At the company’s annual general meeting, chairman Barry O'Callaghan said that notwithstanding non-recurring items, 2005-06 was a year that pointed to a strong future for the engineering company.
O’Callaghan said the disappointing end financial results for the company had masked an otherwise strong result and some outstanding performances; yet the company had learnt from its mistakes and was initiating a number of measures to mitigate any similar risks to the company in the future.
“Over the coming year, Downer EDI will have an even more rigorous approach to the contracts it enters into and will apply more stringent strategies to mitigate risks in the business,” O'Callaghan said.
“At the same time, the board recognises that we need to be careful that in the industries we are in, we do not get too risk averse, to the extent that we stifle our ability to grow.
“The reality is that in a booming infrastructure sector, risks are exacerbated by a shortage of resources, including skilled people.”
O'Callaghan said it was how the company managed these risks that was important and strategies would include seeking to improve its contract management processes, changes to the management teams in question and the establishment of an enhanced corporate commercial team.
In August, Downer EDI reported a net loss of $24.93 million, due to a $199 million provision for one-off costs linked to delays at Douglas Sands, Victoria and other construction projects.
However, its underlying profit came in at $137.75 million, underpinned by a 24% increase in revenue to $4.6 billion.
While Downer has been the subject of recent takeover speculation, managing director Stephen Gillies said today that earlier this year a takeover bid for UK engineering group AMEC subsidiary Spie was rejected principally on price; however, it demonstrates Downer EDI’s plans to seek larger and more international capability.
“This would have allowed the development of a truly international services business to compete with the likes of Worley Parsons,” Gillies said.
But Gillies did say the company was still considering acquisition possibilities; meanwhile, he said sales were already tracking slightly ahead of expectations at this point in 2006-07.
“At the top line, sales are a little ahead of expectations – offsetting this is some underperformance by the process engineering group, as a couple of contracts are completed this year that were the subject of provisioning in 2006,” he said.
O'Callaghan said he was confident about Downer EDI’s future outlook considering the company provides services to the buoyant infrastructure markets in Australia, New Zealand, Asia and the United Kingdom which are all continuing to show signs of growth.
