Downer profit slides 14pc, more falls to come

Investors have sent Downer EDI shares up to 13pc higher after its profit fell less than expected.

Downer EDI's rail division in Maryborough, Queensland.

Engineering and infrastructure services group Downer EDI is enjoying one of its best days on the market in three years, after it comfortably outstripped depressed market expectations in reporting a 14 per cent slide in net profit.

The company’s shares initially rose as much as 13 per cent on the news, its best showing since February 2013, although it had pared gains by 12.40pm (AEST) to trade up 8.1 per cent at $4.50.

If it holds at this level it will be its strongest gain since an 8.8 per cent surge on February 4 this year.

The ASX-listed group (DOW), which has been hurt by the resources downturn, said net profit after tax for the full-year to June 30 softened 14.1 per cent to $180.6m, broadly matching its guidance for a figure around $180m.

Downer comfortably beat analyst projections, however, with the average estimate seen at just $167m.

Downer shares were up 7.9 per cent in early trade.

The group warned its net profit would likely edge down to $170m in FY2017 as its resources-facing operations continue to lag, although this guidance was significantly higher than analyst expectations for profit of $152.4m next year.

“Whilst Downer faces continued pressure in its resources-based businesses, the company is progressing well in repositioning to service increased investment and outsourcing in roads and rail, public transport, utilities, defence and communications,” the group said.

The company’s total revenue of $7.4bn came in line with projections, while its pre-tax earnings of $276.9m were more than $14m above what the market expected.

Downer chief executive Grant Fenn said the performance revealed the benefits of its increased focus on infrastructure services.

“Downer is successfully transitioning for the growth in public infrastructure and service delivery,” he said.

“Over 55 per cent of group revenues are generated from servicing public infrastructure customers in Australia and New Zealand and this percentage will rise as we grow our transport, utilities, technology and communications, defence and rail businesses.”

Mr Fenn said the result was its sixth consecutive year of matching or beating its profit guidance.

Downer declared a final dividend of 12c a share, in line with last year’s payout.