Shareholders of Downer EDI (ASX:DOW) received disappointing news on Thursday, a week after management provided a glimpse into the company's disappointing performance and losses during the 2022-23 financial year.
The company announced a reduction in its final dividend to 8 cents per share, down from the 12 cents paid in the latter half of 2021-22. Coupled with the 5 cents interim dividend (previously 12 cents), shareholders are now facing an almost 50% decrease in their total dividend payout for the year ending in June, compared to the 24 cents per share distributed in 2021-22.
Given the disclosed issues including problematic contracts, inadequate accounting oversight, and weak board-to-management leadership, shareholders have valid reasons to feel aggrieved about bearing the consequences of the company's underperformance.
A silver lining for shareholders is the fact that the share price has risen by 18% year to date. This positive movement is attributed to the market's acceptance of the company's efforts to address contract and management issues, which were unveiled in late 2022 and the initial months of this year.
Thursday's financial report underscored the impact of impairments, revealing a loss of $386 million as a consequence of the update provided a week earlier. This starkly contrasted with the $140 million net profit recorded for the year ending in June 2022.
Excluding the effects of the impairments, the company reported an underlying net after-tax profit of $174.2 million and underlying EBITA (earnings before interest, taxes, and amortization) of $323.4 million. Over the year, revenue saw a 5.4% increase, reaching $12.6 billion.
Chairman Mark Menhinnitt acknowledged in the annual report that "Downer's FY23 full-year results were below our expectations, but we are encouraged by our improvement in the second half and the positive momentum we are carrying into FY24."
"As a Board, we are committed to collaborating with our CEO Peter Tompkins and the Executive Leadership Team to enhance contract performance, fortify Downer's risk management framework, and achieve margins in line with our target of at least 4.5% EBITA margin in FY25. The Board firmly supports Peter's vision and strategy to transform the company."
