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Contractor Drake & Scull to raise capital after loss

2017-02-16 11:01:59

Like other construction firms in the region, the Drake & Scull has been hit hard by tough competition in the sector and an economic slowdown caused by low oil prices. Rich-Joseph Facun / The National
 

Drake & Scull International has become the second Dubai contractor in as many days to announce a capital raising after the company reported a Dh786.9 million loss for 2016.

The company, which specialises in mechanical, electrical and plumbing work, said it had secured a commitment from the Dubai-based investment bank Tabarak Investment to inject Dh500m into the company as part of a capital restructuring plan.

According to its website, Tabarak offers investment and advisory services, among other things. Tabarak could not be reached for comment.

The contractor, however, needs the approval of shareholders and the regulator, Securities and Commodities Authority, for the capital-raising exercise.

Shareholders will vote at the company’s annual general meeting in April on whether to approve the capital restructuring plan, the company said.

DSI reported that losses for the year shrank from Dh938.8m in 2015 to Dh786.9m in 2016. However, the company said that losses for the fourth quarter of 2016 stood at Dh490m, compared with Dh14.7m a year earlier. Revenue shrank to Dh3.24 billion last year from Dh4.2bn in 2015.

DSI said that the group had been hit by cost overruns and revenue reversals on disputed legacy projects, primarily in the civil sector and in Saudi Arabia.

The company said it planned to focus in future on the regional engineering sector.

"Today we are announcing the initial steps to stabilise and turn around our business," said Wael Allan, Drake & Scull’s chief executive.

"The capital reduction is an important milestone in our recapitalisation programme and is a strategic move to improve the balance sheet and the capital structure.

"I would like to reiterate that we are dedicating our efforts to regain business momentum and to restore our leadership position in the regional engineering sector. Our focus has shifted to building a clear path of sustainable growth, driven mainly by our core MEP business."

DSI shares closed up 6.9 per cent at 51 fils.

On Monday, Arabtec announced a Dh1.5bn rights issue after it posted a Dh3.4bn 2016 loss.

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( courtesy of TheNational )