They need to snag a couple of contracts as their work in hand is decreasing. Only around $250mil work in hand left after FY20.
They are bullish on this front calling for between $475 -$525 mil in Revenue FY21. I have their break-even including Interest and Depreciation at around $500 mil a year with the reduced admin expenses. I'd like to see some boring Rail and Road projects making up any new contracts. This space is probably the safest as we saw what happens in Renewables and with Oil project spend being delayed we need to pick up something and fast.
On of the below chart you can see that the Infrastructure will be gone and the out sized reliance on Renewables will be diminished.
Looking at the Balance Sheet is a real worry. I always deduct Intangibles and I wouldn't put too much value on Homeground so that leaves me with negative equity. In reality Homeground is of some value but will have to watch this space to see what they can get for it in a sales transaction.
I believe they need to somehow trade their way out of this mess. They are in survival mode dependent on arbitration wins, contract wins and the sale of Homeground. How they manage their diminished cash pile will ultimately determine if they fold or can trade out of this.
They will likely trade at a paper loss for the next year or two but let's hope they can manage the cash position.
The below EBITDA Bridge is good and shows clearly the one off impacts.
More from the report below shows they cleaned a bit up in the half year.
Important to read the below regarding Going Concern.
Many pressing issues at the same time making this an interesting company to watch. There will be some lessons learned regarding investing in engineering/construction companies. My take away from past experience is that they can recover from a bad contract. That being said, it looks like Decmil had two large bad contracts simultaneously.
I also don't feel that that their operations will be greatly impacted by COVID-19 but obviously it does make capital raises more difficult and this company has liquidity issues.
I have my concerns on this one but do enjoy a bit of drama. It's not all Doom and Gloom but more Doom than Gloom at this point.
