Downer Tips Return To Dividends In 2021

By Glenn Dyer | More Articles by Glenn Dyer

Downer EDI expects to resume paying dividends this financial year, after re-confirming on Wednesday that it won’t be paying a final dividend for 2019-20 after write-downs and other charges pushed it to a statutory net loss of $155.7 million.

The result compares with a $261.8 million net profit in the 2018-19 financial year and was driven by contract losses in its engineering, construction, and maintenance services business as well as $367.2 million (pre-tax) worth of one-off, items.

In its full-year results released to the market yesterday, Downer reported total revenue of $13.4 billion, down 0.2% on the prior year, and EBITA (earnings before interest, tax, and amortisation) of $416 million.

Underlying NPATA (net profit after tax and before amortisation of acquired intangible assets) fell 36.8% to $215.1 million as the impact of the COVID-19 pandemic and lockdowns hit its businesses, especially hospitality and associated services.

Downer’s utilities business dragged, with EBITA down 15.8% as NBN contracts wound down and contracts in New Zealand ended.

Downer is now looking for less capital intensive businesses, hence its decision to exit contract mining and laundering.
But the group still sees much of its future in utilities, plus the multibillion-dollar market for transport services that continues to grow on both sides of the Tasman.

It says it is no longer tendering for “hard dollar” construction contracts in the coal, iron ore, industrial electrical and instrumentation, and structural, mechanical, and piping sectors, saying it is focusing construction work on “areas where it has a competitive differentiation”.

Downer announced a year ago it was considering selling its mining services business but suspended efforts in March due to the extraordinary market volatility caused by the pandemic.

Last month, it again announced it was exploring a partial or full divestment after being approached by potential buyers.

Downer is currently trying to mop up the 11% or so of Spotless, it doesn’t own. Some of that business will be sold once the takeover is completed. That’s if there are buyers.

Downer did not provide earnings guidance for 2020-21, citing the uncertain operating environment. That also saw the company reconfirm that there will be no final payout (like IAG, for instance).

The board expects Downer to be in a position to resume dividends this financial year, subject to business performance and conditions.

Downer shares rose 2.8% to $4.30

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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