion is a provision for Muscat Expessway project and Central Corridor project. The other provisions come from other contracts which could not be financially closed for a long period.