VDM Group has sold the surplus assets of its subsidiary Civmec, including the name, for more than $2 million as part of the group's restructure and consolidation strategy.
The group said today it had sold a plant, the subsidiary name and the balance of two minor contracts to Western Australian owned and operated civil construction contractor Ballymount Enterprises for $2.3 million.
Proceeds from the sale, along with other assets sold separately, will be used to retire around $1.5 million interest bearing debt and working capital for the group.
At the end of calendar 2008, VDM had $108 million in interest bearing debt and $24.3 million cash at hand.
VDM chief financial officer Peter Simpson said the group retained Civmec's intellectual property and capability to continue business in civil and concrete works, which will continue under another subsidiary, Wylie and Skene Pty Ltd.
He told WA Business News that 20 employees working at Civmec will be transferred across to Ballymount.
At its peak, Civmec had employed around 300 people but the workforce had been wound down significantly in recent times following the completion of major projects such as the Argyle diamond joint venture.
Last month, VDM tipped an operating loss for the 2009 financial year due to restructuring expenses coupled with current business conditions and a write down of between $75 million and $85 million for the year.
Mr Simpson said there were no plans to sell further VDM assets at this stage.
He added that VDM has been approached to sell the Civmec business by Ballymount, which is run by brothers Pat and Nicholas Tallon.
Ballymount's previous contracts include work at the Boddington gold mine and the Wesfarmers liquefied natural gas plant in Kwinana.
"The Civmec business was attractive to us because it's past reputation and portfolio of projects provides a good foundation," Nicholas Tallon said.
"We believe Civmec has unrealized potential and we are focused on further developing the business."
Ballymount has appointed Jim Fitzgerald as managing director of Civmec.
Shares in VDM closed unchanged at 21 cents today.
The announcement is below:
VDM Group Ltd (ASX: VMG) advises that as part of its restructuring and consolidation efforts it has sold the surplus business assets of Civmec Construction and Engineering (CIVMEC), but retained intellectual property and capability to continue business in civil and concrete works.
The proceeds of the sale of these assets, along with other assets sold separately, will be used to retire approximately $1.5 million interest bearing debt and provide working capital to the Group.
The surplus assets sold consist of plant that is not required for the business moving forward, the CIVMEC name and the works to complete two minor contracts, and have been disposed for approximately $2.3 million.
VDM Construction will continue to actively tender and pursue opportunities for civil construction work as part of the restructure and consolidation that resulted in the disposal of the CIVMEC surplus assets. The construction works previously undertaken by CIVMEC will now be undertaken by Wylie and Skene Pty Ltd.