Downer EDI (NZX: DOW) lands NZ$490M road contract in Victoria

Downer EDI Limited (NZX:DOW), a provider of integrated services, announced today (28 October 2022) that it has received a road maintenance contract worth NZ$490 million. The contract is for a maximum term of seven-and-a-half years and begins in February 2023.

The company said that the contract was awarded by the Department of Transport and will be subject to annual budget reviews.

As per the contract, Dow is expected to deliver ‘routine maintenance, planned maintenance defect and hazard rectification’ for more than 8,500 kilometers of road in Victoria’s Hume region.

Grant Fenn, CEO, DOW, said that this would extend its partnership with the Department of Transport, maintaining 9,500 lane kilometers of state roads in Victoria.

As per the update, Downer is a leader in road services in Australia and New Zealand. It maintains more than 28,000 kilometers of roads across Australia and 25,000 kilometers across New Zealand.

Other contracts

Recently, DOW was also awarded a South Australian Housing Authority maintenance contract worth NZ$630 million. The work on it is scheduled to commence in January 2023.

The company reported that it would deliver 'reactive’ maintenance, vacant restoration, and minor works to 27,000 social and public housing units under the contract.

According to Grant Fenn,  this award shows Dow’s capability as a social housing maintenance service provider.

On 26 June 2022, Dow had been awarded two contracts worth NZ$800 million by Auckland for over a maximum term of 10 years. The contract started on 1 July 2022 for an initial five years with an option to be extended for another five years.

Downer’s FY22 performance

Downer reported a statutory net profit after tax of NZ$152 million and an underlying net profit after tax of NZ$225.3 million. Downer declared a final dividend of 12 cps, taking total dividends to 24 cps for the year. The company's total revenue was NZ$11,987 million with a statutory EBIDTA of NZ$358 million.

Further, the company revealed that it had exited non-core businesses like mining and hospitality and would now be focusing on its core urban services business. According to Downer, these businesses also have more predictable revenues and cash flows.

Stock update

On 28 October 2022, the stock was trading flat at NZ$0.00 at the time of writing this article.