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19 March 2024

Damas losses mount to Dh1.9bn

The losses amount to an equated loss of Dh4.77m for each of the retailer’s 400-odd stores around the world. (FILE)

Published
By Vicky Kapur

Dubai-based jewellery retailer Damas International (Damas) made a net loss of Dh1.91 billion for the year ending March 31, 2010, according to its statement posted on the Nasdaq Dubai website.

The losses amount to more than 52 per cent of the jeweller’s issued capital of Dh3.63 billion, and add up to an equated loss of Dh4.77 million for each of the retailer’s 400-odd stores around the world.

“The news of unauthorised withdrawals amidst a recession and a significant rise in gold prices triggered a series of events leading to a severe liquidity crisis in the Group in October 2009,” Damas disclosed in the accompanying Investor Briefing document.

The company has undertaken a $872 million debt restructuring exercise, with a repayment standstill agreed with the lenders from November 19, 2009, until September 30, 2010.

“Damas continues to move forward with its financial restructuring, demonstrating the confidence of our bank lenders in the strength of the company’s underlying business model, while also preparing for the implementation of our operational restructuring, which will allow the company to sustain its growth trajectory despite current challenging conditions,” said Anan Fakhreddin, CEO, Damas International.

“The draft financial restructuring plan also takes into account the recovery to be made from the major shareholders in respect of the unauthorised withdrawals,” the investors’ document stated.

According to the Investor Briefing, Abdullah Brothers, the founding members of Damas, owed the company more than Dh457 million as of March 31, 2010. The brothers were in March this year fined Dh2.57 million by the Dubai Financial Services Authority (DFSA), the regulator of Dubai International Financial Centre (DIFC), for failing to exercise appropriate corporate governance over the company and its subsidiaries.

The brothers, Tawhid, Tawfique and Tamjid Abdullah, were further banned by the DFSA from acting as directors of Damas or any company in the DIFC for a period of 10 years.
Nevertheless, Damas in June 2010 appointed the brothers as senior advisors in a non-executive role, sidestepping the ban. “The Group is committed to recovering outstanding receivables (both cash and gold) that are with counterparties. In recovering these amounts, the relationships and knowledge of the Abdullah Brothers is considered by the Board as vital. The Brothers are working with the Group to assist in such recoveries,” the investors’ document said.

According to the latest results, Damas’ assets declined 35 per cent during the year, from Dh6.2 billion in 2009 to Dh4 billion this year. Before considering the impact of non-recurring expenses and impairments, the jeweller reported net profits of Dh9.7 million for the period but made a net loss due to provisions and non-recurring charges totalling Dh1.92 billion, the statement said.

Damas’ annual revenues declined 31 per cent to Dh3.3 billion compared with Dh4.8 billion last year, and gross profits declined 33 per cent to Dh565 million for the 12 months ending March 31, 2010. The statement added that Damas witnessed a decline in total sales volumes as a consequence of the impact of the global financial crisis, lower consumer confidence and higher gold prices.

Nevertheless, it said, the company maintained a gross profit margin of 17 per cent during the period.