Damas International, the largest gold and jewellery retailer in the Middle East, has returned to profit, marking a major rebound after a year of heavy losses and controversy in the boardroom.
The retailer, which has more than 500 stores across the region, yesterday reported net profit of Dh4.2 million (US$1.1m) for the six months ending on September 30.
For the same period last year, Damas reported a Dh714.9m loss because of write-downs for underperforming loans and unauthorised investments that nearly pushed the company out of business.
Anan Fakhreddin, the chief executive of Damas, said the company's latest results demonstrated the strength of its core retail business.
"I think this is the first sign of recovery that Damas is showing now, in spite of a very difficult year in the market globally," Mr Fakhreddin said. "We've turned around from net losses into a profitable position this year."
The publicly listed retailer has struggled to recover since October last year, when its then-chief executive, Tawhid Abdullah, stepped down from his post after disclosing "unauthorised transactions".
These Dh614m in deals included property investments such as a shopping mall in Turkey and about 2 tonnes of borrowed gold.
The Dubai Financial Services Authority later conducted an investigation and found the deals were done without proper shareholder approval. It banned Tawhid and his brothers, Tawfique and Tamjid Abdullah, members of the founding family who held executive roles at Damas, from holding executive posts at any Dubai International Financial Centre company for between five and 10 years. Mr Fakhreddin was later installed as chief executive, and a new board of directors was appointed.
The deals also weighed heavily on the retailer's books and Damas suffered a Dh1.9 billion loss for the 12 months to March 31 this year, one of the largest yet for a public company in the Emirates.
While its underlying retail business continued to be profitable, the losses stemmed from lower sales and write-offs.
Damas has since been working with its more than 20 creditors to sign a debt restructuring deal for more than Dh3bn. On Monday, the standstill it had in place with the banks was extended to the end of this month to allow the company time to finalise the deal.
Damas is also aiming to sign an agreement with the Abdullah brothers as co-creditors with other parties to whom the brothers also owe money. This settlement deal is to be signed on or before January 31. If not, Damas would revert back to an older settlement agreement which would force the Abdullah brothers to pay back Dh400m immediately.
Mr Fakhreddin said: "I hope it will be over in the very near future, from a Damas perspective. We are ready to move a signing phase. Because of the large number of banks involved, whether it is the cascade or financial restructuring, the finalisation is taking a bit longer than we expect."
Damas has also been challenged by record high gold prices but Mr Fakhreddin is hoping for an improvement.
Revenues for the six months to September 30 were Dh1.3bn, down from Dh1.67bn in the same period last year.
"The second half of the [financial] year presents better opportunities for jewellers because of the seasonal nature of the business," Mr Fakhreddin said. "We hope to be able to translate that to better performance."