More annual reports from Dow:
2024 ReportPeers and competitors of Dow:
Hazer Group Limited Annual Report
2024
We are held together by our closely held values of family and relationships,
care and respect, excellence and integrity.
The Kauri connects us to Safety, the Rimu connects us to Delivery,
the Tōtara connects us to Relationships and the Kahikatea connects us
to Thought Leadership. These are our four Pillars upon which we build
‘Relationships creating success’. United and ready to move forward!
ACKNOWLEDGEMENT OF COUNTRY
Downer acknowledges Aboriginal and
Torres Strait Islander peoples as the First
Australians and the Traditional Custodians
across Australia. We would like to
acknowledge and pay our respects to
the Elders of the past, present and future
in maintaining the culture, Country and
their spiritual connection to the land.
WHAKATAUKĪ
Ko te whānau, ko te manaaki, ko te
kairangatira, ko te ngākau pono ngā
tikanga tuku iho hei korowai mo tatou.
Ko te Kauri i whakawhiwhi haumaru, ko
te Rimu i whakawhiwhi taonga, ko te
Tōtara i whakawhiwhi whanaungatanga,
ko te Kahikatea i whakawhiwhi
whakaaro matakite.
Ngā pou e wha i aumangea ai te
whakatauki ‘Mā te whanaungatanga
ka angitū’. Hui e! Taiki e!
In this Report
Chairman’s and CEO message
4
Highlights
6
Directors’ Report
10
Auditor’s Signed Reports
Auditor’s Independent Declaration
78
Independent Auditor’s Report
79
Financial Statements
Consolidated Statement of Profit or Loss
87
and other Comprehensive Income
Consolidated Statement of Financial Position
88
Consolidated Statement of Changes in Equity
89
Consolidated Statement of Cash Flows
90
Notes to the consolidated financial statements
A
About this
report
91–93
B
Business
performance
94–111
B1
Segment
information
B2
Revenue
B3
Individually
significant items
B4
Earnings per
share
B5
Taxation
B6
Remuneration
of auditor
B7
Subsequent
events
C
Operating
assets and
liabilities
112–129
C1
Reconciliation of
cash and cash
equivalents
C2
Trade
receivables and
contract assets
C3
Inventories
C4
Trade payables
and contract
liabilities
C5
Property, plant
and equipment
C6
Right-of-use
assets
C7
Intangible
assets
C8
Other provisions
C9
Contingent
liabilities
D
Employee
benefits
130–131
D1
Employee
benefits
D2
Defined
benefit plan
D3
Key
management
personnel
compensation
D4
Employee
discount share
plan
E
Capital
structure
and financing
132–141
E1
Borrowings
E2
Financing
facilities
E3
Lease liabilities
E4
Commitments
E5
Issued capital
and non-
controlling
interest
E6
Reserves
E7
Dividends
F
Group
structure
142–159
F1
Joint
arrangements
and associate
entities
F2
Controlled
entities
F3
Related party
information
F4
Parent entity
disclosures
F5
Deed of cross
guarantee
F6
Acquisition of
businesses
F7
Disposal of
businesses
F8
Disposal group
held for sale
G
Other
160–170
G1
New accounting
standards
G2
Capital and
financial risk
management
G3
Other financial
assets and
liabilities
Consolidated entity disclosure statement
171
Directors’ Declaration
177
Corporate Governance
178
Information for Investors
194
Important notice and disclaimer
The information in this report has been prepared by Downer EDI Limited ABN 97 003 872 848 (Downer or the Company). This report may contain statements
that are, or may be deemed to be, forward-looking statements. Such statements can generally be identified by the use of words such as “likely”,
“looking-forward”, “expect”, “predict”, “will”, “may”, “intend”, “seek”, “would”, “continue”, “plan”, “objective”, “estimate”, “potential”, “anticipate”, “believe”, “risk”, “aim”,
“forecast”, “assumption”, “projection”, “forecast”, “target”, “goal”, “outlook”, “guidance” and similar expressions. Indications of plans, strategies, management
and company objectives, potential transactions, sales and financial performance are also forward-looking statements. Such statements are not guarantees
of future performance, and involve known and unknown risks, uncertainties, assumptions, contingencies and other factors, many of which are outside
the control of the Company. No representation is made or will be made that any forward-looking statements will be achieved or will prove to be correct.
Readers are cautioned not to place undue reliance on forward-looking statements, particularly in the light of the current economic climate and the
significant volatility and uncertainty, and the Company assumes no obligation to update such statements. Past performance information in this report is
given for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance.
Forward-looking statements and statements regarding other information contained in this report may also be made – verbally and in writing – by members
of the Company’s management in connection with this report. Such statements are also subject to the same limitations, uncertainties and assumptions
which are set out in this report.
This report contains certain climate-related statements which are subject to uncertainties, limitations, risks and assumption associated with climate-related
information and the ever-changing environment we operate in. The information in this report should be read in conjunction with the qualifications and
guidance included in this report as well as Downer’s 2024 Sustainability Report available at www.downergroup.com.
The information contained in this report may include information derived from publicly available sources that have not been independently verified.
Certain financial data included in this report is ‘non-IFRS financial information’. The Company believes that this non-IFRS financial information provides useful
insight in measuring the financial performance and condition of Downer. Readers are cautioned not to place undue reliance on any non-IFRS financial
information included in this report. These measures have not been subject to audit or review.
Annual Report 2024 Downer EDI Limited
1
Underlying normalised cash conversion2
104.4%
Statutory NPAT
$82.1m
Total Revenue1
$12.0bn
Underlying2 NPATA
$210.1m
Statutory EBITA
$203.6m
Underlying2 EBITA
$380.8m
Operating cash flow
$544.1m
1. Total revenue is a non-statutory disclosure and includes revenue from joint ventures, other alliances and other income.
2. Underlying EBITA, NPATA and normalised cash conversion are non-IFRS measures that are used by management to assess the performance of the business. They have been
calculated from the statutory measures and defined in the Directors’ Report Group Financial Performance section on pages 15 and 16.
Employees
30,000+
Sites and locations where Downer has a presence
700+
Highlights
About Downer
Downer is a leading provider of integrated services in Australia and New Zealand. Our purpose is to enable communities
to thrive, delivering essential infrastructure services that improve the lives of millions of people every day, while leaving a
positive lasting legacy for future generations.
Downer is one of Australia and New Zealand’s largest employers, with a workforce of more than 30,000 people. Downer
operates in sectors that are closely connected to the investment that is being driven by population growth, urbanisation,
national security and decarbonisation – including roads, rail, ports and airports, power, gas, water, telecommunications,
health, education, defence, and other government sectors.
For more information visit downergroup.com.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
2
3
Downer commenced Financial Year 2024 with a business
transformation plan, which included the following priorities:
Developing an enterprise-wide strategy and
performance culture program
Embedding the new trans-Tasman operating model to
simplify our structure
Enhancing our risk management and governance
framework
Returning the Utilities business to profitability
Improving EBITA margin and cash conversion
Strengthening our balance sheet
Delivering $100 million of overhead reductions
Simplifying our portfolio.
We’re proud of the achievements and progress made by
our team over the past 12 months. And while there is still
work to do, we can see a bright future ahead of us.
Improved financial performance
With our simplified operating model implemented at the
start of the financial year and a clear focus on delivery,
Downer’s results across the Group showed improvements
in all key financial metrics.
Our focus on EBITA margin improvement and quality of
earnings is evident in the result, having achieved a pro
forma (excluding divestments) margin of 3.3% in FY24,
compared to 2.6% in FY23. Importantly, this included a
second half margin of 4.0%, compared to 3.0% for the prior
corresponding period.
EBITA and NPATA growth was backed by strong normalised
cash conversion. Underlying EBITA of $380.8 million
increased 17.7%, driven by a recovery in Utilities, growth in
Facilities, and benefits realised from our cost-out program.
Underlying NPATA increased 20.6% to $210.1 million.
Normalised cash conversion of 104.4% was a significant
improvement on 62.6% in FY23 and Downer’s balance
sheet has strengthened considerably, with net debt to
EBITDA of 1.4x (down from 2.0x).
Through the period we achieved $130 million of cost-out,
ahead of our initial $100 million target. Management’s
focus is now on realising the full $175 million of cost-out
benefits (including the additional $75 million announced in
February 2024) during FY25.
We also continued to strengthen tendering and risk
governance processes in FY24. We have been disciplined
in the application of our enhanced risk appetite guardrails,
and we are prioritising bidding opportunities that allow us
to aim for higher margins with customers who value our
technical capability.
We still have a lot to do, however, the transformational
changes we have implemented over the past 12 months
have been significant. Downer’s financial performance in
FY24 demonstrates the positive impact that the Group’s
leadership changes, new strategy and culture, and
turnaround priorities are having on the performance
of the business.
Health and safety
Tragically, we lost three people to workplace incidents in
FY24. On behalf of Downer’s Board and management
team, we extend our deepest sympathies to those
affected.
Keeping our people safe is Downer’s highest priority,
and we are determined to learn from these tragic events.
While Downer’s lag indicators improved in FY24 (Lost
Time Injury Frequency Rate was below our target of <0.90
at 0.88 and lower than the FY23 result of 0.90, and Total
Recordable Injury Frequency Rate was also below the
target of <3.00 at 2.54 and lower than the FY23 result of
2.68), we are committed to improving safety performance.
Management’s single most important priority in FY25
remains the safety of our people and the elimination of
serious incidents across our operations.
Looking ahead
Downer’s FY24 results emphasise the progress we
are making in our turnaround and demonstrate the
organisation’s ability to deliver earnings and EBITA margin
improvement in varied market conditions within our
enhanced risk guardrails. They also highlight the diversified
nature of our business portfolio and progress against our
business improvement plan to achieve efficiencies across
our operations.
We have good momentum and growing confidence
entering FY25.
Our priorities for FY25 are to continue executing our
transformation strategy, underpinned by a back to basics
approach with a steadfast focus on project delivery, Zero
Harm and risk management.
We are confident Downer is on the right path to becoming
a more sustainable, high-performing organisation that
delivers long-term value for shareholders and success for
our customers.
Mark Menhinnitt
Peter Tompkins
Downer Chairman
Chief Executive Officer
An important marker occurred in May 2024, with Fitch
Ratings revising the outlook on Downer’s Long Term Issuer
Default Rating (IDR) from negative to stable. Fitch also
affirmed Downer’s IDR and senior unsecured investment
grade credit rating at BBB (investment grade). The
revision reflects an expectation of our ability to deliver
the identified cost savings and continued margin
improvement and balance sheet strength.
In a challenging operating environment punctuated by
some macroeconomic uncertainty, labour shortages and
persistent cost pressures, this is a pleasing result.
The Downer Board has declared a final ordinary dividend
of 11.0 cents per share (cps), taking the total dividend for
the year of 17.0 cps, which represents a payout ratio of 58%.
A year of transition
The new operating model and structure of the
organisation has substantially redefined roles, authorities,
and accountability for performance. To support the
operating model and to drive achievement of strategic
priorities, the Group’s leadership team has been
renewed, including the addition of several senior external
appointments, namely, Chief Risk Officer, Chief Information
Officer, Group Executive General Manager Finance, and
Chief Operating Officer Energy & Utilities.
The governance structure at a Board and management
level has also been redefined and reset. The structure,
timing and depth of management reviews of Business
Units and contracts has been strengthened. Improved
capital allocation and investment approval disciplines
and governance processes have been implemented. A
new enterprise-wide IT strategy and governance model
has been developed and is being implemented under our
new CIO with corresponding capacity and capability uplift.
As highlighted in last year’s report, the new Board Project
Governance Committee and the redefined People and
Culture Committee have been in place for the full year.
On 1 July 2024, we launched our new Purpose, ‘Enabling
communities to thrive’, which articulates the value of the
work Downer delivers and our role within the communities
where we operate. It has resonated strongly with our
people and customers, and formed the foundation of the
strategic and high performance cultural plans that were
developed during the year.
Chairman and
CEO message
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
4
5
Significant size, scale
and breadth of capability
Transport
10 April 2024: Downer awarded
road maintenance contract
by Victoria’s Department of
Transport and Planning.
Utilities
May 2024: Downer awarded two-
and-a-half-year contract with
the New Zealand Department
of Corrections to deliver their
Water Infrastructure Program
in Auckland, Wellington and
Christchurch.
Facilities
27 October 2023: Downer
received a one-year extension
on its Estate Maintenance and
Operation Services (EMOS)
contract with the Australian
Department of Defence.
Facilities
27 June 2024: Downer awarded
10-year contract to deliver
maintenance services across
the Homes NSW public
housing portfolio covering
Inner City Sydney, Southern
Tablelands, South Coast,
Macarthur and Southern
Highlands, and
Illawarra.
Transport
18 June 2024: Downer chosen to deliver
new highway and walking and cycling
paths for the Ōtaki to north of Levin
highway upgrade project by NZ Transport
Agency Waka Kotahi.
Transport
3 July 2023: Downer
awarded road
maintenance
contract by Hamilton
City Council.
Transport
18 April 2024: Downer
awarded Hobart Airport
Airfield Upgrade Project
contract.
Utilities
6 June 2024: Downer
awarded contract
by Western Power to
deliver meter reading
and replacements in
Western Australia.
Facilities
Downer secured
contract extensions to
deliver maintenance,
shutdown and
sustaining capital
services to industrial
and energy customers
including BHP,
Chevron and WesCEF.
Facilities
14 September 2023: Downer
selected to deliver the Planning
Phase of the Australian Defence
Force’s proposed Woomera
Redevelopment Program in
South Australia.
Utilities
28 May 2024: Downer awarded
new contract by Unitywater
to deliver water, sewerage
and recycled water services
in south-east Queensland.
Downer’s geographical footprint spreads
across Australia and New Zealand,
operating at more than 700 sites covering
all corners of both countries. In FY24,
Downer continued to win new work in
all sectors in which we operate.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
6
7
Transport
Downer’s Transport segment comprises its
Road Services, Rail & Transit Systems and
Projects businesses.
Downer delivers multi-disciplined solutions
to customers across the transport sector
in Australia and New Zealand, with our
capabilities including road services,
transport infrastructure, rail, airports, and
end-to-end transport solutions and asset
management.
Facilities
The Facilities segment operates in
Australia and New Zealand across a
range of industry sectors including
education, health, government, defence
and industrial and energy. We deliver
asset management services to facilities
and estates that cover maintenance,
expansion and frontline services for social
and economic infrastructure.
Downer’s expertise covers a broad range
of asset types including universities,
schools and hospitals, social housing,
corrections, defence estates and
supporting defence capability. Downer
is also a leading provider of end-to-end
asset lifecycle and specialist services to
the power generation, future energy, oil,
gas, industrial and mineral processing
sectors.
Utilities
Downer’s Utilities businesses provide services
and solutions that connect communities to
essential networks and infrastructure.
We provide a range of end-to-end services
and solutions for utilities asset owners across
Australia and New Zealand.
We design, build, operate and maintain
today’s critical assets and networks, delivering
services across the water, energy and
telecommunications sectors.
The Downer ecosystem
Downer delivers essential services to our customers
in the Transport, Utilities and Facilities sectors across
Australia and New Zealand.
These services touch the lives of millions of people
every day, and enable communities to thrive.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
8
9
Directors’ Report
Mr Menhinnitt is an experienced director and
former senior executive with extensive domestic
and international experience in large infrastructure
development and urban regeneration, investment
management, construction, asset services, operations
and maintenance.
Mr Menhinnitt held several senior roles over a 30-year
career with Lendlease, including as Chief Executive
Officer of Lendlease Australia.
Mr Menhinnitt is currently a Non-executive Director of
The GPT Group and Chairman of Fluent Property Pty Ltd.
Mr Menhinnitt holds a Bachelor of Engineering
(Mechanical) and Master of Business (Applied Finance),
both from the Queensland University of Technology.
He is a member of the Australian Institute of Company
Directors and a Fellow of the Governance Institute
of Australia.
Mr Menhinnitt lives on the Sunshine Coast.
Mr Tompkins was formerly Chief Operating Officer of
Downer and prior to that was CEO and Managing
Director of Spotless Group Holdings Limited.
Mr Tompkins has extensive experience in infrastructure,
construction and maintenance services, both as an
operational and Group executive.
Mr Tompkins joined Downer in 2008 and was appointed
General Counsel in 2010.
Mr Tompkins holds a Bachelor of Laws and Bachelor of
Commerce from Deakin University.
Mr Tompkins lives in Sydney.
The Directors of Downer EDI Limited submit the Annual Financial Report of the
Company for the financial year ended 30 June 2024. In compliance with the
provisions of the Corporations Act 2001 (Cth), the Directors’ Report is set out below.
Board of Directors
Mark Menhinnitt (59)
Chairman since March 2023
Independent Non-executive Director
since March 2022
Peter Tompkins (45)
Managing Director and Chief Executive Officer
since February 2023
Directors’ Report
for the year ended 30 June 2024
Ms Handicott is a former corporate lawyer with over
30 years’ experience in mergers and acquisitions, capital
markets and corporate governance. She was a partner
of national law firm Corrs Chambers Westgarth for
22 years, serving as a member of its National Board for
seven years including four years as National Chairman.
She also has extensive experience in governance of
local and State government organisations.
Ms Handicott was the Chair of listed company
PWR Holdings Limited until October 2023 and a Council
Member of the Queensland Division of the Australian
Institute of Company Directors for nine years until
stepping down in July 2024 having served two years as
the State President.
Ms Handicott is a former Director of CS Energy Limited,
a former member of the Queensland University of
Technology (QUT) Council, the Takeovers Panel and
Corporations and Markets Advisory Committee and a
former Associate Member of the Australian Competition
and Consumer Commission.
A Senior Fellow of FINSIA, Fellow of the Australian Institute
of Company Directors and Member of Chief Executive
Women, Ms Handicott holds a Bachelor of Laws (Hons)
degree from the Queensland University of Technology.
Ms Handicott lives in Brisbane.
Ms Hollows has over 25 years’ experience in the resources
sector in a number of senior managerial roles across
both the public and private sectors, including in mining,
utilities and rail. Her experience spans operational
management, mine development, people and culture,
accounting and finance, mergers and acquisitions,
capital management and corporate governance.
Ms Hollows is the Non-executive Chair of Jameson
Resources Limited, Director and Chair of the Finance
Audit Risk Committee of Chief Executive Women and is a
former Non-executive Director of Qube Holdings Limited.
Ms Hollows was formerly the Chief Executive Officer
of SunWater Limited, a Queensland Government
owned corporation, the Chief Financial Officer and
subsequently Chief Executive Officer of Macarthur Coal
Limited and Managing Director of AMCI Australia and
South East Asia.
A Fellow of the Australian Institute of Company Directors
and a Member of Chief Executive Women and the
Institute of Chartered Accountants, Ms Hollows holds
a Bachelor of Business – Accounting and a Graduate
Diploma in Advanced Accounting (Distinction) from the
Queensland University of Technology and is a Graduate
of Harvard Business School’s Program for Management
Development.
Ms Hollows lives in Brisbane.
Teresa Handicott (61)
Independent Non-executive Director
since September 2016
Nicole Hollows (53)
Independent Non-executive Director
since June 2018
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
10
11
Directors’ Report
Directors’ Report
Dr Howse has extensive senior executive and
non-executive experience in the infrastructure,
energy and resources, construction, data centres,
telecommunications and property sectors.
Dr Howse held several senior roles with CIMIC, including
Chief Strategy Officer.
Dr Howse is currently a Non-executive Director of
Macquarie Technology Group, Sydney Desalination Plant
Pty Limited and BAI Communications.
Dr Howse has previously served on the boards of Design
Studio Group, Ventia, Nextgen Holdings and Manila North
Tollroads Corporation.
Dr Howse holds a Bachelor of Science and Doctor
of Philosophy (Mathematics) from the University of
Queensland, an executive MBA from IMD, Switzerland
and a Graduate Diploma of Applied Finance and
Investment. She is a member of the Australian Institute
of Company Directors.
Dr Howse lives in Sydney.
Mr MacDonald was formerly the Managing Director of
Zinfra and prior to that held several senior executive roles
in Transfield Services Limited, including Chief Executive
Officer for Marketing and Investments where he led
mergers and acquisitions including their integration
and transformation, Chief Executive Officer of Transfield
Services Infrastructure Fund and Chief Strategy Officer.
Mr MacDonald is currently a Non-executive Director of
Ausgrid, Chair of ERIC Alpha Holdings and its subsidiaries,
Chair of Intera Renewables and a member of Palisade
Investment Partners Investment committee and the
Water NSW Asset Advisory Group.
Mr MacDonald holds a Bachelor of Civil Engineering
(Hons) from Melbourne University and is a member of the
Australian Institute of Company Directors.
Mr MacDonald lives in Sydney.
Dr Adelle Howse (54)
Independent Non-executive Director
since April 2022
Steven MacDonald (63)
Independent Non-executive Director
since September 2023
Ms Broadbent is an experienced Non-executive
Director and senior executive with a background
in business strategy, technology, business
development, and health and safety in the utilities
and telecommunications sectors. Having worked in
both Australia and New Zealand and being based in
Auckland, Ms Broadbent brings a deep understanding
of the New Zealand market.
Ms Broadbent has held Chief Executive and senior
executive roles in the energy, telecommunications and
engineering sectors in the Asia Pacific region, including
with Downer in Australia and New Zealand from 2007
to 2011.
Ms Broadbent is currently a Non-executive Director
of NZX-listed firms Spark New Zealand and Manawa
Energy and is the Deputy Chair of the Business Leaders’
Health & Safety Forum in New Zealand.
Ms Broadbent has previously served as the Chair of
Kordia Group, Chair of Pipeline and Civil Ltd, Non-
executive Director of Transpower, Kaingaroa Timberlands
and Waka Kotahi New Zealand Transport Authority, and
as a member of the New Zealand Government’s Cyber
Security Advisory Committee.
Ms Broadbent holds a Bachelor of Commerce from the
University of Auckland and is a graduate of Harvard
Business School’s Advanced Management Program
and the Australian Institute of Company Directors and
is a Chartered Member of the Institute of Directors in
New Zealand.
Ms Broadbent lives in Auckland.
Mr Barker is an experienced Non-executive Director
and senior executive with experience in finance,
risk management, corporate structuring including
mergers, acquisitions and divestments, and systems
transformation in complex multi-jurisdictional
environments in the engineering, services and
technology sectors.
Mr Barker has 14 years’ experience as a Chief Financial
Officer of ASX-listed multinational companies including
Computershare Ltd and Cardno Ltd. Prior to this he
held senior financial leadership positions with global
corporations including BHP and Cisco Systems.
Mr Barker is currently a Non-executive Director of
Workpac Group and Metarock Group Limited. Mr Barker
has previously served as a Non-executive Director of
Independent Cement & Lime Group.
Mr Barker holds a Bachelor of Commerce from
the University of Queensland, a Master of Business
Administration from Heriot-Watt University and is a
graduate of the Wharton School of the University of
Pennsylvania’s Advanced Management Program. He is a
member of the Australian Institute of Company Directors
and is a Fellow of CPA Australia.
Mr Barker lives in Brisbane.
Sheridan Broadbent (56)
Independent Non-executive Director
since October 2023
Peter Barker (56)
Independent Non-executive Director
since July 2024
Retired Directors
Peter Watson
Independent Non-executive Director since May 2019.
Retired 30 September 2023.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
12
13
Directors’ Report
Directors’ Report
Directors’ shareholdings
The following table sets out each Director’s relevant interest (direct and indirect) in shares, debentures, and rights or
options in shares or debentures (if any) of the Company at the date of this report. No Director has any relevant interest in
shares, debentures and rights or options in shares or debentures, of a related body corporate as at the date of this report.
Director
Number of Fully Paid
Ordinary Shares
Number of Fully Paid
Performance Rights
Number of Fully Paid
Performance Options
Mark Menhinnitt
92,748
–
–
Peter Tompkins1
330,483
808,606
–
Peter Barker
–
–
–
Sheridan Broadbent
590
–
–
Teresa Handicott
31,000
–
–
Nicole Hollows
50,538
–
–
Adelle Howse
15,000
–
–
Steven MacDonald
11,848
–
–
1. Performance rights granted to Mr Tompkins are subject to performance and/or service period conditions over the period 2020 to 2026. Further details regarding the conditions
relating to these restricted shares and performance rights are outlined in sections 6.5 and 9.2 of the Remuneration Report.
Company Secretary
The Company Secretarial function assists the Company to comply with its statutory duties and maintains proper
documentation, registers and records. It also provides advice to Directors and officers about corporate governance and
gives practical effect to any decisions made by the Board.
Mr Robert Regan was appointed Group General Counsel and Company Secretary in January 2019. He has qualifications
in law from the University of Sydney and is an admitted solicitor in New South Wales. Mr Regan was formerly a partner of a
major commercial law firm and has over 30 years of experience in legal practice.
Mr Peter Lyons was appointed Company Secretary in July 2011. A member of CPA Australia and the Governance Institute
of Australia, he has qualifications in commerce from the University of Western Sydney and corporate governance from
the Governance Institute of Australia. Mr Lyons was previously Deputy Company Secretary and has been in financial and
secretarial roles at Downer for over 20 years.
Operating and Financial Review
Principal activities
Downer EDI Limited (Downer) is a leading provider of integrated services in Australia and New Zealand. Downer employs
approximately 30,000 people, mostly in Australia and New Zealand.
Downer operates in sectors that are closely connected to the investments that are being driven by population growth,
recognition by Governments that they must ensure equitable improvements in standards of living for all citizens,
decarbonisation, and urbanisation. The sectors where Downer operates and is exposed to tailwinds include roads, rail,
power, gas, water, telecommunications, health, education, social housing, defence and other government sectors.
These sectors are served by Downer’s Transport, Utilities and Facilities segments.
Group financial performance
Group financials
($m)
Statutory
Underlying3
(excl. ISI)
Pro forma4
(excl. divestments)
FY24
FY23
Change
FY24
FY23
Change
FY24
FY23
Change
Total Revenue1
11,967.6
12,619.7
(5.2%)
11,967.6
12,619.7
(5.2%)
11,743.4
11,133.4
5.5%
EBITA2
203.6
(227.3)
>100%
380.8
323.4
17.7%
384.1
286.4
34.1%
EBITA2 %
1.7%
(1.8%)
3.5pp
3.2%
2.6%
0.6pp
3.3%
2.6%
0.7pp
NPATA2
98.3
(367.3)
>100%
210.1
174.2
20.6%
212.3
146.0
45.4%
EBIT
180.5
(253.5)
>100%
357.7
297.2
20.4%
361.0
260.2
38.7%
NPAT
82.1
(385.7)
>100%
193.9
155.8
24.5%
196.1
127.6
53.7%
1. Total revenue is a non-statutory disclosure and includes revenue, other income and notional revenue from joint ventures and other alliances not proportionately consolidated.
2. Downer calculates EBITA and NPATA by adjusting EBIT and NPAT to add back acquired intangible assets amortisation expense.
3. The underlying result is a non-IFRS measure that is used by Management to assess the performance of the business. Non-IFRS measures have not been subject to audit or review.
4. Pro forma reflects the statutory results adjusted for ISIs and the revenue and EBITA contribution relating to completed divestments to provide a like for like comparison at
30 June 2024. The pro forma result is a non-IFRS measure that is used by Management to assess the performance of the business. Non-IFRS measures have not been subject
to audit or review.
Pro forma revenue of $11.7 billion increased by 5.5%. On a statutory basis, which includes the impact of divestments
made during the period, total revenue decreased 5.2% in FY24. Pro forma revenue growth was driven by Transport,
and particularly the contribution from the Queensland Train Manufacturing Project (QTMP) in the Rail & Transit Systems
Business Unit, together with Telecommunications within Utilities.
Underlying EBITA of $380.8 million increased 17.7%, or 34.1% on a pro-forma basis. The recovery in earnings from the Utilities
business and a strong performance in the Facilities business, together with the benefit of the cost-out program were the
primary drivers of this improved performance. In Transport, the turnaround in the New Zealand Road Services and Projects
business units, together with increased contribution from Rail & Transit Systems (primarily QTMP mobilisation), was offset
by reduced Road Services Transport Agency spend in Victoria, and lower contribution from the Keolis Downer joint venture.
Statutory EBITA of $203.6 million included individually significant items (ISI) of $177.2 million loss before interest and tax for
the year and reflects a positive turnaround from the prior year Statutory EBITA loss of $227.3 million. Refer to additional
information provided in the Operating and Financial Review and in Note B3 to the Financial Report.
Statutory EBIT of $180.5 million, and statutory NPAT of $82.1 million compares to a loss in the prior period of $253.5 million
and $385.7 million respectively.
During the period, cash conversion (operating cash flow excluding interest and tax over underlying EBITDA) of 90.3%
was a significant improvement on FY23 cash conversion of 64.9%. Normalised cash conversion, adjusting for payments
associated with FY23 and FY24 ISI (together $75.9 million), and the Australian Transport Projects GST payment of
$23.5 million disclosed in the FY23 Consolidated Statement of Cash Flows, equates to 104.4%. Cash conversion was
favourably impacted by cash flow phasing, on a material project in delivery phase, which will unwind in FY25.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
14
15
Directors’ Report
Directors’ Report
As a result of the divestment proceeds, earnings improvement and strong operating cash flow during the period, net debt
to EBITDA reduced to 1.4x, an improvement from 2.0x at 30 June 2023.
Net finance costs increased by $0.7 million, or 0.8%, to $88.7 million which was impacted by a higher average cost of debt
offset by the reduction in net debt balances.
The underlying effective tax rate of 27.9% is lower than the statutory corporate tax rate of 30.0% primarily due to the
impact of non-taxable distributions from joint ventures and lower tax rates in overseas jurisdictions (e.g. New Zealand).
Underlying EBITA and reconciliation to Statutory NPAT
Underlying1 EBITA ($m)
Reporting segment
FY24
FY23
Change
Transport
Transport
250.4
288.9
(13.3)%
Utilities
Utilities
55.6
(10.3)
>100%
Facilities
Facilities
177.3
162.1
9.4%
Corporate
Unallocated
(102.5)
(117.3)
12.6%
Group underlying EBITA2
380.8
323.4
17.7%
Amortisation of acquired intangibles (pre-tax)
(23.1)
(26.2)
11.8%
Underlying EBIT
357.7
297.2
20.4%
Net interest expense
(88.7)
(88.0)
(0.8)%
Tax expense
(75.1)
(53.4)
(40.6)%
Underlying NPAT
193.9
155.8
24.5%
Amortisation of acquired intangibles (post tax)
16.2
18.4
(12.0)%
Underlying NPATA2
210.1
174.2
20.6%
Total individually significant items
(177.2)
(550.7)
67.8%
Tax effect on individually significant items
65.4
9.2
>100%
Statutory NPATA
98.3
(367.3)
>100%
Amortisation of acquired intangibles (post tax)
(16.2)
(18.4)
(12.0)%
Statutory NPAT
82.1
(385.7)
>100%
1. The underlying result is a non-IFRS measure that is used by Management to assess the performance of the business. Non-IFRS measures have not been subject to audit or review.
2. Downer calculates EBITA and NPATA by adjusting EBIT and NPAT to add back acquired intangible assets amortisation expense.
Statutory earnings
Statutory earnings before interest and tax (EBIT) of $180.5 million, up from a loss of $253.5 million.
Statutory EBITA of $203.6 million, up from a loss of $227.3 million. The statutory results were impacted by ISI of $177.2 million
loss before interest and tax.
Underlying EBITA of $380.8 million, up 17.7% from $323.4 million.
A reconciliation of the FY24 underlying result to the statutory result is provided below:
$m
EBITA
Net
finance
costs
Tax
expense
NPATA
Amortisation of
acquired intangibles
(post-tax)
NPAT
Underlying result
380.8
(88.7)
(82.0)
210.1
(16.2)
193.9
Fair value on Downer Contingent Share
Options (DCSO)
3.7
–
–
3.7
–
3.7
Net gain on divestments and exit costs
21.7
–
5.5
27.2
–
27.2
Transformation and restructure costs
(61.6)
–
18.0
(43.6)
–
(43.6)
Regulatory reviews and legal matters
(23.3)
–
6.8
(16.5)
–
(16.5)
Impairment and other asset write-downs
(117.7)
–
35.1
(82.6)
–
(82.6)
Total individually significant items
(177.2)
–
65.4
(111.8)
–
(111.8)
Statutory result
203.6
(88.7)
(16.6)
98.3
(16.2)
82.1
Refer to Note B3 to the Financial Report for further details.
Fair value movement on Downer Contingent Share Options (DCSO) liability
As part of the consideration to acquire the shares in Spotless that it did not already own, the Group granted three
tranches of 2.5 million share options to the previous minority interest shareholders on 12 August 2020 which are
exercisable within four years of issue on achievement of three prescribed share price targets (the Downer Contingent
Share Options or DCSO). The fair value at issue date of these options was recognised as a liability arising on the
acquisition of the shares. The DCSO are classified as a liability, with subsequent changes in the fair value recognised in
the Consolidated Statement of Profit or Loss and Other Comprehensive Income. Since 30 June 2023, the fair value of the
DCSO liability has decreased by $3.7 million, with a gain recognised through ‘Other income’ in the Consolidated Statement
of Profit or Loss and Other Comprehensive Income during the year.
