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CIMIC Group Falls 20% After Writing Down $1.8 Billion From Middle East Venture

Tumul Sinha

Tumul is an experienced Equity Analyst with ASR Wealth Advisers. She holds a Master’s Degree in Finance from the University of Sydney. Her key industry verticals include Real Estate, Health Care and Technology.

CIMIC Group Limited (ASX: CIM) has fallen nearly 20% this morning, from $35.09 to $28.34 after providing an update on its BIC Contracting strategy and the consequent impact on its financial results.

CIMIC

CIMIC is an international contractor within the telecommunications, engineering, infrastructure, building, property, mining and environmental services industries. The company’s core geographies are Australia, New Zealand the Asia Pacific, however, they also have ventures in the Middle East.

The company has completed a strategic review of its investment in a non-controlling 45% interest in BIC Contracting, a company operating in the Middle East. After discussing with lenders, creditors, clients and stakeholders (whilst taking into account the context of an accelerated deterioration of local market conditions), CIMIC has decided to sell its stake in BIC Contracting and expects to take a one off post tax impact of around $1.8 billion in its 2019 financial statements (which includes a $700 million cash outlay to pay for BICC liabilities, which it has guaranteed). Consequently, CIMIC will not declare a dividend for 2019.

As such, CIMIC will focus its resources and capital allocation on growth opportunities in its main core markets of Australia, New Zealand and the Asia Pacific. The company expects to announce its 2019 financial results on 4 February 2020, where NPAT is expected to be reported at around $800 million (excluding the BICC impact).

 


 

Disclaimer:
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).
This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.
ASR has no position in any of the stocks mentioned.
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