Dubai: In what is Drake and Scull’s first positive earnings after restructuring its debts over six years, the Dubai contractor swung to a massive net profit of Dh3.79 billion during the second quarter of 2024.
In Q2 2024, excluding the profit from the write-back of liabilities under the approved restructuring settlement plan of Dh3.76 billion, the MEP (mechanical, engineering and plumbing) contractors were “able to achieve a semi-annual net profit of Dh30 million”. It posted a net loss of Dh43.4 million during Q2 2023.
At various points, it was on the edge of liquidation, something that had befallen the other major UAE contractor, Arabtec. However, late last year, Drake and Scull finally pulled through, with the local court allowing the company’s current owners to script a turnaround and bring all the money owed to their side. The restructuring plan was subsequently approved, and the rights issue was followed.
Shafiq Abdelhamid, Chairman of the Board of Directors, said, “I am pleased to announce the company’s return to profitability immediately after the completion of the restructuring plan process, which was full of serious challenges that extended for more than six years. In addition, the company was suffering from catastrophic financial, legal, and operational conditions inside and outside the UAE.”
He said, “We had the courage and transparency to disclose previous accumulated losses of Dh5.5 billion that almost led to the company’s bankruptcy.” According to the company, debts, legal provisions, and bank interest were written off for Dh4.1 billion. The company also reported an increase in equity from a deficit of Dh4.4 billion as of December 31, 2023, to a positive value of Dh180 million as of June 30 this year.
The current management has taken additional provisions to generate other revenues from contingent additional provisions as a precautionary measure before the completion of the restructuring process. The statement explained that it has also managed to increase the company’s capital by 15 per cent above the required percentage for the restructuring plan.
Company revenues grew by 13 per cent compared to the same period last year, and it has fully settled all bank borrowings except for its subsidiary in Germany, which only has bank loans amounting to Dh7.5 million.
Drake and Scull also issued mandatory convertible Sukuk into shares after five years, worth Dh364 million, in favour of qualified financial and commercial creditors, equivalent to 10 per cent of their indebtedness and writing off 90 per cent of the remaining debt amount.
Turning around losses
In May, the company had reported a net loss for Q1, at Dh46 million from Dh119 million a year ago, but the company was not unduly worried about this particular outcome. “The main reason behind Q1-2024 loss was the net financing cost of Dh39 million that will be reversed back in the accounting books back upon successful completion of the restructuring process,” the firm said then.
The company’s Q1-24 result statement was its last before closing the restructuring process, after which it had detailed then that the liabilities related to the restructuring plan creditors will be reversed back in the accounting books based on 90 per cent write off and 10 per cent non-bearing interest mandatory convertible sukuk - as per the settlement plan approved by the Dubai Court of Appeal on November 1, 2023.
Drake & Scull, which had revealed that it had accumulated losses of over Dh5 billion then, has now the space to turn itself around through a deal struck with lenders and creditors. Plus, on another front, the Group is making headway - with a project backlog of Dh589 million compared to Dh435 million as of end of 2023. This was ‘driven by ongoing operations in overseas countries’.
Drake & Scull is also seeking a capital boost via offering new shares. The subscription process for the company’s shares began on April 25 and ended on May 10. The proceeds from the increase in new capital exceeded Dh450 million ($122.5 million), allowing the company to cover the minimum capital target, it said then.
“The company intends to use the net proceeds from the capital increase to enhance working capital and capital expenditures, and support operations, as well as future growth and any potential acquisitions,” Abdelhamid had said then.
The company, which resumed trading on the DFM in May after a suspension of more than five years, is now able to resume its activities by entering into tenders and obtaining new projects, it said in a bourse statement at the time. Trading of its shares was suspended in November 2018 after the company reported heavy financial losses.
