Downer EDI has lifted half year profit by 8.5 per cent as its shift to rail, transport services and technology sectors help offset the continuing decline in its core mining services business.
Net profit in the six months to December 31 rose to to $78.2 million, while revenue edged 1.7 per cent higher to $3.6 billion.
“The results are strong in earnings and cash flow and trading to date indicates the company will be able to improve earnings for the full year,” chief executive Grant Fenn said.
The profit lift follows a disappointing couple of years that has seen the mining sector downturn affect its core business. Downer had also previously cut its full-year profit guidance after missing out on a large rail contract in NSW.
On Thursday, the company lifted its full year net profit guidance seven per cent to $175 million, from the previous forecast of $163 million.
The news lifted the company’s shares, adding 82 cents, or 13.1 per cent, to $7.07.
Downer EDI has built capability in other segments of its business, particularly in light rail design and construction and utilities services, in order to offset the decline in its contract mining business.
That plan has started to pay off, with earnings for the half year rising in its transport services, technology and communications, and rail and engineering businesses. Earnings continued to decline in the mining and utilities services divisions.
“Growth in transport and infrastructure will provide a buoyant market, we think, for a number of years,” Mr Fenn said.
The company continues to reposition the business to service increased investment and outsourcing in public transport, communications and defence sectors, he said.
The engineering group said it had record work-in-hand of $21.1 billion, boosted by major wins in the past six months that include a $2 billion Metro trains contract in Victoria and a $1.7 billion suburban trains contract for Sydney.
SHIFT FROM MINING LIFTS DOWNER’S PROFIT
- Half year net profit up 8.5pct to $78.2m
- Revenue up 1.7pct to $3.6b
- Interim dividend unchanged at 12 cents