Downer paid A$55M for Hawkins adding 'significant technical capability', accounts show

Tuesday 29th August 2017

Australian infrastructure and mining firm Downer EDI spent A$55.4 million snapping up local construction firm Hawkins which was in need of capital at the time of the purchase.

The sale price, which was withheld at the time of the deal in March, emerged in Downer's annual report released today, showing the Sydney-based company paid A$52.6 million, with the gross consideration including A$2.8 million cash balances acquired. At the time of acquisition, Hawkins had negative working capital leading to a negative net asset value of A$16.3 million, resulting in Downer recognising A$71.7 million of goodwill in the deal.

The acquisition brings "significant technical capability," said chief executive Grant Fenn in a statement. The move let Downer increase its presence in the growing market for infrastructure and building in New Zealand, making it the country's No. 2 'vertical' construction company after Fletcher Building. At the time of the purchase, Fenn said an estimated $50 billion will be invested in non-residential construction in New Zealand over the next five years.

Downer didn't break out Hawkins' contribution to the group, saying the newly-acquired business helped lift earnings in its engineering, construction and maintenance division, where revenue was up 6.2 percent to A$2 billion in the year to June 30. The unit's earnings before interest and tax rose 8.5 percent to $52.3 million, partly due to contributions from the Hawkins acquisition and new contracts in New Zealand, it said.

Within New Zealand and the Pacific, its total revenue was at A$1.5 billion versus A$1.3 billion in the prior year. Downer's total revenue - with the bulk being generated in Australia - was A$7.3 billion versus A$6.9 billion in the prior period.

Downer reported a net profit of A$181.5 million and said it is expecting a net profit of around A$190 million in the year through June 2018, excluding any earnings, costs or synergies related to its acquisition of cleaning and catering firm Spotless Group.

The company said its A$1.26 billion takeover bid for Spotless is now closed and it holds 87.8 percent of Spotless shares on issue, just short of the 90 percent required for a compulsory acquisition.

Once Downer completes a review of Spotless's business planning, budgeting, and target setting process it will update guidance, it said. In a target statement in April, Spotless forecast net profit of between A$85 million and A$100 million in the 2018 financial year.

Downer shares last traded at A$6.87 on the ASX. and are up 20 percent so far this year.

(BusinessDesk)

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