Decmil bolsters cash position

Local engineering and construction company Decmil Group is raising up to $32 million to begin work on a number of new projects.

The package comprises $20 million in debt financing and a $10 million share placement, which Decmil says will provide the company with the working capital and balance sheet required to begin work on a suite of new contracts.

It has more than $570 million in new and potential contracts.

That includes a possible contract to build the $50 million Causeway Bridge across the Swan River, with Decmil shortlisted for the works in April.

Decmil says it will use the new funding to progress its growth strategy for FY22 and reduce its reliance on an overdraft facility with NAB (recently extended to July 2023) and on bonding facilities.

The raising will also minimise equity dilution and ensure a healthy balance sheet, chief executive Dickie Dique says.

“Crucially, this injection of funds is to drive growth,” he said.

“The board has decided that pursuing this hybrid financing strategy is the best option available to attract the necessary funds for this proactive initiative, on terms favourable to the company.”

Mr Dique said Decmil had received strong support for the raising.

The company will issue 25 million shares through the placement, in two tranches, with the offer priced at 40 cents per share and representing a 7 per cent discount to Decmil's last closing price of 43 cents.

Euroz Hartleys and Petra Capital are acting as joint lead managers and bookrunners to the raise.

Decmil plans to secure a further $2 million from a share purchase plan, priced on the same terms as the placement.

Both offers include one free attaching option for every two shares, exercisable at 48 cents and with a two-year term (subject to shareholder approval).

Meanwhile, PURE Asset Management is contributing $15 million to the 3.5-year debt facility and Horley (controlled by the Franco Group) the remaining $5 million.

The facility is subject to a number of conditions including completing the first tranche under the placement.

PURE director Nick Berry said the business was pleased to be supporting Decmil.

“The overhaul of contract management, targeted work type, key personnel and now, funding, positions Decmil well to capitalise on unprecedented infrastructure investment,” he said.

Today's announcement comes less than a week after Decmil narrowed its earnings forecast for FY21, to between $7.5 million and $8 million, following a non-cash write-down of a contract.

Decmil noted it had taken a more conservative approach to its profit position.

The company also revealed some of its contracted work had been shifted from FY21 into the current financial year, due to coronavirus-related delays.

It expects to generate more than $500 million in revenue in FY22.

Shares in Decmil were down 8 per cent at 12:25pm AEST to trade at 40 cents.