Clouds gather for engineering firm

Construction and engineering solutions provider Decmil Group has hired advisory firm Moelis to conduct work on the company as many believe it could be the latest group to become a casualty among those contracted to renewable energy projects.

Decmil’s shares have been suspended from trading since February 25 and the understanding is that challenges exist that relate to its contracts.

But as at June last year, the group had no core debt.

The trading halt came before Decmil announced on February 28 that director Don Argent had stepped down from the board, chaired by David Saxelby, and that Peter Thomas had been appointed as the group’s acting chief financial officer after CFO Craig Amos resigned in December due to health reasons.

When Decmil was suspended from trading, its market value was $98m, a far cry from the $350m-odd market value the business had about five years ago.

The company delivered a $14m net profit in August for the 2019 financial year, saying revenue grew 94 per cent to $663m as it secured new contracts and conditions improved in the infrastructure sector. It had $900m of work in hand and revenue was expected to grow further in 2020.

However, other companies have fallen victim to problematic contracts in the renewable energy space, one being RCR Tomlinson, which collapsed into administration in 2018.

John Laing, which is staging an exit from Australia, has placed its renewable energy projects up for sale through Macquarie Capital, but has problematic contracts that need to be addressed before a sale can proceed.

While plenty of work is said to exist, the challenge is that the space has expanded rapidly.

RCR Tomlinson collapsed after it made a rapid entry into solar farm construction over 18 months, winning 15 contracts worth $15bn, which proved to be its undoing.

The situation is unfolding as advisers in the restructuring space remain on high alert for potential corporate casualties from the coronavirus.

Speculation in the market exists that at least one other major retail company collapse is on its way, with many looking to the furniture space, which will likely face delays delivering furniture to customers in the months ahead due to the suspension of work at their factories in China.

Quadrant Private Equity’s Amart discount furniture business this year refinanced about $300m worth of debt, and sources close to the private equity fund have offered reassurance that the group is not facing financial challenges.

It is a similar situation with those close to Greenlit Brands, the owner of Freedom Furniture, who said the business was not about to collapse.

Greenlit Brands, advised by Rothschild, posted a $288.5m loss for the year ended September 29, as the group’s earnings before interest, tax, depreciation and amortisation declined to $49.58m.