x Abu Dhabi, UAEWednesday 24 January 2018

Expansion pays off for Drake & Scull

Drake & Scull, the Dubai contractor, has signed Dh3.4 billion worth of deals in the first half of the year.

Drake & Scull International's aggressive diversification strategy has produced more than Dh3.4 billion (US$925.6 million) worth of projects in the first half of the year.

The mechanical, electrical and plumbing contractor has signed deals in Oman, Egypt, Kuwait, Saudi Arabia and Asia since the beginning of the year, the company announced yesterday.

Projects in Saudi Arabia now account for more than 50 per cent of the company's backlog.

"They're doing very well compared to their peers," said Majed Azzam, an analyst with AlembicHC.

Drake & Scull's newest project is a Dh170m contract for work on the Danat Al Emarat Women & Children's Hospital in Abu Dhabi.

Hospitals are one of the company's growth areas, representing its second-largest market. Recent projects include hospitals in Mina and Jizan in Saudi Arabia, and the American Hospital Dubai expansion.

"They have been very competitive in their pricing," Mr Azzam said. "Their strategy is get as much market share as possible and as quickly as possible."

Analysts will be closely watching profit margins when the company reports detailed financial information at the end of the year, Mr Azzam said.

The company reported earlier this year that its margins were holding steady, but it has not yet started reporting income from many of its large projects in Saudi Arabia.

"The real test will be when we look at the numbers at the end of the year," Mr Azzam said. "We should get more information on what the margins are and what we should expect going forward."

Investors have not been responding to Drake & Scull's results. The company's stock closed at 0.938 fils a share yesterday, down from a high of Dh1.14 a share on February 14.

"Investors now are very cautious" about regional construction companies, Mr Azzam said.

Drake & Scull said it was "extensively bidding for projects in the Mena [Middle East and North Africa] and Asian regions … and is also proactively seeking to develop its integrated service offering and to diversify into various industry sectors in emerging markets".