![]() ![]() ![]() The biggest part of the $549.6 million impairment was $350 million relating to the catering and services contract at Spotless Group. New CEOs and CFOs always start with an asset valuation review, and if they have any doubts about book values it makes sense to do it at their first full-year result. The big impairment did not surprise Downer’s investors. That would be the firmest guide as to how the turnaround is really playing out. Downer’s left it in analysts’ and investors’ hands to figure out how much the company is likely to make in the 2024 financial year if Tompkins and Ashcroft are that sure in the turnaround story, they could put an expected FY24 earnings figure or a margin out with its full-year results next week. If there was one thing the update was missing, it was earnings guidance. It settled to be 3 per cent lower at $4.30 a share after the first hour of trade. ![]() The stock was bouncing around early on Thursday, and was down as much as 5 per cent at one stage. The market didn’t love the update – perhaps it was expecting a little more. If Tompkins can get the other fund managers sniffing around his turnaround story to buy in, then there should be real value created for shareholders. If he keeps it on track for another six months or so, Downer may be back out of the investor sin bin and farewell other basket cases like Bank of Queensland, Star Entertainment Group, Link Administration Holdings and Incitec Pivot.ĭowner’s shares have already rebounded – the stock is up 47 per cent since the lows at the end of February – which is welcome news for existing shareholders, but it’s also the easy gains. He isn’t turning to M&A or pulling any tricks to get Downer out of the sin bin, just his “not wild” strategy to realise value for shareholders. So, six months into the top job, Tompkins is making the right noises. Tompkins said full-year earnings were “well below where they should be for a business like ours”, but were a good first step. They also took some heart in Downer’s $173 million net profit for FY23, which was on an after-tax and amortisation basis and is still subject to final audit, but in the middle of its guidance range. They will be after capital returns in the not-too-distant future. The main thing for them was cash conversion (much stronger in the second half), and Downer’s balance sheet (stronger with net debt at two times EBITDA, and should be made stronger from recent asset sales). That mix of old and potential new investors tuned into Tompkins’ update on Thursday morning. The non-cash impairments are about clearing the decks and winning new investors. Most of the write-down harks back to Spotless Group, which Downer acquired in aggressive circumstances in 2017. Tompkins, now flanked by former Healius/CIMIC executive Malcolm Ashcroft as chief financial officer, has written down the company’s assets by $549.6 million. It was enough to keep the big shareholders happy.Ī few months later, the new CEO is back doing new CEO things. ![]() It was “not wild” by his own admission, but about discipline: an EBITA margin target, cost outs and simplification. Tompkins put his vision to those angry investors in late April. He was appointed under huge pressure from investors, fed up with years of drama and poor capital allocation. That change is Peter Tompkins, father of three and a former lawyer, who is six months into the top job. Downer EDI is one of this year’s sin bin stocks.īad contracts, write-downs, earnings misses, a corruption investigation, boardroom turnover (four directors have gone this year including Grant Fenn who was managing director for 12½ years) all led to a furious shareholder base, and long-overdue change.ĭowner EDI CEO Peter Tompkins fronted investors at an investor day in April, and was back on Thursday morning with an update. ![]()
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