Divestments during the reporting period
Downer made significant progress in the period against its strategic priority of portfolio simplification:
Completed the sale of the remaining part of its Australian Mechanical and Electrical Commercial Projects business
(Asset & Development Services). The Asset & Development Services business’ financial performance is reported under
the Facilities segment for the period
Announced and completed the sale of its 45% interest in Repurpose It, a resource recovery joint venture business
operating in Victoria
Completed other smaller transactions as part of the ongoing strategy to simplify the business and focus on
core markets
Obtained all remaining outstanding consents required to complete the divestment of its Australian Transport Projects
business to Gamuda Berhad.
Refer to Note F7 for further detail on divestments.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
16
17
Directors’ Report
Directors’ Report
Net gain on divestments and exit costs
During the period, divestment and exit costs were recognised in relation to a number of transactions. Refer to Note F7
for further details on the individual transactions.
The material elements of the net gain on divestments and exit costs include:
$36.1 million net pre-tax gain (including disposal costs) across the divestments
$14.4 million pre-tax transaction-related expenses and provisions associated with Downer’s ongoing obligations
and risks associated with divestments
Capital losses on which a deferred tax asset has not been previously recognised have been used to fully offset capital
gains arising on divestments during the year. A deferred tax asset has not been recognised on remaining carried
forward capital losses of $28.4 million at 30 June 2024 as it is not probable that a future capital gain will arise.
Transformation and restructure costs
Transformation and restructure costs represent costs incurred following Downer’s commencement of the Transformation
program to restructure its operating model and review of IT strategy. The material elements of the costs associated with
the transformation and restructure are as follows:
Redundancy and severance costs associated with implementing the new operating model
Transformation program implementation costs including external advisor costs
Software-as-a-Service (SaaS) implementation costs.
Regulatory reviews and legal matters
Regulatory review and legal matters costs were incurred in relation to defending the shareholder class actions filed
against Downer during the prior financial year, responding to regulatory reviews, undertaking business conduct review
and investigations, and settlement of the ‘leaky buildings’ claim (for further information see 2023 Financial Statements
Note C9 Contingent Liabilities (vi)).
The shareholder class actions claims have been disclosed as a contingent liability in Note C9.
Impairment and other asset write-downs
Impairment and other asset write-downs relates to:
Three asphalt plants following review of the carrying value
Accelerated amortisation and write-downs in relation to IT assets and discontinuation of IT development programs,
and resulting onerous licence contract provisions recognised, where the ongoing usage has been reviewed as part of
the cost reduction program and aligned with the Group’s new operating model.
Expenses
The transformation program, including operating model changes and various cost reduction initiatives, achieved
$130 million in gross annualised cost out as part of a targeted $175 million cost out program. The gross annualised cost
out target was updated in Downer’s HY24 results disclosures from $100 million to $175 million, with the remaining $45 million
planned to be achieved by 30 June 2025.
Total expenses of $10.9 billion decreased by 9.4% compared to $12.0 billion in the prior corresponding period (pcp).
Included in total expenses is $217.0 million1 of ISI ($605.1 million in the pcp). Excluding the impact of ISIs, total expenses
decreased 6.5%, compared to a reduction in revenue of 5.2%.
Downer’s cost base (including ISI) by expense type:
FY24
FY23
11.2%
5.4%
12.1%
41.0%
30.3%
31.6%
Plant and equipment, depreciation and amortisation, impairment of assets
Other expenses
Employee benefits expense
Subcontractor
Raw materials and consumables used
7.6%
6.6%
11.9%
42.3%
Employee benefits expenses decreased by 5.7%, or $209.2 million, to $3.4 billion and represents 31.6% of Downer’s cost
base (30.3% in the prior year). The decrease in labour expenses is broadly consistent with the 5.2% reduction in revenue
and the impact of the cost out program. Subcontractor costs decreased by 6.3%, or $309.6 million, to $4.6 billion and
represents 42.3% of Downer’s cost base (41.0% in the prior year). The decrease in subcontractor costs as a percentage
of overall expenses was primarily due to the higher use of subcontractors in the divested Australian Transport Projects
business. Whilst some labour markets have challenges and specialised skills in key segments are in high demand, a trend
of stabilisation has generally improved employee retention and reduced recruitment activities.
Raw materials and consumables costs decreased by 10.9%, or $158.9 million, to $1.3 billion and represents 11.9% of Downer’s
cost base (12.1% in the prior year). The decline was predominantly due to the decrease in construction activities following
the divestment of the Australian Transport Projects and Asset and Development Services businesses.
Plant and equipment costs decreased by 13.2% or $61.9 million to $0.4 billion, as a result of the divestment of Australian
Transport Projects. Total depreciation and amortisation increased by 2.9%, or $9.8 million, to $0.3 billion. Impairment of non-
current assets expense of $69.1 million primarily relates to three asphalt plants. Refer to Note B3 for additional information.
The movement in other expenses is primarily attributable to the ISI recognised in the current and comparative periods.
Refer to Note B3 of the Financial Report for additional information.
1. Total ISI before tax of $177.2 million excluding gain on DCSO of $3.7 million and net gain on divestments of $36.1 million
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
18
19
Directors’ Report
Directors’ Report
Cash flow
Operating cash flow
Operating cash flow of $544.1 million represents a substantial improvement on the prior year, with an underlying cash
conversion of 90.3%. Normalised cash conversion, adjusting for payments associated with FY23 and FY24 ISIs (together
$75.9 million), and the Australian Transport Projects GST payment of $23.5 million disclosed in the FY23 Consolidated
Statement of Cash Flows, equates to 104.4%. Cash conversion was favourably impacted by cash flow phasing, on a
material project in delivery phase, which will unwind in FY25.
During the period, there has been an enhanced and disciplined focus on working capital management, cash collections
and resolution of contractual variations and claims.
Investing cash flow
Total investing cash outflow of $29.3 million includes $68.5 million proceeds from the disposal of businesses during the
period, net of cash disposed. Refer to note F7 for details.
Excluding proceeds from the disposal of businesses, investing cash outflow decreased by 60.4% or $149.4 million to
$97.8 million largely due to the completion of Downer’s investment in a number of asphalt plant upgrades in FY23 and
approximately $32 million of one-off proceeds from the sale of property in 2H24.
Debt and bonding
The Group’s performance bonding facilities totalled $2,104.0 million at 30 June 2024 with $785.6 million undrawn.
During the year, surplus limits were rationalised resulting in a $130 million reduction of undrawn committed bonding
facility limits. There is sufficient capacity to support the existing pipeline and the ongoing operations of the Group.
At 30 June 2024, the Group had liquidity of $2.1 billion comprising cash balances of $837.6 million and undrawn committed
debt facilities of $1,265.0 million. Net debt (excluding lease liabilities) reduced from $703.7 million at 30 June 2023 to
$469.5 million at 30 June 2024. Management reported a reduced net debt to EBITDA (which includes lease liabilities)
of 1.4x at 30 June 2024 from 2.0x at 30 June 2023.
During the period, the Group refinanced $745 million of bilateral and syndicated debt facilities including an extension of
the maturity of the $500 million tranche of the $1.4 billion syndicated bank loan facility maturing in November 2024 to
November 2027 ($200 million) and November 2028 ($300 million).
In May 2024, the outlook on the Group’s external credit rating was revised by Fitch Ratings from BBB (Outlook Negative) to
BBB (Outlook Stable) reflecting an expectation of improved earnings margins, strengthened balance sheet and leverage
metrics, and resolution of outstanding governance matters. The stabilisation of our investment grade credit rating is
positive for our customers and suppliers when they contract with the Group. Furthermore, banks and other lending
institutions will have more confidence in our stabilised credit risk profile which positively impacts their assessment of
pricing, tenor and facility limits on financing facilities.
Dividends
The Downer Board resolved to pay a final dividend of 11.0 cents per share, 50% franked, payable on 15 October 2024 to
shareholders on the register at 16 September 2024. The portion of the unfranked dividend amount that will be paid out of
Conduit Foreign Income (CFI) is 88%.2
The total dividend for FY24 of 17.0 cents per share represented a payout ratio of 58%.
The Company’s Dividend Reinvestment Plan remains suspended.
The Board also determined to continue to pay a fully imputed dividend on the ROADS security, which having been reset
on 15 June 2024 has a yield of 9.43% per annum payable quarterly in arrears, with the next payment due on 15 September
2024. As this dividend is fully imputed (the New Zealand equivalent of being fully franked), the actual cash yield paid by
Downer will be 6.79% per annum until the next reset date.
2. This is relevant only for non-resident shareholders. The effect is that the portion of the unfranked dividend paid out of CFI is not subject to Australian dividend withholding tax.
Balance sheet
Since 30 June 2023, the net assets of the Group reduced by $30.4 million.
Movement in Net Assets ($m)
Increase
Decrease
Total
2000
2100
2200
2300
2400
2500
2600
2700
Closing
Net Assets
Other
Net working
capital
Intangibles
Property, Plant
and Equipment
Decrease
in net debt
Opening
Net Assets
2,289.8
2,259.4
250.9
(103.8)
(93.5)
(60.2)
(23.8)
$’m
Net debt, calculated as borrowings (excluding lease liabilities) less cash and cash equivalents, decreased by
$250.9 million driven by cash generated by operations and cash proceeds collected from divestments (net divestment
proceeds of $68.5 million).
Property, plant and equipment (PP&E) decreased by $93.5 million to $0.8 billion, largely attributable to the sale of the
Metering Services business’ assets and contracts (Refer to Note F7), asset disposals in the Transport segment, combined
with impairments recognised as ISI which were partially offset by capital expenditure.
Intangibles declined by $60.2 million to $2.1 billion, primarily due to the amortisation of software and system development
assets totalling $46.5 million and impairment of $13.2 million as outlined in Note B3.
Net working capital, which includes current trade receivables and contract assets, in addition to current trade payables
and contract liabilities, decreased by $23.8 million, reflecting the impact of divestments in the period and improved
working capital management.
Other, of $103.8 million, is primarily associated with the ISI recognised in the period.
Total equity decreased by $30.4 million, largely as a result of the statutory profit after tax of $82.1 million, offset by dividends
paid during the period of $107.0 million.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
20
21
Directors’ Report
Directors’ Report
Zero Harm
Downer remains steadfastly committed to Zero Harm. Protecting our people, communities and the environment is
Downer’s number one priority.
Tragically, during the year, three workplace fatalities occurred within Downer’s operations. Our Board and management
team have extended condolences to these workers’ families, colleagues, and employers and provided support following
these incidents. Downer operates in some sectors that are exposed to high-risk activities and we are determined to learn
from these tragic events. We are committed to continuous improvement of our systems and processes including our
focus on critical control effectiveness. In response to these incidents, Downer instituted a Group-wide ‘Safety reset’ – a
call-out to our operational leaders to take action and implement programs that would be of most benefit to the unique
profile of their operations. We understand that improving safety performance requires a comprehensive approach
involving the combination of active leadership, accountability, discipline, a positive safety-focused workplace culture, and
effective risk controls.
Since 30 June 2023, Downer’s Lost Time Injury Frequency Rate (LTIFR) decreased to 0.88 from 0.90, and its Total Recordable
Injury Frequency Rate (TRIFR) decreased to 2.54 from 2.68 per million hours worked3. The slight improvement in the
performance of these lagging indicators in FY24 is due to a renewed focus on incident reporting, timely support to injured
workers, and learning lessons from previous incidents.
Downer’s LTIFR performance is better than industry benchmarks published by SafeWork Australia4 for all industries in which
Downer operates. Management’s number one priority in FY25 remains the safety of our people and the elimination of
serious and fatal incidents across our operations.
Group safety performance (12-month rolling frequency rates)
0.5
1.0
1.5
2.0
TRIFR
LTIFR
1.5
2.0
2.5
3.0
3.5
Jun-24
May-24
Apr-24
Mar-24
Feb-24
Jan-24
Dec-23
Nov-23
Oct-23
Sep-23
Aug-23
Jul-23
Jun-23
2.68
0.90
2.54
0.88
TRIFR
LTIFR
For further information refer to our 2024 Sustainability Report.
3. Lost time injuries (LTIs) are defined as injuries that cause the injured person (employee or contractor) to be unfit to perform any work duties for one whole day or shift, or more, after
the shift on which the injury occurred, and any injury that results, directly or indirectly, in the death of the person. The Lost Time Injury Frequency Rate (LTIFR) is the number of LTIs per
million hours worked. Total Recordable Injuries (TRIs) are the number of LTIs plus medically treated injuries (MTIs) for employees and contractors. Total Recordable Injury Frequency
Rate (TRIFR) is the number of TRIs per million hours worked.
4. 2023 Safe Work Australia Industry Benchmarks.
Sustainability
Downer’s Purpose is ‘Enabling communities to thrive’. Downer’s services positively impact millions of people each day,
underscoring the importance of sustainable operations for our people, partners, shareholders, customers, and the
communities where we operate. We are conscious of the impact our activities have on individuals, communities and the
environment.
Safety and sustainability is a foundational pillar of our strategy. To Downer, sustainability means working to reduce our
impact on the environment; as well as prioritising the safety of our people, building trusted relationships and having a
diverse and inclusive workforce, which, combined with our financial performance, contributes to the value that Downer
provides to its shareholders.
Leveraging our market presence, capabilities and our sustainability commitment strategically positions Downer for future
growth by supporting our customers on their pathways to a low-carbon economy.
Details on Downer’s sustainability-related performance for the financial year ended 30 June 2024 can be found in our
2024 Sustainability Report.
Downer EDI Limited is a climate reporting entity for the purposes of the Financial Markets Conduct Act 2013 (NZ). This
report contains Downer EDI Limited’s first climate-related disclosures, which comply with the Aotearoa New Zealand
Climate Standards (NZ CS) issued by the External Reporting Board. These disclosures inform stakeholders about Downer’s
governance of climate-related risks and opportunities, scenario analysis and our climate related plans including metrics
and targets.
Our sustainability commitments are outlined in policies available at www.downergroup.com.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
22
23
Directors’ Report
Transport
Road Services
Rail & Transit Systems
Projects
Transport comprises Downer’s Road Services, Rail
& Transit Systems and Projects businesses.
Downer delivers multi-disciplined solutions to
customers across the transport sector in Australia
and New Zealand, with our capabilities including road
services, transport infrastructure, rail, and end-to-end
transport solutions and asset management.
Underlying
Pro forma1
FY24
Change
FY24
Change
Revenue
6,222.0
(9.2%)
6,042.4
7.8%
EBITA
250.4
(13.3%)
252.8
5.0%
EBITA %
4.0%
(0.2pp)
4.2%
(0.1pp)
Downer successfully completed a number of Transport
business divestments in the period (Australian
Transport Projects, VEC Contracting, and Repurpose
It joint venture). Excluding the contribution from
these divestments, pro forma Transport revenue and
earnings grew 7.8% and 5.0% respectively. This growth
was led by a turnaround in the NZ Transport business,
increased project activity in the Rail & Transit Systems
business (primarily the ramp up of QTMP which more
than offset the wind down of the HCMT build project,
with the 70th and final trainset now delivered and in
passenger service), and overall margin improvement.
The revenue and earnings growth was offset by
reduced Transport Agency spend in Victoria and
South Australia impacting Road Services, and lower
contribution from the Keolis Downer joint venture.
% of total segment
Total revenue2 (FY24)
EBITA3 (FY24)
53%
52%
Road Services
Downer manages and maintains road networks
across Australia and New Zealand and manufactures
and supplies products and services to enable safe,
efficient and reliable journeys. Downer is one of the few
companies with a mature, integrated offering across
the Road Services value chain.
We deliver solutions to our customers’ challenges
through strategic asset management and a leading
portfolio of products and services. We are a leading
manufacturer of bitumen-based products and an
innovator in the sustainable asphalt industry, using
recycled products and environmentally sustainable
methods to produce asphalt.
Downer also has an extensive history of delivering
airport infrastructure and surfacing projects across
Australia, New Zealand, and the Pacific Islands.
FY24 highlights
Downer was awarded a road maintenance contract
by Victoria’s Department of Transport and Planning
on 10 April 2024, valued at an estimated $320 million
over a maximum term of eight years.
On 3 July 2023, Downer was awarded a road
maintenance contract by Hamilton City Council,
valued at up to $540 million over a maximum term
of 10 years.
Downer was awarded the Hobart Airport Airfield
Upgrade Project contract on 18 April 2024.
The upgrades will allow for wide-body international
aircraft, such as the Boeing 787 and the Airbus A350,
to operate at Hobart Airport.
On 10 November 2023, Downer announced the
sale of its 45% interest in Repurpose It, a resource
recovery business operating in Victoria with a focus
on recycling infrastructure spoil and organics.
Segment financial performance
Approximately 50,000km of road networks
managed across Australia and New Zealand
More than 3.2 million tonnes of combined
volume asphalt produced
1.2 million m2 airfield pavements maintained
and upgraded in Australia, New Zealand and the
Pacific annually
1. Pro forma reflects the statutory results adjusted for ISI and excludes the revenue
and EBITA contribution relating to completed divestments to provide a like for
like comparison at 30 June 2024.
2. Total revenue is a non-statutory disclosure and includes revenue, other
income and notional revenue from joint ventures and other alliances not
proportionately consolidated.
3. Downer calculates EBITA by adjusting EBIT to add back acquired intangibles
amortisation expense.
Rail & Transit Systems
Downer is a leading provider of rollingstock asset
management services in Australia.
We have more than 150 years’ experience delivering
innovative transport solutions designing, building
and maintaining flagship rollingstock projects
across the country. Downer has capabilities in
infrastructure, rail systems, operation and maintenance,
and system integration by leveraging its trusted
partnerships with international OEMs.
Downer is not only one of Australia’s largest providers of
rollingstock asset management services for passenger
rail, we are also a partner for the freight rail market.
Downer offers customers design, manufacture and
maintenance, as well as decarbonisation and digital
solutions that have been developed from Downer’s
extensive datasets from building and maintaining
passenger fleets in Queensland, New South Wales,
Victoria and Western Australia.
FY24 highlights
The 70th and final High Capacity Metro Train (HCMT)
entered passenger service, marking the completion
of the largest single order of trains in Victoria’s history.
Queensland Train Manufacturing Program (QTMP)
team fully mobilised, with the Ormeau rail facility
site and Torbanlea train manufacturing sites both
into the earthworks phase. The design for the
65 six-car passenger trains is progressing well, with
engagement with various user groups underway.
RTS Digital – Downer’s rail digital consulting,
software, and services business expanded,
delivering programs and digital capabilities into
new markets.
Projects
Downer delivers multi-disciplined infrastructure
solutions to customers within the transport sector
in New Zealand and the Pacific. Services include
the design and construction of light rail, heavy
rail, signalling, track and station works, rail safety
technology, bridges, roads and vertical construction
(through Downer’s Hawkins business).
Downer has a long history of delivering infrastructure
projects under a variety of contracting models and
collaborative partnerships.
Downer’s integrated capabilities enable intelligent
transport solutions, road network management
and maintenance.
FY24 highlights
On 18 June 2024, Downer, as part of a consortium
with McConnell Dowell, Beca and Tonkin+Taylor,
signed an interim alliance agreement with NZ
Transport Agency Waka Kotahi to deliver new
highway and walking and cycling paths for the
Ōtaki to north of Levin highway upgrade project in
Wellington.
Hawkins successfully delivered Tōtara Haumaru,
North Shore Hospital project, with the new building
officially opening in June 2024.
The Link Alliance reached almost 20 million work
hours on Auckland’s City Rail Link project. In FY24,
the Link Alliance completed the network-wide
signalling system and rail tracks inside the tunnels,
and progressed the fit-out of new station buildings
and facades.
More than 2,000 rollingstock units maintained or
contracted to be maintained
More than 3,000 rollingstock units built or on-order
More than 3,000 rollingstock units overhauled
Poured more than 200,000m3 of concrete
and erected more than 13,800 tonnes of steel
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
24
25
Directors’ Report
Directors’ Report
Utilities
Power & Gas
Water
Telecommunications
Downer provides services and solutions that connect
communities to essential networks and infrastructure.
We design, build, operate and maintain today’s critical
assets and networks, delivering services across the
water, energy and telecommunications sectors.
Underlying
Pro forma1
FY24
Change
FY24
Change
Revenue
2,400.7
6.3%
2,395.3
6.5%
EBITA
55.6
>100%
54.5
>100%
EBITA %
2.3%
2.8pp
2.3%
2.8pp
Downer successfully completed the divestment of
Metering Services during the period. Excluding the
contribution from this divestment, pro forma Utilities
revenue grew 6.5%, while EBITA increased to $54.5
million from a loss of $10.7 million in the prior year. The
Utilities turnaround was a key focus area in FY24. The
commercial reset of the Power Maintenance Contract
continued in FY24, reaching breakeven in the second
half. In addition, the portfolio of water construction
projects continued to run-off after losses in FY23
with good progress made on resolving outstanding
commercial matters.
% of total segment
Total revenue2 (FY24)
EBITA3 (FY24)
20%
12%
Power & Gas
Downer’s services include planning, designing,
constructing and maintaining transmission and
distribution power assets as well as gas network assets.
Downer provides end-to-end services to owners
of utility assets. Downer constructs and maintains
electricity and gas networks, provides asset inspection
and monitoring services, connects tens of thousands of
new power and gas customers each year and provides
metering technology for efficient energy consumption
for governments, utilities and corporations.
The business is well positioned to support the energy
transition with a strong opportunity pipeline emerging.
Downer will maintain a disciplined approach to our
participation, with our focus areas leveraging our
proven capabilities within commercial models that
appropriately share risk.
FY24 highlights
Power Maintenance contract turnaround
progressing to plan, reaching breakeven in the
second half.
Downer completed a landmark project for
ElectraNet in December 2023, delivering the South
Australian component of Project EnergyConnect,
which covers more than 200 kilometres of
transmission line, making it one of the longest ever
constructed between Australian States.
2,750km of transmission lines and
70 substations built in Australia over the past 10 years
Maintain 100,000km of gas and power
infrastructure assets
1. Pro forma reflects the statutory results adjusted for ISI and excludes the revenue
and EBITA contribution relating to completed divestments to provide a like for
like comparison at 30 June 2024.
2. Total revenue is a non-statutory disclosure and includes revenue, other
income and notional revenue from joint ventures and other alliances not
proportionately consolidated.
3. Downer calculates EBITA by adjusting EBIT to add back acquired intangibles
amortisation expense
Water
Downer delivers complete water lifecycle solutions
for municipal and industrial water users. In Australia,
Downer supports water and wastewater services to
approximately 13 million Australians – which equates to
approximately half the Australian population.
Downer’s expertise includes water treatment,
wastewater treatment, water and wastewater network
design, construction, maintenance and rehabilitation,
desalination and biosolids treatment.
As a provider of asset management services, Downer
supports its customers across the full asset lifecycle
from conceptual development through to design,
construction, commissioning and into operations
and maintenance.
FY24 highlights
Downer was awarded a new contract by Unitywater
on 28 May 2024 to deliver water, sewerage and
recycled water services in south-east Queensland.
The contract commenced in May 2024, with an
initial five-year term plus three two-year extension
options. The contract is valued at an estimated
$600 million to Downer over the initial five-year term.
Downer was awarded a two-and-a-half-year
contract with the New Zealand Department of
Corrections in May 2024 to deliver their Water
Infrastructure Program in Auckland, Wellington
and Christchurch.
Downer reached agreement on open commercial
matters in late-FY24 addressing contractual claims
on loss making water construction portfolio. All but
one project is now substantially complete with the
remaining project forecast to complete in FY25.
Telecommunications
Downer is a leading provider of end-to-end
technology and communications service solutions,
working with Australia and New Zealand’s largest
telecommunications providers to build and strengthen
their networks and infrastructure.
Downer’s expertise includes integrated civil construction,
electrical, fibre, copper and radio network deployment
capability. Key capabilities include design, engineering,
consulting, maintenance and smart meter installation.
FY24 highlights
On 19 June 2024, Downer was awarded a new
contract by NBN Co Limited, with an estimated
value of more than $100 million over the initial
three-year term. The Business Deployment Module
contract begins in October 2024 and includes a
two-year extension option. Under this contract,
Downer will augment the nbn network through
network extension and the connection of full
fibre technology to businesses in large parts of
Western Australia, South Australia, the Northern
Territory and New South Wales.
On 6 September 2023, Downer was awarded a
contract for the Indara Mobile Network Infrastructure
Expansion Program.
Downer awarded a contract by Western Power
on 6 June 2024 to deliver meter reading and
replacements in Western Australia.
Water and wastewater services for more than
14 million people across Australia
and New Zealand
Enabled 350,000 premises across WA and NSW
to upgrade their broadband services
More than 6,630,000m of fibre cable blown
through the UFB network in NZ
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
26
27
Directors’ Report
Directors’ Report
Facilities
Government and Health & Education
Defence
Industrial & Energy
The Facilities segment operates in Australia and
New Zealand across a range of industry sectors
including education, health, government, defence
and industrial and energy.
Downer delivers asset management services to facilities
and estates that cover maintenance, expansion and
frontline services for social and economic infrastructure.
Downer’s expertise covers a broad range of asset
types including universities, schools and hospitals,
social housing, corrections, defence estates and
supporting defence capability. Downer’s services help
to optimise critical assets, supporting them to operate
reliably and cost effectively. Downer is also a leading
provider of end-to-end asset lifecycle and specialist
services to the power generation, future energy, oil, gas,
industrial and mineral processing sectors.
Underlying
Pro forma1
FY24
Change
FY24
Change
Revenue
3,198.4
(6.3%)
3,159.2
(0.7%)
EBITA
177.3
9.4%
179.3
3.3%
EBITA %
5.5%
0.8pp
5.7%
0.2pp
Downer successfully completed two Facilities business
divestments in the period (Asset and Development
Services and AE Smith New Zealand). Excluding the
contribution from these divestments, pro forma
Facilities revenue declined 0.7%, while EBITA increased
3.3%. As a result, EBITA margin increased 0.2% to 5.7%.
Margin improvement across the portfolio of long-term
contracts in the Government and Health & Education
businesses, together with increased profitability in the
Industrial & Energy business, contributed to the strong
Facilities result.
% of total segment
Total revenue2 (FY24)
EBITA3 (FY24)
27%
37%
Government and Health & Education
Downer is one of the largest integrated facilities
management services providers in Australia and
New Zealand, delivering property and facilities
management services to government departments,
agencies and authorities at the Federal, State and
municipal levels. Downer provides management of its
customers’ assets across their lifecycle. Downer has a
40-year history of supporting the daily operations of
hospitals across Australia and New Zealand, delivering
a range of services that create a safe environment
for hospital staff, patients and their guests. At leading
schools and tertiary institutions, Downer helps to
enhance learning environments through integrated
services such as catering, building and grounds
maintenance, conserving energy with air-conditioning
and lighting solutions and supporting a secure
environment.
FY24 highlights
Completed the divestments of Asset and
Development Services and AE Smith New Zealand.
On 27 June 2024, Downer was awarded a new
contract to deliver maintenance services across
the Homes NSW public housing portfolio covering
Inner City Sydney, Southern Tablelands, South Coast,
Macarthur and Southern Highlands, and Illawarra.
The contract to deliver responsive and programmed
maintenance services commenced on 1 July 2024
and is valued at approximately $860 million for a
maximum term of 10 years.
21 Public Private Partnership projects across the
defence, education, health and leisure sectors
1. Pro forma reflects the statutory results adjusted for ISI and excludes the revenue
and EBITA contribution relating to completed divestments to provide a like for
like comparison at 30 June 2024.
2. Total revenue is a non-statutory disclosure and includes revenue, other
income and notional revenue from joint ventures and other alliances not
proportionately consolidated.
3. Downer calculates EBITA by adjusting EBIT to add back acquired intangibles
amortisation expense.
Defence
Downer provides a broad range of professional
services, base and estate management and
estate development and base upgrade services
to the Australian Defence Force, the New Zealand
Defence Force and other government agencies.
We have a comprehensive Defence Capability Life
Cycle offering and mindset. Our Sovereign Industry
Capability delivers to the needs of Defence and other
government agencies.
FY24 highlights
On 27 October 2023, Downer received an extension
on its Estate Maintenance and Operation Services
(EMOS) contract with the Australian Department of
Defence. The 12-month extension will commence
in August 2024 and run through to 31 July 2025,
generating revenue to Downer of approximately
$400 million.
On 14 September 2023, Downer was selected to
deliver the Planning Phase of the Australian Defence
Force’s proposed Woomera Redevelopment
Program in South Australia. The Downer CPB
joint venture commenced the Planning Phase
in September 2023, with development activities
for the project (estimated value, $500 million to
$750 million – subject to further Government review)
that will form the basis of Defence’s submission for
Government approval.
In partnership with Downer’s Roads Services
business, Downer Defence completed an airfield
works project to deliver infrastructure upgrades at
RAAF Base Williamtown and Newcastle Airport.
Industrial & Energy
Downer is a leading provider of end-to-end asset
lifecycle and specialist services to Australia’s critical
economic infrastructure including the power
generation, future energy, oil, gas, industrial, and
mineral processing sectors.
Our key capabilities cover a full range of services
including maintenance, shutdowns, turnaround
and outage delivery, equipment overhauls and
modifications, sustaining capital programs,
manufacturing, project development and
commissioning services. Through our Mineral
Technologies business, Downer is a leading provider
of fine physical mineral separation solutions.
FY24 highlights
Downer’s customer, Santos, achieved mechanical
completion on the CO2 first injection components
for its Moomba Carbon Capture and Storage Project
in South Australia in June 2024. Downer provided
civil, mechanical and electrical construction and
commissioning services for the project, which is
nearing completion.
In November 2023, Downer delivered the major
outage of Unit One of AGL’s Bayswater Power Station
in the Hunter Valley, completing the refurbishment
of mechanical plant including scaffolding,
mechanical, electrical and instrumentation, and
multiple works to the external sections of the unit.
Strengthened long-term relationships to deliver
maintenance, shutdown and sustaining capital
services in the Western region, securing contract
extensions and expanding services provided to
customers such as BHP, Chevron and WesCEF.
Enable the support of approximately
40,000 Defence personnel
Provide maintenance and outage services essential in
running Australia’s power stations, servicing customers
that supply 50% of the National Electricity Market.
Involved in two of Australia’s largest
carbon capture and storage projects
Annual Report 2024 Downer EDI Limited
28
29
Directors’ Report
Directors’ Report
Strategic objectives and future opportunities
Downer’s core Transport, Utilities and Facilities segments hold strong trans-Tasman market positions with key capabilities
delivering to evolving customer needs. Our business is supported by solid fundamentals to target resilient and high
quality earnings growth in pursuit of our Purpose of ‘Enabling communities to thrive’.
Our core capabilities, relationships and scale:
Position us to provide critical infrastructure services for long-term, government and blue chip customers
Align with favourable sectors benefiting from supportive tailwinds and strong growth prospects
Aim to deliver predictable and stable operational performance
Generate cash returns with reduced capital intensity.
Downer’s Purpose, Promise and Pillars
Our Purpose is: Enabling Communities to Thrive – Te whakaahei hapori momoho.
Our Promise is: Our customers’ success is our success.
Our Pillars represent the foundations of how we think, plan and solve problems together:
Safety and sustainability – We aim to leave a positive legacy for future generations, and we are committed to Zero
Harm for our people, communities and the environment
Delivery – We build trust by delivering on our promises with excellence while focusing on safety, value for money
and efficiency
Relationships – We collaborate to build and sustain enduring relationships with our customers, our people and our
communities, based on trust and integrity
Thought leadership – We remain at the forefront of our industry by employing the best people and having the
courage to challenge the status quo.
Strategies to realise long-term value for shareholders
During the year, Downer undertook an in-depth strategic planning process to develop enterprise level strategic, business
unit full potential, and functional support plans, which included assessing the historic drivers of performance, the future
growth potential of the markets we operate in and our organisational capabilities and service offerings required to
achieve our strategic objectives. We also launched our new aspirational culture framework, The Downer Difference, in
July 2024. Distilled across our Strategic Focus Areas, the outputs of the strategic planning process support our immediate
priority to implement our back to basics transformation program.
The program incorporates targeted initiatives to:
Enhance leadership capability and drive a performance culture
Focus our businesses on where to play and how to win
Implement enhanced risk protocols through tendering and governance with an emphasis on reassessing our risk
appetite, permitted services, acceptable commercial models and terms, and minimum return hurdles
Improve project delivery capabilities to support project margin growth
Streamline our operating model for efficiency
Simplify our portfolio.
These coordinated actions provide the pathway to achievement of a management target EBITA margin of more
than 4.5%.1
1. The EBITA margin target of more than 4.5% is a management target that is incorporated into Downer’s long-term incentive plan and is not provided as guidance.
The macro settings that have shaped our strategy include:
Growing and ageing populations, along with the expansion of government services to support and enhance
equitable living standards for all citizens
The energy transition towards net zero, which is driving an unprecedented step change in energy investment
Geopolitical shifts, that are necessitating material investment in new Defence capabilities, including sustainment of
existing assets and significant infrastructure upgrades
A renewed emphasis by Federal and State Governments on reducing reliance on global supply chains, highlighting
the importance of local industry participation, skills and building robust domestic supply chain and capability.
Within our strategy, we have chosen clear priorities to align and respond to these trends, to enhance our capabilities,
customer relationships and industry partnerships necessary to achieve and sustain market leading positions.
