Damas profits surge six-fold

Dubai-based jeweller Damas International has announced a 524 per cent growth in its net profits for the six-month period ended September 30, 2011.

Damas’ consolidated financial statement posted on the website of Nasdaq Dubai, where shares of the jewellery and watch retailer are listed, show that it posted net profits of Dh26.5 million for the six-month period, compared to a net profit of Dh4.2m for the same period last year.

The retailer’s bottom line was hit last year by a Dh15.4m ‘allowance against consignment and receivables exposures,’ which the company did not have to incur for the six-month period this year. On top of that, gold rose as an investment asset and bullion was in demand globally during the period.

Damas booked profits of Dh148m from sales of gold and bullion jewellery in the period, up 85 per cent from the Dh80m it registered in the same period of last year. Moreover, its statement shows that the retailer also sold more pearl jewellery for the period – from Dh11.2m worth of jewellery for the six-month period last year, Damas sold pearl jewellery worth Dh15.7m for the same period this year, a growth of more than 40 per cent.

The latest positive results suggest that the worst may be behind the beleaguered retailer, which announced a Dh3 billion restructuring of its bank borrowings on May 11, 2011.

Under the financial restructuring, banks agreed to segregate Damas’ total borrowings into three tranches. The first tranche of Dh1.093 billion will be repaid in quarterly instalments of Dh45.75m each over the next six years.

The remaining debt is segregated into two tranches – of Dh1.45bn and Dh475m. Tranches 2 and 3 are revolving in nature with the interest rates to be reviewed at the end of three years. Under the terms of restructuring, the entire debt bears the pricing of the applicable interbank borrowing (Libor/Eibor) rates and a margin of 350 basis points, with the exception of tranche 3, which carries a discounted rate of the applicable interbank borrowing rate plus a margin of 262.50 basis points.

In March 2010, Dubai’s Financial Services Authority fined Damas, and the Abdullah brothers a total of $3.72 million and ordered them to repay $99.4 million plus the value of approximately 1.9 million grams of gold after it found they had withdrawn Damas funds for their personal use without disclosing it to the board.

As a condition precedent to the completion of the financial restructuring, a Cascade Agreement was signed on May 1, 2011, between part-owners Abdullah Brothers, the Damas Group and the other bank creditors to Abdulla Brothers. Under the agreement, Abdulla Brothers have agreed to repay the amounts owed to the group, which currently stands at Dh612mn, over a three-year period.