Drake & Scull International’s board of directors has agreed to the appointment of external consultants to advise on the state of its finances, which are weighed down by uncollected receivables.
In a statement to the Dubai Financial Market yesterday morning, the company said that its board had “approved appointing PricewaterhouseCoopers (PwC) as strategic and financial adviser to assist with examining the company’s capital structure and financial liabilities”.
A spokesman said that the review is likely to conclude by the first quarter of next year.
The contractor is considering divestments in non-core geographies to help relieve strain on its finances as it continues cost-cutting measures. The company posted a narrower quarterly loss attributable to its equity owners of Dh46.3 million in the three months to September as it trimmed costs and focused on high-margin business.
Drake & Scull is facing cash flow issues due partly to the current tough operating environment for contractors, particularly in Saudi Arabia, but also as a result of the fact that it has a sizeable amount of uncollected receivables.
Accounts for the nine months to September 30 show that it is owed about Dh1.16 billion for work done. It also finished the period with a negative cash balance of Dh246m, with its auditor (also PwC) stating that if it is not able to generate sufficient cash flows, it may not be able to meet its financial obligations.
In a recent interview with The National, the new chief executive, Wael Allan, said that the company is undertaking "a thorough evaluation of where we are … Obviously, we have some receivables that have been there for some time. We are assessing the viability of all of these aspects.
“We’ve brought in specialists – good people that understand how construction is funded to assess and look at our business plan and the long term for our business.”
When asked if it would need to raise more finance, Mr Allan said: “I can’t say that at the moment because our evaluation has not been completed.
“That’s why we have the advisers. They are looking really thoroughly at our outgoings, what is predicted to come in, what is likely to collect and what is not. Based on that evaluation, by the end of this year we will be in a position to state that clearly to the market.”
Mr Allan, who had previously been Middle East chief executive at building consultancy Arcadis before joining Drake & Scull in May, has sought to cut costs. The company’s ill-fated move into general contracting is being scaled back outside the UAE. In its core business of mechanical, electrical and plumbing (MEP) contracting, it is exiting markets such as India where it is not a significant player.
“Our vision is to be within the top three providers of MEP,” he said. “Countries where we are not in the top three, we will withdraw [from].”
Drake & Scull’s shares finished trading on the Dubai Financial Market 1.2 per cent lower on Thursday, at 50.8 fils.
mfahy@thenational.ae
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Dubai Bling season three
Cast: Loujain Adada, Zeina Khoury, Farhana Bodi, Ebraheem Al Samadi, Mona Kattan, and couples Safa & Fahad Siddiqui and DJ Bliss & Danya Mohammed
Rating: 1/5
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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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How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
Abu Dhabi GP schedule
Friday: First practice - 1pm; Second practice - 5pm
Saturday: Final practice - 2pm; Qualifying - 5pm
Sunday: Etihad Airways Abu Dhabi Grand Prix (55 laps) - 5.10pm
