Step 3 - Downer EDI KCQ's

Enabling Communities to Thrive

KCQ – What does Downer EDI do?

Downer EDI is a one-stop-shop for all your infrastructure needs. Before being allocated this company for the assignment my knowledge of Downer EDI was somewhat limited and potentially misguided. Initially I knew Downer EDI to be a mining company and although they definitely have their finger in the mining pie, they are so much bigger and broader than that. Downer EDI is Australia’s Leading provider for things such as transport, airports, bridges, telecommunications infrastructure, power and gas distribution, renewable energy, water, commercial buildings, power and energy infrastructure, industrial and marine infrastructure, and defence infrastructure (Downer Group, n.d.). Essentially Downer EDI’s operations can be structured into 4 key sectors, Transport, Utilities, Mining & Resources, and Facilities Management.

The transport sector provides services such as road network management, routine maintenance, asphalt laying and rail infrastructure development. In other words, no matter how you get to work or school every day, it is almost guaranteed that Downer either made it happen or is making sure it continues to run smoothly. Transport is currently (as of FY2024) Downer EDI’s best financially performing sector.

Downer EDI offers services in utilities such as power, gas, water, renewables and communications. This sector is responsible for planning, designing, constructing, operating and maintaining for utility companies throughout Australia. (Downer Group, n.d.)

The mining and resources sector (the only thing my uninformed brain thought Downer EDI provided) provides mining companies with services such as drilling, exploration, planning and management (Bloomberg L.P, n.d.). This was previously one of their biggest sectors however was recently replaced by the transport sector.

Finally, the facilities management sector which is currently run by one of Downer EDI’s subsidiaries Spotless Group Holdings. This sector provides countless facility services such as cleaning, catering and building maintenance to corporate clients throughout Australia and New Zealand.

The broad nature of the infrastructure that Downer provides, means that they are Australia’s, and in some cases New Zealand’s, go to company to manage, maintain and build government and commercial infrastructure.

KCQ – What is Downer EDI’s Business Strategy?

Downer EDI’s business strategy really seems to align with its overarching purpose of “Enabling communities to thrive.” In 2023, they redefined this purpose to reflect a broader societal shift towards sustainable development (Downer EDI Limited, 2023). From what I gathered, they’re not just focusing on safety anymore (though that’s still a priority); they’re now actively pushing into more environmentally and socially responsible directions. To me, this shows they’re genuinely trying to make a difference—not just within the company, but in the communities, they operate in.

Their emphasis on supporting the energy transition and fostering community well-being reinforces that message. I find it very admirable to see a corporation of Downer's size take serious steps toward betterment, specifically social and environmental responsibility. With their influence over big infrastructure projects across Australia and New Zealand, they are in a position to set a precedent—and if they're headed towards a sustainable future, then that sends an extremely strong message to other corporations that change needs to happen and can be achieved.

In terms of strategy, Downer has some clear areas of interest that were apparent to me: selective tendering, cost-effectiveness, and investment in renewable energy. As I did it, selective tendering means them choosing projects that align with their strengths and values—basically, doing work that aligns with their purpose and results in steady, long-term revenue. Cost efficiency also seems to be a big theme across their recent annual reports. They’re running internal programs to streamline operations and improve financial performance, which is pretty common in big businesses, but still important. What really caught my interest though is their growing investment in renewable energy—things like solar, hydro, and wind. It feels like this move strongly reflects the sustainability shift they’ve been talking about and backs up their commitment to community and future-focused development.

KCQ – Downer EDI’s Annual Reports – What do they say?

The CEO and Chairman’s reports in recent annual reports have provided valuable insights into the company’s performance during the respective financial years, as well as strategic priorities for the year ahead. After reading those sections, I found it easier to make sense of the financial statements, since they helped frame what I was looking at and why certain figures stood out.

