SHARES in Macmahon Holdings slumped to an eight-year low after the mining contractor launched an $80.7 million capital raising and sold its ailing construction business.
The stock dropped heavily after coming out of a trading halt on Friday, closing 5¢ lower at 21.5¢ after earlier sliding to 18¢.
This week, it announced the sale of its construction arm to Leighton Holdings for $16.3 million, and downgraded earnings guidance.
The chief executive of Macmahon Holdings, Ross Carroll, warned its net profit for 2012-13 would be between nil and $25 million as the company had been forced to make substantial write-downs on its construction business.
Three months ago, Macmahon shocked investors with news that its annual profit would be about half the $56 million reported in 2011-12.
A senior analyst at Morningstar Equities Research, Ross MacMillan, said he had cut his net profit forecasts for the group to $2.4 million for 2012-13 from $24.3 million.
He described the capital raising as highly dilutive and advised investors not to take up their entitlements.
"However, if the shares trade above the offer price, there may be profitable opportunities for investors to take up their entitlements and sell shares on market," he said in a note to clients on Friday.
As its shares resumed trading, Macmahon said it had completed the book-build for the institutional component of its fully underwritten capital raising.
The company raised $42 million from institutions, who paid 16¢ a share. Existing institutional investors took up 86 per cent of the new shares. The offer is being used to strengthen Macmahon's balance sheet and expand its mining business.
Smaller institutions did not take up all their entitlements to the new shares, which were sold to other institutional investors and major shareholder Leighton Holdings.
Retail investors will be offered $38 million worth of shares from Wednesday.
Macmahon wants to become a dedicated full service mining contractor after offloading its construction business.
A major review of Macmahon's businesses and costs led to the axing of up to 50 jobs.
Macmahon expects to be hit by one-off costs of about $10 million as a result of its restructuring, and redundancy and closure costs.