Dubai: The Dubai engineering company Drake and Scull International’s accumulated losses at the end of 2020 was Dh4.9 billion – or in another way of looking at it, that’s 458 per cent as a percentage of capital.
The losses are mainly a product of significant provisioning related to payments the company is owed from “legacy projects” in Oman and India, as well as in the UAE. “These receivables and work in progress were kept on the balance-sheet despite the audit qualification since 2016 on the recoverability of these,” the company said in a statement.
Because of the poor performance of legacy projects, Drake and Scull’s costs to hand over projects went “far beyond budgets”, and which led to project performance bonds getting liquidated. This increased the accumulated losses.
It was in 2019 that Drake & Scull first mentioned the true size of its combined losses, which at the time had swelled to past Dh5 billion. Strict cost control, sales or shutdown of subsidiary companies, and pursuing legal cases against former management, which has been blamed for the present dire situation it finds itself in.
There is also a parallel move to go in for a wide-ranging restructure, subject to creditors approving, and that the company expects to be completed over five years. The creditors are expected to vote on the plan shortly.