Drake & Scull shares soar 30% on DFM return

The company resumed trading on the Dubai stock exchange after long-drawn debt negotiations and complex restructurings

An investor looks at the screen at the Dubai International Financial Market. Reuters

The shares of Dubai-based contractor Drake & Scull International surged by 30 per cent on Wednesday as it resumed trading on the Dubai Financial Market after more than five years.

The stock, which is trading under the ticker symbol “DSI”, was priced at Dh0.33 at 10.05am UAE time, up from its previous price of Dh0.25.

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 this week.

“This milestone will certainly contribute to completing the restructuring process, as well as working on the growth of Drake & Scull International business and its ability to commit to implementing its future business plan and financing its new projects in all its operating sectors,” said Eng Shafiq Abdelhamid, chairman of Drake & Scull.

“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.”

The company’s return to the DFM follows long-drawn debt negotiations with its lender and trade creditors, as well as a series of court cases, a complete managerial revamp and two complex capital restructurings over the past decade.

Drake & Scull fell on hard times during the three-year oil price slump from 2014, which heavily affected the property and construction sector in the region.

In the severe liquidity crunch that followed, many construction companies across the region laid off tens of thousands of workers as payments dried up.

After its initial public offering, the company expanded operations aggressively and went on an acquisition spree, including in Syria and Libya.

However, geopolitical volatility and security concerns dealt a blow to business in Syria and Libya. The company's inability to receive payments from government and private companies after the 2014 slump also contributed to the severe financial crunch it faced at the time.

Trading of its shares was suspended in November 2018 after the company reported heavy financial losses.

In 2022, Drake & Scull completed its restructuring plan after the company achieved the required voting percentage from its 600-plus creditors for a consensual agreement.

The company reported higher net losses in 2023 compared with the previous year, despite a rise in revenue.

Its total net loss for the year stood at Dh352.1 million, up from Dh224.3 million in the same period in the previous year, according to its recent financial statement.

Revenue during the period rose by about 16 per cent to Dh93.8 million. The company had Dh356 million worth of assets at the end of last year.

In a filing this week, the company said accumulated losses stood at Dh5.5 billion as of March 31.

It expects the benefits of restructuring to materialise in the second quarter of this year, leading to an overall equity improvement of about Dh4.6 billion.

Drake & Scull recorded a capital gain of Dh3.4 billion by writing off 90 per cent of creditor claims, the company said.

It also said that accrued interest expenses and provisions for legal cases, totalling about Dh414 million, were reversed, and mandatory convertible securities amounting to Dh365 million were issued.

The Dubai government has approved designs for a new passenger terminal at Al Maktoum International Airport and has started construction at a cost of Dh128 billion. Photo: Dubai government via AP

Spread across 70 square kilometres, the new airport will be five times the size of the current Dubai International Airport. Photo: Dubai government via AP

Once complete, Al Maktoum International Airport will have "the world's largest capacity", reaching up to 260 million passengers. Photo: Dubai government via AP

The Al Maktoum International Airport will fully absorb Dubai International Airport’s operations within 10 years. Photo: Dubai government via AP

A satellite image shows the site of Al Maktoum International Airport. The airport will feature 400 gates, five parallel runways and new aviation technology. Photo: Planet Labs PBC via AP

“Looking at the way ahead, the company has a long road ahead, with its tasks cut out,” Vijay Valecha, chief investment officer of Century Financial, told The National.

“To start with, the company is staring at an extremely bad brand reputation. Although the firm has recently won some contracts and some rise in order backlogs, the overall market reputation and credibility have been badly damaged.”

Since infrastructure projects demand not only timely completion but also high-quality work, the company's future business prospects will depend on its efforts to strengthen relationships with prominent developers and government entities, he said.

Drake & Scull's return to the stock market comes at a time when the UAE, the Arab world's second-largest economy, is experiencing a construction boom.

Dubai is constructing a new terminal at Al Maktoum Airport with a total investment of Dh128 billion ($34.8 billion), in a move to expand its capacity to 260 million passengers.

Developers, including Emaar Properties, have announced projects near the area in anticipation of higher demand from buyers.

They have also unveiled new projects across the UAE as demand for property continues to increase amid a rise in prices.