Drake & Scull shares take a wild ride after decision not to give dividends

The volume of Drake & Scull International (DSI) shares changing hands rose to the highest level since November after the company said that it would not be recommending a dividend this year.

Investors traded 141 million shares yesterday on the Dubai Financial Market, an increase of 870 per cent over Monday's volume.

DSI shares fell 4.6 per cent during early trade, its biggest decline in three weeks, before rallying to close down just 0.5 per cent.

At the same time the DFM General Index rose 1.5 per cent to close at 4,520.73 points.

DSI, a mechanical electrical and plumbing specialist, announced the news before the start of trade after a board of directors meeting on Monday. It gave no reason for its decision. There was no response to further requests for information.

The news comes after DSI announced that profit last year increased 61 per cent to Dh185 million and turnover rose 47 per cent to Dh4.9 billion.

It also comes after Emaar last month proposed a 15 per cent dividend for its investors – a 50 per cent increase on last year. Arabtec confirmed last month that it would recommend a 10 per cent cash dividend.

“This is not what the market had been expecting,” said Sebastien Henin, the head of asset management at The National Investor. “The first impression is very negative for the stock, but there is also another explanation. It is likely that the company wants to save cash to spend on its backlog of projects.

DSI said that its total backlog for last year reached Dh12bn, an increase of 36 per cent compared with 2012.

The company, which was hit hard by the global financial crisis, has been extending its reach beyond its specialist origins.

Since the start of the year, the company’s German unit has won a trio of orders worth Dh166m for wastewater plants in Europe, while its Indian arm has bagged two contracts worth another Dh50m for water treatment works in India.

Meanwhile, DSI in February won its first rail project in the Middle East with a Dh35m subcontract to build part of a light-rail system to move passengers inside Dubai International Airport. And another DSI unit won a Dh375m contract from Nakheel to build its the Pointe retail complex on the Palm Jumeirah.

DSI hopes to add more projects across the oil, gas and rail sectors in the year ahead.

lbarnard@thenational.ae

Drake & Scull shares take a wild ride after decision not to give dividends

DSI shares fell 4.6 per cent during early trading on Tuesday, their greatest decline in three weeks, before rallying to close at just 0.58 per cent down on the previous day.