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Mon 15 Aug 2011 10:10 AM

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Renaissance uncovers fraud, cuts jobs at Topaz unit

Oman-listed firm posts 77% plunge in H1 profit, says “serious” issues could cost it $30m

Renaissance uncovers fraud, cuts jobs at Topaz unit
Renaissance posted a 77% plunge in first-half net profit to $5.84m and warned of "serious" issues in its Topaz unit

Oman's Renaissance Services said it uncovered
"serious" issues at its Topaz unit, including financial misconduct
and fraud, as the diversified firm posted a 77 percent plunge in its first-half
net profit.

Topaz, which pulled a $500m IPO earlier in the year, did not
disclose information to the board of directors and breached the company's code
of business conduct, Renaissance's chairman Samir Fancy said in a statement
published on the bourse on Monday.

The company - one of the biggest oil services companies in
the Middle East - discovered evidence of fraud and ethical misconduct at one of
the Topaz subsidiaries abroad, centred around the use of $2.9m of cash in the
business, the statement said.

Renaissance said it was moving to quickly address the
issues, the one-off impact of which could climb to as much as $30m.

The company will cut more than 100 jobs in Topaz's
engineering business and expects to realise savings from the move in 2012.

All managers of the unnamed overseas subsidiary were
dismissed and Topaz' chief executive, Fazel Fazelbhoy, stepped down on May 30,
he added.

Resignations have also been accepted for the company's
finance director and the chief operating officer at Topaz Engineering, the
statement said.

The company's first half, which Fancy described as "one
of the most troubled periods in our company's history" saw a net profit of
OR2.25m ($5.84m),compared with a net profit of OR9.8m in the year-ago period.

Renaissance had pulled a much-anticipated initial public
offering of its Topaz unit in March, citing valuation concerns and growing
regional unrest. The $500m London listing implied a market value of $1.5bn to
$1.9bn for the Dubai-based unit.

"Whatever external factors may affect sentiment, the
problems we have encountered internally in Topaz need to be fully resolved
before any further contemplation of a listing," the chairman said.

He added that the company is also in discussions with lead
banks to refinance its debt. Renaissance shares have lost 39 percent of its
value year-to-date.

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