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Downer's first-half NZ revenue flatlines as Hawkins, utilities make up for slower transport sales

Thursday 7th February 2019

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Downer EDI's New Zealand business reported flat first-half sales as gains from its Hawkins construction and utilities businesses made up for weaker sales from transport infrastructure. 

Sydney-based Downer's revenue from the New Zealand and the Pacific Islands was largely unchanged at A$1.21 billion in the six months ended Dec. 31, lagging behind a group wide gain of 8.6 percent to generate sales of A$6.6 billion. 

The New Zealand transport division, which spans road and rail construction and maintenance, reported an 8.6 percent decline in revenue to A$499.7 million and noted a weaker performance from local transport infrastructure as weighing on earnings. 

The company still sees good prospects for transport infrastructure on both sides of the Tasman, but said the cost of bidding can be high and project risk can be significant. 

The Kiwi utilities business, covering electricity, water, gas and telecommunication infrastructure, posted an 8.5 percent increase in revenue to A$229.9 million, while its facilities unit, which includes the Hawkins construction company, lifted revenue 6.6 percent to A$477.2 million. 

Downer bought Hawkins in 2017 for A$55.4 million, expanding its presence in New Zealand and gaining capability in 'vertical' construction, a segment in which many local firms have struggled to maintain profitability over the past year. 

The company said there is a big pipeline of work for power and gas utilities in New Zealand and Australia, whereas large telecommunications projects are coming to an end. Still, increasing data usage will keep driving demand in that sector. 

Group net profit of A$141.4 million compared to a loss of A$15.9 million a year earlier, and the company increased its annual earnings guidance to A$352 million from an earlier forecast of A$335 million. Underlying earnings rose 24 percent to A$163.4 million in the six months ended Dec. 31. 

Downer's board declared an interim dividend of 14 Australian cents per share, up from 13 cents a year earlier. It will be paid on March 21 with a record date of Feb. 21. 

The ASX-listed shares fell 3.6 percent to A$7.285, and have gained 7.5 percent so far this year. 


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