Drake & Scull reports 28% drop in 9M 2015 revenues
Ongoing measures by the contractor to strengthen the balance sheet, boost working capital, reduce SG&A and improve operational efficiency
Drake & Scull International (DSI) have reported a 28% decline in revenue for the first nine months of 2015 from $980 (AED3.6bn) in 2014 to $762m (AED2.8bn).
The decline is due to the more conservative approach to revenue recognition and to adjustments for uncertified variations orders and disputed extensions of time claims, as per the company's statement on the Dubai Financial Market (DFM).
The contractor also reported a net loss of $258m (AED951m) for the first nine of months of 2015 as against $26m (AED97m) reported for the same period last year.
The decline was mainly due to the one-off provisions and revenue and gross profit adjustments taken in the third quarter of 2015.
The current challenging macro-economic environment; characterized by weaker oil prices, a slowdown in the construction sector and a more competitive landscape has caused developers and clients to defer payments and delay projects across DSI’s major markets, according to its statement.
This has prompted the board to conduct a review of its projects and take a more conservative approach to its financial position. Consequently, the company has taken a number of one-off provisions related to ongoing arbitration and legal cases in the UAE and KSA in addition to revenue and gross profit adjustments for uncertified variations orders and disputed extensions of time claims, accrued certified work and other general provisions across several major projects in the GCC.
Commenting on the results, Khaldoun Tabari, CEO and vice chairman of DSI, said: “As the current regional construction sector remains extremely challenging we have taken a pre-emptive and prudent view of our exposure related to key projects and have introduced cost efficiency measures to preserve cash and initiatives to reduce debt.”
“Longer-term we remain confident about the prospects for the Company. We believe that regional government diversification programs and required infrastructure investments remain a significant tailwind in the GCC and that our clients remain fully committed to funding and completing their ongoing projects.”
As of 30 September 2015, the company’s substantial order backlog of over 160 projects stood at $3.3bn (AED12.3bn). KSA and the UAE remain the largest markets for DSI, accounting for 32% and 20% of the total backlog respectively.