Downer EDI boss claims to have ‘good grip’ on problems

afr.com:

Downer EDI’s boss, Peter Tompkins, says the troubled contractor’s new management team has “a good grip on all known issues” after disclosing $550 million in write-downs ahead of the company’s annual results.

One week before reporting fiscal 2023 earnings Downer told investors it will deliver an annual net loss of $386 million and warned it was facing a more competitive market for defence projects and ongoing difficulties with some utilities projects.

The hefty loss is caused by a pre-tax, non-cash impairment charge of $549.6 million, mostly related to writing down goodwill acquired in Downer’s $1.2 billion purchase of services group Spotless in 2017.

New Downer CEO Peter Tompkins is writing off goodwill linked to the company’s 2017 Spotless acquisition. Michael Quelch

The pricey Spotless acquisition, which was made as part of a strategy by former chief executive Grant Fenn to diversify away from mining services, was controversial from the start, with investors questioning why Downer paid a hefty premium to buy a poorly performing company.

Downer has struggled to make money from Spotless, especially during the COVID-19 pandemic when sports stadiums and other venues that used Spotless’ catering services closed, and previously wrote down $165 million of goodwill in fiscal 2020.

This year, Downer is writing down $350 million of goodwill related to its facilities business (which includes Spotless) and is taking an additional $133 million goodwill write-down in its utilities business.

It is also expensing $25 million of restructuring costs and $6.5 million of regulatory and legal costs, which include defending several class action lawsuits filed after the company’s shares tumbled in December and then again in February.

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