Dubai: Drake and Scull International (DSI), the Dubai-listed construction firm, said on Tuesday it is seeking shareholder approval to raise Dh500 million in a rights issue and to reduce its capital by up to 50 per cent.
The announcement comes as the company reported around Dh787 million in losses from 2016, with the figure narrowing from the Dh939 million in losses in 2015. Revenues also dropped 23 per cent to reach Dh3.2 billion in 2016.
“Against the backdrop of the significant liquidity challenges in the regional construction sector, the group’s results for the fiscal year 2016 were impacted by major revenue reversals, profit adjustments, cost overruns, and investment impairments, emanating primarily from several disputed legacy projects in the construction business in the KSA,” DSI said in a statement.
In a separate statement posted to the Dubai bourse, DSI said it will propose to shareholders a capital restructuring plan, which will involve reducing up to 50 per cent of share capital via the cancellation of shares.
The next phase of the plan aims to raise capital by issuing new equity shares to an investor called Tabarak Investment.
DSI’s board said it plans to call for an annual general assembly in April 2017 to provide details on the capital restructure plan and to vote on its implementation.
The statement sent shares plunging early trade, with DSI share prices down nearly 6 per cent in the first 10 minutes of trade. Shares rebounded, however, ending the day 6.9 per cent higher, and were the most actively traded by value on the Dubai bourse.
It also comes just one day after another Dubai-listed construction company, Arabtec, said it plans to reduce capital and raise Dh1.5 billion in a rights issue. The plans by both companies come as contractors face mounting losses and increased challenges on the back of tightened liquidity, delayed payment cycles, and squeezed profit margins.
Wael Allan, chief executive officer at Drake and Scull International, said the capital restructuring plan marks “initial steps to stabilise and turn around our business.” He added that the new shareholder, Tabarak, will help DSI on a number of financial and operational initiatives.
