DSI posts record Q4 profits surge
Dubai - The Dubai-based construction major normalised its profitability following the third quarter 2015 one-off provisions and posted a steep jump in net profit of Dh14.7 million in the three months to December 31, compared with a profit of Dh3.8 million in the year-earlier period.
An increase in revenue despite a slowdown in the regional construction sector helped Drake & Scull (DSI) to post a record surge in fourth-quarter profitability.
The Dubai-based construction major normalised its profitability following the third quarter 2015 one-off provisions and posted a steep jump in net profit of Dh14.7 million in the three months to December 31, compared with a profit of Dh3.8 million in the year-earlier period.
DSI said in a statement to Dubai's bourse that the group's results for the fiscal year 2015 were affected by the unprecedented measures undertaken in third quarter 2015 in response to the challenging market conditions, leading to the adoption of a conservative approach towards the company's financial position in relation to its exposure on certain projects in key markets.
"The impact of these measures was felt in the top line and bottom line performance for fiscal 2015. DSI's profitability for the year was impacted by the Dh984 million one-off provisions undertaken in third quarter 2015 related to ongoing arbitration and legal cases in the UAE and Saudi Arabia 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," said the company statement.
The company reported Dh4.23 billion in revenue for 2015 compared to Dh4.76 billion reported in 2014. The net loss for the period was Dh936.7 million compared to a net profit of Dh101 million reported for fiscal 2014.
DSI's order backlog reached Dh11.86 billion as on December 31, 2015 and the total value of project awards secured in 2015 stood at Dh3 billion. The UAE and the engineering business accounted for 70 per cent and 82 per cent of total project awards respectively, reflecting the company's strategic and ongoing focus on its home market and core engineering business.
"The company will continue to pursue its outstanding receivables and claims and expects a number of provisions to be reversed in the future," DSI said.
DSI said it had also initiated a cost-cutting programme to improve operational efficiency. "DSI is also committed to improving its working capital, reducing debt levels, improving its capital structure and boosting liquidity."
Despite the current challenging market conditions, the underlying long-term growth outlook for the regional industry presents promising opportunities for DSI, particularly in the UAE. The company reiterated its commitment to the process of fiscal consolidation, discipline and austerity in light of the prevailing macro-economic environment in the region. DSI retains its optimism about the prospects for its engineering business, which is expected to remain the key growth driver for DSI with an additional promising potential for growth in the rail sector in 2016.
For 2015, the company posted a net loss of Dh936.8 million, against a profit of Dh100.7 million in 2014. DSI's annual results were weighed by a heavy loss in the third quarter after the contractor was forced into significant provisioning.