ASX 200 share Downer crashes 21% on lower profit and guidance

The company has slashed its interim dividend by 58%.

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Key points
  • The Downer share price is plummeting 21% at the time of writing to trade at $3.145
  • It comes after the company revealed its profit fell 20% year-on-year in the first half and downgraded its full-year guidance
  • Meanwhile, it's replaced the team responsible for the $22 million accounting error

The share price of S&P/ASX 200 Index (ASX: XJO) industrials company Downer EDI Ltd (ASX: DOW) is plummeting after it posted disappointing half-year earnings.

Right now, the stock is down 20.58%, trading at $3.145.

Person with thumbs down and a red sad face poster covering their face.

Image source: Getty Images

Downer share price crumbles on disappointing earnings

Here are the key takeaways from the engineering, construction, and maintenance business' first half results:

  • $68.1 million of profit ­– a 20.3% fall on that of the prior comparable period (pcp)
  • $6.1 billion of revenue – up 2.9%
  • $129.8 million of earnings before interest and tax (EBIT) – down 22.5% on the pcp
  • Basic earnings per share (EPS) slipped 21.8% to 9.3 cents
  • 5 cent per share final dividend declared – down from the pcp's 12 cent offering

The company said that, while it posted higher revenue, its earnings were impacted by unprecedented weather, labour shortages, and contract and project losses in its utilities segment.

Its utilities segment saw its revenue lift 12.3% to $1.1 billion. However, its earnings before interest and tax and amortisation of acquired intangible assets (EBITA) plunged to a $5.2 million loss.

Meanwhile, its transport segment saw a 1.2% increase in revenue to $2.7 billion while its EBITA fell 14.5% to $88.7 million. Finally, its facilities segment brought it $2.3 billion of revenue and $99 million of EBITA – up 11.8% and 11.1% respectively on the pcp.

Downer's expenses also rose 3.3% last half to $178.2 million.

What else is going on with the company today?

As readers might remember, Downer revealed a major accounting error in December. It has provided an update on the mistake today.

The company has investigated the errors and is confident the misreporting is only related to one specific contract. All up, the error meant its post-tax earnings were overstated by $22.2 million between April 2020 and June 2022.

The utilities management team responsible for the contract has been replaced while the company has restated its earnings for the impacted period.

What's next?

The Downer share price might also be being weighed down by the company's second guidance downgrade of financial year 2023.

It previously dropped its forecasted profit after tax and before amortisation of acquired intangible assets (NPATA) to between $210 million and $230 million

Today, it dropped its outlook for the measure once more to between $170 million and $190 million.

The latest downgrade comes on the loss of a utilities contract, risk of water project losses, a slowdown in Government minor capital works, and the impact of storms and flooding in New Zealand. Though, the company expects the latter to provide opportunities in financial year 2024.

Downer share price snapshot

Today's plunge sees the Downer share price in the year-to-date red, having fallen 14% since the start of 2023. It's also currently down 37% over the last 12 months.

For comparison, the ASX 200 has risen 4% year to date and 3% over the last 12 months.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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