Downer EDI Ltd said in its annual report, out yesterday, it paid a gross consideration of $A55.4 million to buy Hawkins Construction Ltd from the McConnell family.
But in that figure there was $A2.8 million of cash balances and, “at the date of acquisition, the net asset value of Hawkins was negative $A16.3 million due to negative working capital of the business, resulting in $A71.7 million of goodwill being recognised”.
In other words, Downer paid $A52.6 million for $A71.7 million of business.
Downer announced the deal on 8 March and said it was to be completed on 31 March. However, it paid for Hawkins in 2 instalments, the first in March and the second in June.
Downer reported a provisional purchase price allocation in its June accounts because the identification of intangible assets on acquisition hadn’t been completed due to the proximity of the transaction to year end.
Downer’s own results were a mixture – net profit after tax up by less than $AA1 million, ebit also unchanged, but very low gearing and $AA2 billion of cash & facilities available to continue the growth path it’s taken in acquiring Spotless Group Holdings Ltd (offer finally closed on Monday when Downer held 87.8% of Spotless, so it can’t continue to compulsory acquisition).
Excluding Spotless earnings and any costs or synergies related to the acquisition, Downer is targeting net profit after tax of about $A190 million for the 2018 financial year, a 5% increase.
Spotless, in its target’s statement in April, provided earnings guidance of $A85-100 million net profit after tax for the 2018 financial year.
Result highlights, with no contribution from Spotless:
- Net profit after tax up 0.5% to $A181.5 million ($A180.6 million in 2016)
- Total revenue up 5.7% to $A7.8 billion ($A7.39 billion)
- Earnings before interest & tax (ebit) up 0.3% to $2A77.8 million ($A276.9 million)
- Operating cashflow of $A441.6 million, representing cash conversion of 103.1% of earnings before interest, tax, depreciation & amortisation (ebitda)
- Work in hand $A22.5 billion ($A21.1 billion at 31 December 2016)
- Gearing, including Spotless, 14.7% – 17.7% including off-balance sheet debt, with available liquidity of $A2 billion comprising cash of $A844.6 million & undrawn committed facilities of $A1.2 billion
- Basic earnings/share up 5.8% to A35.8c (A38c)
- Diluted earnings/share up 2.5% to A35c (A35.9c)
- Net tangible asset backing/ordinary share down 54.8% to A119c (A263.3c)
- Total revenue $A2.2 billion, up 16.4%
- Ebit $A124.6 million, up 20.2%
- Work in hand $A6.3 billion
- Total revenue $A1.5 billion, up 19.1%
- Ebit $A84.1 million, up 17.8%
- Work in hand $A3.6 billion
- Total revenue $A850.2 million, up 2.9%
- Ebit $A30.3 million, up 110.4%
- Work in hand $A8.0 billion
Engineering, construction & maintenance:
- Total revenue $A2.0 billion, up 6.2%
- Ebit $A52.3 million, up 8.5%
- Work in hand $A2.6 billion
- Total revenue $A1.3 billion, down 18.5%
- Ebit $A83.4 million, down 35.8%
- Work in hand $A2 billion
New Zealand & Pacific:
- Total revenue $A1.54 billion ($A1.3 billion)
- Segment assets $A687 million ($A546 million)
- Acquisition of segment assets $A102 million ($A20.5 million)
9 March 2017: McConnells follow up Harker deal with Hawkins sale to Downer
Attribution: Downer annual report & release.