Downer share price edges higher on military contract win

A young bearded man wearing a white t-shirt with a yellow backdrop holds up his arms to his chest and points to the camera in celebration of ASX shares rising todayA young bearded man wearing a white t-shirt with a yellow backdrop holds up his arms to his chest and points to the camera in celebration of ASX shares rising today

The Downer EDI Ltd (ASX: DOW) share price is in fine form on Friday morning. This follows the company’s after-market announcement yesterday that it has been awarded a contract from the Department of Defence.

At the time of writing, the integrated services company’s shares are up 0.55%, trading at $5.52.

Downer awarded redevelopment contract

In its release, Downer advised it has been selected to deliver the planning phase of the Australian Defence Force’s proposed Riverina Redevelopment Program.

The planning phase is expected to generate $30 million in revenue for Downer, and will involve a number of works. This includes planning, standardising design, cost and time efficiencies in program approvals and construction packaging/delivery.

Downer advised that the planning phase would start this year and be completed by late-2023.

Furthermore, a delivery phase may follow through, subject to government and parliamentary approvals. This would involve an estimated $1.1 billion worth of works for the joint venture over five years.

The redevelopment program comprises of a 50/50 joint venture with CIMIC Group Ltd’s (ASX: CIM) construction group, CPB Contractors.

The Australian Defence Force is seeking to upgrade existing infrastructure and facilities across three military sites. Redevelopments include:

  • Construction of new messing and live-in accommodation
  • Construction of new training facilities
  • Refurbishment and upgrading of existing buildings
  • Construction of new car parks
  • Remedial works and upgrades to infrastructure services.

This incorporates the RAAF Base in Wagga, the Albury-Wodonga military area, and the Kapooka military area.

What did management say?

Commenting on the award, Downer CEO Grant Fenn said:

This contract reflects Downer’s strong credentials that stem from an 80-plus-year relationship with the Department of Defence.

In that time, our Defence business has expanded to include the Department of Defence, the Australian Defence Force (ADF) and other Commonwealth national security agencies.

We look forward to working closely with the Department to develop these important Defence facilities, which is proposed to support Defence capability for the next 30 years.

About the Downer share price

A challenging couple of months led the Downer share price to touch a 52-week low of $4.79 in early March.

Nonetheless, its shares have since rebounded to trade around February levels between $5.00 and $5.60.

Year to date, the company’s shares are down 8%.

Downer commands a market capitalisation of around $3.71 billion, based on today’s price.

The post Downer share price edges higher on military contract win appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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