Downer’s strategy is underpinned by the following focus areas:
Strategic focus area
Safety – maintain
focus on Zero Harm
A dedicated Zero Harm culture is essential to achieve ongoing success, to build relationships
with our people, customers and communities and to deliver industry-leading health, safety and
environmental performance.
Our commitment to achieving our Zero Harm goal resonates throughout the organisation.
We promote our people’s safety, health and wellbeing, enable environmentally sustainable
business activities and include safe practices through our operations.
Downer’s Integrated Management System, The Downer Standard, supports consistent
management of Zero Harm risk and performance. Downer holds third-party accreditation to
the International Standards ISO 45001 (Safety), ISO 9001 (Quality), and ISO 14001 (Environment)
providing a system for safety, quality and environmental management, along with a framework
for developing, implementing, and monitoring. This allows Downer to deliver best practice
information and work processes to its frontline employees, enhancing their ability to manage
risk and adapt to changing work environments.
Sustainability –
address climate-
related risks and
position for growth
opportunities through
decarbonisation
Downer seeks to include sustainability practices in the way it delivers services and operates our
business. Our skills, experience and technical capabilities position us to play a role in delivering
high-value solutions that support our customers in navigating the energy transition and
progressing to a lower emissions future.
Achieving our own emissions reduction pathway is essential to establishing credibility for the
services and solutions we provide.
Downer supports the science on climate change and is committed to taking action to
decarbonise its operations to help play its part in reducing global temperature rise. Downer has
set a near-term Scope 1 and 2 GHG emissions reduction target, utilising the SBTi’s Corporate Near
Term Target Setting tool and a net zero Scope 1 and 2 GHG emissions reduction target, utilising the
SBTi’s Corporate Net Zero Tool (noting the below discussion regarding Downer’s Scope 3 targets
has necessitated a review of this component of the target).
Downer’s near-term Scope 3 target and Scope 3 component of its Net Zero target is under review.
Downer undertook a pre-assurance engagement to assess the robustness of its approach, as
well as the completeness and accuracy of data produced for Scope 3 emissions. As a result of
this exercise, Downer found that emissions resulting from Scope 3 Category 9 and Category 11
required further review of assumptions and methodologies used which were not finalised
before the publication of this report. Downer has utilised Adoption Provisions 4 and 5 of NZ CS 2
in not disclosing these categories in FY24. Downer’s near term Scope 3 target, and the Scope 3
component of its Net Zero target is being remeasured with the aim to communicate our
ambition in FY25.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
30
31
Directors’ Report
Directors’ Report
Strategic focus area
Sustainability –
address climate-
related risks and
position for growth
opportunities through
decarbonisation
continued
Downer’s near term Scope 1 and 2 GHG emissions commitments are aligned with a 1.5°C
pathway and support the transition to net zero emissions by 2050. Downer’s GHG emissions
reduction targets are:
50% reduction by 2032 across absolute Scope 1 and 2 emissions against a 2020 baseline
Net zero by 2050 across Scope 1, 2 emissions against a 2020 baseline (noting that Downer's
near-term Scope 3 target and Scope 3 component of its Net zero target is under review).
To achieve net zero, Downer aims to reduce its Scope 1, 2 emissions by 90% from a 2020 baseline,
with the residual 10% being covered by the purchase of neutralising/carbon removal offsets. We
anticipate, based on our Decarbonisation pathway modelling, that these may be purchased in
the 2040s, subject to Downer reducing its emissions to 90% from a 2020 baseline. We intend that
these will be certified carbon removal/neutralising offsets in the form of Australian Carbon Credit
Units (ACCUs), or equivalent, however this will be dependent on prevailing market conditions. It is
noted that the market for carbon removal offsets is rapidly evolving, which Downer will monitor as
it aims to track towards its target.
Examples of our progress include a continued focus on energy efficiency and GHG emissions
reductions, efforts to decarbonise our fixed assets with new technology and fuel switching, further
decarbonising Downer’s fleet through electric and alternate fuel vehicles, increasing the use of
renewable energy sources both on and off the grid, and incorporating low emissions materials
into our products.
Further details relating to Downer's response to climate-related risks and opportunities are
outlined in the Climate Statement contained within our 2024 Sustainability Report.
Leadership and
culture – driving a
performance culture
Culture is a key enabler to achieve our strategic objectives. At the core of Downer’s transformative
journey and strategy lies a commitment to fostering a high-performance culture. ‘The Downer
Difference’ is our new cultural framework focused on high performance and leadership
capability. This centres around three pivotal areas: accountability (We own the outcomes);
customer-centricity (We do it for our customers); and a safe, inclusive and purpose-led workplace
(We stand for each other); and is underpinned by a set of behaviours that guide the actions and
attitudes of our people.
The operating model and structure of the organisation has substantially redefined roles,
authorities, and accountability for performance. To support the new operating model and to
drive achievement of strategic priorities, the Group’s leadership team has been renewed with
75% of the Executive Leadership Team either new to Downer or new to their leadership role. These
appointments include our Chief Risk Officer, Chief Information Officer, Chief Operating Officer
Energy & Utilities, Group Executive General Manager Finance, Group Executive General Manager
Business Serices Centre, and Group Executive General Manager Zero Harm.
Focus on project
margins – tendering
and governance
Effective assessment and management of risks and opportunities is fundamental to enhancing
project margins with consistent and predictable outcomes for Downer and our customers. In
FY24, Downer established a new Executive role of Chief Risk Officer. Downer has continued to
refine tendering and risk governance processes including the establishment of a Board Project
Governance Committee (PGC). The PGC's primary purpose is to approve tender opportunities
that are above defined value and risk thresholds at defined stage gates (pursue, prepare, submit
tender and execute contract) and monitor overall performance of the portfolio of projects. The
PGC is chaired by an independent Director and comprises six members, including the CEO.
Our immediate priority is to focus on the quality of revenue and to pursue work which aligns with
our capabilities with commercial models that appropriately balance risk and return and working
with customers that value our technical skills and reliable service delivery. Included in our risk
management framework are dynamic and iterative governance controls aimed at enhancing
earnings resilience to protect and create long-term value.
Strategic focus area
Focus on project
margins – tendering
and governance
continued
The Downer Standard (TDS) provides a policy framework and guardrails to strive for consistency
in risk management. To support selective tendering and disciplined execution, Downer’s Delivery
Management Methodology (DMM) guides all stages of the delivery lifecycle with a structured
and repeatable framework. Our 5C framework clearly defines our contract risk guardrails and
risk appetite.
Our Three Lines of Defence model incorporates organisational accountability and promotes
the consistent application of TDS and DMM. Operational management delivers our first line of
defence, Business Unit leadership provides oversight and performance requirements for the
second line, and risk assurance monitoring and reporting to Executive and ultimately the Downer
Board deliver the third line of defence.
Focus on project
margins – project
delivery
The needs of Downer’s customers continue to grow and evolve. This requires reliable, digitally
enabled cost-effective asset management and service delivery. In response, Downer is focused
on uplifting our operational excellence and project delivery capability to achieve customer
outcomes safely while meeting or exceeding tendered margins.
Strengthening our critical capabilities supports improved decision making, the disciplined
execution of essential business practices, implementing critical project controls and identifying,
managing, and optimising risk and opportunity through the project delivery life cycle.
We are focused on implementing our back to basics contracting disciplines and embracing new
technology and better utilisation of data to uplift our project delivery.
Operating model
enhancement –
reshaping of central
functions and
delivery support
Downer has successfully transitioned to a trans-Tasman operating model with a focus on
improved project delivery, resource and capability sharing, and enhanced customer outcomes.
Our ongoing transformation activities – including a reshaping of the role of corporate and
Business Unit support functions – continue to deliver significant reductions in operating cost
and stabilise the platform for enhanced business efficiency, standardisation and delivery
support for projects. This includes work to standardise overhead reporting and recharge models,
the rationalisation and update of our IT systems, an enhancement of our capital allocation
framework and a resetting of risk management guardrails for improved tendering, governance
and project delivery outcomes.
Refinement of management and leadership structures and enhanced risk and performance
governance has supported improved accountability for project delivery performance outcomes
aligned to The Downer Difference framework.
Further refinements and optimisation of organisational support models are progressing through
FY25 to deliver additional cost efficiencies and enhanced portfolio performance.
Portfolio refinement
– simplify, reduce
risk and maximise
shareholder value
Downer’s core Transport, Utilities and Facilities portfolio has strong foundations and is oriented to
growth markets with attractive long-term characteristics.
During FY24, six divestments were completed as part of an ongoing strategic process to
refine Downer’s optimal portfolio aligned to key market tailwinds and divest non-core and
underperforming businesses.
Portfolio simplification and refinement continues, with a focus on non-core underperforming
assets and reducing risk to align with our enterprise risk appetite. Further portfolio changes
continue to be explored which will be dependent upon market conditions, maximising
shareholder value, and capital allocation to businesses which meet our strategic, financial
and risk parameters.
Refer to Our Approach to Risk Management for further details on risks associated with the pursuit of Downer’s strategic
objectives and future opportunities.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
32
33
Directors’ Report
Directors’ Report
Our approach to risk management
We manage risk across all levels of our organisational risk hierarchy.
Board
Set risk framework
and appetite
Audit and
Risk Committee
Compliance with
risk framework
and appetite
Project
Governance
Committee
Bid and project
governance
Group
Implement risk framework and appetite
Manage and report enterprise risks
Operational risk governance
Internal Audit
Tender and Contracts Committee
Business reviews
Report to Board and Board Committees
Business units and functions
Manage and report operational risks
Bid, contract and project risk governance
Report to Quarterly Business Review
Bids, contracts and projects
Perform bid, contract and project assessments
Manage and report risks and opportunities
Report to Delivery Governance Leadership
First line
of defence
Second line
of defence
Third line
of defence
Directors
OPERATIONAL RISKS
ENTERPRISE RISKS
At the Group level, we actively manage a range of risks which could have a material impact on our ability to achieve
strategic objectives. We apply a risk management framework to identify, assess and manage these risks.
Downer’s risk mitigation and management strategies relating to material enterprise risks, including general business,
operational and macroeconomic risks, are outlined below.
Overview of risk and potential impact
Risk mitigation and management strategies
Key contracts, competition and customer retention
There is a risk that material contracts may
be cancelled, not renewed or renewed on
less favourable terms.
Operating in highly competitive markets,
increased competition and market changes
can impact our ability to renew or secure
new contracts. Such events could lead to
reduced work-in-hand, profitability, and
earnings.
Additionally, some of our contracts have
fixed or capped pricing exposing us to
potential losses due to cost escalations that
cannot be recovered from customers.
We prioritise maintaining strong relationships with customers across a
range of different markets.
We focus on delivering successful outcomes for our customers,
strategic partnerships, and joint ventures with high-quality services,
leading technology, thought leadership, and knowledge providers.
Our Customer Relationship Management (CRM) system helps us
effectively manage our diverse customer base.
We apply rigorous bid governance processes for tendering projects
within our risk appetite. We maintain a strong emphasis on cost
control, supply chain management and project oversight.
Our Tender and Contracts Committee and Board Project Governance
Committee (established in FY24) provide oversight for bid and project
governance, contract and tender evaluation and the Quarterly Business
Review process oversees the performance of projects and contracts.
We continue to focus on risk management and operational excellence
with strategies in place aimed at improving performance, delivering
tendered and budget margins, and reducing variability.
Overview of risk and potential impact
Risk mitigation and management strategies
Organisational culture
Failure to create and maintain a culture
which supports our core behaviours, ethics,
principles, and values can impact our ability
to execute our strategy and maintain our
social licence to operate.
We updated our Purpose, Promise and Pillars to better align with our
people, our customers, and the communities we operate in.
Focus groups were held with our employees to understand Downer’s
current culture and define what we want our target culture to be. From
this we are implementing a high-performance culture program, called
The Downer Difference.
Our cultural re-set, The Downer Difference, was launched in July
2024 to leverage our strengths and shape our identity as a high-
performance organisation that delivers for our customers and
embraces different perspectives.
Brand and reputation
Our reputation is crucial to winning and
retaining work, attracting and retaining
employees, accessing capital markets and
maintaining our social licence to operate.
Building and maintaining trust among
stakeholders is vital for our business. A failure
to uphold this trust could result in negative
media attention, damaging our reputation
and impacting stakeholder support.
Reputational damage could also jeopardise
contract renewals and our ability to
participate in new tenders.
Our Standards of Business Conduct applies to all officers and
employees, and we endorse leading governance practices, along
with training, reporting processes and consequence management.
We regularly engage and correspond with our customers to provide
assurance on our commitment to the highest standards of conduct.
We continue to strengthen our culture and organisational
compliance to protect our reputation and strengthen our position
in the marketplace. For example, we have implemented a Source-
to-Contract application to strengthen the vendor prequalification
process and rolled out tailored ethics training.
We communicate regularly with all our people across Downer to
foster a strong and constructive culture to deliver upon our common
Purpose and Promise.
Delivery management performance and bid governance
Inadequate project performance can affect
portfolio returns and erode value.
Given the industries we operate in and the
scale of some of our contracts, there is a
risk of significant losses if bid governance
processes and project delivery are not
properly followed.
Our integrated management system, The Downer Standard (TDS),
provides policy framework, governance, and consistency in our
approach to risk and opportunity management.
Our delivery lifecycle is managed and underpinned by the TDS,
our Opportunity and Bid Management, Delivery Management
Methodology and business performance management frameworks.
We have established organisational capability uplift programs and
quarterly business reviews to focus on driving delivery performance,
reviewing key projects and managing operational risks.
We maintain project risk management processes and systems across
our business, as well as specific bid governance processes relating
to tenders for large projects to evaluate strategic rationale, cost, time
and risk. Internal Audit provides independent assurance of design and
operational effectiveness of these processes and systems.
Our enhanced risk framework and its guiding principles – capacity,
capability, counterparty, contract, compensation – prioritises the
projects we pursue, selectively focusing on those that offer improved
margins and align with customers who value our technical capability.
Key governance forums – the Tender and Contracts Committee, the
Board Project Governance Committee – provide oversight for bid and
project governance, contract and tender evaluation, and monitoring,
so we have the capability to deliver outcomes effectively while
managing appropriate levels of risk.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
34
35
Directors’ Report
Directors’ Report
Overview of risk and potential impact
Risk mitigation and management strategies
Key suppliers, subcontractors and partners
Reliance on a limited number of specialist
suppliers or subcontractors can affect
project outcomes particularly if performance
issues arise.
Where suppliers or subcontractors fail to
meet contractual obligations or choose not
to renew contracts, our ability to complete
projects and secure new work could be
compromised.
We maintain long-term relationships with
certain suppliers and partners critical to our
business activities, and any changes in these
relationships could negatively impact our
financial performance.
Additionally, conflicts of interest, fraud
or corruption within our suppliers,
subcontractors or partners could have
adverse effects on our operations, reputation
and performance.
We work with key suppliers to assess and manage supply chain
resilience.
Our standardised Procurement Framework is closely aligned to the
principles of ISO 20400 – Sustainable Procurement and is supported
by tools and platforms. This is designed to assist in engaging suppliers
and subcontractors to seek alignment to sustainability objectives
defined in our framework.
In FY24, we implemented a new vendor management system, Felix,
to enhance our prequalification and onboarding controls, directly
addressing advice from independent procurement and probity
experts to further improve our practices in line with AS8001:2021,
Fraud and Corruption Control.
Macroeconomic and geopolitical conditions including government expenditure
Changes in macroeconomic conditions
through deterioration in the economy may
impact the industries in which we operate
and could have a material negative
impact on our operational and financial
performance.
We must remain agile and responsive to
global and local events, including changes
in government policy, trade tensions,
geopolitical conditions and rising economic
uncertainty and volatility.
Public authorities and Government
departments in Australia and New
Zealand are major customers of Downer.
Changes in prioritisation of, or restrictions
on, government expenditure may impact
our earnings.
Our Board and Executive Management consider external economic
conditions and geopolitical risks when developing strategy and plans
to build resiliency and responsiveness in the business should events
occur.
We gain perspectives from external subject matter experts, our
customers, and key stakeholders.
We maintain a diversified book of secured work with long-term
contracts, which underpins earnings from these projects.
We operate in diversified markets and with government centric
customers to mitigate the impact of budgetary and expenditure
reductions or changes in key customer spending profiles.
We deliver essential maintenance services to critical infrastructure
assets. The essential nature of these services helps mitigate both the
impact of changing government spending priorities and the duration
of any decline in spending.
Overview of risk and potential impact
Risk mitigation and management strategies
Financial markets and treasury
We are subject to various forms of financial
market risk including liquidity, interest rate
and foreign exchange risk.
Capital market volatility may impact our
ability to transact and access suitable
capital on acceptable terms due to factors
outside of our control including perceptions
of our credit rating, our carbon intensity,
the global supply of credit and the level
of credit defaults.
Therefore, we may not be able to undertake
ordinary business operations, potential
acquisitions, growth opportunities, or
develop new business or respond to
competitive pressures.
Rising interest rates may adversely impact
our interest payments on our floating
rate borrowings. Disruptions in financial
markets may affect the availability and
cost of hedging, which may have a
material adverse impact on our financial
performance and position.
We operate internationally and are exposed
to foreign exchange rate risks associated
with foreign currency denominated debt,
input costs and offshore earnings.
We have a Treasury Risk Management Standard which defines the
management of the Group’s financial assets and liabilities, and
financial market risks giving consideration to the impact on our
reputation, financial counterparties, credit ratings, shareholders,
customers and suppliers.
Financial markets risk is governed by a Board approved Treasury Policy,
which sets strict parameters to manage liquidity, interest rate and
foreign exchange risks by:
— Access to diverse funding sources across global capital markets on
competitive terms and tenors
— Stipulating minimum and maximum hedging requirements for
floating rate borrowings and foreign exchange exposures that
reduces exposure to interest rate volatility and exchange rate
fluctuations
— Selecting interest rate hedge counterparties based on credit
strength and market capability to allow continued access to
efficient hedging sources
— Establishing committed term funding from investment grade
rated banks that is spread over a variety of tenors to minimise
refinancing risk
— Aiming to retain an investment grade credit rating
— Maintaining a liquidity buffer and financial covenant compliance.
We engage with existing and potential equity and debt investors to
regularly update them about the business.
Cost escalation
As an integrated service provider, we are
exposed to cost escalation and inflationary
pressures which may be above budgeted
levels across elements of our cost base.
If we are unable to offset these cost
pressures through contractual inflation
recovery mechanisms or planned cost out,
this could adversely impact our profitability
and financial performance.
Escalation clauses, where included in customer contracts, provide
a degree of protection against increasing costs of service delivery
through indexation (e.g. CPI, WPI) or other cost escalation mechanisms.
Alliance, commercial models with pain/gain share clauses are another
form of contract model, which we include where possible in customer
contracts to offset the risk of cost escalation above budgeted
amounts.
We perform commercial management reviews of our contracts for
appropriateness given prevailing market conditions, including inflation
pressures, supply shortages and other potentially disruptive events
which may increase costs.
We have targeted to reduce our exposure to fixed price lump sum
contracts. In instances where we do fixed price work, we often see
early contractor involvement (ECI) contracting models which enables
the contractor to become involved before design is completed and
enables enhanced transparency over pricing subcontractor and
trades for cost estimates with the aim of reducing risk.
We employ disciplined cost management of both project and
overhead costs.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
36
37
Directors’ Report
Directors’ Report
Overview of risk and potential impact
Risk mitigation and management strategies
Talent, labour and employee relations
Attracting and retaining talent, workforce
engagement, upskilling and growing
capability is critical to achieve our strategic
objectives.
Our growth and profitability may be limited
by the loss of key management, the inability
to attract suitably qualified personnel, a
decline in labour productivity or by increases
in costs associated with recruiting and
retaining personnel.
In certain functions and operations, we
rely on the availability of skilled personnel
to deliver our services, making access to
labour a potential risk.
The majority of Downer’s workforce
is covered by a variety of industrial
instruments; collective agreements in
New Zealand and enterprise agreements
and modern awards in Australia.
Consequently, we may be exposed to
the risk of industrial action which can
adversely impact operations and customer
experience of our services.
We are committed to fostering a workplace environment that
prioritises inclusion and belonging, supports the health and wellbeing
of our people, and provides opportunities for their professional growth
and development.
Downer launched Core People Processes and a new IT system,
HRCore, which is directed at the consistent application of best
practice people processes.
Several initiatives are in place to foster a positive workplace, including
Own Different (Inclusion and Belonging), Own Respect (Workplace
Behaviours), THRIVE (Diversity and Equity) and Indigenous inclusion
and awareness programs.
Talent attraction and retention strategies include career progression
pathways, remuneration and other incentives, investment in learning
and internal development opportunities.
Downer mitigates the risk of industrial action by aiming to
effectively engage and consult with our employees and employee
representatives to negotiate collective and enterprise agreements,
address issues and grievances promptly and comply with
workplace laws.
Further details relating to the management of talent, labour
availability and employee retention risks, and related performance,
are outlined in our 2024 Sustainability Report.
Employment arrangements
The majority of Downer’s workforce is
covered by industrial instruments; collective
agreements in New Zealand and enterprise
agreements and modern awards in Australia.
These industrial instruments are complex
and require interpretation to accurately
determine payments and accrual of
employee benefits. The application of
industrial instruments is subject to change
as a consequence of developments
in legislation and case law and the
requirement to renegotiate and renew
them periodically.
The complexity and volume of industrial
instruments that apply to Downer could
result in issues leading to reputational
damage, disruption to operations and an
increase in direct and indirect labour costs.
All of which may have a negative impact on
our financial performance.
We have established an Employment Compliance function in our
Business Service Centre that focuses on providing assurance across
processes and controls supporting employee payments.
A dedicated Industrial Relations function, comprised of industrial
relations specialists and employment lawyers, provides interpretation,
advice, and active management of changes to workplace landscape
and specific industrial relations risk.
Downer is currently reviewing its Workforce Management processes
with a commitment to continuously improving the end-to-end
activities associated with employee time capture and payments.
Overview of risk and potential impact
Risk mitigation and management strategies
Climate-related risks
Climate change exposes our business,
customers and communities to a range of
acute and chronic physical risks, and exposes
society and Downer to transition risks.
Physical risks resulting from climate change
can be event driven (acute) such as
increased severity of extreme weather events
(for example, cyclones, droughts, floods and
fires) or relate to longer-term shifts (chronic)
in precipitation and temperature and
increased variability in weather patterns (for
example, sea level rise). Potential impacts
could include disrupted works and/or
damaged assets, which could result in loss
of revenue and increased capital costs for
repairs. Exposure to chronic physical risks
could see increasing difficulties in Downer
to be able to secure insurance for frequent
weather-related events.
Transition risks result from the transition
to a lower-carbon global economy and
include those that relate to policy and
legal actions, technology changes, market
responses, and reputational considerations.
Potential impacts could include increased
capital and operating costs, loss of revenue
opportunities and legal action.
Downer’s decarbonisation pathway considers commercially viable
options to reduce our exposure to carbon-related liability. Downer
is continuously monitoring developments to enable timely pivots in
response to market and technological changes. This aims to mitigate
Downer’s exposure to transition risks resulting from policy and legal
actions, technology changes and market responses, as well as
maintain our reputation.
Downer’s diverse revenue stream in the sectors we serve helps to
mitigate exposure to transition risk stemming from market responses.
Downer is committed to the Environmental Product Declaration
process for the road surfacing products it provides to enhance
transparency of the environmental outcomes of these products, to
help mitigate transition risk stemming from reputational concerns.
Downer has insurance against losses from some extreme weather
and climate-related events (for example, flood coverage is included in
the majority of Downer locations). This does not extend to all impacts
stemming from climate-related events (for example, prolonged wet
weather that causes demand for asphalt to reduce is not covered).
Downer continues to assess contractual arrangements and
commercial terms with respect to physical impacts of climate change
(acute and chronic weather events) for appropriate mitigation
measures are in place, including force majeure clauses and cost pass
through mechanisms.
For further details regarding Downer’s assessment of climate-
related risks, refer to Downer’s climate-related disclosure (compliant
with the Aotearoa New Zealand Climate Standards (NZ CS) issued
by the External Reporting Board) in our 2024 Sustainability Report,
pages 16-32.
Workplace health and safety
Downer works in several sectors regarded
as high risk.
We are committed to providing an
environment where our employees,
contractors, customers, and the public are
safe at all times. Our ability to meet our
corporate and social responsibilities relies
on our focus on promoting health, safety
and wellbeing.
We recognise that our activities carry risks
that could result in serious injury or death.
Workplace fatalities or significant injuries not
only harm individuals but also negatively
impact our operations, employees, and the
communities we serve. Furthermore, failure
to comply with applicable health and safety
regulations could result in penalties and
compensation obligations.
We are committed to the safety, health and wellbeing of our people
and our communities through safe practices, identifying critical risks
and controls and continuous improvement of our safety performance.
We continually assess, understand, and mitigate critical risks and high
potential incidents applying directions and implementing guidance
included in our Cardinal Rules.
We promote our Zero Harm commitment across the organisation
through our integrated management system, The Downer Standard.
We maintain third-party certifications to internationally recognised
standards.
Our Own Respect initiative is a holistic strategy to appropriately adopt
recommendations made by the Australian Human Rights Commission
Respect@Work Report.
We identify, assess and implement controls for drivers of psychosocial
risk in the workplace including bullying and harassment.
We encourage employees to raise complaints and have those
complaints dealt with appropriately and without reprisal.
Further details relating to the management of health and safety risks
and related performance are outlined in our 2024 Sustainability Report.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
38
39
Directors’ Report
Directors’ Report
Overview of risk and potential impact
Risk mitigation and management strategies
Cybersecurity, system continuity and reliance on information technology
We rely on the efficient and uninterrupted
operation of core technologies, IT
infrastructure and systems, which may be
vulnerable to system failures, computer
viruses, cyberattacks, power outages and
human error. Our dependence on third-
party service and software providers adds
to this risk.
Any disruption could impact our ability to
deliver services resulting in customer loss,
revenue decline, reputational damage and
a weakened competitive position.
A cyberattack, inadvertent data breach or
failure to protect confidential information
could lead to data loss, legal breaches,
system outages and affect our reputation
and financial performance.
We have established Technology and Cyber Risk management
practices and have a framework in place to mitigate and reduce the
negative impact of information security and technology risks. The
Audit and Risk Committee provide oversight of technology, data and
cyber related risks.
We maintain an ISO 27001 certified Information Security Management
System describing the standards, controls, and procedures relating
to the confidentiality, integrity and continuity of critical information
assets.
Our digital strategy focuses on delivering technology solutions that
support business performance. This includes a strategic roadmap
for our digital future, incorporating automation, digitisation,
standardisation and generative AI to improve efficiency and delivery.
We continue to invest in and maintain key controls in threat and
vulnerability management including a Security Operations Centre with
a focus on security incident response and planning, user awareness
and simulation, management and mitigation of third-party risk, back-
ups and resilience for key systems, and IT assurance regimes.
Further details relating to the management of cybersecurity risks and
related performance are outlined in our 2024 Sustainability Report.
Guarantees, indemnity and liability
At times we are required to provide
guarantees and indemnities for the
performance of counterparties, including
controlled entities and related parties,
regarding their contractual and financial
obligations.
There is a risk that we may fail to meet our
obligations related to the quality of our
products or services, potentially leading
to claims for contractual damages or
statutory penalties.
Certain entities within Downer are subject
to standard design liability for completed
design and construction projects. This
liability may include claims, disputes, and
litigation against Downer and joint ventures
in which we have an interest; as well as the
obligation to rectify design defects at our
own expense.
We have diversified bonding facilities for providing guarantees related
to performance addressing underlying customer credit risk.
The Group also maintains insurance policies to cover potential
liabilities. However, the availability of insurance on suitable terms and
at a reasonable cost is not guaranteed and it is possible that certain
events may not be fully covered or covered at all.
We take legal advice in respect of claims and include relevant
provisions in our financial statements to fulfill our statutory and
contractual obligations including quality assurances in the project
delivery. We have standards, management reviews and verification
processes to address this risk as set out in The Downer Standard.
Overview of risk and potential impact
Risk mitigation and management strategies
Regulatory compliance and licence to operate
Our business is affected by Government
Policy. Changes to industry-specific
requirements, general legal and regulatory
arrangements and taxation policy can
have an adverse effect on our financial
performance. Further, any major shift in
regulatory policy or reform may impact the
profitability of Downer and its customers.
Non-compliance with legislative or
regulatory requirements can impact our
licence to operate.
We have dedicated Legal and Compliance personnel who partner
with the business to advise on and monitor legal, regulatory and
public policy changes, in addition to legal issues and claims.
We have compliance frameworks, operational compliance plans and
assurance programs in place which support and monitor conformity
with relevant regulatory requirements.
Our whistleblower policy supports the reporting of breaches of our
Standards of Business Conduct including any inappropriate, unethical,
corrupt or illegal behaviour, misconduct, or any other improper
situations or circumstances. We maintain both internal and external
processes that allow for the reporting of breaches, including Our Voice,
which is an external and independent service that allows employees
to anonymously report such potential breaches.
We encourage our employees, subcontractors and partners to voice
their concerns if they identify potentially unethical practices. We do
not tolerate victimisation of a whistleblower and are committed to
providing support and protection against any reprisal for reporting a
breach or potential breach. Any employee found to have victimised
another will be subject to disciplinary action.
We continue to maintain and enhance The Downer Standard and
employee compliance training programs to enable our people to
act with the highest ethical standards and comply with relevant
obligations.
We have undertaken external reviews of our ethics frameworks and
established improvement initiatives to drive improved culture and
organisational behaviours.
Transformation
We continue to undergo an enterprise-wide
transformation program to position us for
long-term sustainable success.
We are focused on:
Enhancing our leadership capability and
creating a performance culture
Resetting our operating model
by integrating our Australian and
New Zealand operations
Improving our tendering, risk
management, and project delivery
Simplifying our portfolio
Failure to successfully manage, execute
and deliver the initiatives identified in this
transformation program could adversely
impact our business operations, strategic
objectives, profitability, shareholder returns,
credit rating and market confidence.
An Enterprise Project Management Office has been established
to oversee and coordinate Group-wide transformation projects, to
support initiatives that align with our ambitions and targets.
Ownership and accountability for executing transformation initiatives
sits with the respective Business Units and functional leaders which
have dedicated teams to oversee the delivery of improvement
projects.
We are driving effectiveness by building transformation capabilities
across the business, fostering Group-wide learning and promoting
accountability for delivering change initiatives.
An Investment Committee has been established, which as part of its
remit oversees and approves funding and related business cases for
strategic initiatives.
We work with external business transformation experts as required
to implement our new operating model.
Further details relating to Downer’s transformation are outlined in our
2024 Sustainability Report.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
40
41
Directors’ Report
Directors’ Report
Overview of risk and potential impact
Risk mitigation and management strategies
Exogenous events
We operate in an ever-changing landscape
and are not immune to unexpected and
unpredictable events that have significant
negative impacts on both our short-term
and long-term goals and objectives.
These unpredictable events include, but are
not limited to, pandemics, extreme weather
events, changes in climatic conditions, geo-
political instability, supply chain disruption,
and military conflicts.
We have experience in responding to crises and unpredictable events.
By reflecting on past experiences, we continually improve our crisis
response and build resilience and agility into our business to manage
future uncertainties.
Through our risk management processes we aim to identify potential
risks and vulnerabilities, allowing us to implement appropriate plans
and mitigation strategies should such events occur.
Outlook
There is building momentum and we have growing confidence entering FY25.
We will continue to focus on enhancing the quality of revenue and targeting continued improvement in EBITA margin
towards our management target of more than 4.5%.2
We will give a further update at Downer’s Annual General Meeting (AGM) in November 2024.
Subsequent events
On 21 August 2024, the DCSO (refer to Note B3) conditions for the Tranche 2 and Tranche 3 series were not satisfied and
have lapsed.
Outside the above, at the date of this report, there is no other matter or circumstance that has arisen since the end of the
financial year, that has significantly affected, or may significantly affect, the operations of the Group, the results of those
operations, or the state of affairs of the Group in subsequent financial years.
Changes in state of affairs
During the financial year there was no significant change in the state of affairs of the Group other than that referred to in
the Financial Statements or notes thereto.
Environmental management
Downer is committed to managing the impacts of its activities on the natural and built environment. The Company
strives to help its customers succeed by developing and delivering environmentally responsible and sustainable
solutions, enabling resilient and thriving communities. These commitments are outlined in Downer’s Environmental
Sustainability Policy, available on its website at www.downergroup.com/board-policies.
Downer’s environmental management system, accredited to AS/NZ ISO14001:2015, is part of The Downer Standard, a
Group-wide integrated management system. This standard enables a consistent approach to identifying and controlling
environmental risks and managing environmental performance. The system undergoes internal and external audits by
independent third parties to provide oversight and assurance.
Downer’s 10 Environmental Principles provide guidance to employees and stakeholders, promoting awareness of
environmental commitments, and aiming for compliance with The Downer Standard and environmental laws. Effective
management of environmental risks is integral to Downer’s service delivery, with a focus on implementing effective
controls through its critical risk program and a commitment to continuous improvement. The Company leverages
lessons learned to protect and sustain the natural environment.
2. The EBITA margin target of more than 4.5% is a management target that is incorporated into Downer’s long-term incentive plan and is not provided as guidance.
