Wednesday 22nd Nov, 2017

Downer forecasts profit growth after solid FY17

Freight rail track - stock - credit Shutterstock (8)
Photo: Shutterstock

New rail projects will help drive profit growth at engineering group Downer, the company has said in its annual report, following its acquisition of management provider Spotless.

Downer on Tuesday reported a net profit after tax of $181.5 million, up from $180.6 million a year prior.

The profit growth was off the back of a 5.7% uptick in total revenue, which hit $7.8 billion in FY17.

Downer’s chief executive Grant Fenn said it was very pleasing the company had exceeded its revenue, earnings and net profit guidance, saying new projects for its Transport and Rail divisions were very much to credit for the result.

“[The Transport division] won several new infrastructure projects during the year including Newcastle Light Rail, the NSW Transport Access Program and the High Capacity Metro Trains depots in Melbourne,” Fenn said.

“The outlook for Transport is very positive with increasing demand for product innovation, small asset management and intelligent infrastructure.”

Meanwhile the Rail division secured the High Capacity Metro Trains rolling stock project in Victoria, and the Sydney Growth Trains project in NSW.

“These major Rail projects are progressing well,” Fenn said, “and also we continue to perform well on the Waratah and Millennium maintenance contracts.”

Fenn said the growing activity from state governments in the passenger rail rolling stock market made up for a tough market in freight rail.

“The growth in transport infrastructure investment will provide a buoyant market for a number of years in construction and product supply,” he added.

Downer Transport’s total revenue was up 16.4% to $2.2 billioon, EBIT was up 20.2% to $124.6 billion, and the division cites work in hand of $6.3 billion.

Meanwhile Downer Rail’s total revenue was up 2.9% to $850.2 million, EBIT was up 110.4% to $30.3 million, and the division has $8.0 billion work in hand.

Solid growth for Rail and Transport should support the company as it continues to deal with dwindling numbers for its Mining division.

The Mining division’s total revenue was down 18.5% to $1.3 billion, while EBIT was down 35.8% to $83.4 million, and work in hand stands at just $2.0 billion.

Fenn said Mining had endured the expiry of the Christmas Creek contract with Fortescue Metals Group in WA in September 2016, and warned there would be a full year impact attributable to Christmas Creek for FY18.

Meanwhile Downer’s Utilities division was buoyed by strong performance on NBN contracts, leading to a 19.1% growth in revenue to $1.5 billion, EBIT growth of 17.8% to $84.1 million, and work in hand of $3.6 billion.

And Downer’s final division, Engineering, Construction & Maintenance, saw a 6.2% growth in revenue to $2.0 billion, an 8.5% rise in EBIT to $52.3 million, and has work in hand of $2.6 billion.

“Overall, this is a strong result that reflects the success of our strategy to focus on growth in public infrastructure and service delivery,” Fenn concluded.