Drake & Scull cuts losses; CEO to leave

Drake & Scull International (DSI), a regional market leader in engineering and related services, reported a net loss of Dh199 million ($54.18 million) for the second quarter of this year, a 12 per cent reduction compared to Dh226 million ($61.53 million) during Q2, 2016. Revenues for the quarter stood at Dh660 million ($179.69 million) compared to Dh806 million ($219.44 million) recorded for the same period last year. The revenue achieved for the quarter is consistent with the parameters of the financial targets set forth by the group at the outset of the fiscal year and is reflective of a sustained performance in key markets, mainly the UAE, the company said. The net loss included the Dh68 million ($18.51 million) additional one-off provisions and impairments charges undertaken during Q2, 2017. The provisions recorded in the quarter characterises the strategic direction of the group aimed at mitigating all contingent exposures to set a solid foundation for sustainable growth and profitability post completion of the capital restructuring programme, it said. The group’s board in its meeting to review and approve the financial results, also resolved to terminate the services of CEO Wael Allan. It also approved the resignations of several board members including that of former executive vice chairman Khaldoun Al Tabari. The company’s Capital Restructuring Programme is steaming ahead on schedule and is set to be concluded by the end of Q3, 2017. Phase One of the programme (capital reduction) will be concluded in few weeks with the approval for the issuance of the new equity to Tabarak Investment expected to be completed in September. Phase Two will see the group’s capital increase by Dh500 million ($136.1 million) with Tabarak Investment’s entry as a strategic investor. Tabarak Investment, currently the largest shareholder of DSI, recently reaffirmed its commitment to the company and extended an interest-free ‘Qard Hasan’ loan of up to Dh100 million ($136.13 million) to the group. The loan will be directed towards DSI’s working capital requirements to accelerate projects performance and delivery as it proceeds with its capital restructuring programme. The group advanced with the disposal of its non-core assets and has also finalised negotiations for the release of the remaining funds from the sale of its One Palm investment in Dubai in Q3, 2017. The funds along with the fresh equity infusion from Tabarak Investment will help restore the liquidity of the group, enabling DSI to successfully execute its projects backlog and improve productivity across all operating segments. As of June 30, 2017, the group had a diverse order backlog of Dh6.6 billion ($1.8 nillion) and is in the advanced stages of negotiation for new orders, with the latest project wins expected to be announced during the second half of the year, it said. Feras Kalthoum, acting CFO, said: “The results of the quarter should be viewed within the context of our turnaround plan and the capital restructuring programme and are consistent with our financial targets set out at the outset of the fiscal year. “Our efforts to complete the capital and debt restructuring of the group coupled with continued balancing of our portfolio to mitigate any contingent exposure that may impact our future profitability will soon reflect positively on our financial performance and top line targets.” Mohammed Atatreh, board member, added: “The year 2017 will continue to be a transitional year for DSI as we proceed with the execution of our turnaround plan. Our efforts to streamline our operations and restore our financial position will enable us to set solid foundation for sustainable growth. “The continued support of Tabarak Investment has enabled us to maintain good progress year to date, keeping us on track to set up the group for growth in 2018 and beyond. We look forward to shifting our focus on aggressively delivering and growing our order pipeline and invigorating our industry leadership