26-July-2021:  Update and Capital Raising

First off, I do not own any Decmil (DCG) shares, and I'm steering well clear of this company.  Their management are rubbish and their track record is woeful.  They are loss-making and their share price has been heading south-east since they were trading between $10 and $12 per share in 2012, so for almost a decade now.  At the time it was $1 to $1.20/share, but they've since had a 1 for 10 share consolidation, so based on today's share price (post-consolidation), their SP range back in 2012 was equivalent to $10 to $12.

They announced this raising today, at 40 cps, and promptly dropped to 39.5 cps.  Their trading range today was 39 to 40 cps.  The CR is a A$10 million two tranche placement at $0.40/share plus a SPP of "up to" $2m on the same terms as the placement.  The placement consists of:

• Tranche 1 (unconditional): 19.3 million new shares to raise ~A$7.7 million
• Tranche 2 (conditional): 5.7 million new shares to raise ~A$2.3 million, subject to shareholder approval at a general meeting of the Company to be held on or about 30 Aug 2021.

This raising includes one option for every two new shares issued, exercisable at $0.48, with an expiry date of 2 years from issue, which, IMHO, would be the only reason for anybody to be interested in this raising, but I'm still steering clear of them.

If you skim through this presso (link above - at the top of this straw), they are certainly painting the company in the best possible light - starting with slide 3, titled "Investment Highlights":

1. Leading Australian construction company with national footprint, successfully operating for over 40 years
2. FY21 a successful year of consolidation – new board and management / contracts performing well / balance sheet strengthened / strong pipeline
3. Extremely positive outlook across all market segments – infrastructure / resources / construction / energy
4. Strong FY22 expected through building momentum on the year of consolidation
5. $30m financing to support working capital and position Decmil for future opportunities

Wow - what's not to like?  Actually, almost everything.  Their debt levels for a start, and the fact that they're taking on another A$20 million subordinated debt facility - announced in this presentation, in addition to the $10 to $12m capital raising (placement & SPP), and they already had debt.  They ended FY20 with A$17.75m in long term debt.  And their entire market cap is just $55m (total shares on issue multiplied by the current share price).

Next - their profitability, or lack thereof.  They posted a big loss in FY20 and I'm tipping they are going to post another one for FY21, hence this CR before the results are announced.  Their ROE over the past 5 (five) financial years has ranged from as high as 6% to as low as -68% (that's MINUS 68 per cent), which was FY20 (their most recent full financial year).  Their FY20 ROC (return on capital) was -59% - again, please note there is a MINUS sign there, i.e. their ROE and ROC were both severely negative.  Those numbers were sourced from Commsec.

The ASX website shows DCG's TTM EPS (trailing twelve month earnings per share) as -$0.158 (negative 15.8 cps) and Commsec show DCG's "current" EPS as being -$3.299 which sounds a tad extreme.  Something NQR there me-thinks. I don't think Commsec have allowed for the 1 for 10 share consolidation (SC) that DCG did in early November 2020, which probably means that should read -$0.3299, but that still seems like a huge EPS loss.  That 1:10 SC may also have affected those Commsec ROE and ROC numbers for FY20 for DCG, but they would both still be negative.  Any way you look at it, FY20 was a horrible year for the company during which they had some massive write-downs and lost a lot of money.

Decmil actually claimed to have returned to profitability in Half 1 of FY21 (the 6 months ended 31-Dec-2020) - see here - however that profit was less than $1m.  It was actually NPAT of $0.6m ($600K).  And they said they also had a "Healthy cash position of $29.7 million at 31 December 2020" plus "Decmil has reduced its debts substantially during the period, repaying the $25 million term loan from National Australia Bank and reducing amounts owing to surety providers for called bonds from $27 million at 30 June 2020 to $16 million at 31 December 2020."

And yet here we are, 5 months later (than that 24-Feb-2021 report) raising more money and talking on more debt at the same time.  And with a share price that is below the raising price.  Just barely below, but it's still below.  And they do have a history of raising capital.  They raised another $52.4m last June, just prior to closing their books for FY20, by way of an accelerated pro rata non-renounceable entitlement offer on the basis of 4.2 new shares for every 1 existing share at an issue price of $0.05 per new share.  That was before their share consolidation in November, so was equivalent to 50 cps based on today's share structure.  They were already in a trading suspension when they announced that heavily discounted CR - and they'd last traded at $0.079/share (on 18-May-2020), equivalent to $0.79 now.  They opened again (on 02-June-2020) at $0.093, but they were down to $0.053 ten days later.  The company then consolidated their shares on the basis of 1 share for every 10 held on 05-Nov-2020.  They made their most recent 12-month high of 72 cps shortly after that, and then it's been all downhill from there again.

