The company, which has faced mounting losses since 2015, called the general assembly meeting in accordance with an article of UAE companies law. Rich-Joseph Facun / The National
The company, which has faced mounting losses since 2015, called the general assembly meeting in accordance with an article of UAE companies law. Rich-Joseph Facun / The National

Property

Drake & Scull shares jump after shareholders approve continuing operations

Dubai-based contractor says there will further restructuring

Deena Kamel
Sarah Townsend

October 07, 2018

Drake & Scull International's shares jumped after the Dubai contractor said a majority of shareholders voted for continuing the company's operations during a general assembly last week.

The board informed shareholders about the company's future plans and the developments in the investigation into the previous executive management by the current management, DSI said in a statement to the Dubai Financial Market on Sunday, without providing details. DSI shares rose 2.9 per cent to Dh0.44 at market close.

"The shareholders of the company were informed by the board of directors on the current situation of the company," DSI said in the bourse filing.

The company, which has faced mounting losses since 2015, called the general assembly meeting in accordance with an article of UAE companies law. Article 302 of the company law requires firms to vote on whether to continue operating once their losses reach half of their share capital.

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Ahead of the meeting, private equity company Tabarak Investment increased its shareholding in DSI to 13.73 per cent from 13.26 per cent.

DSI, which reported a second-quarter loss of Dh181 million compared to a Dh183m loss a year earlier, has been hit by a slump in the region’s construction industry in the past few years along with many contractors whose payments were delayed as oil prices fell to a three-year low.

The company, which last year announced a turnaround plan, will see "further restructuring," Feras Kalthoum, chief restructuring officer at Drake & Scull, told The National, without providing details.

After voting to keep the company in business, the biggest priorities facing Drake & Scull are assessing the profitability of their projects and fund-raising, Nabil Al Rantisi, managing director at Daman Investments, said.

"They have to look at the pipeline of the business and see how profitable it is and second, they have to raise money through debt or equity," Mr Al Rantisi said. "They may consider raising debt that's convertible to equity."

In July, the company said its former management was involved in “material” financial violations that are under investigation by UAE authorities. Former chief executive Khaldoun Al Tabari has denied allegations of financial misconduct.

What is the FNC?

The Federal National Council is one of five federal authorities established by the UAE constitution. It held its first session on December 2, 1972, a year to the day after Federation.
It has 40 members, eight of whom are women. The members represent the UAE population through each of the emirates. Abu Dhabi and Dubai have eight members each, Sharjah and Ras al Khaimah six, and Ajman, Fujairah and Umm Al Quwain have four.
They bring Emirati issues to the council for debate and put those concerns to ministers summoned for questioning. 
The FNC’s main functions include passing, amending or rejecting federal draft laws, discussing international treaties and agreements, and offering recommendations on general subjects raised during sessions.
Federal draft laws must first pass through the FNC for recommendations when members can amend the laws to suit the needs of citizens. The draft laws are then forwarded to the Cabinet for consideration and approval. 
Since 2006, half of the members have been elected by UAE citizens to serve four-year terms and the other half are appointed by the Ruler’s Courts of the seven emirates.
In the 2015 elections, 78 of the 252 candidates were women. Women also represented 48 per cent of all voters and 67 per cent of the voters were under the age of 40.
 

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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