Downer Group’s shares tumbled 11.7% to A$6.58 after the infrastructure contractor posted a 10% increase in underlying profit for FY2026 but issued a cautious outlook for the first half of FY2027.
The company reported underlying net profit after tax and amortisation (NPATA) of A$306.7 million, up from A$278.8 million a year earlier, while statutory net profit after tax surged 51% to A$225 million. Underlying earnings before interest, tax, depreciation and amortisation (EBITA) rose 6% to A$503 million, with margins improving to 5.1% from 4.4% in FY2025. Revenue declined 4.6% year-on-year to A$9.9 billion, though pro forma revenue adjusted for foreign exchange fell 2.8%.
Management maintained its dividend at A$0.292 per share, including a final payout of A$0.163 per share, fully franked. The company also continued its share buyback program, having repurchased roughly 37% of the A$5% allowance announced in September 2025.
Cash conversion remained strong at 91.1%, exceeding the >90% target, while net debt fell 2% to A$254 million. Net debt to EBITDA improved to 0.8 times, down from 0.9 times a year earlier and well below the 1.5 times target. Interest cover strengthened to 10.6 times, though interest expense declined to A$68 million.
Segment performance varied, with energy and utilities EBITA up 20% to A$140.9 million, driven by higher margins and new contracts, including a A$500 million maintenance deal with Chevron. Transport EBITA rose 6.8% to A$297 million, supported by government infrastructure projects in Australia and New Zealand. Facilities EBITA increased to A$143.5 million, with a A$3 billion defense contract and a long-term partnership with Stockland contributing to growth.
The company’s order book expanded 10% to A$38.5 billion, with 93% services-based and 90% government-related. Total new work secured during the year reached A$12.2 billion, covering over 70% of FY2027 revenue.
Looking ahead, Downer expects FY2027 revenue and earnings growth but cautioned that first-half performance would trail the prior period due to higher capital and transformation spending. Capital expenditure is projected to rise to 1.8%-2% of revenue, while transformation spending is set to increase to A$70 million and operating expenditure by A$20 million. Interest expense is also expected to climb.
Longer-term guidance includes annual revenue growth of 4%-5% through FY2030 and an EBITA margin target of about 6% by FY2030. The company’s three-year total shareholder return stands at 118%, outperforming the ASX 100 median excluding financials by roughly sixfold.
