Dubai’s DSI says it will seek to keep operating as shares slide

Shares in loss-making Dubai builder Drake & Scull plunged on Wednesday after it said shareholders would meet to decide whether to dissolve the company, although the board later insisted the firm would seek to continue operating.

The company, which posted a second-quarter net loss of Dhs181.1m ($49.3m) against a year-earlier loss of Dhs182.7m, said it was calling a general assembly on September 27 under an article of United Arab Emirates company law.

Read: Dubai contractor Drake & Scull says shareholders to decide whether to dissolve firm

The law requires companies to vote on whether they should continue operating if their accumulated losses have reached half of their issued share capital.

Drake & Scull’s shares plunged their 10 per cent daily limit to a record low of Dhs0.405 after the statement, leaving them down 82 per cent since the end of last year.

The shares were then briefly suspended as the company issued a second statement saying its board and management would do their utmost to ensure it continued operating. However, the stock price had not recovered by the late afternoon.

The general assembly vote “is a procedural step that needs to be taken and doesn’t mean that there is an intent to dissolve the Company prior to the expiry of its term,” the second statement said.

Like many Gulf construction firms, Drake & Scull has been hit by a slump in the regional building industry over the past few years; quarterly contract revenue shrank 47 per cent from a year ago in the second quarter.

It attributed its second-quarter losses mainly to cost overruns in secondary markets such as Oman, Qatar and Jordan, as well as rising debt servicing costs.

Late last month, independent equity research outfit AlphaMena downgraded the stock to a “sell”, saying the company faced liquidity issues and was relying on debt as a last resort; it estimated the company’s net debt at Dhs2.77bn ($755m).

Drake & Scull’s first statement on Wednesday said it would use the general assembly meeting to brief shareholders on its current situation and plans, and on developments in an investigation by its new management of the previous management. It did not give any details of the investigation.

Drake & Scull’s biggest shareholder is Ajman Bank with 13.06 per cent, according to stock exchange data. Other shareholders include local private equity firm Tabarak Investment and local businessman Adel Abdulhamed Ibrahim al-Hosani, according to Thomson Reuters data. Ajman Bank shares were down 2.4 per cent.