Drake & Scull appoints PwC to review financial liabilities
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.
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