Shareholders to decide whether to keep company operating
DUBAI - 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 insisted the firm would seek to continue operating.
The company, which posted a second-quarter net loss of 181.1 million dirhams ($49.3 million) against a year-earlier loss of 182.7 million dirhams, said it was calling a general assembly on Sept. 27 under an article of United Arab Emirates company law.
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 percent daily limit to a record low of 0.405 dirham after the statement, leaving them down 82 percent 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 did not recover and closed limit-down.
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 percent 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.
In mid-August, Drake & Scull appointed Yousef Al Mulla as group chief executive, replacing Fadi Feghali, who had taken the post in April; it did not explain the change. At that time, the company said it was devising a fresh restructuring plan that would ensure its continued existence and its ability to grow.
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 2.77 billion dirhams ($755 million).
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, but in a statement in July, it said there had been unspecified "material financial violations" by previous management and that the violations were being investigated by UAE authorities.
Drake & Scull said in mid-July that local private equity firm Tabarak Investment owned 13.26 percent of the company. Tabarak did not immediately respond on Wednesday to telephone calls and an email seeking comment on how it would vote at the general assembly.
Ajman Bank holds 13.06 percent of Drake & Scull's shares, according to stock exchange data. The bank said it had no exposure to the company and was holding the shares as collateral for a financing facility provided to Tabarak, which was the beneficial owner of the shares. Ajman Bank's stock fell 2.1 percent.
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