Downer EDI's FY profit jumps

Engineering and construction group warns of increased revenue uncertainty for the coming year on fewer new capital works.

Downer EDI (DOW) has warned of increased uncertainty in revenue streams for the year ahead, due to fewer new major capital works in the resources sector, despite posting a lift in full-year profit.

In the year to June 30, the group said net profit before individually significant items was $215.435 million, 10.4% higher than the $195.22 million recorded in the previous corresponding period.

In the same period, total revenue from ordinary activities was $8.375 billion, 3.8% higher than the $8.071 billion posted in the prior year.

Downer announced a final dividend of 11 cents per share, 7.7 cents of which was franked, payable on September 24.

Combined with the group's interim dividend of 10 cents, Downer declared a total 2013 dividend of 21 cents per share, 14.7 cents of which was franked.

Earnings before interest and tax before individually significant items were $370.333 million, a 6.9% increase from $346.483 in the prior year.

Downer chief executive officer Grant Fenn said the results demonstrated the robustness of the business in a difficult market.

The group said in the coming year it expects a reduction in new major capital works in the resources sector, a greater emphasis by mining customers on optimising their volumes and cost of production, and budgetary pressure on the level of government expenditure on road and rail maintenance (see Roger Montgomery's Inside the mining services disaster).

The company's short-term focus is on securing its revenue base and continuing to drive down costs through improved project execution.

In the group's infrastructure business, revenue increased 13.1% to $5.2 billion due to better project execution and cost control, while EBIT rose 33.2% to $230.3 million.

"The majority of Downer Infrastructure's work comprises contracts that are valued at less than $30 million and are recurring in nature and this makes the business more resilient through economic cycles," Mr Fenn said.

In mining, revenue grew 3.7% to $2.6 billion as market conditions remain challenging, with customers seeking to reduce costs, while EBIT lifted 0.4% to $174.2 million.

"After several years of very strong growth, the 2013 financial year was one of consolidation and contract execution for Downer Mining," Mr Fenn said.

In the rail business, revenue lifted four% to $1.3 billion and EBIT fell 22.7% to $59 million.

The Waratah Train Project was now running to schedule, Mr Fenn said. 

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