This ASX 200 stock is surging 10% following a return to profit

Downer EDI Ltd (ASX: DOW) shares are catching the eye on Wednesday morning.

At the time of writing, the ASX 200 stock is up 10% to $4.74.

Investors have been scrambling to buy the integrated services provider’s shares following the release of its half-year results.

What did the ASX 200 stock report?

• Total revenue down 1.9% to $6 billion
• Underlying EBITA up 12.6% to $150.5 million
• Underlying NPATA up 11.9% to 76.1 million
• Statutory profit after tax up 5.9% to $72.1 million
• Interim dividend up 20% to 6 cents per share

What happened during the half?

For the six months ended 31 December, the ASX 200 stock returned to profit with a 5.9% increase in statutory profit after tax to $72.1 million. That was despite Downer reporting a 1.9% decline in revenue for the period.

Management advised that this was primarily driven by a recovery in earnings from the Utilities business compared to a loss in the prior year. In addition, an improved performance in the Projects business in New Zealand also helped.

In light of this profit rebound, the Downer board was able to increase its dividend by 20% to 6 cents per share. This represents a 58% payout ratio.

The ASX 200 stock’s CEO, Peter Tompkins, was pleased with the half. He said:

We said that FY24 would be an important transition year for Downer as we address areas of underperformance, stabilise, and reposition the business for future profitable growth.

Delivering double digit underlying EBITA and NPATA growth alongside solid underlying cash conversion during the half highlights the momentum we are building as we address underperformance and execute on our transformation agenda.

Outlook

No guidance was given for the full year but management has reiterated “that FY24 is an important year in the company’s turnaround program.”

Though, one positive is that “Downer anticipates continued EBITA margin percentage improvement in H2 through a combination of cost out and improving operational performance towards its management target of >4.5% in FY25.”

Downer shares are now up 21% over the last 12 months.

The post This ASX 200 stock is surging 10% following a return to profit appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro 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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