Cost-Outs and Improving Operational Performance Expected to Drive Earnings Gains for Downer

Downer is a major domestic infrastructure, rail, engineering, and maintenance business. The company is chiefly exposed to the domestic rail, water, road, and telecommunications sectors. The future of Downer is focused on urban services, with mining and high-risk construction businesses sold down. Downer does not have a moat despite position, scale, and strong customer relationships. Contracting is a difficult industry in which to establish a moat, and Downer in the past decade underperformed from an operational and financial perspective as a result of miscalculating contract risk, poor project management, and unsatisfactory project execution.