New equity issue, trading update and privatisation proposal

New equity issue, trading update and privatisation proposal

Calibre Group Limited ("Calibre") announces today that it has concluded a new agreement for the issuance of $17.1m in Series B Preference Shares as new equity, replacing the Series A Convertible Note (Series A Notes) debt instruments.

The new preference shares provide for a greater level of equity in the business, reducing both gross debt levels and the financing costs of that debt for Calibre. Following the recent sale of G&S Engineering (G&S) and repayment of part of the proceeds towards bank debt, gross debt has reduced by $27.0m since 30 June 2018. Importantly, the issuance of the preference shares has enabled Calibre to terminate the Series A notes which removes the impending obligation to redeem those notes by 31 October 2018.

Calibre has issued 2.45bn Series B cumulative redeemable convertible preference shares to the Series A Noteholders as a fair market value exchange for the cancellation and termination of the existing Series A Notes. The Series B Preference Shares, redeemable at Calibre’s option, are convertible into 2.45bn ordinary shares on 1 November 2019 at $0.007 per share.

The Series B preference shares pay a cumulative 14% frankable yield, with the distribution convertible at the Noteholder’s option into cash, ordinary shares or a combination of both cash and ordinary shares.

Calibre shareholders will be asked to approve the potential future issue of ordinary shares upon any conversion of the Series B Preference Shares and the Series B Convertible Notes (which were issued in October 2016) by way of an ordinary resolution at its Annual General Meeting in November 2018. Shareholder approval is required under the Corporations Act as the conversion of the Series B Preference Shares and the Series B Convertible Notes could result in each of the Noteholders and preference shareholders having voting power in more than 20% of Calibre.

Calibre’s major shareholder, First Reserve, has confirmed that its current intention is to vote in favour of these resolutions at the AGM.

Mr Massey, Calibre’s Managing Director, stated “The issuance of the preference shares as new equity marks an important milestone in the recapitalisation of the business. We continue to progress the implementation of a new working capital facility to better position Calibre as it delivers an increased level of new work.

Calibre’s FY19 order book is now around $420m and Calibre is increasingly positioned to maximise its opportunities as a result of renewed growth in its resources related markets in Western Australia and the East Coast infrastructure markets”.

Trading update - FY2018 unaudited financial results

Calibre provides the following trading update, in terms of its results for the full year ended 30 June 2018. This is ahead of the release of its audited financial statements later this week.

Operating cash flows were $17.8m for the FY18 year, up 110% from $8.5m in FY17. This improved result included the benefit of a significant number of working capital initiatives pursued across the business.

Despite these improved cash flows and improved revenue outcomes, Group underlying EBITDA was down 34% from $25.8m last year to $17.1m. The Professional Services business underlying EBITDA was down $5.6m to $1.3m this year, with June 2018’s results well below expectations requiring steps to resize areas of the business and reduce controllable costs in August 2018.

Overall Construction and Maintenance (C&M) underlying EBITDA before impairments was up from $21.8m to $23.8m, reflecting a normalisation of $9.1m of an individual EPC project loss impacting the reported C&M EBITDA of $11.9m. The EPC loss of $9.1m, was higher than as anticipated in June 2018, and contributed to a lower level of proceeds from the sale of G&S than originally predicted, contributing to an impairment loss of $15.8m recorded in FY18.

In preparing the 30 June 2018 accounts the Group is required to adopt strict accounting standard accounting requirements to revalue all assets and liabilities on a fair value basis. As a result, the Group recorded a total of $33.7m in non-cash impairment charges, comprising $17.9m in Professional Services and $15.8m in C&M. After the sale of G&S, this has resulted in a pro-forma net asset values for these continuing businesses, less Group liabilities, at 30 June 2018 of $103.2m.

Given the decisions that were taken in FY18 to sell the business, in whole or part, the Group was also required to record $9.6m in restructure and sale(s) related costs in the FY18 year. In summary, the unaudited 30 June 2018 results are anticipated to be:

Looking forward, Calibre has transformed its revenue mix to be 23% built environment, 14% resources, 5% operational technology and 58% utility infrastructure. Calibre’s current FY19 work on hand is $420m and with demand-led growth in both the utilities infrastructure and iron ore markets is anticipating revenue of $500m into FY19.

Higher FY19 revenues, an increased focus on internal efficiencies and reduced controllable costs are anticipated to deliver a FY19 underlying EBITDA materially higher than FY18. Year to date operating performance has been marginally ahead of expectations, and is trending towards exceeding FY18 Group underlying EBITDA.

Following the sale of G&S, the Group has reduced gross bank debt to $68m. In addition, after the issuance of the Series B Preference Shares and the cancellation of the Series A Convertible Notes the Group has $11m in convertible notes maturing within the next two years.

Working capital and privatisation proposals

The Calibre Board continues to advance a number of working capital and capital management initiatives, including evaluating an expression of interest to privatise the Group. The proposal is incomplete, non-binding and confidential and is currently being evaluated by the Board. There is no certainty that any binding proposal, which is able to be considered by shareholders, will be received. The Board will update shareholders on any material developments.

- ENDS -

INVESTOR AND MEDIA CONTACT:
Craig Allen
Calibre Group Limited
enquiries@calibregroup.com | +61 422 009 143

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