Qualified environment and sustainability professionals are in each business unit to provide support. Business units have
planned initiative and actions that support compliance and performance enhancement, along with a customised
Climate Change and Decarbonisation Plans. These plans assign responsibilities for implementing actions and
deliverables, with progress monitored regularly and reported throughout the year. This performance assessment is linked
to the business unit’s annual performance and the short-term incentive program.
Employee Discount Share Plan (ESP)
An ESP was instituted in June 2005. In accordance with the provisions of the plan, as approved by shareholders at the
1998 Annual General Meeting, permanent full-time and part-time employees of Downer EDI Limited and its subsidiary
companies who have completed six months service may be invited to participate.
No shares were issued under the ESP during the years ended 30 June 2024 or 30 June 2023.
There are no performance rights or performance options, in relation to unissued shares, that are outstanding.
Directors’ meetings
The following table sets out the number of Directors’ meetings (including meetings of Board Committees) held during
the 2024 financial year and the number of meetings attended by each Director (while they were a Director or Board
Committee member). During the year, eight scheduled Board meetings, six unscheduled Board meetings, seven Audit
and Risk Committee meetings, eight People and Culture Committee meetings, nineteen Project Governance Committee
meetings, five Zero Harm Committee meetings and four Nominations Committee meetings were held in addition to three
ad hoc meetings attended by various Directors in relation to tender reviews and major projects.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
42
43
Directors’ Report
Directors’ Report
Director
Board – Scheduled
Board – Unscheduled
Eligible1
Attended
Eligible1
Attended
Mark Menhinnitt (Chair)
8
8
6
6
Peter Tompkins
8
8
6
6
Sheridan Broadbent3, 11
6
6
4
3
Teresa Handicott
8
8
6
6
Nicole Hollows
8
8
6
6
Adelle Howse
8
8
6
6
Steven MacDonald2
7
7
4
4
Peter Watson4
2
2
2
2
Director
Audit and Risk Committee
– Scheduled
Audit and Risk Committee
– Unscheduled
Eligible1
Attended
Eligible1
Attended
Teresa Handicott
6
6
1
1
Nicole Hollows (Chair)
6
6
1
1
Adelle Howse
6
6
1
1
Steven MacDonald2, 6
5
5
0
0
Peter Watson4
1
1
1
1
Director
People and Culture
Committee – Scheduled
People and Culture
Committee – Unscheduled
Eligible1
Attended
Eligible1
Attended
Mark Menhinnitt
4
4
4
4
Sheridan Broadbent3
3
3
2
2
Teresa Handicott7
2
2
3
3
Nicole Hollows
4
4
4
4
Adelle Howse (Chair)
4
4
4
4
Peter Watson4
1
1
2
1
Director
Project Governance
Committee – Scheduled
Project Governance
Committee – Unscheduled
Eligible1
Attended
Eligible1
Attended
Mark Menhinnitt (Chair)
10
10
9
9
Peter Tompkins9
10
9
9
9
Sheridan Broadbent5, 10
5
5
7
6
Nicole Hollows12
10
10
9
8
Steven MacDonald2, 13
8
8
9
8
Peter Watson4
3
3
1
1
Director
Zero Harm Committee
Nominations Committee
Eligible1
Attended
Eligible1
Attended
Mark Menhinnitt (Chair of Nominations Committee)
5
5
4
4
Peter Tompkins
5
5
–
–
Sheridan Broadbent (Chair of Zero Harm Committee from October 2023)3
3
3
–
–
Teresa Handicott8
2
2
4
4
Nicole Hollows
–
–
4
4
Adelle Howse
–
–
4
4
Steven MacDonald2
4
4
–
–
Peter Watson (Chair of Zero Harm Committee, to September 2023)4
2
2
–
–
1. These columns indicate the number of meetings eligible during the period each person listed was a Director or member of the relevant Board Committee.
2. Mr MacDonald joined the Board on 1 September 2023.
3. Ms Broadbent joined the Board on 2 October 2023.
4. Mr Watson retired on 30 September 2023.
5. Ms Broadbent appointed as a member of the Project Governance Committee, effective from 1 December 2023.
6. Mr MacDonald appointed as a member of the Audit and Risk Committee, effective from 1 December 2023.
7. Ms Handicott ceased as a member of the People and Culture Committee, effective from 5.00pm on 31 December 2023.
8. Ms Handicott appointed as a member of the Zero Harm Committee, effective from 1 January 2024.
9. Mr Tompkins was an apology for one scheduled Project Governance Committee meeting due to an urgent business matter.
10. Ms Broadbent was an apology for one unscheduled Project Governance Committee meeting that was convened at short notice due to pre-existing commitments.
11. Ms Broadbent was an apology for one unscheduled Board meeting that was convened at short notice due to pre-existing commitments.
12. Ms Hollows was an apology for one unscheduled Project Governance Committee meeting whilst on leave of absence.
13. Mr MacDonald was an apology for one unscheduled Project Governance Committee meeting convened at short notice due to pre-existing commitments.
Indemnification of officers and auditors
During the financial year, the Company paid a premium in respect of a contract insuring the Directors of the Company,
the Company Secretary, all officers of the Company and of any related body corporate against a liability incurred as a
Director, secretary or executive officer to the extent permitted by the Corporations Act 2001 (Cth).
The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.
Downer’s Constitution includes indemnities, to the extent permitted by law, for each Director and Company Secretary
of Downer and its subsidiaries against liability incurred in the performance of their roles as officers. The Directors and
the Company Secretaries listed on pages 10 to 14, individuals who act as a Director or Company Secretary of Downer’s
subsidiaries and certain individuals who formerly held any of these roles also have the benefit of the indemnity in
the Constitution.
The Company has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or
auditor of the Company or of any related body corporate against a liability incurred as such an officer or auditor.
Corporate Governance
The Board endorses the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations
(ASX Principles). The Group’s corporate governance statement is set out at pages 178 to 193 of this Annual Report.
Non-audit services
Downer is committed to audit independence. The Audit and Risk Committee reviews the independence of the external
auditors on an annual basis. This process includes confirmation from the auditors that, in their professional judgement,
they are independent of the Group. So that there is no potential conflict of interest in work undertaken by Downer’s
external auditors, they may only provide services that are consistent with the role of the Company’s auditor.
KPMG was the Group’s auditor during the financial year until cessation, having identified a conflict of interest after the Group
filed a defence in the shareholder class action (refer to Note C9) and pleaded a proportionate liability defence against
KPMG on 4 March 2024. Non-audit remuneration of KPMG whilst auditor during the financial year was $42,447.
PricewaterhouseCoopers (PwC) was appointed during the financial year in April 2024.
The Board has considered the position of audit independence and, in accordance with the advice from the Audit and
Risk Committee, is satisfied that the provision of non-audit services during the year is compatible with the general
standard of independence for auditors imposed by the Corporations Act 2001 (Cth). This included consideration of
services provided by PwC during the year prior to their appointment as our external auditor and cessation of services
deemed incompatible with the role of external auditor.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
44
45
Directors’ Report
Directors’ Report
The Directors are of the opinion that the services as disclosed below do not compromise the external auditor’s
independence, based on advice received from the Audit and Risk Committee, for the following reasons:
All non-audit services have been reviewed and approved so that they do not impact the integrity and objectivity
of the auditor
None of the services undermine the general principles relating to auditor independence as set out in the Institute
of Chartered Accountants in Australia and CPA Australia’s Code of Conduct APES 110 Code of Ethics for Professional
Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the
auditor’s own work, acting in a management or decision making capacity for the Company, acting as advocate for
the Company or jointly sharing economic risks and rewards.
A copy of the auditor’s independence declaration is set out on page 78 of this Annual Report.
During the year, details of the fees paid or payable for non-audit services provided by the auditors of the parent entity, its
related practices and related audit firms were as follows:
Auditor
PwC
KPMG
PwC
KPMG
Non-audit services
2024
$
2024
$
2023
$
2023
$
Tax services
150,681
42,447
158,749
24,150
Advisory services
214,377
–
411,216
16,694
Other services and agreed upon procedures
85,000
–
–
–
450,058
42,447
569,965
40,844
PwC’s fees for Non-audit services during the financial year included $295,653 for engagements entered prior to PwC
appointment as auditors (2023: $569,965).
Rounding of amounts
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ reports) Instrument 2016/191,
relating to the ‘rounding off’ of amounts in the Directors’ Report and consolidated financial statements. Unless otherwise
stated, amounts have been rounded off to the nearest whole number of millions of dollars and one place of decimals
representing hundreds of thousands of dollars.
Remuneration Report
Chairman’s Letter
Dear Fellow Shareholders,
On behalf of the Board, we are pleased to present Downer’s 2024 Remuneration Report.
The 2024 financial year has been a year of turn-around and transformation. The business reset is progressing to plan and
there are proof points that the new executive team and strategy is having a positive impact on business performance.
At the last Annual General Meeting in November 2023, 91.45% of votes cast by shareholders were in favour of the 2023
Remuneration Report. The structure of the 2024 Remuneration Report has been prepared with the same objective
of providing readers with a transparent view of how performance has been linked to reward outcomes for the 2024
financial year.
FY24: A year of transformation and turnaround
FY24 was the first full financial year of a transformation program that was initiated in the second half of FY23. In August
2023, the Chief Executive Officer outlined the transformation priorities for the FY24 financial year which were to:
Commence the new fully integrated trans-Tasman operating structure to remove organisational silos
Focus on EBITA margin improvement through a focus on consistent project delivery, risk management and
overhead efficiency
Achieve the $100 million cost out program
Introduce enhanced tendering governance processes with an enhanced focus on risk allocation in contracts
Make enhancements to the Group’s procurement controls in response to an ICAC enquiry
Improve the quality of earnings, with higher focus on cash collection and conversion
Complete under-performing, low margin water construction contracts in the Utilities business and return the Business
Unit to profitability
Strengthen the balance sheet and stabilise Downer’s Fitch investment grade credit rating (which was on
negative watch)
Develop and implement enterprise-level strategic, full potential and high-performance culture plans
Increase organisational capability through an uplift in people, systems and processes.
FY24: Performance
Peter Tompkins (Managing Director and CEO) and Malcolm Ashcroft (CFO) completed their first full financial year as KMP
in FY24. In this period, the operating model and structure of the organisation has substantially redefined roles, authorities,
and accountability for performance. To support the new operating model and to drive achievement of strategic priorities,
the Group’s leadership team has been renewed, including the addition of several senior external appointments, namely
Chief Risk Officer, Chief Information Officer, Group Executive Business Services, Group Executive General Manager
Finance, and Chief Operating Officer Energy & Utilities.
The governance structure at Board and Management levels has also been redefined and reset. At a management
level, the structure, timing and depth of management reviews of Business Units and contracts has been strengthened.
Improved capital allocation and investment approval disciplines and governance processes have been implemented.
A new enterprise-wide IT strategy and governance model has been developed and is being implemented under our
new CIO, with a corresponding capacity and capability uplift. As highlighted in last year’s report the new Board Project
Governance Committee and the redefined People and Culture Committee have been in place for the full year.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
46
47
Directors’ Report
Directors’ Report
The financial performance achieved in FY24 demonstrates that the Group’s leadership changes, new strategy, culture
and transformation program priorities outlined above are having a positive impact on the performance of the business.
Key highlights of Downer’s FY24 financial performance include:
An increase in statutory NPAT to $82.1 million, up from $385.7 million loss in FY23.
An increase in underlying NPATA to $210.1 million, a 21% improvement from the previous financial year.
An increase in operating cash flow by 71% to $544.1 million.
Strong normalised cash conversion of 104.4% (compared to 62.6% in the prior corresponding period).
Continued EBITA margin improvement of 3.3% on a pro forma basis for FY24 compared to 2.6% for FY23
(4.0% for the second half on a pro forma basis, compared to 2.9% for the prior corresponding period).
Achievement of the $100 million cost out program, with an additional $75 million target announced in February 2024.
Net Debt/EBITA of 1.4x at June 2024 (compared to 2.0x at June 2023).
A three-year decarbonisation plan being implemented.
In the Utilities business (loss making in FY23), enhanced tender risk guardrails helped the business target new
opportunities that have acceptable risk characteristics, with low margin water construction projects complete or nearing
completion. With these and other initiatives reducing costs and driving efficiencies, the Utilities business delivered positive
earnings growth in FY24 and, importantly, has the foundations in place for continued earnings growth.
A further turnaround proof point occurred in May 2024, with Fitch Ratings revising the outlook on Downer’s Long Term
Issuer Default Rating (IDR) from negative to stable. Fitch also affirmed Downer’s IDR and senior unsecured investment
grade credit rating at BBB (investment grade). The revision reflects Fitch’s view of our ability to deliver the identified cost
savings to return our EBITDA margin to above 5% for FY25.
Tragically, during the year, there were three workplace fatalities. The Board and Management team’s deepest sympathies
are extended to those affected. Keeping our people safe is Downer’s highest priority. While our systems and processes are
sound, we are elevating our focus on critical control improvement. A Group-wide safety reset to focus our teams’ attention
on critical control effectiveness has commenced. Downer’s Lost Time Injury Frequency Rate (LTIFR) for FY24 at 0.88 was
below our target of <0.90 and FY23 result of 0.90. Our Total Recordable Injury Frequency Rate (TRIFR) at 2.54 was below the
target of <3.00 and lower than our FY23 result of 2.68. These lagging indicators confirm Downer’s performance remains
superior to industry benchmarks published by SafeWork Australia for all industries in which Downer operates. Management’s
single most important priority in FY25 remains the safety of our People and the elimination of serious incidents across our
operations. This has been reflected in the changes to our remuneration framework for FY25 (see below).
FY24: Remuneration outcomes
Short-term incentive (STI) outcomes
The STI outcomes in FY24 reflect the intended operation of the remuneration framework and appropriately represent
the underlying performance of the business and progress against the Group’s transformation program goals. Several
enhancements were made to the STI plan for FY24, reflecting feedback from investors and improving alignment with
the operating model. This included the addition of an additional ‘one-off’ transformation measure which increased the
weighting of financial measures in the scorecard from 60% to 70%, an increased focus on employee engagement, and
increasing the rigour of our safety KPIs. Details of FY24 enhancements are outlined in section 1.
The financial gate (NPATA) for the scorecard was achieved, thereby opening the Group scorecard for both financial and
non-financial KPIs (apart from Safety).
The Board considered these results in the tragic context of the three fatalities that occurred during the year. The Board
has determined that, in addition to the Safety scorecard outcome of zero, downward discretion should apply to the
full Zero Harm element of the scorecard. As a result, the sustainability scorecard (which had otherwise been achieved)
has been assessed as zero. As a result, 0% of the Zero Harm component of the FY24 STI Scorecard has been achieved
(20% of the total scorecard). Further detail can be found at section 7.3.2.
The overall scorecard result after the Board’s modification was 72.03% of target (54.02% of maximum). As per the plan
rules, 50% of the STI award is deferred over two years.
Based on the progress made in FY24, the Board is confident Downer is on the right path to becoming a more sustainable,
high-performing organisation that delivers long-term value for shareholders.
2022 Long-term incentive (LTI) outcomes and 2024 LTI changes
Testing of the 2022 LTI Plan was performed in August 2024. Relative Total Shareholder Return (RTSR), Earnings per Share
(EPS), Earnings, Net Profit After Tax and Amortisation (NPATA) and Funds from Operations (FFO) hurdles were not met,
resulting in performance rights being forfeited. Further detail can be found at section 7.3.4.
As highlighted in last year’s remuneration report, the Board, in accordance with the Company policy, re-based the
FY23 EPS value to be used as the baseline for the EPS component of the 2024 LTI Plan, from which performance will be
measured. The Board determined that the base value for FY23 EPS be increased to 30 cents per share so that any future
reward will be tested against an appropriately challenging starting point that is aligned with shareholders.
For alignment with Downer’s focus on achieving a higher quality of earnings through a sustained improvement in EBITA
margin across the business and the 4.5% EBITA margin target, the Board introduced a ‘gate’ requiring an average EBITA
margin outcome of at least 4.5% across FY25 and FY26 for the purpose of the balanced scorecard component of the FY24
LTI plan. This included a minimum EBITA margin threshold of 4.2% in FY25. Further details of the plan enhancements are
disclosed in section 1.
Assessment of Individually Significant Items (ISI)
Each year, in accordance with policy, the Board considers the impact of matters including acquisitions, impairments,
divestments and importantly for FY24, the impact of decisions made in the business turn-around transformation program
that impact FY24 financial outcomes.
For FY24, multiple ISIs were identified to have a significant impact on NPATA with a lesser impact on FFO (cashflow) and
considered qualitatively non-underlying and/or one-off in nature as part of the transformation. This included divestment
and exit costs, regulatory reviews and legal matters, transformation and restructuring costs, and impairment and asset
write downs.
In assessing each ISI, the overarching focus of the Board is appropriate accountability for delivery of budgets and
business plans while not creating a barrier to tough transformation decisions that set the organisation up for longer-term
value creation. With FY24 being a year of significant business reset and transformation, the Board has assessed a wide
range of matters impacting NPATA and ISIs to reflect the underlying performance of management and the business.
The details of the matters which affected the FY24 statutory result which were adjusted by the Board based on the above
principles are set out in sections 7.4.1, 7.4.2 and 7.4.3 of this report.
Non-executive Director (NED) succession and remuneration
Board renewal has continued to be a key area of focus, with the following changes to the composition of the Board
occurring in FY24:
Peter Watson retired from the Board on 30 September 2023
Steven MacDonald appointed as a Non-executive Director, effective from 1 September 2023
Sheridan Broadbent appointed as a Non-executive Director, effective from 2 October 2023.
Both Mr MacDonald and Ms Broadbent joined Downer as Independent Directors.
Peter Barker joined the Board as a Non-executive Director from 1 July 2024 as an Independent Director and will stand for
election at the Annual General Meeting in November 2024.
There were no changes to either the NED fee pool or fee levels in FY24.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
48
49
Directors’ Report
Directors’ Report
Remuneration framework for FY25
The FY24 STI scorecard included a one-off transformation initiative component with a 20% weighting. This was so that
appropriate prioritisation of initiatives that would set the organisation up for longer-term success. For FY25, this measure
has been removed to reflect the Board’s expectation that transformation and optimisation will now be measured through
their impact on other financial metrics. The 20% transformation measure has been reallocated, establishing a 65%
financial and 35% non-financial weighting:
Given our commitment to safety of our people and disappointing safety outcomes in FY24, the Board has increased
the weighting of the Safety measure within the STI scorecard to 15% (up from 10%). For FY25, if the safety ‘gate’
(zero fatalities) is not passed, the entire Safety measure will be forfeited
The NPATA component has been increased by 10% to 35% and FFO increased by 5% to 30% reflecting the criticality
of sustained financial performance to the generation of shareholder value.
To increase the focus on achieving a higher quality of earnings through a sustained improvement in EBITA margin across
the business and the 4.5% EBITA average margin target across FY25 and FY26, the Board has introduced an EBITA margin
performance modifier to the NPATA component within the existing STI framework to further incentivise Executives to
deliver higher quality of earnings. Details are provided in section 1.
The Board will continue to review and refine the existing remuneration framework to:
Consider feedback and expectations of key stakeholders
Continue to align with our strategy, including our multi-year Transformation program
Reward performance that is aligned with the long-term interests of shareholders.
We thank you for your support and welcome feedback from shareholders and other key stakeholders at our 2024 AGM.
Mark Menhinnitt
Adelle Howse
Board Chair
People and Culture Committee Chair
Remuneration Report – Audited
The Remuneration Report provides information about the remuneration arrangements for
key management personnel (KMP), which means Non-executive Directors and the Group’s
most senior executives, for the year to 30 June 2024. The term ‘executive’ in this Report
means KMPs who are not Non-executive Directors.
The Report covers the following matters:
1.
Summary of changes to remuneration policy
2.
Details of Key Management Personnel
3.
Remuneration Policy, Principles and Practices
4.
Relationship between Remuneration Policy and Company Performance
5.
The Board’s Role in Remuneration
6.
Description of Executive Remuneration
7.
Details of Executive Remuneration
8.
Executive Equity Ownership
9.
Key Terms of Employment Contracts
10. Related Party Information
11. Description of Non-executive Director Remuneration
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
50
51
Directors’ Report
Directors’ Report
1. Summary of changes to Remuneration Policy
Downer has continued to refine its remuneration framework during the period informed by Company strategy,
competitive position and stakeholder feedback. Changes to policy are noted in the relevant sections of this Report and
are summarised in the table below.
Policy
Enhancements in 2024
Short-term incentive
(STI) plan
The overall structure of the STI plan was enhanced following feedback from investors and to
improve alignment to the operating model with some changes to relative weightings and the
introduction of an additional financial (transformation) measure.
Weighting to Portfolio and Performance (financial) measures increased from 60% to 70% for
the FY24 year. This allowed the inclusion of an additional ‘one-off’ Portfolio and Performance
measure focused on net financial benefits derived from measurable transformation
initiatives. The transformation initiatives measure represents 20% of the scorecard alongside
the profitability measure (NPATA) of 25% and a Cash measure of 25%.
The Transformation measure was calculated as the financial benefit gained from specific
transformation initiatives in FY24 less certain implementation costs and aiming to achieve
recurring transformation benefits beyond FY24.
The Learning and Development measure was replaced with an increased focus on Employee
Engagement with the people measure of 10% based fully on the Employee Engagement
survey outcomes as an indicator of progress in the culture initiatives and transformation.
Financial and Zero Harm gateways remained unchanged.
Long-term incentive
(LTI) plan
The overall structure of the LTI plan continued with some changes to the performance hurdles.
The relative TSR measure now requires absolute TSR to be positive.
The EPS growth baseline was adjusted for elements of underperformance in FY23.
The balanced scorecard measure was enhanced with the inclusion of a minimum EBITA
margin achievement measure for FY25 and FY26 in order to be eligible for any vesting under
the Scorecard condition.
Policy
Enhancements in 2025
Short-term incentive
(STI) plan
With the changes to the operating model now completed, the one-off transformation measure
implemented for FY24 has been removed, and as a result the NPATA measure weighting will
increase from 25% to 35% and FFO measure weighting will increase from 25% to 30%.
Improving EBITA margins is an important driver of delivering value for shareholders. To
continue to drive the improvements in the quality of earnings, as evidenced by the material
improvement in percent margins delivered in FY24, the Board has introduced an EBITA
margin performance modifier to the NPATA component of the STI. The scorecard outcome
for the NPATA component will increase if an EBITA margin greater than 4.2% to a maximum of
4.6% EBITA is achieved. The Board believes that achieving a higher EBITA margin percentage
will have sustained benefits into future years. The application of the EBITA margin modifier is
balanced with the following controls:
— The Financial gateway (threshold NPATA) still must be achieved for any payment to trigger;
— EBITA margin of 4.2% has to be reached before there is any enhancement; and
— The maximum payment under the existing NPATA scorecard component cannot
be exceeded.
Policy
Enhancements in 2025
Short-term incentive
(STI) plan
continued
The Safety weighting will increase from 10% to 15% reflecting the importance of safety within
the business, and if the safety ‘gate’ (zero fatalities) is not passed, the entire Safety measure
will be forfeited. The Sustainability component will remain at 10% with a separate gate relating
to environmental incidents.
The People measure will continue to be focused on employee engagement but as part of
a transition to a new employee engagement assessment aligned to the transformation,
for FY25 the measure will require a significant increase in participation as well as successful
execution of employee engagement improvement initiatives.
Long-term incentive
(LTI) plan
Shareholder and proxy advisor feedback has been incorporated into the FY24 plan. The Board
will continue to review the LTI framework so it is aligned with the long-term interests of
shareholders.
2. Details of Key Management Personnel
The following persons acted as Directors of the Company during or since the end of the most recent financial year:
Director
Role
M J Menhinnitt
Chairman, Independent Non-executive
P J Tompkins
Managing Director and Chief Executive Officer
P A Barker
Independent Non-executive Director (commenced 1 July 2024)
S Broadbent
Independent Non-executive Director (commenced 2 October 2023)
T G Handicott
Independent Non-executive Director
N M Hollows
Independent Non-executive Director
A M Howse
Independent Non-executive Director
S J MacDonald
Independent Non-executive Director (commenced 1 September 2023)
P L Watson
Independent Non-executive Director (retired 30 September 2023)
2.1. Executive KMP
The named persons held their current executive position for the whole of the most recent financial year.
Executive
Role
P J Tompkins
Managing Director and Chief Executive Officer
M R Ashcroft
Chief Financial Officer
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
52
53
Directors’ Report
Directors’ Report
3. Remuneration Policy, Principles and Practices
3.1. Executive remuneration policy
Downer’s executive remuneration policy and practices are summarised in the table below.
Policy
Practices aligned with policy
Retain experienced, proven
performers, and those
considered to have high
potential for succession
Provide remuneration that is internally fair
Remuneration is competitive with the external market
Defer a substantial part of pay contingent on continuing service and sustained
performance.
Focus performance
Provide a substantial component of pay contingent on performance against
targets
Focus attention on the most important drivers of value by linking pay to their
achievement
Require profitability to reach a challenging level before any bonus payments can
be made
Provide a LTI plan component that rewards consistent Scorecard performance over
multiple years and over which executives have a clear line of sight.
Provide a Zero Harm
environment
Incorporate measures that embody Zero Harm for Downer’s employees, contractors,
communities and the environment as a significant component of reward.
Manage risk
Encourage sustainability by balancing incentives for achieving both short-term and
longer-term results, and deferring equity-based reward vesting after performance
has been initially tested
Set stretch targets that finely balance returns with reasonable but not excessive risk
taking and cap maximum incentive payments
Do not provide excessive ‘cliff’ reward vesting that may encourage excessive risk
taking as a performance threshold is approached
Diversify risk and limit the prospects of unintended consequences from focusing on
just one measure in both short-term and long-term incentive plans
Stagger vesting of deferred short-term incentive payments to encourage retention
and allow forfeiture of rewards that are the result of misconduct or material
adjustments
Retain full Board discretion to vary incentive payments, including in the event of
excessive risk taking
Restrict trading of vested equity rewards for compliance with the Company’s
Securities Trading Policy.
Policy
Practices aligned with policy
Align executive interests with
those of shareholders
Provide that a significant proportion of pay is delivered as equity so part of
executive reward is linked to shareholder value performance
Provide a long-term incentive that is based on consistent Scorecard performance
against challenging targets set each year that reflect sector volatility and prevailing
economic conditions as well as relative TSR and earnings per share measures
directly related to shareholder value
Maintain a guideline minimum shareholding requirement for the MD & CEO equal
to 12 months’ fixed remuneration
Exclude the short-term impact of opportunistic acquisitions and divestments from
performance assessment to encourage agility and responsiveness
Encourage holding of shares after vesting via a trading restriction for all executives
and payment of LTI components in shares
Prohibit hedging of unvested equity and equity subject to a trading lock for
alignment with shareholder outcomes.
Attract experienced,
proven performers
Provide a total remuneration opportunity sufficient to attract proven and
experienced executives from secure positions in other companies and retain
existing executives.
4. Relationship between Remuneration Policy and Company Performance
4.1. Company strategy and remuneration
Downer’s business strategy has been refreshed and reflected in our operating model and includes:
A focus on driving a performance and risk management culture across the organisation
A simplified operating model with efficient overheads and a continuous improvement approach to year-on-year
cost reductions
Implementation of The Downer Difference which prioritises Capability, Process and Technology enhancements to
drive a higher level of satisfaction for staff and customers
Managing risk and opportunities within an approved ‘risk appetite’ framework and enhancing the Company’s
capability to deliver more consistent project and contract margins through the application of The Downer Standard.
The Company’s remuneration policy complements this strategy by:
Focusing on Financial and Portfolio is appropriately balanced with non-financial measures that underpin Downer’s
purpose of Enabling Communities to Thrive – Safety, Sustainability and People
Incorporating Company-wide performance requirements for earnings (NPATA), Funds from Operations (FFO) and
Quality of Earnings (EBITA margin percentage) in the STI and LTI scorecards
Incorporating performance metrics that focus on FFO to provide a strong emphasis on capital allocation, capital
efficiency and financial discipline
Excluding the short-term impacts of opportunistic acquisitions and divestments on incentive outcomes to encourage
flexibility, responsiveness and growth consistent with strategy
Deferring 50% of STI awards to encourage sustainable performance and a longer-term focus
Incorporating consistent financial performance in the LTIP Scorecard measure
Encouraging engagement with, and the development and retention of, its people to help maintain a sustainable
supply of talent.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
54
55
Directors’ Report
Directors’ Report
4.2. Remuneration linked to performance
The link to performance is provided by:
Requiring a significant portion of executive remuneration to vary with short-term and long-term performance
Applying a profitability gateway to be achieved before an STI reward is made
Safety and environmental gateways to be achieved before calculating any reward for safety and sustainability
performance
Applying challenging financial and non-financial measures to assess performance
Focusing management on strategic business objectives that create shareholder value
Delivering a significant proportion of payment in equity for alignment with shareholder interests.
Downer measures performance on the following key corporate measures:
Earnings per share (EPS) growth
Total shareholder return (TSR) relative to other ASX 100 companies (excluding ASX ‘Financials’ sector companies)
with a minimum requirement of positive TSR
Group NPATA
Divisional EBITA
EBITA margin
Transformation net cost benefits (for FY24 only)
Funds from operations (FFO)
Engagement with Downer’s people
Zero Harm measures of safety and environmental sustainability.
Remuneration for all executives varies with performance on these key measures.
The following graph shows the Company’s performance compared to the median performance of the ASX 100
(excluding financials) over the three-year period to 30 June 2024. Relative TSR is a measure in Downer’s LTI plan.
Performance is reflected in TSR outcomes of the 2021 and 2022 LTI plans, where this measure was not achieved.
Further detail is at section 7.3.4.
Downer EDI TSR compared to S&P/ASX 100 median excluding ‘Financials’ sector*
Total Shareholder Return (Indexed to 100)
0
50
100
150
200
Jun
2021
Dec
2021
Jun
2022
Dec
2022
Jun
2023
Dec
2023
Jun
2024
Downer EDI TSR
S&P/ASX 100 median TSR excl financials
*
S&P/ASX 100 companies as at 1 July 2021.
The graphs below illustrate Downer’s performance against key financial and non-financial performance indicators over
the last five years.
In 2023, Downer has identified certain accounting adjustments in its Australian Utilities business involving historical
misreporting of revenue and contract assets in one of Downer’s maintenance contracts as outlined in prior reports. As
a consequence, the Group identified accounting adjustments to prior periods, including financial years 2020, 2021 and
2022 in relation to the measure of progress. The adjustments have been corrected by restating each of the affected
financial statement line items for prior periods.
Net profit after tax
Funds from operations2
NPAT (statutory)
NPAT (underlying)
-500
-400
-300
-200
-100
0
100
200
300
2024
2023
2022
2021
2020
$'m
-500
-400
-300
-200
-100
0
100
200
300
Underlying (adjusted for material
transactions and individually significant items)
172.81
140.41
(157.5)1
(385.7)
82.1
431.54
429.33
(219.1)
56.55
549.25
-300
-200
-100
0
100
200
300
400
500
2024
2023
2022
2021
2020
$'m
Basic earnings per share
Safety
-80
-60
-40
-20
0
20
40
60
2024
2023
2022
2021
2020
Cents per share
-80
-60
-40
-20
0
20
40
60
Basic earnings per share
Underlying earnings per share
24.11
19.61
(26.4)1
(59.0)
10.3
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2024
2023
2022
2021
2020
0.99
0.82
0.67
Lost Time Injuries per 1,000,000 hours
0.90
0.88
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Total Recordable Injuries per 1,000,000 hours
LTIFR
TRIFR
1. Restated for certain accounting adjustment in its Australian Utilities business (refer to Note A to the consolidated financial statements).
2. Following the adoption of AASB 16 Leases which resulted in a change in accounting policy from FY20, historical FFO was not restated.
3. Adjusted for material transactions. 2022: $104.5 million net decrease and 2023: $184.0 million net decrease related to the divestment of the Australian Transport Project Business.
4. Adjusted for material transactions, including the payment for Spotless shares. 2021: $313.1 million net decrease.
5. Adjusted for cash impact of Individually Significant Items. 2023 prior year disclosure of $47.5 million amended to $56.5 million to take into account cash impact of Individually
Significant Items. 2024 Funds from operations of $549.2 million is Operating cash flow $544.1 million less investing cash flow ($29.3 million), adjusted to add $34.4 million of ISI
cash flows.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
56
57
Directors’ Report
Directors’ Report
5. The Board’s Role in Remuneration
The Board engages with shareholders, management and other stakeholders as required, to continuously refine and
improve executive and Director remuneration policies and practices.
Two Board Committees deal with remuneration matters. They are the People and Culture Committee and the
Nominations Committee.
The interaction with the Board, other committees, management, and other stakeholders is shown in the diagram below.
Board
The Board is responsible for:
Approving Downer’s remuneration strategy
Determining the quantum of remuneration for
Non-executive Directors and MD & CEO.
The Board has overarching discretion with respect
to any awards made under the Company’s
incentive plans.
Remuneration
consultants and other
external advisors
Provide
independent advice,
information and
recommendations
relevant to
remuneration
decisions
The PCC may
seek independent
advice from external
advisors on various
remuneration-related
matters
Any advice provided
by external advisors
is used to assist the
Board – it is not a
substitute for the
Board and PCC
procedures
Each Committee
has the authority
to engage external
professional advisors
without seeking
approval of the Board
or management.
