Downer EDI Selected By Chorus For 2019 Field Services Agreement

Downer EDI Limited (ASX: DOW), is a company from the industrials sector that designs, builds and sustains assets, infrastructure and facilities and is also the leading provider of integrated services in Australia and New Zealand.

On 14 May 2019, the company declared that it had been chosen for 2019 Field Services Agreement by Chorus Limited. This agreement is for a period of 2 years and 9 months. Through this Field Services Agreement, Downer EDI will provide field services from the Waikato to the Lower South Island. Further, this agreement will generate a revenue of approximately $220 million to Downer.

The agreement consists of reactive maintenance and provisioning services, network maintenance routines, cable locates as well as build services work, which would commence from July 1, 2019.

Based on the Field Services Agreement, the Chief Executive Officer of Downer, Grant Fenn, stated that this agreement would expand the delivery of extensive network maintenance and build services of the company in New Zealand.

Mr Fenn also highlighted that Downer EDI has a long-term relationship with the Chorus. The New Zealand team of DOW is the leading provider of the communication solutions along with the end-to-end technology. Further, with this Field Services Agreement, the company’s geographic spread has got doubled. The company will continue to work with the Chorus on the construction and maintenance of their network.

Chorus is a New Zealand based company. It is into the business of building, as well as managing an open-access internet network, rolling out ultra-fast broadband that will benefit generations to come. The company works with the phone and broadband providers to keep the people of New Zealand connected via a range of products and services.

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In the Macquarie Australia Conference Presentation, CEO Grant Fenn highlighted the company’s 1H FY2019 results. During the 1HFY2019 period, there was a growth in the NPATA by 23.8% as compared to the previous corresponding period. The total revenue in the 1H FY20-19 increased by 8.6% to $6,623.0 million, EBITDA by 20.6% to $268.0 million and operating cash inflow of $355.3 million.

He also highlighted that the company’s Urban Services businesses had contributed 80% of the Downer’s EBITDA.

Urban Services (Source: Company’s Report)

The company has work in hand of $43.5 billion.

In FY2019, the company’s NPATA guidance is of $352 million before minority interests. The FY2019 operational and financial goals are as follows:

  • Zero Harm: The company will ensure to provide its employees with a safe environment with improving injury rates and well-being.
  • Growth: In FY2019, the company aims to deliver an EPS growth of 19%.
  • Cash flow: The company also seeks to maintain a strong cash flow conversion consistent with recent periods.
  • Balance sheet: The company will aim to maintain a conservative gearing position, providing flexibility to the balance sheet to support growth.

The DOW stock has generated a decent YTD return of 16.92%. The shares of DOW last traded at A$7.840 (as on 14 May 2019), down by 1.135% as compared to its previous closing price. Downer EDI holds a market capitalization of A$4.72 billion with A$594.7 million outstanding shares and a PE ratio of 22.050x.


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