Downer EDI’s (ASX:DOW) relatively new management team asserts that it has successfully addressed all the issues, met the revised guidance for the financial year ending in June, and is committed to delivering on its promises regarding cost reductions and margin rebuilding over the next year.
In a statement to the ASX on Thursday, Downer EDI expressed confidence that it had completed the cleanup of its accounts and operations following the discovery of several problematic contracts and revenue shortfalls.
According to the company’s latest review of asset values, it anticipates recognising a non-cash, pre-tax impairment charge of $549.6 million in its financial results for the year ending on June 30, 2023.
During the results presentation for the financial year ending June 30, scheduled for August 10 (next week), and subject to final auditing and other procedures, the company expects to report an underlying net after-tax profit of approximately $174 million, falling “within the previously communicated guidance range.”
Furthermore, Downer projects a statutory net after-tax loss of approximately $386 million, which includes a $483.0 million non-cash goodwill impairment, other asset impairments of $66.6 million, and other individually significant items (net, pre-tax) of $1.1 million.
Additionally, the company anticipates highlighting strong cash conversion in the first half of the year, an improvement in net debt to EBITDA coverage, and “good progress towards the $100 million per annum cost reduction benefit target, a key enabler of the Group’s 4.5% EBITA margin target.”
CEO Peter Tompkins remarked in the Thursday statement to the ASX, “As we announced at the Investor Day in April, Downer is undergoing a period of significant and necessary organisational change. Against this backdrop, we have delivered underlying earnings in line with what was previously communicated, and we are building positive momentum in the transformation program.”
He added, “The new trans-Tasman business structure is now operational, and we achieved an important milestone in the simplification of Downer’s portfolio in June by completing the divestment of the Australian Transport Projects business.”
“Pleasingly, we are making strong progress in relation to the cost-out program, with the 400-head FTE reduction target now expected to be completed by the end of this calendar year. We remain on target to achieve the overall transformation cost-out benefits of $100 million per annum in FY25,” he said.”