There is not a lot of confidence in the market around this company, and why would there be?  They have a history of over-promising and under-delivering, raising capital regularly, consolidating their share structure, plus major bunfights with clients, including a major one with the NZ DOC (department of corrections), a dispute that resulted in Decmil closing down their entire New Zealand operations, and disputes with their subcontractors, like a high profile dispute with Southern Cross Electrical Engineering - SCEE (ASX: SXE) - who struggled to get paid by DCG for work SXE performed for them.  Decmil's share price has been heading the wrong way for over 9 years.  The company's founder, Denis Criddle, left the company in 2018, leaving his son Scott to run the company.  Scott Criddle held the positions of Chief Operating Officer, Chief Executive Officer, Managing Director, and finally Executive Director, before also leaving the company, in mid-2020 after almost sending the company broke.  Decmil as a company wasn't doing well when Scott took over the top job there, but he certainly didn't do them any favours with his leadership.  The Criddle's are no longer listed as substantial shareholders in the company.  The only substantial shareholders are Thorney Investment Group (a.k.a. TIGA Trading) with 18.7%, Franco Family Holdings with 7.67% and IFM Investors with 6.11%.  For more info on the Franco Family, see this article:  https://www.afr.com/property/residential/the-billionaires-living-on-perth-s-millionaire-s-row-20190715-p5279h

The bit about the Franco Family is just over halfway through the article.  Interesting that Kerry Stokes only paid $200K for his 3200sq m block in the 70s and then in 2018 Ryan and Kerry Stokes paid $11m for a property three doors down, with five bedrooms, an internal lift and a boathouse, which was rumoured to have been bought as interim accommodation while renovations on Kerry's home were under way.  It was also speculated that the second house was bought as a future Perth residence for Ryan.  ...Anyway, I digress.  The Stokes boys have nothing to do with Decmil Group.

Alex Waislitz’s Thorney Opportunities Fund (TOP) have had some success with some of their investments, but they also have a history of doubling down on some dogs at times.  The TOP SP is currently around 55 cps and they were higher than that 3 years ago, and 5 years ago, so those people who suggest that Thorney are excellent stockpickers might want to look a little deeper into their performance over recent years, which suggests that they have been backing some poorly performing companies whose future prospects also don't look too flash, like Decmil Group.

I wouldn't touch Decmil with a barge pole.  There's just nothing to like there.

18-Nov-2020:  Decmil Group (DCG) recommenced trading today after their 1 for 10 share consolidation.  Commsec show them as rising +855.22% today, but not really.  If you owned 10,000 DCG shares, they last traded at 6.7c ($0.067) on 06-Nov-2020, so your 10,000 DCG would have been worth $670 ...and today you would now own 1,000 DCG which closed at 64c ($0.64), so your DCG position would now be worth $640, i.e. $30 less (-4.48%).

Not sure if anyone on here is holding DCG on their Strawman.com scorecard, but it is likely that the system will not yet have made the adjustment for that 1-for-10 share consolidation, and will show the position to be hundreds of percent up, which is of course not correct - and will be changed.

DCG is a company I have been actively avoiding for a number of years, and I have posted a couple of straws here about them.  Always promising the world, and delivering a lot less than what they promise.  The founder retired and let his son run the business for a few years, but watched the value of his multi-million-dollar DCG shareholding lose value every year.  They recently replaced Dennis Criddle's son, Scott Criddle, with a new CEO - see here:  https://www.afr.com/companies/infrastructure/decmil-brings-in-new-ceo-to-fix-troubles-20200519-p54u9x

For those with AFR access (these stories might be behind a paywall) - here's some further reading:

https://www.afr.com/companies/infrastructure/perth-liquidator-wins-decmil-creditor-battle-20200706-p559cw

https://www.afr.com/companies/infrastructure/decmil-chased-by-southern-cross-for-11m-in-claims-20200611-p551ja  

https://www.afr.com/street-talk/decmil-recap-heads-to-5c-hartleys-readies-launch-20200527-p54wso

https://www.afr.com/street-talk/down-down-at-decmil-recap-still-wip-20200524-p54vvs

https://www.afr.com/street-talk/hartleys-kicks-off-decmil-recap-raising-20200519-p54u9p

https://www.afr.com/companies/infrastructure/decmil-caught-in-liquidator-battle-20200518-p54tvy

https://www.afr.com/street-talk/big-discount-for-little-decmil-has-fundies-looking-20200519-p54u7n

The overarching theme here is there really isn't any good news.  If you've been a DCG shareholder, it's all bad.  Poor management.  Bad company.  Poor investment.  Still is!

