Dubai: Drake & Scull International has lost its chairman, Obaid Bin Touq, just days after the exits of the Group CEO, the chief financial officer and chief legal officer. The announcement of Bin Touq’s resignation from the board of directors came just an hour away from the company’s annual general meeting (AGM).
No reasons were given for the resignation and that of another board member, Khamis Bu Amim, which was also announced Tuesday. An executive committee is overseeing the day-to-day operations of the engineering firm, which is still coming to terms with a whopping Dh5.09 billion loss that it reported for 2018.
“The chairman’s departure will only maximise the sentiment that DSI is rudderless and still no closer to a solution,” said a shareholder. “There was a lot of hope riding on Bin Touq that he would have been able to come up with something.
“DSI should have come up with a full reasoning of why he resigned. The timing of this announcement was unfortunate.”
That’s because market sources were hoping for some direction at Tuesday’s AGM from the company on how it planned to implement a restructuring plan. So far, DSI has not issued any formal statement on what shareholders have approved and the next steps it will be taking to stanch the losses. It closed 2018 with a Dh4 billion plus deficit between its total liabilities and assets.
The chairman’s departure will only maximise the sentiment that DSI is rudderless and still no closer to a solution. There was a lot of hope riding on Bin Touq that he would have been able to come up with something. DSI should have come up with a full reasoning of why he resigned.
And then last Thursday, the UAE stock market regulator — Emirates Securities and Commodities Authority — confirmed that an external audit team will go through DSI’s financials dating back several years to see how it came to posting a Dh5 billion plus loss in 2018. The team has been empowered to conduct detailed investigations, including decisions taken by former board of directors as well as senior executives. (It is not known how long the team will take to come up with the findings and when ESCA will take action on these.) With these investigations looming over the company, how far can DSI go with a turnaround plan, which included issuing a convertible sukuk. It will take a lot for the market to be convinced, according to Vikram Venkataraman, managing director at Vianta Advisors, a consultancy. “Issuing a sukuk under the umbrella of the stock market authority is a disservice to investors, not all of whom may have realised the gravity of the problem. As such, there is no junk bond market here that can host such listings.”
The only piece of silver lining that DSI has had in recent days was about a new committee it set up with lender banks to come up with solutions. A statement issued on Monday spoke about a “lasting solution” that would ensure a continuity of operations.
But DSI will need to buck up on its operations as well. The firm, which is into mechanical, electrical and plumbing related works, had been one of the leading names in the construction business. It has been associated with multiple landmark projects in the UAE and elsewhere.
But in the latest data of MEP activity in the UAE, provided by ProTenders, the big wins have gone to other companies. The biggest one awarded in the first four months was $800 million (Dh2.94 billion) for Uptown Tower, which went to Voltas, while another for $300 million for an Address Hotel was bagged by International Electro-Mechanical Services Company, according to ProTenders.
“This is where DSI needs to find its groove, by winning the big-ticket MEP contracts,” said the shareholder. “In the recent past, the only significant one was for Reem Mall (in Abu Dhabi), and that was announced back in December.”