Management
Provides information
relevant to the
remuneration
decisions and makes
recommendations to
the PCC
Obtains remuneration
information from
external advisors to
assist the PCC (i.e.
market data, legal, tax
and accounting advice).
People and Culture Committee (PCC)
The PCC is delegated responsibility by the
Board to review and, where relevant, make
recommendations on:
Executive remuneration and incentive policy
Remuneration of senior executives of the
Company
Executive reward and its impact on risk
management
Executive incentive plans
Equity-based plans
Superannuation arrangements
Recruitment, retention, performance and
termination policies and procedures for all Key
Management Personnel and senior executives
reporting directly to the MD & CEO
Disclosure of remuneration in the Company’s
public materials including ASX filings and the
Annual Report
Retirement payments for all Key Management
Personnel and senior executives reporting
directly to the MD & CEO.
During the period, the PCC retained
Guerdon Associates and Sodali
& Co as its advisors. Guerdon
Associates do not provide services to
management and are considered to
be independent.
Nominations Committee is
responsible for recommending
and reviewing remuneration
arrangements for the Executive
Director and Non-executive Directors
of the Company.
Consultation with
shareholders and other
stakeholders
Management may seek
its own independent
advice with respect
to information and
recommendations
relevant to remuneration.
6. Description of Executive Remuneration
6.1. Executive remuneration structure
Executive remuneration has a fixed component and a component that varies with performance.
The variable component means that a proportion of pay varies with performance. Performance is assessed annually
for performance periods covering one year and three years. Payment for performance assessed over one year is an STI.
Payment for performance over a three-year period is an LTI.
In order for maximum STIs to be awarded, performance must achieve a stretch goal that is a clear margin above the
planned budget for the period. This enables the Company to attract and retain better performing executives, and is
aimed at aligning pay outcomes with shareholder returns.
Target STIs are less than the maximum STI. Target STI is payable on achievement of planned objectives. For executives,
the target STI is 75% of the maximum STI. The maximum total remuneration that can be earned by an executive is
capped. The maximums are determined as a percentage of fixed remuneration.
Executive position
Target STI
% of fixed
remuneration
Maximum
STI % of fixed
remuneration
Maximum
LTI % of fixed
remuneration
Maximum total
performance-
based pay as a % of
fixed remuneration
MD & CEO – Peter Tompkins
75
100
130
230
CFO – Malcolm Ashcroft
56.25
75
75
150
The proportions of STI to LTI take into account:
Market practice
The service period before executives can receive equity rewards
The behaviours that the Board seeks to encourage through direct key performance indicators
The guideline for the MD & CEO to maintain a shareholding as a multiple of pay after long-term incentive rewards
have vested.
6.2. Remuneration benchmarking
Remuneration is benchmarked against roles of similar scope and complexity in relevant industries, using a variety of
independent sources of market data. This market data is regularly updated and reviewed. The benchmarking approach
is designed to consider the size and nature of Downer’s businesses and will take into account global markets for talent
where appropriate for key roles, as well as individual factors, such as location, economic environment and remuneration
trends. This enables Downer to remain competitive in setting remuneration for executives.
Downer is a diverse Company operating in many market sectors. This means that identifying a select group of peers
of comparable size and nature is challenging. The TSR comparator group under the LTI plan includes the companies,
excluding financial services companies, in the ASX 100 index. Consideration has been given to using a smaller group of
direct competitors for comparison, however:
Limiting the comparator group to a small number of direct competitors could result in very volatile outcomes from
period to period
Management’s strong focus is on returning the Company’s ranking amongst the ASX 100 companies.
While market levels of remuneration are monitored on a regular basis, there is no contractual requirement or expectation
that any adjustments will be made.
6.3. Fixed remuneration
Fixed remuneration is the sum of salary and the direct cost of providing employee benefits, including superannuation,
motor vehicles, car parking, living away from home expenses and fringe benefits tax.
The level of remuneration is set to be able to retain proven performers and when necessary to attract the most suitable
external candidates from secure employment elsewhere.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
58
59
Directors’ Report
Directors’ Report
6.4. Short-term Incentive
The STI plan provides for an annual payment that varies with annual performance. This has been applied to performance
measured over the Company’s financial year to 30 June 2024.
The basis of the plan is designed to align STI outcomes with financial results.
6.4.1. STI tabular summary
The following table outlines the major features of the 2024 STI plan.
Purpose of STI plan
Focus performance on drivers of shareholder value over a 12-month period
Improve Zero Harm and people-related results
That remuneration varies with the Company’s 12-month performance.
Minimum
performance
‘gateways’ before
any payments
can be made
Achievement of a gateway based on 90% of budgeted Group NPATA for corporate executives
and Divisional EBITA for divisional heads
This minimum is set at a challenging level to justify the payment of STI to an executive and
deliver an acceptable return for the funds employed in running the business
Positive and negative impacts from material but opportunistic transactions are excluded from
gateway assessment. Whether to exclude the impact of significant items (positive or negative) is
considered on a case by case basis
Further independent gateways apply to the Zero Harm element
Should a workplace fatality or serious environmental incident occur, 50% of the Zero Harm
element is foregone, with 100% foregone should both occur.
Maximum STI that
can be earned
MD & CEO: up to 100% of fixed remuneration
CFO: up to 75% of fixed remuneration.
Percentage of
STI that can
be earned on
achieving target
expectations
75% of the maximum. For an executive to receive more, performance in excess of target
expectations will be required.
Individual
Performance
Modifier (IPM)
An IPM may be applied based on an executive’s individual key performance indicators and
relative performance
Moderate individual performance may result in an IPM of less than 1 or outstanding performance
may result in an IPM greater than 1. The IPM must average no greater than 1 across all
participants
Application of an IPM cannot result in an award greater than the maximum STI% level set out in
section 6.1.
Performance
period
1 July 2023 to 30 June 2024.
Performance
assessed
August 2024.
STI Deferral
50% of the award is deferred with the first tranche of 25% vesting one year following award and the
second tranche of 25% vesting two years following award subject to the satisfaction of a continued
employment condition. This requires the executive to remain employed at the time of payment.
Payment timing
September 2024 for the first cash payment of 50% of the award. The deferred components of the STI
payments will be paid one and two years following the award, in equal tranches of 25% of the award.
Form of payment
Cash for initial payment.
The value of deferred components will be settled in shares or cash, net of personal tax
Deferred components may be settled in shares. This is designed to encourage executive share
ownership, and not adversely impact executives who have to meet their taxation obligations
arising from the vesting of the deferred components. However, the Board retains the discretion
to vest deferred awards, in the form of shares or cash, and will generally have regard to an
executive’s individual circumstances and existing level of equity ownership
An eligible leaver’s deferred components will be settled in shares or in cash at the sole and
absolute discretion of the Board.
Dividend
equivalent
payments
No dividend entitlements are attached to the deferred components during the vesting period.
Board discretion
The Board may exercise discretion to:
Vary STI payments by up to + or – 100% from the payment applicable to the level of performance
achieved, up to the maximum for that executive
Reduce partly or fully the value of the deferred components that are due to vest in certain
circumstances, including where an executive has acted inappropriately or where the Board
considers that the financial results against which the STI performance measures were tested
were incorrect in a material respect or have been reversed or restated
Settle deferred components in shares or cash, with the intended default approach being shares
Vary from policy in exceptional circumstances. However, any variation from policy and the
reasons for it will be disclosed.
Malus and
clawback
All or part of the deferred components that are due to vest may be reduced in value if the Board
determines that an executive has committed an act of fraud, defalcation or gross misconduct or in
other circumstances at the discretion of the Board.
New recruits
New executives (either new starts or promoted employees) are eligible to participate in the STI in the
year in which they commence in their position with a pro-rata entitlement.
Terminating
executives
There is no STI entitlement where an executive’s employment terminates prior to the end of the
financial year. Where an executive’s employment terminates prior to the vesting date, the unvested
deferred components will be forfeited. However, the Board has retained discretion to vest deferred
awards, in the form of shares or cash, in their ordinary course where the executive is judged to be an
eligible leaver.
Performance
requirements
Zero Harm, People and Portfolio and Performance measures.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
60
61
Directors’ Report
Directors’ Report
Zero Harm
Zero Harm reflects Downer’s commitment to its customers, employees, regulators and the
communities it serves.
Performance is assessed on the following measures:
Safety Lag Indicators
Total Recordable Injury Frequency Rate (TRIFR): the number of recordable injuries per million
hours calculated over 12 months
Lost Time Injury Frequency Rate (LTIFR): the number of lost time injuries per million hours
calculated over 12 months.
Critical Risk Assurance and Action Management
Achievement of critical risk observation targets and maintenance of an active program of audits
and inspections
Completion of all actions arising from high potential incidents within a defined timeframe.
Communities of Practice
Leading a Group-wide Community of Practice (CoP) focusing on implementing changes to
better control of one critical risk. The CoP must deliver a set of minimum deliverables identified
in the STI Guide.
Decarbonisation
Development of a three-year Climate Change and Decarbonisation Plan, to support GHG
emissions reductions to achieve Downer’s near-term GHG emissions targets for Scope 1 and 2
Achievement of a set percentage of absolute Scope 1 and 2 GHG emissions targets.
People
Performance is assessed on measures of employee engagement
Employee engagement requires the achievement of an overall engagement score against a
defined range in the annual Group-wide employee engagement survey
This measure was selected to drive a focus that seeks to achieve a high performance culture.
Financial
Performance is assessed on Group NPATA or Divisional EBITA, Transformation Initiatives and FFO
performance against the budget.
NPATA and EBITA provide transparency on operational business performance, align with how
Downer presents its results to the market and allow for easier understanding of alignment between
performance and remuneration outcomes. The Board considers this approach to be appropriate as:
The Board is the ultimate decision maker for transactions that give rise to acquired intangibles
that result in the amortisation expense
The impact of amortisation of acquired intangibles, which in nature relate to long-term strategic
decisions, remains reflected in incentive outcomes through the EPS measure in the LTI plan
FFO is defined as net cash from operating activities less investing cash flow.
The Transformation Initiatives are calculated as the in-year FY24 financial benefits specifically
attributable to transformation initiatives that have recurring future value.
STI plan incentive
calculation
Fixed
remuneration
X Maximum STI
opportunity
X
Scorecard
result
X
Individual
Performance
Modifier
=
STI payment
Weightings applied to the 2024 STI scorecard measures for all executives, including the MD & CEO, are set out in the
table below.
Executive
Group NPATA
Divisional EBITA
Funds from
Operations
Transformation
Zero Harm
People
Corporate
25%
–
25%
20%
20%
10%
Business Unit
7.5%
17.5%
25%
(7.5% Group,
17.5% Division)
20%
(10% Group,
10% Division)
20%
10%
6.5. Long-term Incentive
6.5.1. LTI tabular summary
The following table outlines the major features of the 2024 LTI plan.
Purpose of
LTI plan
Focus performance on drivers of shareholder value over a three-year period
Manage risk by countering any tendency to over-emphasise short-term performance to the
detriment of longer-term growth and sustainability
Vary a part of remuneration with the Company’s longer-term performance.
Maximum value
of equity that
can be granted
MD & CEO: 130% of fixed remuneration
CFO: 75% of fixed remuneration.
Performance
period
1 July 2023 to 30 June 2026. Performance assessed August 2026.
Additional service
period after
performance
period for shares
to vest
Performance rights for which the relevant performance vesting condition is satisfied will not vest
unless executives remain employed with the Group on 30 June 2027.
Performance
rights vest
July 2027.
Form of award
and payment
Performance rights.
Performance
conditions
There are three performance conditions. Each applies to one-third of the performance rights
granted to each executive.
Relative TSR
The relative TSR performance condition is based on the Company’s TSR performance relative to the
TSR of companies comprising the ASX 100 index, excluding financial services companies, at the start
of the performance period on 1 July 2023, measured over the three years to 30 June 2026. In addition,
the absolute TSR must be greater than 0 to be eligible for any vesting under the TSR condition.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
62
63
Directors’ Report
Directors’ Report
Performance
conditions
continued
The performance vesting scale that will apply to the performance rights subject to the relative TSR
test is shown in the table below:
Downer EDI Limited’s
TSR Ranking
Percentage of performance rights subject to TSR condition
that qualify for vesting
< 50th percentile
0%
50th percentile
30%
Above 50th and below
75th percentile
Pro-rata so that 2.8% of the performance rights in the tranche will vest
for every 1% increase between the 50th percentile and 75th percentile
75th percentile and above
100%
EPS growth
The EPS growth performance condition is based on the Company’s compound annual EPS growth
over the three years to 30 June 2026. For FY24, the EPS baseline was adjusted upwards to 30 cents
per share so that any future reward will be tested against an appropriately challenging starting point
aligned to shareholders’ expectations.
The performance vesting scale that will apply to the performance rights subject to the EPS growth
test is shown in the table below:
Downer EDI Limited’s EPS
compound annual growth
Percentage of performance rights subject to EPS condition
that qualify for vesting
< 5%
0%
5%
30%
Above 5% to < 10%
Pro-rata so that 14% of the performance rights in the tranche
will vest for every 1% increase in EPS growth between 5% and 10%
10% or more
100%
Scorecard
The Scorecard performance condition is based on the Group’s NPATA and FFO for each of the three
years to 30 June 2026. As these measures are considered to be key drivers of shareholder value, they
have been included in the LTI plan to reward consistent and sustainable financial performance.
The performance vesting scale that will apply to the performance rights subject to the Scorecard
test is shown in the table below:
Scorecard result
Percentage of performance rights subject to Scorecard condition
that qualify for vesting
< 90%
0%
90%
30%
Above 90% to < 110%
Pro-rata so that 3.5% of the performance rights in the tranche will vest
for every 1% increase in the Scorecard result between 90% and 110%
110% or more
100%
NPATA and FFO targets are set at the beginning of each of the three financial years. The performance
of each component will be assessed each year relative to the targets. Performance of each
component will be determined as the average of the annual performance assessments for the
three years. The performance rights will vest on a pro-rata basis from 30% upon meeting the
minimum three-year average component performance level of 90% of target to 100% at the
capped maximum three-year average component performance level of 110% of target. In addition,
the Scorecard condition is subject to achieving a minimum EBITA margin gate. The Margin Gate
requires that Downer achieve:
a minimum Group EBITA margin of 4.2% for the 2025 financial year; and
a minimum average Group EBITA margin of 4.5% across the 2025 and 2026 financial years.
Performance
conditions
continued
Scorecard continued
The Scorecard condition is designed to:
Strengthen retention through the setting of challenging targets on an annual basis that reflect
prevailing market conditions, for a portion of LTI awards
Focus on consistent measures aligned with the STI plan and to encourage a long-term approach
to achieving annual financial performance targets
Improve the line of sight for executives so as to increase motivation and focus on consistent
performance
Focus on performance sustainability through reward of consistent achievement of absolute
performance targets over the long term.
Treatment of
dividends and
voting rights on
performance
rights
Performance rights do not have voting rights or accrue dividends.
How performance
rights and shares
are acquired
The rights are issued by the Company and held by the participant subject to the satisfaction of
the vesting conditions. The number of rights held may be adjusted pro-rata, consistent with ASX
adjustment factors, for any capital restructures.
If the rights vest, executives can exercise them to receive shares that are normally acquired
on‑market. The Board retains the discretion to vest awards in the form of cash.
Restriction
on hedging
Hedging of entitlements under the plan by executives is not permitted.
Restriction
on trading
After vesting, any shares will remain subject to a trading restriction that is governed by the
Company’s Securities Trading Policy.
New participants
New participants (either new starters or promoted employees) are eligible to participate in the LTI on
the first grant date applicable to all executives after they commence in their position. An additional
pro-rata entitlement if their employment commenced after the grant date in the prior calendar year
may be made on a discretionary basis.
Ceasing
executives
Where an executive ceases employment with the Group prior to the vesting date, the rights will
be forfeited. However, the Board will retain the discretion to retain executives in the plan in certain
circumstances including the death, total and permanent disability or retirement of an executive.
In these circumstances, the Board will also retain the discretion to vest awards in the form of cash.
Change of
control
On the occurrence of a change of control event and providing at least 12 months of the grants’
performance period have elapsed, unvested performance rights pro-rated with the elapsed service
period are tested for vesting with performance against the relevant relative TSR, EPS growth or
Scorecard requirements for that relevant period. Vesting will occur to the extent the performance
conditions are met. Performance rights that have already been tested, have met performance
requirements and are subject to the completion of the service condition, fully vest.
Malus and
clawback
All unvested performance rights will be forfeited if the Board determines that an executive has
committed an act of fraud, defalcation or gross misconduct or in other circumstances at the
discretion of the Board.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
64
65
Directors’ Report
Directors’ Report
6.5.2. Post-vesting shareholding guideline
The MD & CEO is required to continue to hold shares after they have vested until the shareholding guideline has been
attained. This guideline requires that the MD & CEO holds vested long-term incentive shares equal in value to 100% of his
fixed remuneration. The MD & CEO’s shareholding is currently 92% of the guideline level.
The guideline requirement has been developed to reinforce alignment with shareholder interests. The People and Culture
Committee has discretion to allow variations from this guideline requirement.
The Board retains the right to vary from policy in exceptional circumstances. However, any variation from policy and the
reasons for it will be disclosed.
6.6. Treatment of major transactions
Downer has a long history of strategic mergers, acquisitions and divestments. On each occasion, the Board considers
the impact of these transactions. Where a transaction is both material and unbudgeted, the Board considers whether it
is appropriate to adjust for its impact on the key performance indicators on which executive performance is measured.
The objective of any adjustment is that opportunities to add value through an opportunistic divestment or acquisition
should not be fettered by consideration of the impact on incentive payments. That is, executives should be ‘no better
or worse off’ as a result of the transaction. No adjustments are made for market reactions to a transaction as the Board
believes that management is accountable for those outcomes.
The Board considers this approach to be appropriate so that:
Executives and the Board consider these transactions solely based on the best interests of Downer
Executives remain accountable for transaction execution and post-transaction performance from the next budget
cycle
Executives complete opportunistic transactions that are in the long-term interests of shareholders
It is consistent with the Board’s long-term view when considering the value of major transactions to Downer’s
shareholders
Downer remains agile and responsive in managing its portfolio by pursuing opportunities as and when they emerge
rather than being constrained by the annual budget process.
In assessing Zero Harm performance of executives, the results of acquired businesses are excluded for a period of
12 months post acquisition so management is accountable for the objectives set in the annual business planning
process and in recognition that an integration period during which Downer’s Zero Harm framework (including systems,
processes, definitions and measurement and reporting methods) is implemented through the acquired business is
appropriate provided it is delivered within approved parameters. Where this transition to Downer’s framework takes place
over a longer period due to the complexity of the implementation or the maturity profile of the acquired business, the
Board will consider an extension to a more appropriate period.
6.7. Treatment of significant items
From time to time, Downer’s performance is impacted by significant items, including importantly for FY24, the impact of
decisions made in the transformation program that impact FY24 outcomes but set the organisation up for longer-term
success and shareholder value. Where these occur, the Board considers whether to adjust for their impact (positive or
negative) on a case by case basis, having regard to the circumstances relevant to each item.
The Board considers this approach to be appropriate so that executives are held accountable for the delivery of the
annual budget and business plan and that executives and the Board make decisions solely based on the best interests
of Downer. Decisions made in relation to business reorganisation and restructuring are assessed appropriately in a
transformation period so that executives responsible for transformation programs are not penalised for making decisions
in the longer-term best interests of the Company and shareholders.
7. Details of Executive Remuneration
7.1. Remuneration received in relation to the 2024 financial year
Executives receive a mix of remuneration during the year, comprising fixed remuneration, an STI paid in cash, and
an LTI in the form of performance rights that vest four years later, subject to meeting performance and continued
employment conditions.
The table below lists the remuneration actually received in relation to the 2024 financial year, comprising fixed
remuneration, cash STIs relating to 2024, deferred STIs payable in 2024 in respect of prior years and the value of LTI
grants that vested during the 2024 financial year. This information differs to that provided in the statutory remuneration
table at section 7.2 which shows the share-based payment accounting expense for LTIs and deferred STIs determined
in accordance with accounting standards rather than the value of LTI grants that vested during the year.
Fixed
Remuneration1
$
Cash Bonus
paid or
payable in
respect of
current year2
$
Deferred
Bonus paid
or payable
in respect of
prior years3
$
Other
Benefits4
$
Total
payments
$
LTI
that vested
during 20245
$
Total
remuneration
received
$
P J Tompkins
1,555,504
418,655
–
30,356
2,004,515
–
2,004,515
M R Ashcroft
927,137
182,318
–
29,608
1,139,063
–
1,139,063
2,482,641
600,973
–
59,964
3,143,578
–
3,143,578
1. Fixed remuneration comprises salary and fees, payment of leave entitlements, non-monetary benefits and superannuation payments.
2. Cash Bonus paid or payable in respect of current year represents cash payments in relation to the 2024 financial year.
3. Deferred Bonus represents the deferred bonus amount to be paid in September 2024, being the second deferred component of the 2022 award, adjusted as set out in section 7.3.3.
P J Tompkins chose to voluntarily forgo his 2023 deferred components, each of which is valued at $121,875. There was no deferred component payable for the 2023 award as no STI
award was paid to P J Tompkins.
4. Other benefits represent movements of leave accruals.
5. Represents the fair value of performance rights granted in previous years that vested during the year, calculated as the number of performance rights that vested multiplied by the
closing market prices of Downer shares on the vesting date.
7.2. Remuneration of executive key management personnel required under the
Corporations Act 2001 (Cth)
Short-term employee benefits
Long-term
employee
benefit
Post-employment benefits
2024
Salary
and fees
$
Cash
Bonus paid
or payable
in respect
of current
year1
$
Non-
monetary
$
Other
long-term
benefits2
$
Super-
annuation
$
Other
benefits
$
Termin-
ination
benefits
$
Subtotal
$
Share-
based
payment
trans-
actions3
$
Total
$
P J Tompkins
1,498,574
418,655
29,531
24,852
27,399
–
–
1,999,011
770,483
2,769,494
M R Ashcroft
872,601
182,318
27,137
2,772
27,399
–
–
1,112,227
223,230
1,335,457
2,371,175
600,973
56,668
27,624
54,798
–
–
3,111,238
993,713
4,104,951
1. Cash Bonus paid or payable in respect of current year represents cash payments in relation to the 2024 financial year. These comprise the 50% cash component of the award.
2. This includes the net movement in Long Service Leave provision over the reporting period.
3. This represents AASB 2 Share-based payments relating to deferred shares of P Tompkins of $174,440 and M R Ashcroft of $75,966 and performance rights. Performance rights
represent the fair value of vested and unvested equity expensed during the period including reversal for forfeited equity incentives and the probability of the incentives vesting,
related to grants made to the executive, as outlined in section 8.2. Vesting of the majority of securities remains subject to significant performance and service conditions as
outlined in section 6.5.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
66
67
Directors’ Report
Directors’ Report
Short-term employee benefits
Long-term
employee
benefit
Post-employment benefits
2023
Salary
and fees
$
Cash
Bonus paid
or payable
in respect
of current
year2
$
Non-
monetary
$
Other
long-term
benefits4
$
Super-
annuation
$
Other
benefits
$
Termin-
ination
benefits
$
Subtotal
$
Share-
based
payment
trans-
actions3
$
Total
$
P J Tompkins
1,166,842
–
154,532
153,487
25,292
–
–
1,500,153
145,667
1,645,820
G A Fenn1
1,308,244
–
52,365
21,646
18,969
–
–
1,401,224
(262,778)
1,138,446
M R Ashcroft1
72,892
–
5,432
1,178
6,323
–
–
85,825
–
85,825
M J Ferguson
961,645
–
37,903
16,243
25,292
–
–
1,041,083
(463,644)
577,439
3,509,623
–
250,232
192,554
75,876
–
–
4,028,285
(580,755) 3,447,530
1. Amounts represent the payments relating to the period during which the individuals were Key Management Personnel (KMP). G A Fenn ceased as a member of the KMP on
27 February 2023. M R Ashcroft became a member of the KMP on 1 June 2023.
2. Cash Bonus paid or payable in respect of current year represents cash payments in relation to the 2023 financial year. These comprise the 50% cash component of the award.
3. This represents AASB 2 Share-based payments relating to deferred shares of G A Fenn of $60,721 (cash settled), P Tompkins of $48,663 and M J Ferguson of $34,344 (cash settled)
and performance rights. Performance rights represent the fair value of vested and unvested equity expensed during the period including reversal for forfeited equity incentives
and the probability of the incentives vesting, related to grants made to the executive, as outlined in section 8.2. Vesting of the majority of securities remains subject to significant
performance and service conditions as outlined in section 6.5.
4. This includes the net movement in Long Service Leave provision over the reporting period.
7.3. Performance related remuneration
7.3.1. Performance outcomes required under the Corporations Act 2001 (Cth)
The table below lists the proportions of remuneration paid during the year ended 30 June 2024 that are performance and
non-performance related and the proportion of STIs that were earned during the year ended 30 June 2024 due to the
achievement of the relevant performance targets.
Proportion of
2024 remuneration
2024
Short-term incentive
Performance
Related1
%
Non-
performance
Related
%
Paid
%
Forfeited
%
P J Tompkins
43
57
54
46
M R Ashcroft
30
70
54
46
1. Performance related portion includes the reversal of expense for forfeited equity incentives described in section 6.5.
7.3.2. 2024 Group STI Scorecard and Outcomes
Performance is assessed for each scorecard measure based on the actual outcomes compared to the performance
levels defined below.
The scorecard measures are Downer’s priorities and performance requirements are set at challenging levels to drive
organisational performance and continued improvement of the business.
The minimum earnings performance gateway was achieved by KMP, meaning the STI scorecard opened for FY24.
The STI outcome achieved for each measure is set out in the table below. The Safety gate (zero fatalities) was not met for
KMP, meaning that the combined Safety and Sustainability results would normally be reduced by 50%. This was further
reduced to 0% reflecting the disappointing performance outcomes in the year.
Element
Measure
Description
Weighting
%
Min
Target
Max
Modified
Outcome
%
Safety1
Achieve Defined Safety KPIs
Achieve TRIFR below 3.0
10
0
Achieve LTIFR below 0.9
Critical Risk Assurance and Action
Management
Communities of Practice (Critical
Control Improvement and
Effectiveness)
Sustainability1 Decarbonisation
Group’s Scope 1 and 2
GHG emissions performance
10
0
People
Employee engagement
Achieve an overall Employee
Engagement Score between 68%
and 72%
10
0
Portfolio and
Performance
Net Profit After Tax and
before Amortisation of
acquired intangibles
Achieve NPATA of $207.0 million
to $276.0 million with a target of
$230.0 million
25
9.02
Funds from operations
Achieve FFO of $351.1 million to
$468.1 million with a target of
$390.0 million
25
25
Transformation initiatives
Achieve Transformation of
$85.5 million to $114 million with a
target of $95.0 million
20
20
1. Safety and Sustainability reduced to zero due to three fatalities.
For 2024, the IPM applied to each member of the KMP remained at 1.
7.3.3. Deferred STI Outcomes
The MD & CEO and CFO did not receive a 2023 STI award, accordingly no deferred components are payable in 2024.
The current MD & CEO voluntarily forwent his FY22 deferred components. The Board has determined that for the former
CEO and former CFO, no payment of the second deferred component of the FY22 plan will be made.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
68
69
Directors’ Report
Directors’ Report
7.3.4. LTI performance outcomes
The table below summarises LTI performance measures tested and the outcomes for each executive.
Relevant executives1
Relevant LTI measure
Performance outcome
% LTI tranche that vested
P J Tompkins
2021 plan – performance period 1 July 2020 to 30 June 2023
TSR tranche – percentile ranking
of Downer’s TSR relative to the
constituents of the ASX 100 over
a three-year period.
Actual performance ranked
at the 15th percentile based
on a TSR result of –5.03%.
0% became provisionally
qualified. 100% were forfeited.
EPS tranche – compound annual
earnings per share growth
against absolute targets over
a three-year period.
Actual performance was
–9.88%.
0% became provisionally
qualified. 100% were forfeited.
Scorecard tranche – sustained
NPATA and FFO performance
against budget over a
three-year period.
Actual performance was
84.4% for NPATA and 118.2%
for FFO.
16.7% became provisionally
qualified and remain subject
to Board approval. 83.3%
were forfeited.
P J Tompkins
2022 plan – performance period 1 July 2021 to 30 June 20242
TSR tranche – percentile ranking
of Downer’s TSR relative to the
constituents of the ASX 100 over a
three-year period.
Actual performance ranked
at the 24th percentile based
on a TSR result of –5.84%.
0% became provisionally
qualified. 100% were forfeited.
EPS tranche – compound annual
earnings per share growth against
absolute targets over a three-year
period.
Actual performance was
-5.98%.
0% became provisionally
qualified. 100% were forfeited.
Scorecard tranche – sustained
NPATA and FFO performance
against budget over a
three-year period.
Actual performance was
75.9% for NPATA and 82.1%
for FFO.
0% became provisionally
qualified. 100% were forfeited.
1. Relevant executives refers to members of the KMP who are participants in the plan tested.
2. Test outcomes for the 2022 plan are provisional and will be confirmed following release of the Company’s audited 2024 results. Accordingly, the outcomes are not reflected in the
disclosures in section 8.
7.4. Major transactions and significant items
During the year there were individually significant items that included major transactions and individual items that
had a significant impact that are one-off or non-recurring in nature. The Board considers such items at the end of
each performance period and whether it is appropriate to adjust for their impact on incentive outcomes. These items,
identified as qualitatively non-underlying and/or one-off in nature including those that form part of the transformation,
highlight the importance of striking the right balance to enable management to progress strategy implementation and
transformation to set the business up for sustainable growth, despite short-term cost and capital implications.
7.4.1. Major transactions
During the year, there were six major transactions as part of portfolio simplification strategy being divestment and exit
costs for the Australian Transport Project business, Asset & Development Services business, Repurpose It, VEC construction
contracting business, AE Smith New Zealand and Metering Services Australia.
7.4.2. Significant items
During the year, there were several significant items categorised as follows:
Item
Description
Regulatory reviews
and legal matters
Costs incurred in relation to significant regulatory and legal matters consistent with treatment
in FY23.
Transformation and
restructuring costs
Costs incurred in relation to the Group’s transformation program including restructuring
and redundancy costs associated with the new operating model, cost out program, site
rationalisation, external consulting costs and Software-as-a-Service (SaaS) implementation costs.
Asset Impairments
Impairment charges that relate to asphalt plants in the Transport segment, including one
plant established in 2022 following a compulsory acquisition process funded by the acquiring
authority resulting in a gain of $60.1 million (post tax) treated as an Individually Significant
Item in FY22 STI scorecard, and impairment and other costs associated with software projects
terminated as a result of IT cost reduction program and IT strategic review.
In assessing performance, the Board exercises its judgement in evaluating the quality of results including the nature of
significant items and whether there should be any adjustments considered for remuneration purposes. See Note B3 of
the Annual Report and the Investor Presentation for a reconciliation between statutory and underlying results.
7.4.3. Impacts from Individually Significant Items
With FY24 being a year of significant business reset and transformation, the Board examined a wide range of matters
impacting NPATA and FFO to determine ISI’s that reflect the underlying performance of management and the business.
This approach aligns to the principle that the executives are ‘no better or worse off’ as a result of the transactions and
significant items so that performance is measured against delivery of the Company’s strategy and business plan.
The following table summarises the ISIs:
Measure
Adjustment
NPATA
Exclusion of $(177.2) million before tax (refer Note B3 for further details on Individually Significant Items)
comprising:
$3.7 million fair value movement on Downer Contingent Share Options (DCSO) liability.
$21,7 million net gain on divestments and exit costs.
$(23.3) million regulatory reviews and legal matters.
$(61.6) million transformation and restructuring costs, comprising: $(28.7) million employee benefits
expense; $(31.6) million other expenses; and, $(1.3) million restructuring costs of an equity accounted
associate.
$(117.7) million impairment and other asset write-downs, comprising: $(69.1) million impairment
charges; $(11.2) million accelerated amortisation; and $(37.4) million of other expenses.
Exclusion of associated tax benefit of $65.4 million.
Total adjustment to NPATA of $(111.8) million.
FFO
Exclusion of cash inflows and outflows before tax:
Net inflow $45.0 million for divestment gains and exit costs with net proceeds $68.5 million less
$23.5 million GST payment outflow.
Outflow $(13.8) million for regulatory reviews and legal matters
Outflow $(51.9) million for transformation and restructuring costs.
Outflow of $(13.7) million for assets impaired and written down.
Total adjustment to FFO of outflow $(34.4) million.
EPS
The use of NPAT adjusted as set out above.
TSR
No adjustments were made.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
70
71
Directors’ Report
Directors’ Report
7.4.4. Future periods
For major transactions completed in 2024, the impact on operational performance is included in the 2025 budget and
accordingly no adjustments are expected in respect of FY25 operational performance.
7.5. Variations from policy
There were no variations from policy in 2024.
8. Executive Equity Ownership
8.1. Ordinary shares
KMP equity holdings in fully paid ordinary shares and performance rights issued by Downer EDI Limited are as follows:
Ordinary shares
Performance rights
Balance at
1 July 2023
No.
Net
Change
No.
Balance at
30 June 2024
No.
Balance at
1 July 2023
No.
Net
Change
No.