List of trades by substantial shareholders of Decmil Group (DCG) since their last substantial shareholder list was published (from Commsec):

• BlackRock Group, Buy, 19 Jun 19, old: 5.18%, new: 6.93% (4,393,258 shares bought)
• Carol Australia Holdings Pty Limited, Buy, 02 Aug 19, Old: N/A, New: 8.20%
• Mitsubishi UFJ Financial Group, Inc., Buy, 02 Aug 19, Old: N/A, New: 8.87%
• Commonwealth Bank of Australia, Sell, 02 Aug 19, Old: 9.50%, new: 8.03% (3,475,246 shares sold)
• BlackRock Group, Buy, 03 Dec 19, old: 6.93%, new: 7.94% (2,479,618 shares bought)
• Thorney Opportunities Ltd, Buy, 23 Dec 19, old: 10.21%, new: 11.68% (3,630,000 bought)
• TIGA Trading Pty Ltd, Buy, 23 Dec 19, old: 10.21%, new: 11.68% (3,630,000 bought)
• Paradice Investment Management Pty Ltd, Sell, 23 Dec 19, old: 6.45%, new: N/A
• Carol Australia Holdings Pty Limited, Sell, 27 Dec 19, old: 8.87%, new: 7.40% (3,422,150 shares sold)
• Mitsubishi UFJ Financial Group, Inc., Sell, 27 Dec 19, old: 8.87%, new: 7.44% (3,333,549 shares sold)
• Commonwealth Bank of Australia, Sell, 27 Dec 19, old: 8.03%, new: 6.39% (3,861,840 shares sold)
• Carol Australia Holdings Pty Limited, Sell, 30 Dec 19, old: 7.40%, new: 6.13% (3,049,656 shares sold)
• Mitsubishi UFJ Financial Group, Inc., Sell, 30 Dec 19, old: 7.44%, new: 6.14% (3,115,875 sold)
• Commonwealth Bank of Australia, Sell, 30 Dec 19, old: 6.39%, new: 5.11% (3,049,656 sold)
• Commonwealth Bank of Australia, Sell, 13 Jan 20, old: 5.11%, new: N/A
• BlackRock Group, Sell, 30 Mar 20, old: 7.94%, new: N/A
• Thorney Opportunities Ltd, Buy, 30 Mar 20, old: 11.68%, new: 17.17% (13,137,341 bought)
• TIGA Trading Pty Ltd, Buy, 30 Mar 20: old: 11.68%, new: 17.17% (13,137,341 bought)
• Commonwealth Bank of Australia, Buy, 13 May 2020, old: N/A, new: 6.06%

Note: TIGA is Thorney Investment Group Australia, so TIGA Trading and Thorney are the same holding, not different holdings.  Likewise, Carol Australia Holdings P/L is a controlled entity of Mitsubishi UFJ financial group, so Carol's holding is included in Mitsubishi UFJ's holdings.

Decmil Group's Substantial holders at 30 June 2019 were:

• Thorney Investments Group, 26,024,227 shares, 10.92%
• Denis Criddle, 22,479,145 shares, 11.61%
• Commonwealth Bank Group, 20,466,031 shares, 8.59%
• BlackRock Group, 16,520,645 shares, 6.93%
• Paradice Investment Management Pty Ltd, 15,358,597 shares, 6.44%

...for a total of 44.49% of the company.

The latest list (as at 14 May 2020) according to the transactions listed above is:

• Thorney Investments Group, 17.17%
• Denis Criddle, 11.61%
• Commonwealth Bank Group, 6.06%
• BlackRock Group, no longer substantial shareholders
• Paradice Investment Management Pty Ltd, no longer substantial shareholders
• Mitsubishi UFJ Financial Group, Inc., 6.14% (which includes the 6.13% owned by MUFJFG subsidiary Carol Australia Holdings)

...for a total of 40.98% of the company.

So, since June 30, 2019...

