Well, well, things are looking up for shareholders in Sydney-based engineering group Downer EDI (DOW).
Another six months has passed and there are no unwelcome surprises in the shape of earnings downgrades, profit warnings or asset impairments or other mishaps (such as the troubled Sydney suburban train contract which now seems to be on track).
In fact the news yesterday was modestly positive with net profit of $99.1 million ahead of market forecasts of a profit of around $95 million.
That was despite a sharp fall in revenue for the year as the company felt the tightening in the resources sector.
And interim dividend was raised to 11c a share from 10c, joining interim dividend boosters such REA Group, JB Hi Fi, Argo Investments and Country Road (which resumed paying dividends this half year).
Earnings before interest, tax, depreciation and amortisation fell to $297.5 million from $324.2 million in the December 2012 half year.
Revenue for the half fell 16.7% t to $3.9 billion, with the rail division down a sharp 19.3% to $600 million, while the largest of all was the 23.2% in mining division revenue to $1 billion.
The company’s core infrastructure division saw revenue slide 12.6% to $2.3 billion.
Gearing, including off-balance sheet debt, stands at 16.2%, which leaves the group "well positioned for opportunities".
But Downer all but ruled out bidding for Forge Group (FGE), the troubled Western Australian engineer which has run into problems with two power station projects.
CEO Grant Fenn indicated that such a move couldn’t be ruled out totally, but added that the due diligence would have to be very good.
DOW 1Y – Another six months without a shock from Downer EDI
Looking at the half year, Mr Fenn said, "Despite revenues being down in each of our three divisions the focus on cost reduction, productivity improvement and capital management has delivered an improved result and put the Group in a good position to achieve its full year forecast of $215 million NPAT".
He said that while revenue fell in Australia by 18%, "early action to reduce costs has substantially reduced the negative impact on earnings".
Also helping was a lower tax rate (just over 27% compared with more than 31% previously). As well corporate and interest costs fell by a combined $51 million in the half year.
These may be one-offs, so the apparently good result at the half year might not turn out to be so rosy in the full year figures.
“The environment has been very challenging and the business has responded well by reducing costs and securing forward revenue.
"One of the very pleasing and important elements of the past six months is the strength of the Work-in-hand, which has increased from $19.0 billion to $19.6 billion.
Mr Fenn said that 67 Waratah trains were now available for passenger service and the last train had departed China on its way to Cardiff. He said he anticipates that the 78th train will be presented to Transport for NSW this May.
Looking to the rest of 2014, the company is confident previous guidance can be met.
"As expected, the 2014 financial year has been characterised by a reduction in new major capital works in the resources sector, a greater emphasis by mining customers on optimising their volumes and cost of production and budgetary pressure on the level of Government expenditure on road and rail maintenance.
"As a result, 2014 has so far been a year of consolidation rather than growth and this is expected to continue through the full year.
"That said, the performance of the Group in the first half of the year, including the focus on costs and efficiency, suggests that Downer is on track to meet its forecast NPAT of around $215 million for the 2014 financial year," directors said yesterday.
The shares fell 6c to $4.80, not a bad performance given the nervy selling rush in the wider market yesterday.
