Drake & Scull sacks CEO following $54.2m Q2 2017 net loss

Drake & Scull International (DSI) has terminated the services of chief executive officer, Wael Allan, following the announcement of a $54.2m (AED199m) net loss for Q2 2017.

The UAE-headquartered contractor’s board also accepted the resignations of several board members, including that of former executive vice chairman, Khaldoun Al Tabari.

In a missive issued to Dubai Financial Market (DFM), DSI reported revenues of $179.7m (AED660m) for Q2 2017, down from $219.4m (AED806m) during the corresponding period of last year.

The company said that the revenue achieved in Q2 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 DFM statement added that the quarterly net loss of $54.2m (AED199m) was a result of the $18.5m (AED68m) additional one-off provisions and impairment charges undertaken during the period. The figure represents a 12% year-on-year improvement, compared to the $61.5m (AED226m) net loss recorded by DSI in Q2 2016.

“The provisions recorded in the quarter characterise 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,” the statement added.

Earlier this month, DSI secured an interest-free qard al-hasan loan of up to $27.2m (AED100m) from Tabarak Investment, which is currently the group’s largest shareholder.

The loan is intended to meet the firm’s immediate working capital requirements as it completes the first phase of its capital restructuring programme.

Commenting on its financial strategy in the latest missive to DFM, DSI said: “The capital restructuring programme is steaming ahead on schedule, and is set to be concluded by the end of Q3 2017. Phase 1 of the programme (capital reduction) will be concluded in [a] few weeks, with the approval for the issuance of the new equity to Tabarak Investment LLC expected to be completed in September.

“Phase 2 will see the group’s capital increase by AED500m [$136.1m], with Tabarak Investment’s entry as a strategic investor.”

The company also said the disposal of its non-core assets is advancing, and that it finalised negotiations for the release of the remaining funds from the sale of its One Palm investment in Dubai in Q3 2017.

These funds, along with the injection of equity from Tabarak Investment, are expected to help restore the liquidity of the group, enabling DSI to “successfully execute its projects backlog and improve productivity across all operating segments”.

Feras Kalthoum, acting chief financial officer of DSI, 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.”

DSI board member, Mohammed Atatreh, 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 [a] 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.”

As of 30 June, 2017, DSI’s order backlog stood at $1.8bn (AED6.6bn). The firm also noted that it is in the “advanced stages of negotiation for new orders”, and that it expects to announce fresh contract wins in H2 2017.