Drake & Scull confirms financial violations by previous management
(7/12/2018 8:12:00 AM)
Dubai contractor Drake & Scull International said its former management was involved in “material” financial violations that are currently under investigation by the designated UAE authorities.
The company confirmed earlier reports about the probe in a regulatory filing to the Dubai Financial Market on Wednesday. “In order to preserve the confidentiality of the investigation in accordance with UAE laws, the company reiterates that the disclosure of the value of the violations and the individuals under investigation will be subject to co-ordination with the designated authorities in the UAE and their timely approval in the future,” the company said in a disclosure on the DFM, where its shares are traded.
Drake & Scull's former-chief executive Khaldoun Al Tabari denied allegations of financial misconduct, in an emailed statement late Wednesday. "I was given no opportunity to respond to the supposed internal investigation by DSI," Mr Al Tabari said. "I also challenge the statement made today by DSI to the Dubai Financial Market regarding violations under ‘the previous management’. No such allegations have been put to me."
Earlier this week, Bloomberg reported that an internal probe by DSI found ex-chief executive Khaldoun Al Tabari and his daughter Zeina owe the company as much as
Dh1 billion, citing unidentified sources. Last month, DSI said it had completed an investigation and filed a report to the UAE authorities. Its shares lagged earlier in the week amid concerns about the probe outcome.
"I refute in the strongest terms any suggestion that I or my daughter owe Drake & Scull International any money at all, let alone the huge sums mentioned by some media outlets, and any suggestion that the previous management of DSI was guilty of any wrongdoing, impropriety, negligence or incompetence," Mr Al Tabari said.
Al Tabari added that any attempts to discredit or defame him or his daughter will be "taken seriously" and are likely to have "legal consequences." Mr Al Tabari stepped down from his role as chief executive in 2016 and relinquished his seat on the company’s board.
"It comes as a surprise that such baseless allegations are raised now, nearly two years after I have stepped down from my position," he said. "It saddens me that such unfounded allegations are raised against me by a company that I set up in the UAE more than 20 years ago."
DSI undertook a management shake-up earlier this year. In March the company appointed Prabhakar Raut as chief financial officer, its fourth CFO in three years, replacing Feras Kalthoum who became the chief restructuring officer. This was after DSI named Fadi Feghali group chief executive in March, a post that had been vacant since August.
Mr Feghali assumed his role on April 1. DSI stock declined 41 per cent in the past month compared with a 6.5 per cent decline in the DFM. The company reported a full-year loss of Dh1.4 bn, that was wider than estimates of a Dh1.38 bn loss.
In April the company’s shareholders asked the board to consider raising Dh500 million by issuing shares to a strategic partner or through convertible bonds. DSI has been struggling since a three-year drop in oil prices slowed down construction activity in the Middle East.
However, the contractor returned to profitability in the first quarter of 2018 amid a company-wide restructure and cost-cutting measures by its new management. Net income for the first three months of the year was Dh7m compared with a loss of Dh839m in the same period a year earlier.
DSI's main business lines include engineering, construction, and oil and gas. The company's shares rose 0.73 per cent to Dh0.690 at the end of trading on the DFM.