Drake & Scull International (DSI), a construction and engineering firm, faced significant financial distress due to mismanagement and alleged financial irregularities. The company’s aggressive expansion and inadequate risk management strategies led to substantial losses and legal challenges.
- Strategic Management Failures:The company expanded into numerous projects without adequate due diligence, leading to cost overruns and project delays. Weak financial planning and lack of strategic focus resulted in significant accumulated losses.
Drake & Scull International (DSI), a Dubai-based contractor, has experienced a tumultuous journey of strategic management failures, financial struggles, and attempts at revival. Here’s an elaboration on the company’s situation:
Financial Mismanagement and Losses
DSI faced severe financial difficulties, with accumulated losses reaching alarming levels:
- By 2023, accumulated losses amounted to almost AED5.5 billion.
- The company reported a net loss of AED368 million for the year 2023, a 64% increase from the previous year.
- Current liabilities exceeded current assets by more than AED4.5 billion in 2023.
Governance and Transparency Issues
The company struggled with governance and transparency:
- Auditors were unable to confirm details of bank balances, borrowings, and liabilities totaling almost AED4 billion.
- Former CEO Khaldoun Tabari and a former employee were ordered by the Dubai Court of Cassation to pay AED151.9 million as compensation for damages incurred during their tenure.
- DSI filed lawsuits with claims equivalent to more than AED10 billion, including civil cases against former management and advisory firms.
Restructuring Efforts
DSI has undergone multiple restructuring attempts:
- In 2024, shareholders approved a restructuring plan and capital increase.
- The company announced intentions to write off 90% of its debts and convert the remaining 10% into mandatory convertible sukuk.
- A capital increase of “no less than AED300 million” was outlined in the court-approved restructuring plan.
Market Performance and Trading
DSI’s stock market performance has been volatile:
- Trading in DSI shares was suspended since November 2018 due to losses exceeding 75% of its capital.
- In 2024, the company received approval to resume trading on the Dubai Financial Market (DFM) after increasing its capital.
Recent Developments
As of early 2025, DSI is showing signs of potential recovery:
- The company closed a subscription for new capital, with proceeds exceeding AED450 million in May 2024.
- DSI narrowed its net loss to AED35 million in Q3 2023, showing some improvement.
- The company aims to implement an “ambitious business plan” to return to a market-leading position in its focus areas, including mechanical, electrical and plumbing, water and environment, and energy sectors.
Drake & Scull International’s case highlights the critical importance of sound financial management, transparent governance, and effective risk management in the construction and engineering sector. The company’s ongoing efforts to restructure and revive its operations will be closely watched by investors and industry observers in the coming years.