Balance at
30 June 2024
No.
P J Tompkins
286,004
20,132
306,136
239,758
–121,732
118,026
M R Ashcroft
–
–
–
–
–
–
8.2. Performance rights
As outlined in section 6.5.1, the LTI plan for the 2024 financial year is in the form of performance rights. Relief from
certain regulatory requirements was applied for and has been received from the Australian Securities and Investments
Commission. During the year, the LTI plans for the 2023 and 2024 financial years were approved as outlined in section 6.5
of this report, however grants of performance rights were made in early July 2024. This means that grants in relation to
2023 and 2024 for Peter Tompkins will be made during the 2025 financial year.
The following table shows the number of performance rights granted by Downer EDI Limited and percentage of
performance rights that vested or were forfeited during the year for each grant that affects compensation in this or future
reporting periods.
2021 Plan
2022 Plan
Number of
performance
rights1
Vested
%
Forfeited
%
Number of
performance
rights2
Vested
%
Forfeited
%
Current Executives
P J Tompkins
146,079
16.7
83.3
93,679
–
100.0
M R Ashcroft
–
–
–
–
–
–
Former Executives
G A Fenn
584,317
16.7
83.3
374,714
–
100.0
1. Grant date 30 September 2021. Expiry date is 1 July 2024. The fair value of shares granted was $5.73 per share for the EPS and Scorecard tranches and $3.86 per share for the TSR tranche.
2. Grant date 30 September 2022. Expiry date is 1 July 2025. The fair value of shares granted was $3.85 per share for the EPS and Scorecard tranches and $1.80 per share for the TSR tranche.
2023 Plan
2024 Plan
Number of
performance
rights
Vested
%
Forfeited
%
Number of
performance
rights
Vested
%
Forfeited
%
Current Executives
P J Tompkins
234,4791
–
–
480,4483
–
–
M R Ashcroft
–
–
–
160,9443
–
–
Former Executives
G A Fenn
466,6252
–
–
–
–
–
1. Grant date 4 July 2024 being FY25. Expiry date is 1 July 2026. The fair value of shares granted was $4.30 per share for the EPS and Scorecard tranches and $1.17 per share for the
TSR tranche.
2. Grant date 31 May 2023. Expiry date is 1 July 2026. The fair value of shares granted was $2.94 per share for the EPS and Scorecard tranches and $0.57 per share for the TSR tranche.
3. Grant date 4 July 2024 being FY25. Expiry date is 1 July 2027. The fair value of shares granted was $4.09 per share for the EPS and Scorecard tranches and $2.80 per share for the
TSR tranche.
The maximum number of performance rights that may vest in future years that will be recognised as share-based
payments in future years is set out in the table below:
Maximum number of performance rights for the vesting year for current Executive
2025
2026
2027
P J Tompkins
–
234,479
480,448
M R Ashcroft
–
–
160,944
The maximum expense for performance rights that may vest in future years that will be recognised as share-based
payments in future years is set out in the table below . The amount reported is the value of share-based payments
calculated in accordance with AASB 2 Share-based Payment over the vesting period. As detailed in section 8.2, the 2023
and 2024 grants were made on 4 July 2024.
2025
$
2026
$
2027
$
P J Tompkins
644,567
630,515
439,610
M R Ashcroft
147,264
147,264
147,264
8.3. Remuneration consultants
Guerdon Associates and Sodali & Co were engaged by the Board’s People and Culture Committee to provide
remuneration advice in relation to KMP, but did not provide the Board’s People and Culture Committee with remuneration
recommendations as defined under Division 1, Part 1.2, 9B (1) of the Corporations Act 2001 (Cth).
The Board was satisfied that advice received was free from any undue influence by KMP to whom the advice may
relate, because strict protocols were observed and complied with regarding any interaction between the advisors
and management, and because all remuneration advice was provided to the Board Chairman or People and Culture
Committee Chairman.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
72
73
Directors’ Report
Directors’ Report
9. Key Terms of Employment Contracts
9.1. Notice and termination payments
Executives are on contracts with no fixed end date.
The following table captures the notice periods applicable to termination of the employment of executives.
Termination notice
period by Downer
Termination notice
period by employee
Termination
payments payable
under contract
MD & CEO
12 months
12 months
12 months
CFO
6 months
6 months
6 months
Downer can elect to either require executives to provide service during their notice period or make a payment in lieu.
Termination payments are calculated based upon total fixed remuneration at the date of termination. No payment is
made for termination due to gross misconduct.
9.2. Managing Director and Chief Executive Officer of Downer’s employment agreement
9.2.1. P J Tompkins
Mr Tompkins was appointed as the MD & CEO of Downer commencing on 27 February 2023. The following table sets out
the key terms of the Managing Director’s employment agreement.
Term
Until terminated by either party.
Fixed
remuneration
$1.55 million per annum.
Fixed remuneration includes superannuation and non-cash benefits.
STI opportunity
Mr Tompkins is eligible to receive an annual STI and the maximum STI opportunity is 100% of fixed
remuneration.
Any entitlement to an STI is at the discretion of the Board, having regard to performance measures
and targets developed in consultation with Mr Tompkins including Downer’s financial performance,
safety, people, environmental and sustainability targets and adherence to risk management
policies and practices. The Board also retains the right to vary the STI by + or – 100% (up to the 100%
maximum) based on its assessment of performance. The STI deferral arrangements in place for KMP
apply to Mr Tompkins.
There is no STI entitlement where the MD & CEO’s employment terminates prior to the end of the
financial year, other than in the event of a change in control or by mutual agreement.
LTI opportunity
Mr Tompkins is eligible to participate in the annual LTI plan and the value of the award is 130% of
fixed remuneration.
Mr Tompkins’ performance requirements have been described in section 6.5.
In the event of a change of control, providing at least 12 months of a grant’s performance period
have elapsed, unvested shares and performance rights pro-rated with the elapsed service period
are tested for vesting with performance against the relevant hurdles for that period and vest, as
appropriate. Shares that have already been tested, have met performance requirements, and are
subject to the completion of the service condition, fully vest.
Termination
Mr Tompkins can resign:
(a) By providing 12 months’ written notice; or
(b) By providing 30 days’ written notice in circumstances where there is a fundamental change in
his role or responsibilities. In these circumstances, Mr Tompkins is entitled to a payment in lieu of
12 months’ notice.
Downer can terminate Mr Tompkins’ employment:
(a) Immediately for misconduct or other circumstances justifying summary dismissal; or
(b) By providing 12 months’ written notice.
When notice is required, Downer can make a payment in lieu of notice of all or part of any notice
period (calculated based on Mr Tompkins’ fixed annual remuneration).
If Mr Tompkins resigns he will be subject to a 12-month post-employment restraint in certain areas
where the Downer Group operates, where he is restricted from working for competitive businesses.
Other
The agreement contains provisions regarding leave entitlements, duties, confidentiality, intellectual
property, moral rights and other facilitative and ancillary clauses. It also contains provisions regarding
corporate governance and a provision dealing with the Corporations Act 2001 (Cth) limits on
termination benefits to be made to Mr Tompkins.
10. Related Party Information
10.1. Transactions with other related parties
Transactions entered into during the year with Directors of Downer EDI Limited and the Group are within normal
employee, customer or supplier relationships on terms and conditions no more favourable than dealings in the same
circumstances on an arm’s length basis and included:
The receipt of dividends from Downer EDI Limited
Participation in the Long-Term Incentive Plan
Terms and conditions of employment
Reimbursement of expenses.
A number of Directors of the Company hold directorships in other entities. Several of these entities transacted with the
Group on terms and conditions no more favourable than those available on an arm’s length basis.
11. Description of Non-executive Director Remuneration
11.1. Non-executive Director remuneration policy
Downer’s Non-executive Director remuneration policy is to provide fair remuneration that is sufficient to attract and retain
Directors with the experience, knowledge, skills and judgement to steward the Company.
Fees for Non-executive Directors are fixed and are not linked to the financial performance of the Company. The Board
believes this is necessary for Non-executive Directors to maintain their independence.
Non-executive Directors are not entitled to retirement benefits. Shareholders last approved an annual aggregate cap of
$2.4 million for Non-executive Director fees at the 2022 AGM. The allocation of fees to Non-executive Directors within this
cap has been determined after consideration of a number of factors, including the time commitment of Directors, the
size and scale of the Company’s operations, the skill sets of Board members, the quantum of fees paid to Non-executive
Directors of comparable companies and participation in Board Committee work.
The basis of fees and the fee pool are reviewed when new Directors are appointed to the Board, when the structure of
the Board changes, or at least every three years. Reference is made to individual Non-executive Director fee levels and
workload (i.e. number of meetings and the number of Directors) at comparably sized companies from all industries other
than the financial services sector, and the fee pools at these companies. In addition, an assessment is made on the
extent of flexibility provided by the fee pool to recruit any additional Directors for planned succession after allocation
of fees to existing Directors.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
74
75
Directors’ Report
Directors’ Report
There have been no base or committee fee increases during FY24. The total fees paid in FY24 was $1.6 million
(FY23: $1.7 million).
The Board Chair receives a fee of $454,000 per annum (inclusive of all Committee fees). The other Non-executive Directors
each receive a base fee of $180,000 per annum.
Additional fees are paid for Committee duties:
$43,500 for the Chair of the Audit and Risk Committee; and $35,000 for the Chair of each of the People and Culture
Committee, Project Governance Committee and Zero Harm Committee
$20,000 for members of the Audit and Risk Committee; and $17,500 for the members of each of the People and
Culture Committee, Project Governance Committee and Zero Harm Committee.
11.2. Non-executive Director minimum securityholding policy
The Board introduced a minimum securityholding policy for Non-executive Directors effective from 1 July 2023.
Under the policy, each Non-executive Director is required to establish and maintain a minimum security holding equal to
or greater than 100% of their annual base fee. The requirement is to be met within four years after the latter of the date of
their appointment or the commencement of the Policy.
The guideline requirement has been developed to reinforce alignment with shareholder interests. The Board retains the
right to vary from policy in exceptional circumstances.
11.3. Non-executive Directors’ remuneration
The table below sets out the remuneration paid to Non-executive Directors for the 2024 and 2023 financial years.
Short-term benefits
Post-employment benefits
Year
Board fee
$
Committee
fee
$
Total fees
$
Super-
annuation
$
Total
$
M J Menhinnitt
2024
426,601
–
426,601
27,399
454,000
2023
252,853
22,834
275,687
22,861
298,548
M P Chellew1
2024
–
–
–
–
–
2023
290,465
–
290,465
18,969
309,434
M J Binns1
2024
–
–
–
–
–
2023
95,023
20,765
115,788
2,694
118,482
S Broadbent1
2024
131,151
48,170
179,321
5,263
184,584
2023
–
–
–
–
–
T G Handicott
2024
162,162
33,784
195,946
21,554
217,500
2023
162,896
43,175
206,071
21,637
227,708
N M Hollows
2024
162,162
70,721
232,883
25,617
258,500
2023
162,896
71,041
233,937
24,563
258,500
A M Howse
2024
162,162
49,550
211,712
23,288
235,000
2023
162,896
40,535
203,431
21,360
224,791
S J MacDonald1
2024
135,135
36,787
171,922
18,911
190,833
2023
–
–
–
–
–
P L Watson2
2024
40,541
16,329
56,870
6,256
63,126
2023
162,896
76,587
239,483
24,945
264,428
1. Amounts represent the payments relating to the period during which the individual was a Non-executive Director.
2. P L Watson ceased to be Non-executive Director on 30 September 2023.
11.4. Equity held by Non-executive Directors
The table below sets out the equity in Downer held by Non-executive Directors for the 2024 financial year.
2024
Balance at
1 July 2023
Net
change
Balance at
30 June 2024
M J Menhinnitt
71,748
21,000
92,748
S Broadbent
–
590
590
T G Handicott
31,000
–
31,000
N M Hollows
40,538
10,000
50,538
A M Howse
5,000
10,000
15,000
S MacDonald
–
11,848
11,848
P L Watson1
17,933
–
17,933
1. Balance as at 30 June 2024 for P L Watson represents the number of shares held as at retirement date.
Signed in accordance with a resolution of the Directors made pursuant to section 298(2) of the Corporations Act 2001 (Cth).
On behalf of the Directors.
Mark Menhinnitt
Chairman
Sydney, 30 August 2024
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
76
77
Auditor’s Independence Declaration
for the year ended 30 June 2024
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999
Liability limited by a scheme approved under Professional Standards Legislation.
Auditor’s Independence Declaration
As lead auditor for the audit of Downer EDI Limited for the year ended 30 June 2024, I declare that to
the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Downer EDI Limited and the entities it controlled during the period.
Jane Reilly
Sydney
Partner
PricewaterhouseCoopers
30 August 2024
Independent Auditor’s Report
for the year ended 30 June 2024
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999
Liability limited by a scheme approved under Professional Standards Legislation.
Independent auditor’s report
To the members of Downer EDI Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Downer EDI Limited (the Company) and its controlled entities
(together the Group) is in accordance with the Corporations Act 2001, including:
(a)
giving a true and fair view of the Group's financial position as at 30 June 2024 and of its
financial performance for the year then ended
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The financial report comprises:
•
the consolidated statement of financial position as at 30 June 2024
•
the consolidated statement of changes in equity for the year then ended
•
the consolidated statement of cash flows for the year then ended
•
the consolidated statement of profit or loss and other comprehensive income for the year then
ended
•
the notes to the consolidated financial statements, including material accounting policy
information and other explanatory information
•
the consolidated entity disclosure statement as at 30 June 2024
•
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
78
79
Independent Auditor’s Report
Independent Auditor’s Report
Key audit matter
How our audit addressed the key audit matter
Recognition of revenue and related contract assets
Refer to note B2 Revenue, and note C2 Trade
receivables and contract assets
As described in Note B2 to the consolidated financial
statements, the Group recognises revenue from
rendering of services, construction contracts and sale
of goods across the Group. For construction contracts
and some rendering of services, the Group recognises
revenue using the measure of progress that best
reflects the Group’s performance in satisfying the
performance obligation over time.
There are certain key estimates that drive the
measurement of the Group’s revenue and resulting
contract assets and their recognition in the
consolidated financial statements. These key estimates
include:
•
determining the stage of completion based on a
percentage of costs to complete, which requires
an estimate of expenses incurred to date as a
percentage of total estimated cost;
•
recognition of contract modifications, such as
variations and claims and in particular
unapproved variations to the extent they are
approved or enforceable under the contract and
the amount of revenue is recognised to the extent
it is highly probable that a significant reversal will
not occur;
•
variable consideration which the Group
recognises as revenue only when it is highly
probable that a significant reversal of that revenue
will not occur, in accordance with AASB 15
Revenue from contracts with customers; and
•
impacts of any termination for convenience
clauses in customer contracts on the revenue
recognised and associated contract assets.
Auditing these judgements requires significant
judgement given the estimation uncertainty and
significant complexity involved in estimating the costs
or extent of progress towards completion of work. In
addition, revenue and contract assets are significant
balances to the financial statements.
Therefore, recognition of revenue and contract assets
on rendering of services and construction contracts
Our audit procedures, included but were not limited to
the following:
•
Developed an understanding of the key systems
underpinning the accounting for rendering of
services and construction contract revenue and
the related contract assets, and the relevant
business process controls;
•
Considered the appropriateness of the Group’s
accounting policy in relation to the recognition
and measurement of revenue against the
requirements of the Australian Accounting
Standards;
•
For a selection of projects based on qualitative
and quantitative factors, we performed the
following procedures amongst others:
o Conducted visits to a selection of sites to see
physical evidence of progress;
o Inspected the signed contract agreements to
develop an understanding of key contract
terms;
o Held meetings with project managers and
senior management to develop an
understanding of the status of contracts and
key changes in estimates since previous
years;
o Assessed the cost to complete estimate, by
performing look back procedures on the
Group's historical ability to forecast costs to
complete, including performing sensitivity
analysis and/or comparison of cost estimates
to prior year costs incurred. Some key
forecast assumptions were traced back to the
source of information, such as agreements
with subcontractors and wage agreements
with employees.
o Assessed the measure of progress by
challenging the nature of the goods or
services that the Group has promised to
transfer to the customer, and assessing
whether a reliable measure of progress had
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Audit scope
Key audit matters
•
Our audit focused on where the Group made
subjective judgements; for example, significant
accounting estimates involving assumptions and
inherently uncertain future events.
•
Component audit teams operating under the
Group audit team’s instructions conducted an audit
of the most significant components of the Group.
The components were selected due to their
significance to the Group, either by individual size
or by risk. The Group audit team performed audit
procedures over shared service functions as well
as centrally managed areas such as, but not
limited to, the impairment assessment of goodwill,
share based payments, and the consolidation
process. In addition, selected component audit
teams performed targeted audit or specified
procedures on selected financial statement line
items. Combined, the work carried out gave us
sufficient evidence to express an opinion on the
financial statements as a whole.
•
Amongst other relevant topics, we communicated
the following key audit matters to the Audit and
Risk Committee:
− Recognition of revenue and related contract
assets
− Carrying value of goodwill
•
These are further described in the Key audit
matters section of our report.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
80
81
Independent Auditor’s Report
Independent Auditor’s Report
Key audit matter
How our audit addressed the key audit matter
Carrying value of goodwill
Refer to note C7 Intangible assets
Under Australian Accounting Standards, the Group is
required to test goodwill annually for impairment at the
cash-generating unit (CGU) level. This process is
inherently complex and requires judgement in
forecasting the operational cash flows and determining
discount and growth rates used in the cash flow models
(the models).
The Group has prepared value in use (VIU) models
based on discounted cash flow forecasts to calculate
the recoverable amount for each of the six groups of
CGUs. Key assumptions in the VIU models include
revenue growth, EBIT margin, long-term growth rate,
and discount rate.
The recoverable amount of goodwill was a key audit
matter given the:
•
Financial significance of goodwill in the
consolidated statement of financial position; and
•
Significant judgement applied by the Group in
determining the recoverable amount of each
group of CGUs.
Our audit procedures, included but were not limited to
the following:
•
Developed an understanding of the key controls
associated with the preparation of the discounted
cash flow models used to calculate the
recoverable amount of the groups of CGUs;
•
Assessed the appropriateness of the Group’s
identification of, and allocation of goodwill to, the
groups of CGUs;
•
Assessed whether the groups of CGUs included
directly attributable assets, liabilities, and cash
flows and a reasonable allocation of corporate
assets and overheads;
•
Assessed the appropriateness of cash flow
forecasts included in the models with reference to
historical results, Board approved budgets and
forecasts, economic and industry forecasts and
contracted commitments;
•
Tested the mathematical calculations within the
models;
•
Assessed the appropriateness of the discount
rates, long-term growth rates and valuation
methodology, with the assistance of PwC
valuation experts;
•
Assessed the Group’s ability to forecast future
cash flows for CGUs by comparing historical
budgets with reported actual results;
•
Considered the sensitivity of the models by
varying key assumptions, such as terminal
growth rates, discount rates, and margins; and
•
Assessed the reasonableness of the disclosures
made in note C7, including those disclosures
regarding key assumptions and sensitivities to
changes in such assumptions, against the
requirements of Australian Accounting Standards.
Key audit matter
How our audit addressed the key audit matter
was a focus of our audit and considered to be a key
audit matter.
been used;
o Tested the cost to complete estimate by
assessing the reasonableness of the
foreseeable project loss provisions recorded
as of the year end for a selection of projects;
o Obtained evidence to support variations and
claims recognised against the criteria of
AASB 15. This included assessment of
correspondence with the customer, the
Group’s legal basis for variations and claims,
external legal opinions and qualified
professionals where necessary, and analysis
of the amounts the Group considers to meet
the highly probable requirement;
o Recalculated the revenue based on the input
method for fixed price projects to assess the
calculation of revenue recorded; and
o Assessed the reasonableness of the
judgement made by management for
contracts with a termination for convenience
clause, including the impact of any associated
termination payments.
•
Tested the allocation of both labour and non-
labour costs to project costs to assess the
accuracy of project margins;
•
Tested a sample of payments and transactions
recorded post year end to supporting evidence to
assess completeness of costs recorded during
the year;
•
For a selection of project related balances as of
the year end, tested the subsequent billing of
unbilled contract revenue; and
•
Assessed the reasonableness of the Group’s
disclosures against the requirements of
Australian Accounting standards, including
disclosures with respect to significant estimates
and judgements.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
82
83
Independent Auditor’s Report
Independent Auditor’s Report
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in the directors’ report for the year ended 30 June
2024.
In our opinion, the remuneration report of Downer EDI Limited for the year ended 30 June 2024
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
Jane Reilly
Sydney
Partner
30 August 2024
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 30 June 2024, but does not include the
financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon through our opinion on the financial report. We
have issued a separate opinion on the remuneration report.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report in accordance
with Australian Accounting Standards and the Corporations Act 2001, including giving a true and fair
view, and for such internal control as the directors determine is necessary to enable the preparation of
the financial report that is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing
and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf . This description forms part of our
auditor's report.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
84
85
Financial Statements
Financial Statements
for the year ended 30 June 2024
Consolidated Statement of Profit or Loss
87
and Other Comprehensive Income
Consolidated Statement of Financial Position
88
Consolidated Statement of Changes in Equity
89
Consolidated Statement of Cash Flows
90
Notes to the consolidated financial statements
A
About this
report
91–93
B
Business
performance
94–111
B1
Segment
information
B2
Revenue
B3
Individually
significant items
B4
Earnings per
share
B5
Taxation
B6
Remuneration
of auditor
B7
Subsequent
events
C
Operating
assets and
liabilities
112–129
C1
Reconciliation of
cash and cash
equivalents
C2
Trade
receivables and
contract assets
C3
Inventories
C4
Trade payables
and contract
liabilities
C5
Property, plant
and equipment
C6
Right-of-use
assets
C7
Intangible
assets
C8
Other provisions
C9
Contingent
liabilities
D
Employee
benefits
130–131
D1
Employee
benefits
D2
Defined
benefit plan
D3
Key
management
personnel
compensation
D4
Employee
Discount Share
Plan
E
Capital
structure
and financings
132–141
E1
Borrowings
E2
Financing
facilities
E3
Lease liabilities
E4
Commitments
E5
Issued capital
and non-
controlling
interest
E6
Reserves
E7
Dividends
F
Group
structure
142–159
F1
Joint
arrangements
and associate
entities
F2
Controlled
entities
F3
Related party
information
F4
Parent entity
disclosures
F5
Deed of cross
guarantee
F6
Acquisition of
businesses
F7
Disposal of
businesses
F8
Disposal group
held for sale
G
Other
160–170
G1
New accounting
standards
G2
Capital and
financial risk
management
G3
Other financial
assets and
liabilities
Consolidated Entity Disclosure Statement
171
Directors’ Declaration
177
Consolidated Statement of Profit or Loss and Other Comprehensive Income
for the year ended 30 June 2024
Note
2024
$’m
2023
$’m
Revenue
B2
10,979.5
11,640.4
Other income
B2
71.3
88.6
Total revenue and other income
11,050.8
11,729.0
Employee benefits expense
D1
(3,430.8)
(3,640.0)
Subcontractor costs
(4,608.2)
(4,917.8)
Raw materials and consumables used
(1,299.3)
(1,458.2)
Plant and equipment costs
(406.7)
(468.6)
Depreciation on leased assets
C6
(153.3)
(154.9)
Other depreciation and amortisation
C5,C7
(192.7)
(181.3)
Impairment of non-current assets
C5,C6,C7
(69.1)
(539.5)
Other expenses from ordinary activities
(720.2)
(652.0)
Total expenses
(10,880.3)
(12,012.3)
Share of net profit of joint ventures and associates
F1(a)
10.0
29.8
Earnings before interest and tax
180.5
(253.5)
Finance income
11.6
7.8
Lease finance costs
(25.4)
(22.9)
Other finance costs
(74.9)
(72.9)
Net finance costs
(88.7)
(88.0)
Profit/(loss) before income tax
91.8
(341.5)
Income tax expense
B5(a)
(9.7)
(44.2)
Profit/(loss) after income tax
82.1
(385.7)
Profit/(loss) for the year is attributable to:
– Non-controlling interest(i)
13.0
10.7
– Members of the parent entity(i)
69.1
(396.4)
Profit/(loss) for the year
82.1
(385.7)
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss:
– Actuarial movement on net defined benefit plan obligations
D2
2.1
2.6
– Income tax effect of actuarial movement on defined benefit plan obligations
(0.6)
(0.8)
– Change in fair value of unquoted equity investments
0.8
0.2
Items that may be reclassified subsequently to profit or loss:
– Exchange differences arising on translation of foreign operations
(3.5)
8.5
– Net (loss)/gain on foreign currency forward contracts taken to equity
(1.4)
0.3
– Net loss on cross currency and interest rate swaps taken to equity
(6.4)
(6.6)
– Income tax effect of items above
2.3
1.9
Other comprehensive (loss)/income for the year (net of tax)
(6.7)
6.1
Total comprehensive income/(loss) for the year (net of tax)
75.4
(379.6)
Earnings per share (cents)
Basic earnings per share
B4
10.3
(59.0)
Diluted earnings per share(ii)
B4
10.3
(59.0)
(i) Comparative information has been revised to reflect the changes in presentation detailed in Note A.
(ii) At 30 June 2024, the ROADS were deemed anti-dilutive and consequently, diluted EPS remained at 10.3 cents per share (2023: loss of 59.0 cents per share).
The consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying
notes on pages 91 to 170.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
86
87
Financial Statements
Financial Statements
Consolidated Statement of Financial Position
as at 30 June 2024
Note
2024
$’m
2023
$’m
ASSETS
Current assets
Cash and cash equivalents
C1(c)
837.6
889.1
Trade receivables and contract assets(i)
C2
1,862.7
2,005.3
Other financial assets
G3
20.1
10.7
Inventories
C3
210.5
234.8
Current tax assets
0.4
7.2
Prepayments and other assets
69.6
68.9
Assets classified as held for sale
F8
10.6
92.2
Total current assets
3,011.5
3,308.2
Non-current assets
Trade receivables and contract assets
C2
145.1
138.8
Equity accounted investments
F1(a)
121.8
159.2
Property, plant and equipment
C5
841.2
934.7
Right-of-use assets
C6
412.9
428.5
Intangible assets
C7
2,120.1
2,180.3
Other financial assets
G3
46.1
51.5
Deferred tax assets
B5(b)
19.6
3.3
Prepayments and other assets
29.9
20.9
Total non-current assets
3,736.7
3,917.2
Total assets
6,748.2
7,225.4
LIABILITIES
Current liabilities
Trade payables and contract liabilities(i)
C4
2,041.1
2,183.5
Lease liabilities
E3
126.9
135.2
Other financial liabilities
G3
13.2
15.0
Current tax liabilities
26.4
2.6
Employee benefits provision
D1
274.1
268.2
Other provisions
C8
158.9
66.3
Liabilities associated with assets classified as held for sale
F8
10.6
112.9
Total current liabilities
2,651.2
2,783.7
Non-current liabilities
Trade payables and contract liabilities
C4
60.6
61.1
Borrowings
E1
1,294.0
1,596.4
Lease liabilities
E3
385.0
402.0
Other financial liabilities
G3
21.4
5.7
Deferred tax liabilities
B5(b)
22.4
36.7
Employee benefits provision
D1
24.3
22.7
Other provisions
C8
29.9
27.3
Total non-current liabilities
1,837.6
2,151.9
Total liabilities
4,488.8
4,935.6
Net assets
2,259.4
2,289.8
EQUITY
Issued capital(i)
E5
2,463.9
2,463.8
Reserves
E6
13.4
19.0
Accumulated losses
(396.5)
(371.6)
Equity attributable to the parent interests
2,080.8
2,111.2
Non-controlling interest(i)
178.6
178.6
Total equity
2,259.4
2,289.8
(i) Comparative information has been revised to reflect the changes in presentation detailed in Note A.
The consolidated statement of financial position should be read in conjunction with the accompanying notes on
pages 91 to 170.
Consolidated Statement of Changes in Equity
for the year ended 30 June 2024
2024
$’m
Note
Issued
capital
Reserves
Accumulated
losses
Total
attributable
to owners of
the parent
Non-
controlling
interest
Total
Balance at 1 July 2023
2,463.8
19.0
(371.6)
2,111.2
178.6
2,289.8
Profit after income tax
–
–
69.1
69.1
13.0
82.1
Other comprehensive loss for the
year (net of tax)
–
(6.7)
–
(6.7)
–
(6.7)
Total comprehensive income/
(loss) for the year
–
(6.7)
69.1
62.4
13.0
75.4
Vested executive incentive share
transactions
0.1
(0.1)
–
–
–
–
Share-based employee benefits
expense
–
3.2
–
3.2
–
3.2
Income tax relating to share-based
transactions during the year
–
(2.0)
–
(2.0)
–
(2.0)
Payment of dividends(i)
E7
–
–
(94.0)
(94.0)
(13.0)
(107.0)
Balance at 30 June 2024
2,463.9
13.4
(396.5)
2,080.8
178.6
2,259.4
(i) Relates to the 2023 final dividend, 2024 interim dividend and $13.0 million ROADS dividends paid during the financial year.
2023
$’m
Issued
capital
Reserves
(Accumulated
losses)/
retained
earnings
Total
attributable
to owners of
the parent
Non-
controlling
interest
Total
Balance at 30 June 2022
2,660.2
12.1
139.5
2,811.8
–
2,811.8
Reclassification of ROADS(ii)
(178.6)
–
–
(178.6)
178.6
–
Revised balance at 1 July 2022
2,481.6
12.1
139.5
2,633.2
178.6
2,811.8
Loss after income tax(ii)
–
–
(396.4)
(396.4)
10.7
(385.7)
Other comprehensive income for the
year (net of tax)
–
6.1
–
6.1
–
6.1
Total comprehensive (loss)/income
for the year
–
6.1
(396.4)
(390.3)
10.7
(379.6)
Share-based employee benefits
income
–
(0.8)
–
(0.8)
–
(0.8)
Income tax relating to share‑based
transactions during the year
–
1.6
–
1.6
–
1.6
Group on-market
share buy-back
(17.8)
–
–
(17.8)
–
(17.8)
Payment of dividends(ii),(iii)
–
–
(114.7)
(114.7)
(10.7)
(125.4)
Revised balance at 30 June 2023
2,463.8
19.0
(371.6)
2,111.2
178.6
2,289.8
(ii) Comparative information has been revised to reflect the changes in presentation detailed in Note A.
(iii) Relates to the 2022 final dividend, 2023 interim dividend and $10.7 million ROADS dividends paid during the financial year.
The consolidated statement of changes in equity should be read in conjunction with the accompanying notes on pages 91 to 170.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
88
89
Financial Statements
Consolidated Statement of Cash Flows
for the year ended 30 June 2024
Note
2024
$’m
2023
$’m
Cash flows from operating activities
Receipts from customers(i)
12,333.6
12,776.3
Payments to suppliers and employees(i)
(11,693.4)
(12,422.2)
GST proceeds on disposal of business(ii)
(23.5)
23.5
Distributions from equity accounted investees
F1(a)
18.9
33.4
Net cash generated by operating cash flow before interest and tax
635.6
411.0
Interest received
12.2
7.1
Interest paid on lease liabilities
(25.4)
(22.9)
Interest and other costs of finance paid
(67.7)
(70.0)
Income tax paid
(10.6)
(7.0)
Net cash generated by operating activities
C1(a)
544.1
318.2
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
54.5
25.2
Payments for property, plant and equipment
(124.3)
(230.6)
Payments for intangible assets
(22.0)
(32.4)
Payments for acquisition of businesses (net of cash acquired)
F6
(1.3)
(0.1)
Net proceeds from sale of business (net of cash disposed)
F7
68.5
160.5
Receipts from/(payments for) investments
G3
1.0
(8.1)
Net advances to equity accounted investments
(5.7)
(1.2)
Net cash used in investing activities
(29.3)
(86.7)
Cash flows from financing activities
Group on-market share buy-back
E5
–
(17.8)
Proceeds from borrowings(i)
6,033.0
7,251.0
Repayments of borrowings(i)
(6,329.1)
(7,023.5)
Payment of principal of lease liabilities
C1(b)
(163.5)
(165.0)
Dividends paid
(107.0)
(125.4)
Net cash used in financing activities
(566.6)
(80.7)
Net (decrease)/increase in cash and cash equivalents
(51.8)
150.8
Cash and cash equivalents at the beginning of the year
889.1
738.5
Effect of exchange rate changes
0.3
(0.2)
Cash and cash equivalents at the end of the year
C1(c)
837.6
889.1
(i) Comparative information has been revised to reflect the changes in presentation detailed in Note A.
(ii) $23.5 million GST proceeds on the disposal of the Australian Transport Project business in FY23, which was subsequently remitted to the Australian Taxation Office in July 2023.
The consolidated statement of cash flows should be read in conjunction with the accompanying notes on pages 91 to 170.
Notes to the consolidated financial statements
for the year ended 30 June 2024
A_About this report
Statement of compliance
These general purpose financial statements (Financial Report) of Downer EDI Limited (the Company) (ABN 97 003 872 848)
have been prepared in accordance with Australian Accounting Standards issued by the Australian Accounting Standards
Board (AASB) and the Corporations Act 2001 (Cth). The Financial Report also complies with International Financial
Reporting Standards (IFRS Accounting Standards) as issued by the International Accounting Standards Board (IASB).
