Tabcorp, Downer profits fall as both face industry challenges
Engineering firm Downer EDI has reported a 14pc fall full year profit to $180.6 million as the slowdown in the resources sector hit home.
However, chief executive Grant Fenn is not waiting for a pick-up in mining, signalling he was pushing ahead with plans to concentrate on winning major infrastructure and transport work.
“Whilst Downer faces continued pressure in its resources-based businesses, the company is successfully transitioning for the growth in public infrastructure and service delivery,” Mr Fenn said.
“Over 55 per cent of group revenues are generated from servicing public infrastructure customers in Australia and New Zealand and this percentage will rise as we grow our transport, utilities, technology and communications, defence and rail businesses.”
Mining and the mining-focussed engineering divisions reported declines of 2 per cent and 19 per cent in earnings before interest and tax (EBIT) respectively.
Transport services and utility services were standouts with EBIT increases of 17 and 22 per cent.
“Furthermore, our work in hand has increased from $18 billion to $18.6 billion over the past six months and this growth has been driven by transport services, utilities services and technology and communications services,” Mr Fenn told shareholders.
Mr Fenn gave guidance that Downer is targeting a net profit of around $170 million for the 2017 financial year – excluding any major rail-related bid cost write-offs.
Dividends remained flat at 12 cents a share.
The market warmed to the result, pushing Downer up 7 per cent to $4.46, its highest level in 12 months.
Tabcorp profit drops 49pc on court battle, UK business
Gambling outfit Tabcorp has seen its full-year profit dragged down by a legal action over money laundering, as well as a bid to establish a new business in the UK.
Full-year net profit was down 49 per cent to $169 million, despite a 1.5 per cent increase in revenues to $2.2 billion.
Tabcorp noted civil proceedings initiated by the Australian Transaction Reports and Analysis Centre (AUSTRAC) cost it $13.6 million last year.
The action, under Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) laws, centres on allegations of a number of credit-betting incidents totalling millions of dollars with customers AUSTRAC deemed to be “high risk.”
In April AUSTRAC expanded its Federal Court action with another 61 alleged contraventions bringing the total number incidents under investigation to 236.
At the time AUSTRAC chief executive Paul Jevtovic described the allegations as “serious” and said they reflected a systemic pattern of non-compliance over a number of years.
The maximum penalty for an individual contravention under the AML/CTF act is $18 million.
Costs to establish a new online wagering business with News Corporation in the UK amounted to $14.4 million, although these were partially offset by a $12 million income tax benefit.
Underlying profit – excluding the one-off items – was up 8.5 per cent to $185.9 million.
The full-year dividend was up 20 per cent to 24 cents per share.
Tabcorp shares remained flat on the results, trading at $4.85 by 11:30am (AEST).