Drake & Scull International's third-quarter profit plunged by 93 per cent due to higher costs and falling revenues, the firm said yesterday.
Dubai’s second biggest contractor, which specialises in mechanical engineering and plumbing operations, said profits fell to Dh3.9m (US$1m) during the three months to September, down from Dh57.5m during the same period last year. The results missed analysts’ forecasts that generally predicted third-quarter profits for the company of about Dh40.6m.
In a statement to the Dubai Financial Market, DSI said revenues from contracts for the three-month period fell to Dh622.8m, a 26.5 per cent decline from last year.
At the same time the company said general and administrative expenses increased to Dh81.5m, up 15 per cent from a year ago.
For the first nine months of the year, DSI said profits had slumped 56 per cent from Dh154.7m last year to Dh67.6m as contract revenues fell from Dh2.2bn to Dh2.1bn.
Earlier this year, DSI blamed lower productivity and exposure to the euro for disappointing second-quarter profits that slumped to Dh26.1m from Dh51.3m a year earlier.
The company has been expanding its operations from the UAE into other GCC nations, especially Saudi Arabia. “The [third quarter] results reflect an overall slowdown in the construction sector in the region,” said Osama Hamdan, DSI’s chief financial officer.
“Productivity rates dropped across all our projects in the GCC and Africa.
“The procurement cycle in our operations dipped as a result of the summer holiday season, thereby impacting the overall profitability. The company also extended its contract provisioning in the third quarter.”
Last week, DSI announced that it had agreed to a five-year $120m loan deal with a syndicate of banks – including First Gulf Bank and HSBC Middle East – which it said would fund overseas growth.
The announcement followed news that DSI had been awarded three new contracts worth a total of Dh318.5m to complete works on two schemes in Abu Dhabi and one in Taif, Saudi Arabia.
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Sunday, Sept 28 – Second ODI
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Thursday, Oct 2 – Fourth ODI
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Terror attacks in Paris, November 13, 2015
- At 9.16pm, three suicide attackers killed one person outside the Atade de France during a foootball match between France and Germany
- At 9.25pm, three attackers opened fire on restaurants and cafes over 20 minutes, killing 39 people
- Shortly after 9.40pm, three other attackers launched a three-hour raid on the Bataclan, in which 1,500 people had gathered to watch a rock concert. In total, 90 people were killed
- Salah Abdeslam, the only survivor of the terrorists, did not directly participate in the attacks, thought to be due to a technical glitch in his suicide vest
- He fled to Belgium and was involved in attacks on Brussels in March 2016. He is serving a life sentence in France
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Date Started: May 2015
Founders: Rami Shaar and Jad Halaoui
Based: Dubai, UAE
Sector: Laundry
Employees: 170
Funding: about $8m
Funders: Addventure, B&Y Partners, Clara Ventures, Cedar Mundi Partners, Henkel Ventures
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