- Engineering services group Downer (DOW) slashes its profit guidance and flags “accounting irregularities” in its utilities arm
- The company says it has found irregularities involving the historical misreporting of revenue and work in progress in one of its maintenance contracts
- Downer estimates it overstated earnings from the contract by between $30 and $40 million between September 2019 and November 2022
- On the back of the earnings overstatement, and alongside tough weather conditions and cost-to-serve issues, Downer has cut its full-year profit guidance to between $210 million and $230 million for FY23
- Shares in Downer are down 21.6 per cent to $3.77 at 3:01 pm AEDT
Shares in engineering services group Downer (DOW) have lost more than a fifth of their value in one day after the company slashed its profit guidance and flagged “accounting irregularities” in its utilities arm.
The company on Thursday morning told investors it had identified irregularities involving the historical misreporting of revenue and work in progress in one of its maintenance contracts.
Downer has now launched an investigation into the issue, which the company said had been occurring for over three years between September 2019 and November 2022.
While details are currently preliminary, Downer estimated it had overstated earnings for the contract by between $30 and $40 million over the three financial years leading to the end of November this year.
“Any potential ongoing impact on earnings is still being determined,” Downer said in a press release.
The news comes just one week after Downer announced the retirement of longstanding CEO Grant Fenn.
On the back of the earnings overstatement, and alongside tough weather conditions and elevated cost-to-serve issues, Downer has cut its full-year profit guidance to between $210 million and $230 million for FY23.
Previously, the company had forecast growth of between 10 per cent and 20 per cent on its FY22 net profit after tax results of $225.3 million — meaning today’s reduction could equate to as much as $60 million.
“Although the business has a general skew to the second half, we think that the challenge for the last seven months of FY23 has become too large,” Mr Fenn said.
“Our Road Services and Utilities businesses have been heavily impacted by weather, and all businesses have been battling with staff shortages and supply chain issues. These issues are dissipating but not in time for 2023 earnings.”
The company said its new guidance assumed there would be no further material impacts to its bottom line from COVID-19, weather, labour shortages or “other disruptions”.
Shares in Downer fell 21.6 per cent to $3.77 at 3:01 pm AEDT.