Market competition has resulted in Downer EDI returning a flat first-half trading performance, and a $A13million ($NZ13.9million) write-off has prompted a full-year profit downgrade, by $A10million, to $A180million.
Downer chief executive Grant Fenn said "competition remained intense'' and the mining and energy markets continued to be "very challenging''.
"Commodity prices remain very low, with a significant flow-on effect on business investment and operating expenditure,'' Mr Fenn said.
However, he said Downer's first-half performance was "very credible'', given market conditions, and reflected the company's market positions and diversity of operations.
Downer will repeat last year's A12c dividend.
Its shares were up 5.2% on the ASX, to $A3.10, after the announcement.
As announced on Monday, the consortium in which Downer has a share was unsuccessful in its bid for Capital Metro and Downer subsequently wrote off $A13million in pre-tax bid costs in the first-half result.
Downer had been targeting $A190million full-year after-tax profit, but that target was now around $A180million for the financial year.
Craigs Investment Partners broker Peter McIntyre said there was no surprise in the result, given Downer's exposure to the struggling mining sector, and he credited the share price rise to Downer's "having got all the bad news out'' and investors responding positively.
Revenue from Downer's mining division, which includes open-cut and underground mining, planning and design and operation, declined 5.2% to $A781.6million, due to reduced volumes and contract completions.
However, the division's earnings before interest and tax increased 13%, to $A67.7million, due to continued strong performance on ongoing contracts and net favourable one-off benefits of $A15million.
Downer's overall operating cash flow of $A178.1million was 30.9% lower than the same time a year ago, reflecting an increase in unresolved project claims.
The company said: "Failing to take proactive steps to reduce costs in line with forward revenue projections would jeopardise the ability to drive further improvements to business performance.''
Downer has two key internal business initiatives, its "Fit 4 Business Programme'', which was on track to achieve $A500million in cost benefits over five years, and its "Business Transformation Programme'', which invests in core systems and consolidation of business services.
Downer result
Half-year trading to December
Total revenue: Down 1.2%, or $A42.6 million, to $A3.5billion.
Earnings before interest and tax: Down 20.1% to $A113.2million, reflecting Capital Metro write-off. *
Net profit after tax: Down 23.9% to $A72.1million.
Transport Services: Revenue down 12.3% to $A802.9million. Technology and Communication Services: Revenue increased 2% to $A249.9million.
Utilities Services: Revenue increased 83.7% to $A376.5million.
Engineering, Construction & Maintenance: Revenue decreased 4.4% to $A927.8million.
Mining: Revenue decreased 5.2% to $A781.6million.
Rail: Revenue decreased 1% to $A420.1million.*Expenses included $A13million as Downer's share of pre-tax bid costs, over Downer's unsuccessful bid for Canberra's new light rail project, the Capital Metro.
Source: Downer
