Infrastructure giant Downer EDI cites North Island floods in half-year result

Flooding after weather warnings for Auckland and Northland a week after Cyclone Gabrielle. Photo / Dean Purcell

North Island floods have changed the outlook for Australian and New Zealand stock exchange-listed infrastructure, engineering and building giant Downer EDI.

The Sydney-headquartered company, which owns Parnell-HQ Hawkins, cited those floods in its outlook released yesterday.

“The impact of recent floods and storms in the North Island of New Zealand have materially impacted current operations and while we expect this to present opportunities in FY24, the 2H23 pipeline has been impacted,” the business said yesterday when it released its interim result.

It calculated the amount as being A$8 million post-tax.

Downer had not incurred any significant damage to its assets from the floods and storms in the North Island in January and this month.

But it said the events will affect operational performance through the remainder of this financial year which ends on June 30, 2023.

Downer employs about 33,000 people here and in Australia and maintains more than 25,000km of roading in New Zealand and more than 28,000 in Australia.

Urban services revenue was A$6.1b, up 8.9 per cent from the prior corresponding period.

Total group revenue of A$6.1b was up 2.9 per cent. Statutory ebit was A129.8m and statutory net profit after tax was A$68.1m. Underlying ebitda was A$133.6m, down a quarter. A post-tax loss of A$12m was included for a utility maintenance contract.

Statutory net profit after tax was A$77.3m, down 19 per cent on the previous A$95.3m.

Unprecedented wet weather, labour shortages and productivity problems including contract and project losses in the utility division was cited as reasons for driving that down.

Grant Fenn, the chief executive, said the half-year to December 31, 2022, had been challenging.

“Significant parts of our business have been heavily impacted by rain, storms and flooding whilst labour mix and productivity remain an issue.

“Our cash conversion at 8.5 per cent was way off our normal half-end position due to some meaty subcontractor payments on completion of our Sydney Growth Train Project and a few large customer receipts expected in late H1 that was received in H2,” he said.

The market outlook in transport, utilities and facilities businesses remains strong. That was evident in the 9 per cent growth in urban services revenue delivered in the half.

Downer had won a number of important contracts during the period and was preferred on a significant multi-billion dollar Queensland train manufacturing project, Fenn said.

It designs, builds and maintains assets, infrastructure and facilities and has a history of more than 150 years.

Downer New Zealand got $12.9m in wage subsidies in 2021 for 5497 employees, according to the local website on what employers received. Downer Utilities Alliance New Zealand got $609,000 for 513 staff in 2021.

Last year, the New Zealand arm of the business celebrated Māori trades graduates through its leadership programmes.

It has partnered with Te Puni Kōkiri and the Ministry of Māori Development to create Te Ara Whanake, aimed at encouraging Māori staff to advance their careers in all leadership levels of the business.

Downer EDI shares are trading today on the ASX around A$3.16, up 5 per cent today. It has a market capitalisation of A$2.1b and although it is listed on the NZX, it does not trade here. The 52-week share price high was A$5.88 and the low A$2.97.