The consolidated financial statements comprise the Parent company and its controlled entities (together the Group).
The Group is a for-profit entity.
A description of the nature of the Group’s operations and its principal activities are included in the Directors’ Report, which
is not part of the financial statements.
The Financial Report was authorised for issue by the Board of Directors.
Rounding of amounts
Downer is a company of the kind referred to in ASIC Corporations (Rounding in Financial/Directors’ reports) Instrument
2016/191, relating to the ‘rounding off’ of amounts in the Directors’ Report and consolidated financial statements.
Unless otherwise expressly stated, amounts have been rounded off to the nearest whole number of millions of dollars
and one place of decimals representing hundreds of thousands of dollars in accordance with that Instrument.
Amounts shown as $– represent amounts less than $50,000 which have been rounded down. In some instances,
totals may not add due to rounding.
Basis of preparation
The Financial Report has been prepared on a historical cost basis, except for the revaluation of certain financial
instruments measured at fair value, assets held for sale and non-current assets measured at the lower of carrying value
and fair value less costs to sell and defined benefit plans measured at fair value. Cost is based on the fair values of the
consideration given in exchange for assets. All amounts are presented in Australian dollars which is the Company’s
functional and presentation currency.
Certain comparative balances have been reclassified for consistency with the classification in the 30 June 2024 Financial
Report.
The accounting policies used in the preparation of the Financial Report are consistent with those adopted and disclosed in
Downer’s Financial Report for the financial year ended 30 June 2023, except in relation to the relevant new and amended
accounting standards adopted by the Group and their effects on the current period or prior periods as described in Note G1.
Accounting estimates and judgements
The preparation of the Financial Statements requires management to make judgements, estimates and assumptions
that affect the reported amounts in the Financial Statements. Management continually evaluates its judgements
and estimates in relation to assets, liabilities, contingent liabilities, revenues and expenses. Management bases its
judgements, estimates and assumptions on historical experience on other factors including expectations of future events
management believes to be reasonable under the circumstances.
The following table provides an overview of the areas that involved a higher degree of judgement or complexity.
Detailed information about each of these judgements is included in the following notes:
Accounting judgements
Note
Page
Revenue recognition
B2
102
Income taxes
B5
108
Useful lives
C6
119
Impairment of assets
C7
123
Other provisions
C8
128
Contingent liabilities
C9
129
Employee benefits obligations
D1
130
Lease liabilities
E3
136
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
90
91
A _ About this report
A _ About this report
Information about assumptions and estimation uncertainty at the reporting date that has a significant risk of resulting
in a material adjustment to the carrying amount of assets and liabilities within the next financial year is included in the
following notes:
Accounting estimates
Note
Page
Revenue recognition
B2
102
Recognition of deferred tax assets
B5
108
Credit risk
C2
115
Useful lives
C5 to C7
118 to 123
Recoverable value of right-of-use assets
C6
119
Intangible assets
C7
123
Other provisions
C8
128
Employee benefits obligations
D1
130
Lease liabilities
E3
136
Material accounting policies
Accounting policies are selected and applied in a manner such that the resulting financial information satisfies the
concepts of relevance and reliability, thereby the substance of the underlying transactions or other events is reported.
Other material accounting policies are contained in the notes to the Financial Report to which they relate.
(i) Principles of consolidation
The Financial Report incorporates the financial statements of Downer EDI Limited (the Company/Downer) and entities
it controlled. Downer EDI Limited and its subsidiaries together are referred to in the Financial Report as the ‘Group’.
The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity
and has the ability to affect those returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity.
The Financial Report includes the information and results of each subsidiary from the date on which the Company
obtains control and until such date as control of the subsidiary ceases.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the Consolidated Statement
of Profit or Loss and Other Comprehensive Income, Consolidated Statement of Financial Position and Consolidated
Statement of Changes in Equity of the consolidated entity.
Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset.
(ii) Foreign currency
Transactions, assets and liabilities denominated in foreign currencies are translated into Australian dollars at reporting
date using the following applicable exchange rates:
Foreign currency
Applicable exchange rate
Transactions
Date of transaction
Monetary assets and liabilities
Reporting date
Non-monetary assets and liabilities carried at fair value
Date fair value is determined
Foreign exchange gains and losses resulting from translation are recognised in the Consolidated Statement of Profit or
Loss and Other Comprehensive Income, except for qualifying cash flow hedges which are deferred to equity.
On consolidation of foreign operations, the assets, liabilities, income and expenses are translated into Australian dollars
using the following applicable exchange rates:
Foreign operations
Applicable exchange rate
Income and expenses
Average exchange rate
Monetary assets and liabilities
Reporting date
Equity
Historical date
Foreign exchange differences resulting from translation are initially recognised in the foreign currency translation reserve
and subsequently transferred to the profit or loss on disposal of the foreign operation.
(iii) Finance and borrowing costs
Finance costs comprise interest expense on borrowings, unwind of discounts on provisions, cost to establish financing
facilities (which are expensed over the term of the facility), losses on ineffective hedging instruments that are recognised
in profit or loss and finance lease charges.
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a
qualifying asset are capitalised as part of the asset.
Other borrowing costs are expensed in the period in which they are incurred.
Revised comparative balances
(a) Changes in presentation within Equity
During the year ended 30 June 2024, the Group revised the presentation within Equity on the Consolidated Statement
of Financial Position and Consolidated Statement of Changes in Equity. Previously the ROADS securities have been
presented as part of Issued Capital. The ROADS securities have been reclassified from ‘Issued Capital’ to ‘Non-Controlling
Interest’ on the Consolidated Statement of Financial Position and Consolidated Statement of Changes in Equity to
represent the nature of the ROADS securities as equity instruments issued by a subsidiary.
This change has been applied retrospectively and impacted the prior period financial statements of the Group such
that the Group’s Issued Capital attributable to owners of Downer EDI Limited for the year ended 30 June 2023 and
30 June 2022 decreased by $178.6 million (2023 from $2,642.4 million to $2,463.8 million), and Non-Controlling Interest of
the corresponding amount being recognised for 30 June 2023 and 30 June 2022. There is no change in the total Equity
balance or in earnings per share for the Group for 30 June 2023 and 30 June 2022. Refer to Note E5 for further disclosures
provided regarding the ROADS securities.
(b) Changes in presentation of proceeds and repayments of borrowings
The Group revised the presentation within the consolidated statement of cash flows for the year ended 30 June 2023 to
exclude net settled rollover of borrowings which did not give rise to any cash flows. As a result, proceeds from borrowings
and repayments of borrowings both decreased by $8,867.0 million, with no change to net cash used in financing activities.
(c) Changes in presentation within the consolidated statement of financial position
The consolidated statement of financial position has been revised to offset current contract assets and current contract
liabilities related to the same contracts in New Zealand. The impact of this change being a decrease in trade receivables
and contract assets and a decrease in trade payables and contract liabilities of $88.9 million at 30 June 2023, respectively.
There has been no change in net current assets.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
92
93
B _ Business performance
B _ Business performance
B_Business performance
This section provides the information that is most relevant to understanding the financial performance of the Group
during the financial year and, where relevant, the accounting policies applied and the critical judgements and
estimates made.
B1. Segment information
B2. Revenue
B3. Individually significant items
B4. Earnings per share
B5. Taxation
B6. Remuneration of auditor
B7. Subsequent events
B1. Segment information
Identification of reportable segments
An operating segment is a component of an entity that engages in business activities from which it may earn revenue
and incur expenses, whose operating results are regularly reviewed by the Group’s chief operating decision maker in order
to effectively allocate Group resources and assess performance.
The Group has identified its operating segments based on the internal reports that are reviewed and used by the Group
CEO in assessing performance and in determining the allocation of resources. The Group CEO is identified as the Chief
Operating Decision Maker. The operating segments are identified by the Group based on the nature of the services
provided. Financial information about each of these segments and additional information on operating businesses
within each segment is reported to the Group CEO on a regular basis.
The reportable segments are based on a combination of operating businesses determined by the similarity of the
services provided, the sources of the Group’s major risks that could therefore have the greatest effect on the rates of
return and their quantitative contribution to the Group’s results.
The reportable segments identified within the Group are outlined as follows:
Segment
Segment description
Transport
Comprises the Group’s road services businesses across Australia and New Zealand, rail
businesses in Australia and projects businesses in New Zealand. Downer’s road services include:
road network management; routine road maintenance; asset management systems; spray
sealing; asphalt laying; manufacture and supply of bitumen-based products and asphalt
products; the use of recycled products and environmentally sustainable methods to produce
asphalt; and landfill diversion solutions. The Rail business spans all light rail and heavy rail
sectors, from rollingstock to infrastructure; from design and manufacture to through-life-support
including fleet maintenance, operations and comprehensive overhaul of assets. Transport also
provides building and construction solutions across a variety of sectors in New Zealand including
signalling, track and station works, bridges, airports and roads.
Through the Hawkins business, Downer also delivers vertical construction to customers in
New Zealand.
Utilities
Comprises the Group’s power, gas, water and telecommunications businesses. This includes:
planning, designing, constructing, operating, maintaining, managing and decommissioning
power and gas network assets; providing complete water lifecycle solutions for municipal and
industrial water users including water and wastewater treatment, network construction and
rehabilitation; and end-to-end technology and communications solutions including design,
civil construction, network construction, operations and maintenance across fibre, copper and
radio networks.
Segment
Segment description
Facilities
Facilities provides outsourced facility services to customers across a diverse range of industry
sectors including: Defence; education; government; healthcare; industrial; resources; and energy.
Facilities provides technical and engineering services; maintenance and asset management
services including shutdowns, turnaround and outage delivery; operations maintenance,
refrigeration solutions and ongoing management of strategic assets across a range of
sectors. It also provides feasibility studies; engineering design; procurement and construction;
commissioning and decommissioning services; and design and manufacture of mineral
process equipment.
2024
$’m
Transport
Utilities
Facilities
Unallocated
Total
Segment revenue and other income
5,402.3
2,400.7
3,198.4
49.4
11,050.8
Share of sales revenue from joint ventures
and associates(i)
819.7
–
–
97.1
916.8
Total revenue including joint ventures, associates
and other income(i) (ii) (iii)
6,222.0
2,400.7
3,198.4
146.5
11,967.6
Share of net profit/(loss) from joint ventures
and associates
13.5
–
–
(3.5)
10.0
Depreciation and amortisation
220.6
29.5
34.7
61.2
346.0
Total reported segment results – EBIT before
amortisation of acquired intangibles (EBITA)
250.4
55.6
177.3
(279.7)
203.6
Amortisation of acquired intangibles
(1.1)
(0.3)
(4.6)
(17.1)
(23.1)
Earnings before interest and tax (EBIT)
249.3
55.3
172.7
(296.8)
180.5
Net finance costs
(88.7)
Total profit before income tax
91.8
Acquisition of segment assets
110.2
7.6
11.8
16.5
146.1
Segment assets
3,178.8
1,111.9
1,940.9
516.6
6,748.2
Segment liabilities
1,529.9
537.6
753.1
1,668.2
4,488.8
Carrying value of equity accounted investees
96.4
–
–
25.4
121.8
(i) This is a non-statutory disclosure as it relates to Downer’s share of revenue from equity accounted joint ventures and associates.
(ii) Included in FY24 total revenue is $224.2 million (2023: $1,486.3 million) in relation to divested businesses.
(iii) The Group did not derive revenue greater than 10% of the Group’s total revenue from a single major customer.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
94
95
B _ Business performance
B _ Business performance
2023
$’m
Transport
Utilities
Facilities
Unallocated
Total
Segment revenue and other income
6,050.1
2,258.2
3,413.0
7.7
11,729.0
Share of sales revenue from joint ventures
and associates(i)
802.4
–
–
88.3
890.7
Total revenue including joint ventures, associates
and other income(i)
6,852.5
2,258.2
3,413.0
96.0
12,619.7
Share of net profit from joint ventures and associates
29.4
–
–
0.4
29.8
Depreciation and amortisation
217.4
30.7
41.6
46.5
336.2
Total reported segment results – EBIT before
amortisation of acquired intangibles (EBITA)
288.9
(10.3)
162.1
(668.0)
(227.3)
Amortisation of acquired intangibles
(4.5)
(0.3)
(5.0)
(16.4)
(26.2)
Earnings before interest and tax (EBIT)
284.4
(10.6)
157.1
(684.4)
(253.5)
Net finance costs
(88.0)
Total loss before income tax
(341.5)
Acquisition of segment assets
205.7
13.6
17.9
32.5
269.7
Segment assets(ii)
3,434.7
1,174.8
2,019.1
596.8
7,225.4
Segment liabilities(ii)
1,596.7
570.0
792.1
1,976.8
4,935.6
Carrying value of equity accounted investees
130.4
–
–
28.8
159.2
(i) This is a non-statutory disclosure as it relates to Downer’s share of revenue from equity accounted joint ventures and associates.
(ii) Comparative information has been revised to reflect the changes in presentation detailed in Note A.
Reconciliation of segment EBIT to net profit after tax:
Segment results
Note
2024
$’m
2023
$’m
Segment EBIT before Unallocated
477.3
430.9
Unallocated:
Fair value movement on DCSO liability
B3
3.7
10.0
Net gain on divestments and exit costs
B3
21.7
20.8
Transformation and restructure costs
B3
(61.6)
(25.4)
Regulatory reviews and legal matters
B3
(23.3)
(6.5)
Impairment and other asset write-downs
B3
(117.7)
(549.6)
Amortisation of Spotless and Tenix acquired intangible assets
(17.1)
(16.4)
Corporate costs
(102.5)
(117.3)
Total unallocated
(296.8)
(684.4)
Earnings before interest and tax
180.5
(253.5)
Net finance costs
(88.7)
(88.0)
Profit/(loss) before income tax
91.8
(341.5)
Income tax expense
B5(a)
(9.7)
(44.2)
Profit/(loss) after income tax
82.1
(385.7)
Segment assets by geographical location
Segment assets
Non-current(ii)
Acquisition of segment
assets
Non-current
2024
$’m
2023
$’m
2024
$’m
2023
$’m
Geographical location(i)
Australia
2,954.6
3,147.4
84.0
197.7
New Zealand and Pacific
558.4
566.9
61.8
71.5
Rest of the world
1.1
0.9
0.3
0.5
Total
3,514.1
3,715.2
146.1
269.7
(i) Assets are allocated based on the geographical location of the legal entity.
(ii) Total of non-current assets other than deferred tax assets, financial instruments, post-employment benefit assets and trade and other receivables.
B2. Revenue
Revenue and other income
2024
$’m
Transport
Utilities
Facilities
Unallocated
Total
Rendering of services
3,004.2
1,791.8
3,103.0
0.8
7,899.8
Construction contracts
2,071.1
599.4
11.9
–
2,682.4
Sale of goods
297.0
8.6
81.2
–
386.8
Total revenue from contracts with customers
5,372.3
2,399.8
3,196.1
0.8
10,969.0
Other revenue
8.2
–
0.1
2.2
10.5
Total revenue
5,380.5
2,399.8
3,196.2
3.0
10,979.5
Government grants(i)
0.1
0.5
0.7
–
1.3
Insurance recoveries
7.9
–
–
–
7.9
Gain on sale of property, plant and equipment
4.3
–
0.8
–
5.1
Net gain on disposal of business
–
0.4
–
35.7
36.1
Other
9.5
–
0.7
10.7
20.9
Other income
21.8
0.9
2.2
46.4
71.3
Total revenue and other income
5,402.3
2,400.7
3,198.4
49.4
11,050.8
(i) Government grants represents incentives received in relation to the apprenticeship wage subsidies and hiring incentive scheme and research and development tax incentive.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
96
97
B _ Business performance
B _ Business performance
2023
$’m
Transport
Utilities
Facilities
Unallocated
Total
Rendering of services
3,240.6
1,892.4
3,340.0
–
8,473.0
Construction contracts
2,456.9
358.1
–
–
2,815.0
Sale of goods(ii)
268.6
6.8
72.1
–
347.5
Total revenue from contracts with customers
5,966.1
2,257.3
3,412.1
–
11,635.5
Other revenue
7.2
0.1
–
(2.4)
4.9
Total revenue
5,973.3
2,257.4
3,412.1
(2.4)
11,640.4
Government grants(iii)
0.5
0.4
0.1
–
1.0
Insurance recoveries
13.1
–
–
0.1
13.2
Gain on sale of property, plant and equipment
19.2
0.3
0.7
–
20.2
Gain on disposal of businesses
44.4
–
–
–
44.4
Other
(0.4)
0.1
0.1
10.0
9.8
Other income
76.8
0.8
0.9
10.1
88.6
Total revenue and other income
6,050.1
2,258.2
3,413.0
7.7
11,729.0
(ii) The Group reclassified for consistency with current presentation revenue from rendering of services to sale of goods for the year ended 30 June 2023 to reflect the appropriate
categorisation of the nature of the goods and services provided.
(iii) Government grants represents incentives received under the New Zealand Government’s COVID leave support scheme available to eligible businesses impacted by the COVID-19
pandemic, as well as in relation to the New Zealand Government’s apprentice boost scheme.
Revenue from contracts with customers by geographical location
2024
$’m
Transport
Utilities
Facilities
Unallocated
Total
Geographical location(i)
Australia
2,938.2
1,860.3
2,787.9
0.4
7,586.8
New Zealand and Pacific
2,434.0
539.5
357.0
0.4
3,330.9
Rest of the world
0.1
–
51.2
–
51.3
Total revenue from contracts with customers
5,372.3
2,399.8
3,196.1
0.8
10,969.0
2023
$’m
Transport
Utilities
Facilities
Unallocated
Total
Geographical location(i)
Australia
3,590.5
1,732.9
3,031.2
–
8,354.6
New Zealand and Pacific
2,375.6
524.4
342.8
–
3,242.8
Rest of the world
–
–
38.1
–
38.1
Total revenue from contracts with customers
5,966.1
2,257.3
3,412.1
–
11,635.5
(i) Revenue is allocated based on the geographical location of the legal entity.
Recognition and measurement
Revenue
The Group recognises revenue when a customer obtains control of the goods or services, in accordance with AASB 15
Revenue from Contracts with Customers (AASB 15). Revenue is measured at the consideration received or receivable.
Determining the timing of the transfer of control – at a point in time or over time – requires judgement. The Group enters
into client contracts with relatively long-term durations under various contract types including schedules of rates, lump
sum and cost-reimbursable. Various contractual terms and conditions determine the mechanism of pricing and revenue
recognition. Revenue is recognised if it meets the criteria below.
(i) Rendering of services
The Group primarily generates service revenue from the following activities:
Maintenance and management of transport infrastructure
Utilities infrastructure maintenance services (gas, power and water)
Maintenance and installation of infrastructure in the telecommunications sector
Industrial plant maintenance
Rollingstock maintenance and rail asset management services
Engineering and consultancy services
Facilities management
Typically, under the performance obligations of service contracts, the customer consumes and receives the benefit
of the service as it is provided. As such, service revenue is recognised over time as the services are provided.
(ii) Construction contracts
The contractual terms and the way in which the Group operates its construction contracts are derived from projects
predominantly containing one performance obligation. Under these performance obligations, performance either
creates or enhances an asset that the customer controls as the asset is created, or performance does not create
an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance
completed to date. Therefore, revenue is recognised over time based on stage of completion of the contract.
(iii) Sale of goods
Revenue is recognised at a point in time when the customer obtains control of goods, which is generally at the time
of purchase or delivery to the customer.
(iv) Other revenue
Other revenue primarily includes rental income.
(v) Other income
Other income primarily includes insurance recoveries, government grants, gains on sale of property, plant and
equipment, and net gain on disposal of businesses.
Insurance recoveries relate to insurance refunds received for claims lodged that met the recognition criteria of being
‘virtually certain’ following confirmation of indemnity received from insurers.
Government grants relate to income received under the apprenticeship wage and hiring incentive scheme and research
and development tax incentive. The Group elects to present these subsidies in ‘Other income’ as allowed under AASB 120
Accounting for Government grants and disclosure of Government assistance.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
98
99
B _ Business performance
B _ Business performance
Principal versus agent
In some instances where the Group is acting as an agent in arrangements that invoice on behalf of another contractor
as part of the commercial contractual terms and conditions, the revenue recognised is limited to the gross margin that
the Group is entitled to, not the total amount billed.
For contracts where a third party (for example, subcontractors) is involved in providing services, the Group determines
whether it is acting as a principal or an agent. The Group acts as a principal if it controls the specified good or service
before that service is transferred to a customer.
Contract modifications
For services and construction contracts, revenue from variations and claims is recognised to the extent they are
approved or enforceable under the contract. The amount of revenue is then recognised to the extent it is highly probable
that a significant reversal of revenue will not occur.
In making this assessment, the Group considers a number of factors including nature of the claim, formal or informal
acceptance by the customer of the validity of the claim, stage of negotiations, or the historical outcome of similar claims
to determine whether the enforceable and the ‘highly probable’ thresholds have been met.
Revenue in relation to modifications, such as a change in the scope of the contract, will only be included in the
transaction price when it is approved by the parties to the contract or the modification is enforceable and the amount
becomes highly probable. Modifications may also be recognised when client instruction has been received in line with
customary business practice for the customer.
Contract costs (tender costs)
Costs incurred during the tender/bid process are expensed, unless they are incremental to obtaining the contract and the
Group expects to recover those costs or where they are explicitly chargeable to the customer regardless of whether the
contract is obtained.
Performance obligations and contract duration
Revenue is allocated to each performance obligation and recognised as the performance obligation is satisfied which
may be at a point in time or over time.
AASB 15 requires a granular approach to identify the different revenue streams (i.e. performance obligations) in a contract
by identifying the different activities that are being undertaken and then aggregating only those where the different
activities are significantly integrated or highly interdependent. Revenue will be recognised, on certain contracts over
time, as a single performance obligation when the services are part of a series of distinct goods and services that are
substantially integrated with the same pattern of transfer.
AASB 15 provides guidance in respect of the term over which revenue may be recognised and is limited to the period for
which the parties have enforceable rights and obligations. When the customer can terminate a contract for convenience
(without a substantive penalty), the contract term and related revenue is limited to the period.
The Group has elected to apply the practical expedient to not adjust the total consideration over the contract term for
the effect of a financing component if the period between the transfer of services to the customer and the customer’s
payment for these services is expected to be one year or less.
Measure of progress
The Group recognises revenue using the measure of progress that best reflects the Group’s performance in satisfying
the performance obligation over time. The different methods of measuring progress include an input method (e.g. costs
incurred) or an output method (e.g. time elapsed). The same method of progress will be consistently applied to similar
performance obligations.
As a practical expedient where the Group has a right to invoice the customer at an amount that corresponds directly with
its performance to date, then the Group recognises revenue at that amount.
Remaining performance obligations
As of 30 June 2024, the aggregate amount of the transaction price allocated to the remaining performance obligations
is $20,000.5 million (2023: $19,458.2 million). The Group will recognise this revenue when the performance obligations are
satisfied. Approximately ~42% of remaining performance obligations are expected to occur within the next five years; with
the remaining ~58% related to long-term service/maintenance contracts ranging up to 38 years.
The remaining performance obligations balances for both 30 June 2024 and 30 June 2023 presented above relate to
the revenue expected to be recognised from ongoing contracts with an expected duration of more than 12 months.
Variable consideration
Variable consideration that is contingent on the Group’s performance, including key performance payments, liquidated
damages and abatements that offset revenue under the contract, is recognised only when it is highly probable that a
reversal of that revenue will not occur.
In addition, where the identified revenue stream is determined to be a series of distinct goods or services that are
substantially the same and that have the same pattern of transfer to the customer (e.g. maintenance services), variable
consideration is recognised in the period/(s) in which the series of distinct goods or services subject to the variable
consideration are completed.
Loss-making contracts
Loss-making contracts are recognised under AASB 137 Provisions, Contingent Liabilities and Contingent Assets as
onerous contracts.
In making this assessment, the Group considers the performance of a contract cumulatively life to date, in the most
recent reporting period, and updates the final forecast at completion.
In circumstances where contracts have incurred losses, either cumulatively life to date or in the reporting period, and the
final forecast margin anticipates improvements in contract performance to deliver an overall profitable outcome on the
contract, detailed reviews are completed to assess the basis and reasonableness of the expected turnaround. In these
circumstances an onerous contract is not recognised.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
100
101
B _ Business performance
B _ Business performance
Key estimate and judgement: Revenue recognition
Measure of Progress
Management uses judgement in selecting an appropriate measure of progress towards completing satisfaction of an
obligation. The selected method considers the nature of the good or service that the Group has promised to transfer to
the customer.
Stage of completion
Determining the stage of completion based on a percentage of costs to complete requires an estimate of expenses
incurred to date as a percentage of total estimated costs. Significant judgement is required to determine the
remaining costs to be incurred in delivering the remainder of the project.
Modifications
When a contract modification exists and the Group has an approved enforceable right to payment, revenue in
relation to claims and variations is only included in the transaction price when the amount claimable becomes
highly probable. Management uses judgement in determining whether an approved enforceable right exists and
determining when amount is highly probable.
Variable consideration
Determining the amount of variable consideration requires an estimate based on either the ‘expected value’ or the
‘most likely amount’. The estimate of variable consideration can only be recognised to the extent it is highly probable
that a significant revenue reversal will not occur in future. Significant judgement is required in determining whether
revenue should be constrained for variations and claims to customers and potential liquidated damages.
Termination for convenience clauses
When a contract provides that a customer can terminate for convenience, management must determine whether or
not termination penalties payable by the customer to the Group on termination are substantive. This determination
impacts whether the Group accounts for the customer contract as a long-term contract over the stated term or as
a short-term contract over the non-cancellable period. The assessed contract term impacts the determination and
allocation of the transaction price to performance obligations, and ultimately when revenue is recognised.
Defects and warranty
Contracts for rendering of services and construction may include defect and warranty periods following completion
of the project. These obligations are not deemed to be separate performance obligations and associated costs are
estimated and included in the total costs of the contracts. Where required, obligations for defects and warranty are
recognised as a provision, refer to Note C8 Other provisions.
Changes in these estimates or judgements could have a material impact on the financial statements of the Group.
B3. Individually significant items
The following material items of income and expense, forming part of the unallocated segment, are relevant to an
understanding of the Group’s financial performance:
2024
$’m
Fair value
movement
on DCSO
liability
Net gain on
divestments
and exit
costs
Transformation
and restructure
costs
Regulatory
reviews
and legal
matters
Impairment
and other
asset
write-downs
Total
Other income
3.7
–
–
–
–
3.7
Net gain on disposal of businesses
–
36.1
–
–
–
36.1
Employee benefits expense
–
–
(28.7)
–
–
(28.7)
Other depreciation and amortisation
–
–
–
–
(11.2)
(11.2)
Impairment of non-current assets
–
–
–
–
(69.1)
(69.1)
Other expenses from ordinary activities
–
(14.4)
(31.6)
(23.3)
(37.4)
(106.7)
Share of net profit of joint venture
and associates
–
–
(1.3)
–
–
(1.3)
Total significant items before interest
and tax
3.7
21.7
(61.6)
(23.3)
(117.7)
(177.2)
Income tax benefit
–
5.5
18.0
6.8
35.1
65.4
Total significant items after income tax
3.7
27.2
(43.6)
(16.5)
(82.6)
(111.8)
Fair value movement on Downer Contingent Share Options (DCSO) liability
As part of the consideration to acquire the shares in Spotless that it did not already own, the Group granted three
tranches of 2.5 million share options to the previous minority interest shareholders on 12 August 2020 which are
exercisable within four years of issue on achievement of three prescribed share price targets (the Downer Contingent
Share Options or DCSO). The fair value at issue date of these options was recognised as a liability arising on the
acquisition of the shares. The DCSO are classified as a liability, with subsequent changes in the fair value recognised in
the Consolidated Statement of Profit or Loss and Other Comprehensive Income. Since 30 June 2023, the fair value of the
DCSO liability has decreased by $3.7 million, with a gain recognised through ‘Other income’ in the Consolidated Statement
of Profit or Loss and Other Comprehensive Income during the year.
Net gain on divestments and exit costs
During the period, divestment and exit costs were recognised in relation to a number of transactions. Refer to Note F7
for further details on the individual transactions.
The material elements of the net gain on divestments and exit costs include:
$36.1 million net pre-tax gain (including disposal costs) across the divestments
$14.4 million pre-tax transaction-related expenses and provisions associated with Downer’s ongoing obligations
and risks associated with divestments
Capital losses on which a deferred tax asset has not been previously recognised have been used to fully offset capital
gains arising on divestments during the year. A deferred tax asset has not been recognised on remaining carried
forward capital losses of $28.4 million at 30 June 2024 as it is not probable that a future capital gain will arise.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
102
103
B _ Business performance
B _ Business performance
Transformation and restructure costs
Transformation and restructure costs represent costs incurred following Downer’s commencement of the Transformation
program to restructure its operating model and review of IT strategy. The material elements of the costs associated with
the transformation and restructure are as follows:
Redundancy and severance costs associated with implementing the new operating model
Transformation program implementation costs including external advisor costs
Software-as-a-Service (SaaS) implementation costs.
Regulatory reviews and legal matters
Regulatory review and legal matters costs were incurred in relation to defending the shareholder class actions filed
against Downer during the prior financial year, responding to regulatory reviews, undertaking business conduct review
and investigations, and settlement of the 'leaky buildings' claim (for further information see 2023 Financial Statements
Note C9 Contingent Liabilities (vi)).
The shareholder class actions claims have been disclosed as a contingent liability in Note C9.
Impairment and other asset write-downs
Impairment and other asset write-downs relates to:
Three asphalt plants following review of the carrying value
Accelerated amortisation and write-downs in relation to IT assets and discontinuation of IT development programs,
and resulting onerous licence contract provisions recognised, where the ongoing usage has been reviewed as part of
the cost reduction program and aligned with the Group’s new operating model.
Prior Year
The Group recognised the following items as individually significant items as at 30 June 2023:
2023
$’m
Fair value
movement
on DCSO
liability
Divestments
and exit
costs
Portfolio
restructure
costs
Regulatory
reviews and
shareholder
class action
related
costs
Impairment
and other
asset
write-downs
Total
Other income
10.0
–
–
–
–
10.0
Gain on disposal of business
–
44.4
–
–
–
44.4
Impairment of non-current assets
–
(0.7)
–
–
(538.8)
(539.5)
Employee benefits expense
–
(10.4)
(9.7)
–
–
(20.1)
Raw materials and consumables used
–
–
–
–
(5.0)
(5.0)
Other expenses from ordinary activities
–
(12.5)
(15.7)
(6.5)
(5.8)
(40.5)
Total significant items before interest
and tax
10.0
20.8
(25.4)
(6.5)
(549.6)
(550.7)
Income tax benefit/(expense)
–
(18.6)
7.6
1.9
18.3
9.2
Total significant items after income tax
10.0
2.2
(17.8)
(4.6)
(531.3)
(541.5)
Fair value movement on Downer Contingent Share Options (DCSO) liability
Since 30 June 2022, the fair value of the DCSO has decreased by $10.0 million, which has been recognised through ‘Other
income’ in the Consolidated Statement of Profit or Loss and Other Comprehensive Income. This income is driven by the
decrease in Downer’s share price from $5.05 at 30 June 2022 to $4.11 at 30 June 2023.
Divestments and exit costs
In prior year, divestment and exit costs were recognised in relation to Australian Transport Projects – On 20 June 2023,
Downer completed the sale of its Australian Transport Projects business to DT Infrastructure Pty Ltd, a Gamuda Berhad
group company (Gamuda). There remained a number of customer consents outstanding at the date of completion,
some of which remained outstanding as at the date of prior year financial report. These contracts remained with Downer
until the consents were received.
In addition to transaction-related costs incurred, assets previously utilised by the business which will no longer be required
by the Group have been written off. The material elements of divestment and exit costs include:
$44.4 million pre-tax gain (including disposal costs) from the disposal of the Australian Transport Project business.
Refer to Note F7
$23.6 million pre-tax exit costs, relating to impairments of IT infrastructure and applications, transaction-related
employee benefit expenses, costs provision for defect liability periods and other exit costs
A net income tax expense of $18.6 million mainly arising on the gain on divestments and includes the tax impact
of non-deductible goodwill disposed.
Portfolio restructure costs
Represents restructuring costs incurred in prior year following Downer’s commencement of the Transformation program
to restructure its operating model and includes restructuring expenses, redundancy and costs associated with
establishing and running the Transformation program.
Regulatory reviews and shareholder class action related costs
Regulatory review and shareholder class action related costs of $6.5 million were incurred in relation to:
Responding to regulatory reviews by certain regulatory authorities
The review of the Australian Utilities maintenance contract
Defending the shareholder class actions filed against Downer during prior financial year. These claims have been
disclosed as a contingent liability. Refer to Note C9.
Impairment and other assets write-downs
Following the identification of possible impairment indicators, the Group undertook an assessment of the carrying value
of the Utilities Australia and Facilities Group of CGUs. As a result of this assessment, a goodwill impairment of $483.0 million
($133.0 million related to Utilities Australia and $350.0 million related to Facilities) was recognised as at 30 June 2023.
