Downer EDI Limited (ASX: DOW) shares have fallen over 5% today after the asset and infrastructure services provider withdrew its full-year guidance.
Uncertainty around the impact of coronavirus was to blame, with Downer previously targeting net profit after tax and amortisation of $300 million for the 2020 financial year.
Downer CEO Grant Fenn said, "our teams across the Group are working very hard to ensure that our critical services are as resilient as possible in the current environment and we are working closely with our customers around planning and business continuity. We are also implementing a ranger of cost reduction initiatives across the Group."
Downer has a strong balance sheet with significant available liquidity and comfortable headroom in its bank covenants. As at December 31, the Group reported cash of $515 million and committed undrawn facilities of $1.14 billion. Downer's senior unsecured rating of 'BBB Stable' was recently confirmed by Fitch.
Suspension of mining review
Downer announced earlier this week that it had suspended the review of its Mining business, which was announced in August last year. The review had been examining a potential sale of the Mining business but was suspended due to market volatility caused by the coronavirus pandemic. The process in relation to the potential sale of Downer's Laundries business is continuing.
"We are making hard decisions due to the unprecedented impact of this crisis," Fenn said, "these decisions have been taken to position Downer for the future when the COVID-19 situation eases."
Downer's half-year FY20 results
In its half-year results released in mid-February, Downer reported a 3.3% increase in revenue, which grew to $6,838.5 million. Earnings before interest, tax and amortisation (EBITA), however, fell 19.9% to $214.8 million, with Downer adversely impacted by contract losses in its Engineering, Construction and Maintenance division.
Profit after tax from ordinary activities dropped 35.7% to $86.3 million. A dividend of 14 cents per share was declared, unfranked, compared with a 14 cent per share 50% franked dividend in the prior corresponding period.
Shares in Downer have now fallen over 60% from a high of $8.88 in January and are currently trading at $3.30 at the time of writing.
Downer reports that it has a strong pipeline of ongoing work, mainly with Government customers. It expects demand for the vast majority of its services will remain strong, despite the coronavirus pandemic, given its business is predominantly government and critical infrastructure.
