Writedowns tip Downer to $386m annual loss
Downer EDI will report a loss of around $386 million after writing off almost $550 million in goodwill and assets, the services contractor has warned, ahead of delivering its results next week.
New Downer chief executive Peter Tompkins said the management team, overseen by new chairman Mark Menhinnitt, had reviewed the carrying value of its assets and declared a non-cash impairment charge of $549.6 million before tax in its 2023 financial results.
Some $483 million of the charge is related to goodwill in the company’s facilities and utilities cash generating units, which were valued at $1.3 billion before the writedown, and linked to its $1.2 billion purchase of Spotless in 2017, Downer said.
New Downer CEO Peter Tompkins is writing off goodwill linked to the company’s 2017 Spotless acquisition. Michael Quelch
The company attributed the writedown to increases in the after-tax discount rate from changes in the cost of debt and equity, a reassessment of upcoming work in the defence sector to reflect “tightening in market conditions”, and the underperformance of its utilities business.
Downer still expects to report underlying net profit after tax and amortisation on August 10 within its last communicated guidance range, forecasting it will deliver around $174 million.
The contractor has lowered its NPATA guidance twice in the past six months, firstly after revealing “accounting irregularities” in December, andthen again in February, causing its stock to plunge and the former chairman to depart.
The company said its cash conversion was strong in the second half of the fiscal year, being around 100 per cent of underlying earnings, while full year cash conversion was around 65 per cent.
More to come
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