Investors in Downer EDI Ltd (ASX: DOW) are seeing strong gains today after the company unveiled its FY25 results.
Shares in the ASX 200 industrials stock are changing hands at $7.30 apiece at the time of writing, marking a 5.3% jump from yesterday's close.
It appears the market has welcomed Downer's FY25 numbers with today's rally also pushing its share price to a 12-month high.
This surge has now seen Downer's share price rise by 37% since the start of the year to outperform the broader market by some distance.
For comparison, the All Ordinaries Index (XAO) is up by 9.5% during the same period.
Let's take a closer look at how the year played out for this ASX 200 stock.
Image source: Getty Images
FY25 results snapshot
Downer's FY25 performance offered encouragement for investors despite revenue edging lower.
Revenue on a pro-forma basis came in at $10.6 billion, down by 2.5% from the prior year.
The ASX 200 stock generated organic revenue growth across its power and water divisions, as well as its rail and transit services unit.
This was offset by softer results in its Australian road services arm and parts of its New Zealand operations.
Revenue was also impacted by the divestment of several businesses during the year.
That said, management emphasised its strategy focused on improving revenue quality and simplifying its project portfolio.
This includes exiting underperforming contracts to drive stronger operational outcomes.
And on the earnings front, Downer appears to have kicked plenty of goals in FY25.
Underlying net profit after tax (NPATA) of $279.4 million jumped by 33% year-on-year, coming in at the upper end management's guidance.
Underlying operating earnings (EBITDA) of $474.2 million grew by 24.5%.
The company's EBITDA margin of 4.4% also impressed, rising from 3.2% in FY24 and topping management's target of 4.2%.
Free cash flow of $323.9 million increased by 14%, with cash conversion of 98% also beating the company's 90% target.
And the strong cash flow performance helped the ASX 200 stock strengthen its balance sheet.
Its net debt to EBITDA ratio improved to 0.9x after coming in at 1.4x at the same time last year.
What else happened?
Shareholders were also rewarded after the board of directors declared a final fully franked dividend of 14.1 cents per share.
This takes the total dividend for FY25 to 24.9 cents per share, up by 46.5% on the prior year.
In conjunction, Downer announced its plans for an on-market share buyback totalling up to $230 million.
This represents about 5% of the issued capital for the ASX 200 stock.
What next?
Looking ahead, Downer did not provide detailed guidance for FY26.
However, management pointed to operational momentum and greater stability for its business following the completion of its portfolio simplification campaign.
It expects underlying revenue to be flat or marginally lower than its FY25 pro forma numbers.
The ASX 200 stock is also targeting improvements for both its FY26 underlying earnings and EBITDA margin.
In the longer term, Downer plans to make investments to modernise its work practices.
This could involve standardisation and digitisation, as well as the adoption of AI to drive productivity, boost customer experience, and improve cost efficiency.
