Downer EDI, an Australian contracting company, has announced that it expects to incur a net loss after tax of approximately A$386 million ($252.52 million) for the fiscal year 2023 due to impairment charges against its facilities and utilities units. The news caused Downer EDI’s shares to drop nearly 6% to A$4.17, marking their largest intraday loss since February 27.
The company revealed that it would recognize a non-cash, pre-tax impairment charge of A$549.6 million for the year ending June 30, 2023. The impairment is attributed to increased debt costs and challenging market conditions affecting Spotless, Downer EDI’s cleaning and maintenance business that serves the defense sector.
This unexpected impairment charge has come as a shock to the market, particularly considering that the company has already downgraded its guidance twice since December 2022. The update sparked concerns among investors, especially with the release of Downer EDI’s financial results slated for next week.
Downer EDI revised its fiscal 2023 forecasts following lawsuits alleging breaches of disclosures related to a maintenance contract, as well as the disclosure of accounting irregularities in December. The company’s CEO, Peter Tompkins, acknowledged the ongoing organizational changes and stated that despite these challenges, they have delivered underlying earnings consistent with previous communications.
This development highlights the importance of maintaining a balanced viewpoint when analyzing business performance. Downer EDI continues to navigate a period of significant transformation, facing hurdles in multiple sectors. As the company addresses these issues and implements necessary changes, investors and industry watchers will be closely monitoring its progress.
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