1. 3.51% less of the company is owned by substantial shareholders.
2. The Commonwealth Bank, and their subsidiary Colonial First State, own 2.53% less of the company now.
3. In a strong show of suppport, Thorney/TIGA have increased their holding from 10.92% to 17.17% with their most recent purchase being on March 31.
4. Denis Criddle, the founder of Decmil still maintains his 11.61% holding.
5. Denis Criddle's son, Scott Criddle, who is Decmil's CEO and MD, did sell $1m worth of shares in May last year, leaving him with 2.08% of DCG at that time, but he has been awarded 1,216,667 more Performance rights since then and had 606,122 performance rights converted to shares upon vesting - on 02 Sep 2019, and now owns 5,552,104 DCG shares (2.32%) plus performance rights.
6. Paradise and BlackRock have exited the list (sold down or out of DCG entirely)
7. Decmil have a new substantial shareholder, Mitsubishi UFJ Financial Group, which bought CFSGAM - Colonial First State Global Asset Management - off CBA in August 2019, which included CFSGAM subsidiary Carol Australia Holdings - now also part of Mitsubishi UFJ FG.  CFSGAM and Colonial First State are two different companies, and while CBA sold CFSGAM, they retained Colonial First State - see here.  The majority (if not all) of Mitsubishi UFJ's position in DCG was gained via the acquisition of CFSGAM on August 2nd, 2019.  Since that time, they have not bought any more shares and have sold down their position twice.
8. DCG's share price then (30 June 2019) was 91 cents per share.  It is now 78% lower at 20 cps.
9. Last month (on 16 April 2020), Decmil announced that their NZ subsidiary Decmil Construction NZ Limited (DCNZ) would cease trading with immediate effect.  The NZ subsidiary suffered significant losses as a result of termination of a major contract by the NZ Department of Corrections (“DoC”), following a dispute the parties have agreed to take to arbitration for financial settlement. 
10. DCG are now selling assets and felt the need to report to the ASX and the market today (14 May 2020) that their bank (NAB ) will maintain its current facilities and ongoing support for Decmil through to the end of January 2021.

14-May-2020:  Decmil Update on Bank Facilities

Reading between the lines, it sounds to me like Decmil Group (DCG) might be in some trouble and NAB have agreed not to pull the rug from under them before the end of January (2021).  On May 4th (10 days ago), Decmil confirmed a newspaper report that there is a sale process underway for their Homeground Gladstone Village (accomodation village in Qld) and that they were currently negotiating with three parties and had received one firm offer. 

Here's some of today's announcement:

Decmil Group Limited (ASX: DCG) is pleased to announce it has confirmed facilities with its long-term banker National Australia Bank (NAB). 
 
NAB will maintain its current facilities and ongoing support for Decmil through to the end of January 2021, at which point Decmil expects to negotiate a fresh debt facility, preferably also with NAB. 
 
In addition to the NAB facility, Decmil has also confirmed an agreement with the Company’s four surety bond providers that no cash call will be made on the bonds before 31 January 2021. 
 
The effect of the combined agreements is to give Decmil operational certainty to continue moving the business back to strong profitability and to aggressively pursue new business opportunities, as well as enhanced optionality over capital opportunities. 
 
Under the arrangement with NAB, Decmil will continue to draw upon its $65 million multi-option facility. The active components of the facility are a $25 million corporate loan (fully drawn) and a $25 million overdraft facility (currently drawn to approximately $5 million). The facility also includes a contingent instruments facility and an accounts receivable financing facility. 
 
Under the arrangement, Decmil has committed to reduce the overdraft sub-component of the facility to $10 million from 31 January 2021. The $65m overall facility limit remains in place for the period to 31 January 2021. 
 
Decmil and its advisers continue to explore a range of capital options to strengthen the Company’s balance sheet and to best position the Company for anticipated strong growth in the business. 
 
While COVID-19 has impacted on Decmil and many other contracting businesses, the Company expects a strong FY21 on the back of major infrastructure spend by Federal and State governments as they seek to re-ignite economic activity. 
 
Decmil is strongly positioned to gain from this spend, with current projects underway for the state governments of Victoria, Queensland and Western Australia. 
 
The latest project started last week, a $3.5 million contract to relocate a diesel shed for Queensland Rail. This follows Decmil’s recent announcement that the Company had been awarded preferred tenderer status for an $11.5 million contract for roadworks on the Bruce Highway by the Department of Transport and Main Roads Queensland. Decmil also recently announced it had been confirmed as a contractor on the Bayswater Station Metronet project in Western Australia by lead contractor Coleman Rail, with a minimum work program worth $25 million. 
 
Based on current contracts and expectations, Decmil expects a return to operating profit and positive operating cashflow in FY2021. 

--- click on link above for more ---

I don't like Decmil - I don't have a high opinion of their management who didn't cover themselves in glory in prior years.  They have a history of building accomodation units for prisons and detention centres (including offshore detention centres) and then getting into disputes with their clients.  They announced last month that they were closing down their NZ operations immediately after realising that they were unable to resolve a dispute over a $NZ185 million (A$181.5 million) prison contract, which was terminated by New Zealand's Department of Corrections (DOC) on February 25.  They are currently a loss-making company, and despite their "hope" to return to operating profit and positive operating cashflow in FY2021, I wouldn't go near them.  There are so many better companies out there, with superior management teams.  No need to rake around in the mud.  Decmil are like a sick crab that may not survive for much longer, but can still bite you in the meantime.