Drake and Scull International’s (DSI) auditor has raised doubts on the company’s ability to continue as a going concern, although the Dubai contractor has just posted a net profit of 199 million UAE dirhams ($54.179 million) for the first half of the year.
In a report submitted to the Dubai Financial Market (DFM) on Tuesday, Ernst & Young (EY) Middle East said the engineering firm’s current liabilities have exceeded its current assets by 3,991 million UAE dirhams ($1,086 million) as of June 30, 2020.
The company also incurred a negative cash flow from operating activities of 5 million dirhams from January to June this year, while accumulated losses have reached 4,806 million dirhams.
“These conditions indicate the existence of a material uncertainty that may cast significant doubt about the Group’s ability to continue as a going concern and that, therefore, it may be unable to realise its assets and discharge its liabilities in the normal course of business,” the auditor said in a note that accompanied the firm’s interim condensed consolidated financial statements.
However, the company assured that it has reached “advanced stages” in its negotiations with the banks, and that it had taken steps to ensure continuity of its business.
Earlier this year, the contractor initiated a financial reorganisation process to reach an agreement with its creditors.
“During the last few months, DSI was keen to ensure the continuity of the business in its various projects… DSI continued the contracting work on its existing projects, while focusing on the enhancement of our operational efficiencies, operating cost management as well as our overall financial position in line with the restructuring and business plan,” said Munir Mansour, CEO of DSI.
“As of the financial restructuring, we have reached advanced stages in the negotiations with the key banks ahead of finalising the framework and details of the financial reorganisation with the support of the financial reorganisation committee, the board of directors and our advisors,” he added.
Mansour also reiterated that the company has initiated a formal process to allow all affected creditors to register their claims with the “expert” appointed by the financial reorganisation committee.
(Reporting by Cleofe Maceda; editing by Seban Scaria)
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