Downer mining division sale back on

DOWNER EDI is repositioning itself as a focused urban services business.
Downer mining division sale back on Downer mining division sale back on Downer mining division sale back on Downer mining division sale back on Downer mining division sale back on

Staff reporter

The company has launched a A$400 million equity raising to strengthen the balance sheet, move to 100% of Spotless and provide flexibility for continued investment in core businesses.

The cash will be raised via a one-for-5.58 entitlement offer priced at $3.75 per share, a 12% discount to Monday's closing price.

The offer is being underwritten by UBS and Macquarie Capital.

Downer will pay $134.5 million to move to 100% of Spotless.

The move is part of its plan to refocus as an urban services business, a capital-light service-based business with a high proportion of government contracts.

The company is exploring the sale of its mining portfolio in parts or as a whole in response to enquiries from interested parties.

Downer paused an earlier sale process in March due to the COVID-19 pandemic.

Perenti Global had publicly declared its interest in the division, but pulled out due to market conditions.

Downer is also planning to sell its laundries business when market conditions improve.

"We have identified areas of our business where restructuring is required and are taking the necessary steps to exit less profitable markets and contracts and to right-size the cost structure of these businesses," Downer CEO Grant Fenn said.

"We are confident that the actions we are taking will make our business more competitive and allow us to drive improved returns going forward."

The company said it expected to report underlying earnings before interest, tax and amortisation of $410-420 million and underlying net profit after tax and amortisation of $210-220 million for the 2020 financial year.

However, it expects to recognise $386 million of charges outside its underlying result relating to goodwill impairment, restructuring and portfolio review costs, payroll remediation, legal settlements and historical contract claims adjustments.

The statutory FY20 loss is expected to be $150-160 million.

Once the entitlement offer is complete, Downer expects to have pro-forma liquidity of about $2.1 billion and a gearing ratio of about 29.3%, within its long-term target of 25-30%.

Downer shares are expected to resume trading today.