Downer EDI went through a bit of a rollercoaster over the 2021 to 2024 period, which I think reflects not only the broader impact of COVID-19 but also some deep-rooted internal shifts within the company. What stands out to me is how each year tells a different story — from recovery to restructuring to cautious optimism.

Starting with 2021, it felt like Downer was in recovery mode, just like so many other companies trying to steady themselves after the chaos of 2020. Their NPAT jumped to $183 million after a huge loss the year before (over $150 million in the red), which tells me they were focused on stabilising core operations and getting their financial house back in order. While the financial statements don’t go into extreme detail about this shift, it seems like Downer was trying to prove to stakeholders that they could bounce back and keep the business ticking over. Personally, I think that year was more about survival and rebuilding trust than innovation or expansion.

Then came 2022, and while the results weren’t catastrophic, there was a definite step back — NPAT fell by around $30 million. It’s not a huge drop on the surface, but it raises questions about momentum. From what I gathered, this dip was largely due to restructuring costs and some ongoing operational challenges, which the company openly discussed. That kind of transparency stood out to me — they weren’t trying to hide the issues but seemed to be acknowledging that they were in the middle of a much bigger transition. In my view, this was a year of recalibration. They were probably trying to streamline, maybe cut some fat, and set things up for a more focused long-term strategy.

2023, though — that one really grabbed my attention. When I first saw the net loss of $385 million, I honestly thought I’d misread it. Losses happen, but this was huge, especially after they'd been working so hard to bounce back. It was only when I dug deeper that things started to make sense. The loss was mostly driven by a massive $483 million goodwill impairment, which related to their Facilities and Utilities Australia operations. From what I understand, this means those units just weren’t performing to expectations anymore, and market conditions forced them to reassess their value on the books.

Now, goodwill impairments aren’t unusual in big companies — especially during structural changes — but the scale of this one suggests something deeper. It signalled to me that Downer had overestimated the long-term value of these operations, and with the new leadership stepping in, they weren’t going to keep pretending everything was fine.

Speaking of leadership, 2023 also saw the appointment of Peter Tompkins as CEO and Managing Director. That’s not just a name change on the letterhead — new leadership often brings new priorities, and in this case, it seemed to mark a real pivot in company direction. To me, it looked like Downer was finally ready to get serious about change. They weren’t just patching things up anymore; they were starting from the inside out — reviewing operations, cutting what wasn’t working, and trying to set up a more resilient structure for the future. It gave me the impression that while 2023 was brutal on paper, it might’ve been the shake-up they actually needed.

And finally, in 2024, it felt like some of that hard work started to pay off. NPAT was back in the black at $82 million, which isn’t record-breaking but is a solid turnaround considering where they were just a year prior. Revenue did dip slightly (around 5%), but what really stood out to me was the $400 million boost in free cash flow — that’s huge. It tells me they’ve made operational improvements that are having a real financial impact. Plus, the 30% increase in dividends is a major vote of confidence to investors. You don’t increase dividends unless you believe the business is on the right track.

In my opinion, the contrast between 2023 and 2024 says a lot. You can see the consequences of deep restructuring, but also the beginnings of a more focused and efficient business model. The leadership change, the transparency around impairments, and the improved cash flow in 2024 all point to a company that’s working hard to right the ship — not just to impress shareholders in the short term, but to build a stronger base for the future.

KCQ – Downer EDI – What do I think?

Initially when I was allocated Downer EDI as a company, I wasn’t too excited because I thought it would just be another big company with huge profits and nothing really to talk about. Whilst they are quite a large company with great profits, I have also found the recently appointed CEO Peter Tompkins to be very knowledgeable in how to really look at the operations of a company and figure out its weak and strong points to turn it around. I think Downer’s purpose of helping the community thrive is respectable and I genuinely appreciate the work that they have put into Australia’s infrastructure. I think it’s something that I take for granted when using roads or trains or even everyday power usage. Downer EDI is a well-built company with strong foundations for a sustainable and profitable future.