A Damas executive said he and his brothers would within two years repay the jeweller for the US$165 million in unauthorised transactions.
Abdullahs promise to repay Damas
DUBAI // A Damas International senior executive said he and his brothers would within two years repay the jeweller for the US$165 million (Dh606m) in unauthorised transactions that forced one of them to resign as chief executive. Tamjid Abdullah, the deputy managing director, and his brothers own more than half of Damas, will pay for the full value of the deals by using their own assets and properties.
"The assets which we brothers have can cover way more than that deficit," he said in an interview yesterday. Tawhid Abdullah resigned as Damas's chief executive on October 12 after disclosing that the company had made unauthorised transactions. The funds were spent on about 50 deals, including investments in twin 49-storey towers on Sheikh Zayed Road in Dubai called Angsana Hotel and Suites, a shopping mall in Turkey and a stake in the Bupa Cromwell hospital in London, said a person familiar with the matter.
The Abdullah brothers have since signed an agreement to repay in full, and in cash, the value of the transactions under review. Damas hired PriceWaterhouseCoopers and the law firm Dewey and LeBoeuf to carry out a full investigative audit, which is expected to be complete by the end of next month. The company went public in July last year. Tamjid Abdullah would not comment on the unauthorised transactions, but said his brother's resignation had not affected Damas's sales in the latest quarter, nor investor confidence.
Overall sales were up by 4 per cent in the third quarter compared with the same period last year, he said. "We've done better in the third quarter than we have in the last year," he said. "This internal change has no relation to this at all." Laurent-Patrick Gally, a retail analyst at Shuaa Capital, said the company would likely not suffer long-term damage from the unauthorised transactions. "What customers care about is the Damas brand, and I don't think, as a product, Damas has been damaged," he said.
"Maybe for investors there may be some concern, but as a customer I would not change my purchasing patterns." Damas's jewellery sales during Diwali, the Indian festival and one of the big gold sales periods of the year, were on par with last year, said Tamjid Abdullah. While Damas's gold sales were down by 18 per cent, that is mostly due to a record-high gold price, he said. While consumers have cut back on gold purchases, they are buying pearls and diamond jewellery, he said, with sales of each in the third quarter rising 18 per cent and 25 per cent, respectively.
Damas is also producing more jewellery lines with smaller amounts of gold to appeal to budget-conscious consumers, he said. Damas continues to reassess its stores and expansion plans, adjusting for the tough economic climate, he added. The jeweller's goal of opening 100 stores in India in three years is now a five-year plan, Mr Abdullah said. The company expects that the joint venture with the Indian retailer Gitanjali Group, of which Damas owns 51 per cent, will generate 10 billion rupees (Dh776m) in revenue in three to five years.
"[India] has been doing well, but not as much as expected," he said. "When we make a plan, we look at the general economic trend and do a strategy based on that. And definitely, sales have come down in India." Damas did not close any stores in the UAE in the third quarter. But management is re-evaluating existing outlets and shifting some of them to malls with more customer traffic, he said. Mr Abdullah said he was optimistic the upcoming festive season, which included Eid al Adha, Christmas and the New Year's holidays, will help Damas sales match the past year's level.
@Email:firstname.lastname@example.org * With additional reporting by Sarmad Khan