Decmil grilled again on share rally

The ASX has asked contractor Decmil to explain why its share price surged in the days leading up to the resolution of a major legal dispute.

Last week, Decmil told markets it had settled an ongoing battle with Southern Cross Electrical Engineering.

The two businesses had been locked in disagreement over work at Rio Tinto’s Amrun mine since 2018, with Southern Cross seeking an $11 million payout.

For context, Decmil’s market capitalisation stands today at $26 million, according to the ASX, and the business expects to post a loss of $102 million for the year to June 2022 when it reveals its books.

On 3 August, the ASX asked if Decmil was aware of any information which might have led to its share price rising from 14 cents two days prior to about 19 cents.

Decmil’s response said it was not aware of any price sensitive information which had not been released to markets.

The next day, the company announced it had resolved the Southern Cross legal battle.

Responding today to further questions from the ASX, Decmil said the resolution had been incomplete until after markets closed on the Wednesday.

“The dispute with Southern Cross Electrical Engineer Ltd (SCEE) was finalised at 2.30pm (WST) on 3 August 2022 when the companies exchanged a deed of settlement at SCEE’s offices,” Decmil company secretary Ian Hobson said. 

“Any settlement proposal between Decmil and SCEE could only be described as “incomplete” before the exchange of the deed of settlement at that time. 

“The company notes that resolution of the dispute was disclosed before the market opened on 4 August 2022.”

The company also said the deal was not price sensitive.

That’s because the battle had been public, had moved through arbitration proceedings, and the final settlement would not be material to the company’s financial results, Decmil’s letter said.

“The market has been aware of the disputes and the monetary value of the amounts claimed in ASX releases since that time,” Mr Hobson said. 

“The company had substantially provided for an appropriate provision in the results for (the) financial year ended 30 June 2022 as announced to ASX in the FY22 guidance update on 27 July 2022.”

However, the deal was flagged as price sensitive in Southern Cross Electrical’s ASX release.

About 1.4 million Decmil shares changed hands on 3 August, against a five-day average trading volume of just less than 500,000 shares per day.