Diploma : Company Update

141d4b48-fbc8-47d6-a133-a79c3645e31d.pdf ASX Announcement 11 May 2016

Company Update

Western Australian construction & property development company Diploma Group Limited (ASX:DGX) provides the following company update to the market.

Diploma has achieved practical completion at its $30m Capri Apartments project located in Rockingham Western Australia. The seventy six unit project is heavily presold with one apartment remaining to be sold. The application for titles has been made at Landgate and settlements are expected to commence at the end of May 2016. Upon completion of settlements, Diploma expects substantial cash and equity to be returned to the group.

Diploma continues to work towards Practical completion of its $42m Quest Adelaide Tce apartment hotel development in Perth. Diploma announced on 5 April 2016 it had entered into an unconditional sale of the project for $42m to a third party buyer. Settlement of the sale is expected shortly after Practical Completion in July 2016. The completion of this project will return substantial cash and equity to the group and retire project debt of $24m.

Diploma has recently undertaken a review of its operations in light of the current property and commercial construction markets it operates in, in Western Australia. Part of that review is to focus more strategically moving forward on increasing its third party construction pipeline in lieu of internally generated development projects. Diploma has established a dedicated construction business where its core business is the construction of external client projects. This entity, established in October 2010 to service the mining sector, has been renamed DGX Construction and now operates from new premises in Leederville Western Australia. The entity has several projects under construction for private developers and government bodies.

The group's construction arm is currently tendering on and or waiting for decisions on $97m of negotiated and tendered contracts which it expects to make further announcements in relation to over the remaining months of this financial year. The group is actively pursuing other construction opportunities in the non-residential market as it seeks to diversify its construction focus across a number of different sectors within the construction market in Western Australia.

Diploma is awaiting development approval from the MRA in relation to the groups Chemlabs development in East Perth. Approval is anticipated to be granted before 30 June 2016. The development will consist of two stages with Stage 1 comprising 3000m2 of commercial space inclusive of a 1690m2 supermarket plus an apartment hotel of 138 keys to be operated by a major hotel operator in Australia. Stage 2 will consist of a 22 level 165 apartment tower comprising 1,2 and 3 bedroom apartments.

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