Impairment of assets by $66.6 million (pre-tax) relates to adjustment in the carrying value of:
Carrying value of fixed assets and inventory in the Rail business
Shut down, relocation and consolidation of asphalt plants in Australia
IT and other assets that will no longer be utilised or provide future economic benefit as a result of business
restructuring, divestments and transformation
Office space being surplus to requirements and vacated as a result of business restructuring, divestments
and transformation.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
104
105
B _ Business performance
B _ Business performance
B4. Earnings per share
Basic earnings per share
The calculation of basic earnings per share (EPS) is based on the profit/loss attributable to ordinary shareholders and the
weighted-average number of ordinary shares outstanding.
2024
2023
Profit/(loss) attributable to members of the parent entity used in calculating basic EPS ($’m)
69.1
(396.4)
Weighted average number of ordinary shares (WANOS) on issue (m’s)(i)
670.4
671.5
Basic earnings per share (cents)
10.3
(59.0)
Diluted earnings per share
The calculation of diluted earnings per share is based on the following profit/loss attributable to ordinary shareholders
and the weighted-average number of ordinary shares outstanding after adjustments for the effects of all dilutive
potential ordinary shares.
2024
2023
Profit/(loss) attributable to members of the parent entity used in calculating basic EPS ($’m)
69.1
(396.4)
Adjustment of earnings for ROADS dividend paid ($’m)
13.0
10.7
Profit/(loss) attributable to members of the parent entity used in calculating diluted EPS ($’m)
82.1
(385.7)
Weighted average number of ordinary shares
– Weighted average number of ordinary shares (WANOS) on issue (m’s)(i) (ii)
670.4
671.5
– Adjustments for calculation of diluted earnings per share due to ROADS (m’s)(iii)
42.5
44.3
WANOS used in the calculation of diluted EPS (m’s)
712.9
715.8
Diluted earnings per share (cents)(iv)
10.3
(59.0)
(i) The WANOS on issue has been adjusted by the weighted average effect of unvested executive incentive shares and additionally in 2023, the on-market share buy-back.
(ii) For diluted EPS, the WANOS has been further adjusted by the potential vesting of executive incentive shares.
(iii) The WANOS adjustment is the value of ROADS that could potentially be converted into ordinary shares at the reporting date. It is calculated based on the issued value of ROADS in
New Zealand dollars converted to Australian dollars at the spot rate prevailing at the reporting date, which was $183.0 million (2023: $183.8 million), divided by the average market
price of the Company’s ordinary shares for the period 1 July 2023 to 30 June 2024 discounted by 2.5% according to the ROADS contract terms, which was $4.30 (2023: $4.15).
(iv) At 30 June 2024, the ROADS were deemed anti-dilutive and consequently, diluted EPS remained at 10.3 cents per share (2023: loss of 59.0 cents per share).
B5. Taxation
(a) Reconciliation of income tax expense
The prima facie income tax expense/(benefit) on the pre-tax result for the year reconciles to the income tax expense in
the financial statements as follows:
2024
$’m
2023
$’m
Profit/(loss) before income tax
91.8
(341.5)
Tax using the Company’s statutory tax rate
27.5
(102.5)
Effect of tax rates in foreign jurisdictions
(1.1)
(0.9)
Non-deductible expenses
0.4
0.7
Profits and franked distributions from joint ventures and associates
(1.3)
(7.3)
Non-assessable income
(1.1)
(3.0)
Impairment of goodwill
–
144.9
Tax effect of divestments
(12.1)
14.0
Tax effect of previously unrecognised capital losses
–
(2.3)
Benefit of unrecognised temporary differences
–
(0.5)
Other items
(0.4)
3.3
Over-provision of income tax in previous year
(2.2)
(2.2)
Total income tax expense
9.7
44.2
Current tax expense
41.2
35.9
Deferred tax (benefit)/expense
(31.5)
8.3
The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on
taxable profits under Australian tax law. There has been no change in the corporate tax rate when compared with the
previous year.
Recognition and measurement
Current tax
Current tax assets and liabilities are measured at the amount of income taxes payable or recoverable in respect of
the taxable profit or tax loss for the period; this is calculated using tax rates and tax laws that have been enacted or
substantively enacted by the reporting date.
Deferred tax
Deferred tax is accounted for in respect of temporary differences arising from differences between the carrying amount
of assets and liabilities and the corresponding tax base.
Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction
other than a business combination that, at the time of the transaction, affects neither accounting nor taxable profit or
loss and does not give rise to equal taxable and deductible temporary differences.
Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all
deductible temporary differences, unused tax and capital losses and tax offsets, to the extent that it is probable that
sufficient taxable profits will be available to utilise them.
However, deferred tax assets and liabilities are not recognised for:
Temporary differences that arise from the initial recognition of assets or liabilities in a transaction that is not a business
combination which affects neither taxable income nor accounting profit, and does not give rise to equal taxable and
deductible temporary differences
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
106
107
B _ Business performance
B _ Business performance
Temporary differences relating to investments in subsidiaries, associates and joint ventures to the extent that the
Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not
reverse in the foreseeable future
Taxable temporary differences arising from goodwill.
A capital loss of $104.4 million arose on the sale of the Asset and Development Services business to a Management Buy
Out Consortium on 31 August 2023. During the year ended 30 June 2024, a capital gain of $76.0 million arose on the sale of
Downer’s interest in Repurpose It and was reduced to nil via the recoupment of capital losses. A deferred tax asset has not
been recognised on the remaining $28.4 million capital losses as it is not probable that a future capital gain will arise.
Deferred tax assets and liabilities are measured at the tax rates and tax laws that are expected to apply in the year when
the asset is utilised or liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted
at the reporting date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the income statement.
Offsetting deferred tax balances
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and
the Company/consolidated entity intends to settle its current tax assets and liabilities on a net basis.
Tax consolidation
Downer EDI Limited and its wholly owned Australian entities are part of a tax-consolidated group under Australian
taxation law. Downer EDI Limited is the head entity in the tax-consolidated group. Entities within the tax-consolidated
group have entered into a tax funding agreement and a tax sharing agreement with the head entity. Under the terms
of the tax funding agreement, Downer EDI Limited and each of the entities in the tax-consolidated group have agreed
to pay (or receive) a tax equivalent payment to (or from) the head entity, based on the current tax liability or current tax
asset of the entity.
International Tax Reform – Pillar Two Model Rules
As a large multinational enterprise, the Group is subject to the Pillar Two rules, which have been enacted in New Zealand
and draft legislation has been announced in Australia, being the two main jurisdictions in which the Group operates.
The rules will apply in New Zealand for fiscal years beginning from 1 January 2025 and are expected to apply in Australia
from 1 January 2024. Other jurisdictions in which the Group operates are also considering implementation of the Pillar Two
rules. Specifically, the Pillar Two rules are designed to ensure large multinational enterprises pay a minimum level of tax
on the profits arising in each of the jurisdictions in which they operate, imposing an additional tax on profits where the
effective tax rate in that jurisdiction falls below the minimum rate of 15 per cent.
Based on current information available for all jurisdictions in which the Group operates, the Group does not expect a
potential exposure to Pillar Two taxes, and management is not currently aware of any circumstances under which this
might change.
The Group has applied the temporary mandatory relief under amendments to AASB 112 on 27 June 2023 from deferred tax
accounting for the impacts of the Pillar Two rules at 30 June 2024.
Key estimates and judgements:
Recognition of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences, unused tax and capital losses and tax offsets,
to the extent it is probable that sufficient future taxable profits will be available to utilise them. Estimation is required to
determine the amount of deferred tax assets that can be recognised, based upon the likely timing, nature and level of
future taxable profits.
Income taxes
The Group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Judgement is
required to determine the worldwide provision for income taxes and to assess whether deferred tax balances are
recognised on the statement of financial position. Changes in circumstances will alter expectations, which may
impact the amount of provision for income taxes and deferred tax balances recognised.
(b) Movement in deferred tax balances
2024
$’m
At 30 June
2023
Recognised
in profit
or loss
Recognised
in other
comprehen-
sive income
and equity
Net foreign
currency
exchange
differences
Disposal
Net
balance at
30 June
2024
Deferred
tax assets
Deferred
tax
liabilities
Trade receivables and contract assets
(134.5)
(11.5)
–
0.2
–
(145.8)
–
(145.8)
Property, plant and equipment
(33.0)
43.3
–
(0.1)
0.1
10.3
10.3
–
Right-of-use assets
(124.9)
4.5
–
–
–
(120.4)
–
(120.4)
Lease liabilities
156.9
(7.4)
–
–
–
149.5
149.5
–
Intangible assets
(67.9)
7.3
–
–
–
(60.6)
–
(60.6)
Tax losses and other attributes
13.6
(5.3)
–
–
–
8.3
8.3
–
Trade payables and contract liabilities
17.8
6.3
–
–
–
24.1
24.1
–
Employee benefits and other provisions
132.1
8.9
(0.6)
(0.1)
(0.3)
140.0
140.0
–
Other
6.5
(14.6)
(0.2)
0.1
–
(8.2)
–
(8.2)
Net deferred tax assets/(liabilities)
(33.4)
31.5
(0.8)
0.1
(0.2)
(2.8)
332.2
(335.0)
Set-off of DTA against DTL
(312.6)
312.6
Net tax assets/(liabilities)
(2.8)
19.6
(22.4)
2023
$’m
At 30 June
2022
Recognised
in profit
or loss
Recognised
in other
comprehen-
sive income
and equity
Net foreign
currency
exchange
differences
Acquisition
and
disposal
Assets held
for sale
Net
balance at
30 June
2023
Deferred
tax assets
Deferred
tax
liabilities
Trade receivables and contract assets
(122.3)
(11.8)
–
(0.4)
–
–
(134.5)
–
(134.5)
Property, plant and equipment
(60.7)
27.1
0.1
0.2
–
0.3
(33.0)
–
(33.0)
Right-of-use assets
(127.3)
1.8
–
–
–
0.6
(124.9)
–
(124.9)
Lease liabilities
159.1
(1.5)
–
–
–
(0.7)
156.9
156.9
–
Intangible assets
(76.0)
8.2
–
(0.1)
–
–
(67.9)
–
(67.9)
Tax losses and other attributes
50.4
(36.8)
–
–
–
–
13.6
13.6
–
Trade payables and contract liabilities
13.4
5.7
–
(0.2)
–
(1.1)
17.8
17.8
–
Employee benefits and other provisions
150.8
(12.8)
(0.8)
0.3
(3.5)
(1.9)
132.1
132.1
–
Other
(8.7)
11.8
3.4
–
–
–
6.5
6.5
–
Net deferred tax assets/(liabilities)
(21.3)
(8.3)
2.7
(0.2)
(3.5)
(2.8)
(33.4)
326.9
(360.3)
Set-off of DTA against DTL
(323.6)
323.6
Net tax assets/(liabilities)
(33.4)
3.3
(36.7)
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
108
109
B _ Business performance
B _ Business performance
B6. Remuneration of auditor
2024
$'000
2023
$'000
(a) Auditors of the Group – PwC and related network firms
Audit or review of financial reports
5,324
83
Assurance services:
Other assurance services
359
–
Total assurance services
359
–
Other services:
Tax services
151
159
Advisory services
214
411
Other services and agreed upon procedures
85
_
Total other services
450
570
(b) Auditors of the Group – KPMG and related network firms
Audit or review of financial reports
1,791
5,219
Assurance services:
Regulatory assurance services
38
66
Other assurance services
76
254
Total assurance services
114
320
Other services:
Tax services
42
24
Advisory services
–
17
Total other services
42
41
The auditor of the Group was PricewaterhouseCoopers (PwC) for the full year and KPMG for the half year (2023: KPMG).
PwC’s fees for Other Services during the financial year included the following amounts for engagements entered prior to
PwC’s appointment as auditor of the Group in April 2024: Assurance Services nil and Other Services of $295,653.
KPMG was auditor during the financial year until cessation, having identified a conflict of interest after the Group filed a
defence in the shareholder class action (refer to Note C9) and pleaded a proportionate liability defence against KPMG
on 4 March 2024. The change in our external auditors during the financial year (post half year reporting) has resulted in
additional duplicated costs being incurred by the Group in the period. The transition costs to a new auditor are estimated
at $1,300,000 (2023: nil).
Remuneration of KPMG whilst auditor during the financial year were Assurance Services $114,609 and Other
Services $42,447.
B7. Subsequent events
On 21 August 2024, the DCSO (refer Note B3) conditions for Tranche 2 and Tranche 3 series were not satisfied and
have lapsed.
Outside the above, at the date of this report, there is no other matter or circumstance that has arisen since the end of the
financial year, that has significantly affected, or may significantly affect, the operations of the Group, the results of those
operations, or the state of affairs of the Group in subsequent financial years.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
110
111
C _ Operating assets and liabilities
C _ Operating assets and liabilities
C_Operating assets and liabilities
This section provides information relating to the operating assets and liabilities of the Group. Downer has a strong
focus on maintaining a strong balance sheet through continued focus on cash conversion. The Group’s strategy also
considers expenditure, growth and acquisition requirements.
C1. Reconciliation of cash and cash
equivalents
C2. Trade receivables and contract assets
C3. Inventories
C4. Trade payables and contract liabilities
C5. Property, plant and equipment
C6. Right-of-use assets
C7. Intangible assets
C8. Other provisions
C9. Contingent liabilities
C1. Reconciliation of cash and cash equivalents
(a) Reconciliation of cash flows from operating activities
Note
2024
$’m
2023
$’m
Profit/(loss) after tax for the year
82.1
(385.7)
Adjustments for:
Share of joint ventures and associates’ profits net of distributions
F1(a)
8.9
3.6
Depreciation on leased assets
C6
153.3
154.9
Depreciation and amortisation of other non-current assets
C5,C7
192.7
181.3
Impairment of other non-current assets
69.1
539.5
Amortisation of deferred borrowing costs
4.0
3.9
Net gain on sale of property, plant and equipment
(5.0)
(20.2)
Net gain on disposal of businesses
F7
(21.7)
(44.4)
Movement in current tax balances
29.6
28.7
Movement in deferred tax balances
(30.9)
8.3
Movements on net defined benefit plan obligation
D2
1.4
1.5
Share-based employee benefits expense/(income)
D1
3.2
(0.8)
Other
(1.5)
1.0
403.1
857.3
Changes in net assets and liabilities, net of effects from acquisition and disposal of businesses:
(Increase)/decrease in assets:
Current trade receivables and contract assets
91.7
(200.5)
Current inventories
19.1
(26.6)
Other current assets
(0.3)
(10.6)
Non-current trade receivables and contract assets
(6.3)
(17.1)
Other non-current assets
(9.3)
(10.7)
Increase/(decrease) in liabilities:
Current trade payables and contract liabilities
(134.4)
97.4
Current financial liabilities
(20.4)
(14.4)
Current provisions
103.5
(2.1)
Non-current trade payables and contract liabilities
(4.4)
15.4
Non-current financial liabilities
15.8
0.8
Non-current provisions
3.9
15.0
58.9
(153.4)
Net cash generated by operating activities
544.1
318.2
(b) Reconciliation of liabilities arising from financing activities
2024
$’m
1 July
2023
Net cash
flows(i)
Lease net
additions
and
remeasure(ii)
Other
non-cash
changes
Disposal of
businesses
and held for
sale
30 June
2024
Interest bearing loans
1,596.4
(296.1)
–
(6.3)
–
1,294.0
Lease liabilities
537.2
(163.5)
150.6
(12.0)
(0.4)
511.9
Total liabilities from financing activities
2,133.6
(459.6)
150.6
(18.3)
(0.4)
1,805.9
2023
$’m
1 July
2022
Net cash
flows(i)
Lease net
additions
and
remeasure(ii)
Other
non-cash
changes
Disposal of
businesses
and held
for sale
30 June
2023
Interest bearing loans
1,361.7
227.5
–
7.2
–
1,596.4
Lease liabilities
543.9
(165.0)
159.4
3.8
(4.9)
537.2
Total liabilities from financing activities
1,905.6
62.5
159.4
11.0
(4.9)
2,133.6
(i) Gross cash flow movements are disclosed in the cash flow statement.
(ii) Remeasurement amount is disclosed in Note C6.
(c) Cash and cash equivalents
2024
$’m
2023
$’m
For the purpose of the statement of cash flows, cash and cash equivalents comprises:
Cash
768.7
861.9
Short-term deposits
68.9
27.2
Total cash and cash equivalents
837.6
889.1
Cash and short-term deposits includes $52.2 million (2023: $48.0 million) relating to demand deposits for retentions in
accordance with Australian and New Zealand contractual requirements. This cash is not available for general use.
C2. Trade receivables and contract assets
2024
$’m
2023
$’m
Trade receivables
613.8
677.8
Contract assets(i) (ii)
1,352.4
1,385.7
1,966.2
2,063.5
Other receivables
62.3
113.8
Loss allowance on trade receivables and contract assets arising from contracts with customers
(20.7)
(33.2)
Total trade receivables and contract assets
2,007.8
2,144.1
Included in the financial statements as:
Current(i) (ii)
1,862.7
2,005.3
Non-current
145.1
138.8
(i) Current contract assets: $1,208.1 million (2023: $1,247.6 million).
(ii) Comparative information has been revised to reflect the changes in presentation detailed in Note A.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
112
113
C _ Operating assets and liabilities
C _ Operating assets and liabilities
Allowance for credit losses:
The Group’s trade receivables and contract assets are disaggregated based on their expected credit risks
between Government and Private (non-government) customers. An analysis of the balances and loss allowance
is presented below:
2024
$’m
2023
$’m
Government – not due(i)
834.5
860.2
Government – less than 90 days past due
25.8
30.5
Government – more than 90 days past due
5.2
7.8
Private – not due(i)
1,029.5
1,102.7
Private – less than 90 days past due
49.5
44.5
Private – more than 90 days past due
21.7
17.8
Total gross carrying amount
1,966.2
2,063.5
Credit impaired – specific allowance
18.2
29.0
Not credit impaired – lifetime expected credit loss
2.5
4.2
Loss allowance on trade receivables and contract assets arising from contracts with customers
20.7
33.2
(i) Comparative information has been revised to reflect the changes in presentation detailed in Note A.
The Group has policies to manage its overall exposure to credit risk as set out in Note G2(e).
In assessing lifetime expected credit losses (ECL) as at 30 June 2024, the Group has considered the risk arising from the
general economic environment such as persistent inflation, rising interest rates and potential defaults occurring within
the construction environment in which Downer partially operates. The Group has assessed ECLs by segmenting the
portfolio of trade receivables and contract assets by customer (i.e. Government and Private) to better assess inherent
credit risk. The Group defines counterparties as ‘Government’ if the contract is with a Federal, State or Local Government
body. Any counterparties other than those defined as ‘Government’, are classified as ‘Private’, and include sectors heavily
regulated by Government organisations (such as Gas and Electricity), Blue-Chip listed companies, contracts run under
the Public-Private-Partnership model ((PPPs) for which Government organisations are often the end customer), large
multinational companies, network infrastructure companies, as well as other private sector businesses.
The credit risk associated with Government balances is considered to be negligible (2023: negligible) due to the high
creditworthiness of the counterparties. No ‘Government’ related balances are currently in default.
For ‘Private’ balances, the Group has assessed the potential credit risk of default on key customers utilising credit ratings
provided by financial institutions. For those ‘Private’ receivables/contract assets that are ultimately backed by the
Government or a Government body, the credit risk is considered to be low or negligible. For those counterparties that are
currently in default or a risk of default is determined, the Group has recognised specific impairment/credit allowances.
As at 30 June 2024, the $20.7 million (2023: $33.2 million) loss allowance includes a specific provision, against balances not
due, of $18.1 million (2023: $28.4 million) in relation to Probuild Pty Ltd as this customer went into administration in 2022.
Based on the above methodology and in reference to past default experience, the ECLs have decreased from $4.2 million
at 30 June 2023 to $2.5 million at 30 June 2024.
Credit losses on ‘Private’ counterparty balances have historically averaged less than 1%. The allowance for credit losses,
excluding specific provisions, is 0.2% (2023: 0.3%) of the trade receivables and contract assets.
Recognition and measurement
Trade receivables
Trade receivables and other receivables are held with the objective of collecting contractual cash flows and are initially
recognised at fair value and subsequently at amortised cost using the effective interest rate method, less an allowance
for impairment.
Contract assets
Contract assets primarily relate to the Group’s rights to consideration for work performed but not billed at the reporting
date. The contract assets are transferred to trade receivables when the rights have become unconditional. This usually
occurs when the Group issues an invoice in accordance with contractual terms to the customer.
Payments from customers are received based on a billing schedule/milestone basis, as established in our contracts.
Costs to obtain or fulfil contracts
Costs incremental to obtaining a contract and that are expected to be recovered or are explicitly chargeable to the
customer regardless of whether the contract is obtained are capitalised.
Financial assets and liabilities
AASB 9 Financial Instruments (AASB 9) contains a classification and measurement approach for financial assets that
reflects the business model in which assets are managed and their cash flow characteristics.
AASB 9 contains three principal classification categories for financial assets: measured at amortised cost, fair value
through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL).
Fair value
Due to the short-term nature of these financial rights, the carrying amounts of trade receivables and contract assets are
considered to represent their fair values.
Impairment
The Group has applied the simplified approach to recognise lifetime expected credit losses for trade receivables and
contract assets as permitted by AASB 9.
The Group considers the relevant credit risk associated with disaggregated portions of the financial assets and after
considering specific provisions against counterparties and defaults, applies an expected credit loss (ECL) percentage
derived from recorded historic credit losses associated with specific population. The key disaggregation of the balances
is between those that are backed by Government funding and those that are not and between those that are current
or are overdue less than 90 days or become more than 90 days overdue. The Group exercises considerable judgement
about how economic factors (such as rising interest rates and inflation) affect the ECL of each of the disaggregated
balances independently, and applies a premium as deemed appropriate to adjust the historically determined default
rates to present the total expected credit losses on the current balances.
This impairment model applies to financial assets measured at amortised cost or FVOCI (except for investments in
equity instruments).
Key estimate: Credit risk
Credit risk represents the risk that a counterparty will fail to perform an obligation causing a financial loss to the
Group. The Group minimises credit risk by undertaking transactions with a large number of customers in various
industries and geographical areas. A credit risk management policy is in place and exposure to credit risk is monitored
on an ongoing basis.
The Group uses historical information as a basis for the estimation of expected credit losses and then adjusts its
assessment of credit risk based on current macro/micro-economic conditions; however, judgement is applied in
doing this assessment.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
114
115
C _ Operating assets and liabilities
C _ Operating assets and liabilities
C3. Inventories
2024
$’m
2023
$’m
Current
Raw materials
43.8
46.1
Work in progress
6.6
5.3
Finished goods
43.8
59.2
Components and spare parts(i)
116.3
124.2
Total inventories
210.5
234.8
(i) In the prior year, there was a write-down of inventories to their net realisable value at one of Transport's maintenance facilities.
Recognition and measurement
Inventories are valued at the lower of cost and net realisable value. Net realisable value represents the estimated selling
price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. The Group has
considered the net realisable value of inventories at reporting date. An inventory provision is recognised where the net
realisable value from the sale of inventory is estimated to be lower than carrying value.
C4. Trade payables and contract liabilities
2024
$’m
2023
$’m
Trade payables
766.6
817.4
Contract liabilities(i)
246.5
270.6
Accruals
882.3
931.6
Other payables
206.3
225.0
Total trade payables and contract liabilities
2,101.7
2,244.6
Included in the financial statements as:
Current(i)
2,041.1
2,183.5
Non-current
60.6
61.1
(i) Comparative information has been revised to reflect the changes in presentation detailed in Note A.
Recognition and measurement
Trade payables, accruals and other payables
Trade payables, accruals and other payables are recognised when the Group becomes obliged to make future
payments resulting from the purchase of goods and services.
Contract liabilities
Contract liabilities primarily relate to the Group’s obligation to transfer goods or services to a customer for which the
Group has received consideration (or an amount of consideration is due) from the customer. Contract liabilities are
recognised as revenue when work is performed under the contract.
If the net amount of the Group’s rights to consideration for work performed after deduction of progress payments
received is negative, the difference is recognised as a liability and included as part of Contract liabilities.
Of the Contract liabilities balance of $359.5 million at 30 June 2023, substantially all of this revenue has been recognised
in the current year.
Fair value
Due to the short-term nature of these financial obligations, their carrying amounts are estimated to represent their
fair values.
C5. Property, plant and equipment
2024
$’m
Note
Freehold
land and
buildings
Plant, equipment
and leasehold
improvements
Total
Balance as at 1 July 2023
137.7
797.0
934.7
Additions
3.3
119.2
122.5
Disposals at net book value
–
(17.6)
(17.6)
Disposal of businesses
F7
(0.1)
(18.8)
(18.9)
Depreciation expense
(2.7)
(120.4)
(123.1)
Impairment charge(i)
B3
–
(54.5)
(54.5)
Transferred to disposal group assets held for sale
F8
–
(1.0)
(1.0)
Net foreign currency exchange differences at net book value
(0.1)
(0.8)
(0.9)
Net book value as at 30 June 2024
138.1
703.1
841.2
Cost
173.4
1,703.7
1,877.1
Accumulated depreciation and impairment
(35.3)
(1,000.6)
(1,035.9)
2023
$’m
Freehold
land and
buildings
Plant, equipment
and leasehold
improvements
Total
Balance as at 1 July 2022
87.5
836.9
924.4
Additions
77.6
151.8
229.4
Disposals at net book value
(25.0)
(6.9)
(31.9)
Disposal of businesses
–
(36.7)
(36.7)
Depreciation expense
(2.2)
(126.1)
(128.3)
Impairment charge(ii)
–
(25.2)
(25.2)
Transferred to disposal group assets held for sale
–
(0.4)
(0.4)
Net foreign currency exchange differences at net book value
(0.2)
3.6
3.4
Net book value as at 30 June 2023
137.7
797.0
934.7
Cost
170.8
1,751.7
1,922.5
Accumulated depreciation and impairment
(33.1)
(954.7)
(987.8)
(i) Impairment recognised following review of the carrying value of three Asphalt plants in the Transport segment. Refer to Note B3.
(ii) Impairment relates to the adjustment to the carrying value of assets at one of Transport’s maintenance facilities, and to other assets in Australia following a strategic review.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
116
117
C _ Operating assets and liabilities
C _ Operating assets and liabilities
Recognition and measurement
The value of property, plant and equipment is measured as the cost of the asset less accumulated depreciation and
impairment.
The expected useful life and depreciation methods used are listed below:
Item
Useful life
Depreciation method
Freehold land
n/a
No depreciation
Buildings
20 to 50 years
Straight-line
Leasehold improvements
Lease term
Straight-line
Plant and equipment – power and gas
Working hours
Based on hours of use
Plant and equipment – other
3 to 25 years
Straight-line
Key estimate: Useful lives
The estimation of the useful lives of assets has been based on historical experience as well as manufacturers’
warranties (for plant and equipment), lease terms (for leasehold improvements) and turnover policies. In addition, the
condition of the assets is assessed at least annually and considered against the remaining useful life. The residual
value and useful life of assets is reviewed at least at each financial year end.
C6. Right-of-use assets
The Group leases many assets including property, motor vehicles and plant and equipment. Information about leased
assets for which the Group is a lessee is presented below:
2024
$’m
Note
Leasehold
property
Motor
vehicles
Plant and
equipment
Total
Balance as at 1 July 2023
230.0
110.9
87.6
428.5
Additions
23.7
58.6
27.9
110.2
Remeasure
19.2
10.7
10.5
40.4
Depreciation expense
(49.3)
(65.6)
(38.4)
(153.3)
Impairment charge(i)
B3
–
–
(1.4)
(1.4)
Transferred to disposal group assets held for sale
F8
–
(0.1)
–
(0.1)
Disposals at net book value
(4.5)
(3.8)
(2.3)
(10.6)
Disposal of businesses
F7
–
(0.2)
–
(0.2)
Net foreign currency exchange differences at net book value
(0.3)
(0.1)
(0.2)
(0.6)
Net book value as at 30 June 2024
218.8
110.4
83.7
412.9
Cost
466.5
303.8
217.5
987.8
Accumulated depreciation and impairment
(247.7)
(193.4)
(133.8)
(574.9)
(i) Impairment recognised following review of the carrying value of three Asphalt plants in the Transport segment. Refer to Note B3.
2023
$’m
Leasehold
property
Motor
vehicles
Plant and
equipment
Total
Balance as at 1 July 2022
242.3
110.1
83.8
436.2
Additions
23.7
67.7
30.9
122.3
Remeasure
25.3
(1.3)
21.8
45.8
Depreciation expense
(53.1)
(62.1)
(39.7)
(154.9)
Impairment charge(i)
(7.8)
–
–
(7.8)
Transferred to disposal group assets held for sale
(1.5)
(1.0)
(0.1)
(2.6)
Disposals at net book value
(0.2)
(1.3)
(10.5)
(12.0)
Disposal of businesses
(0.3)
(1.4)
–
(1.7)
Net foreign currency exchange differences at net book value
1.6
0.2
1.4
3.2
Net book value as at 30 June 2023
230.0
110.9
87.6
428.5
Cost
453.4
283.6
204.9
941.9
Accumulated depreciation and impairment
(223.4)
(172.7)
(117.3)
(513.4)
(i) Impairment recognised largely as a result of consolidating the Group’s property footprint.
Recognition and measurement
The right-of-use assets are initially measured at cost, which comprises:
The amount of the initial measurement of the lease liability
Any lease payments made at or before the commencement date, less any lease incentives and any initial direct
costs incurred by the lessee
An estimate of the costs to dismantle and remove the underlying asset or to restore the underlying asset.
Subsequently the right-of-use asset is measured at cost less any accumulated depreciation and impairment losses
and adjusted for certain remeasurements of the lease liability.
The right-of-use asset is depreciated over the shorter period of the lease term and the economic useful life of the
underlying asset. If a lease transfers ownership of the underlying asset or the costs of the right-of-use asset reflect that
the Group will exercise a purchase option, the asset will be depreciated from the commencement date to the end of the
useful life of the underlying asset. The depreciation starts at the commencement date of the lease.
Where the initially anticipated lease term is subsequently reassessed, any changes are reflected in a remeasurement
of the lease liability and a corresponding adjustment to the asset.
If the recoverable amount of a right-of-use asset is less than its carrying value, an impairment charge is recognised in
the profit or loss, and the carrying value of the asset is written-down to its recoverable amount. Should the recoverable
amount increase in future periods the carrying value may be adjusted to the lower of the recoverable value or the
amortised cost of the asset had it not been impaired.
Key estimate and judgement:
Useful lives (lease terms)
The estimation of the useful lives has been based on the assets’ lease terms. There are a number of judgements made
in determining the lease terms as noted in the Key estimates and judgements section of Note E3.
The expected useful life of the asset includes a judgement as to whether available extension changes will be exercised.
Changes to this assessment are reflected as a remeasurement, with a corresponding adjustment for the liability.
Recoverable value
In assessing whether a right-of-use asset is impaired, estimation is required to determine the recoverable value of the
asset. For corporate right-of-use assets, impairment is assessed against the recoverable amount of cash-generating
units to which they are allocated.
For surplus and vacated right-of-use assets an impairment test is performed for the individual right-of-use asset,
including consideration of estimated sub-lease income.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
118
119
C _ Operating assets and liabilities
C _ Operating assets and liabilities
C7. Intangible assets
2024
$’m
Note
Goodwill
Customer
contracts
and
relationships
Brand
names on
acquisition
Intellectual
property on
acquisition
Software
and system
development
Total
Balance as at 1 July 2023
1,762.8
150.3
55.0
1.4
210.8
2,180.3
Additions
–
–
–
–
23.6
23.6
Amortisation expense
–
(19.0)
(3.9)
(0.2)
(46.5)
(69.6)
Impairment charge(i)
B3
–
–
–
–
(13.2)
(13.2)
Disposal of businesses
F7
–
(0.4)
–
–
–
(0.4)
Net foreign currency exchange
differences at net book value
(0.5)
–
–
–
(0.1)
(0.6)
Net book value as at
30 June 2024
1,762.3
130.9
51.1
1.2
174.6
2,120.1
Cost
2,562.7
515.2
78.8
2.4
507.0
3,666.1
Accumulated amortisation
and impairment
(800.4)
(384.3)
(27.7)
(1.2)
(332.4)
(1,546.0)
2023
$’m
Goodwill
Customer
contracts
and
relationships
Brand
names on
acquisition
Intellectual
property on
acquisition
Software
and system
development
Total
Balance as at 1 July 2022
2,285.0
172.5
58.7
1.5
223.7
2,741.4
Additions
–
–
–
–
40.3
40.3
Amortisation expense
–
(22.2)
(3.9)
(0.1)
(26.8)
(53.0)
Impairment charge(ii)
(483.0)
–
–
–
(23.5)
(506.5)
Disposal of businesses
(41.3)
–
–
–
(2.8)
(44.1)
Net foreign currency exchange
differences at net book value
2.1
–
0.2
–
(0.1)
2.2
Net book value as at
30 June 2023
1,762.8
150.3
55.0
1.4
210.8
2,180.3
Cost
2,563.2
515.2
78.8
2.4
529.4
3,689.0
Accumulated amortisation
and impairment
(800.4)
(364.9)
(23.8)
(1.0)
(318.6)
(1,508.7)
(i) $13.2 million impairment of IT assets associated with discontinued IT development programs in the Transport and Unallocated segment.
(ii) $483.0 million impairment is as a result of assessment of the carrying value of the Group’s CGUs.
$23.5 million relates to IT assets that will no longer be utilised or provide future economic benefit as a result of business restructuring, divestments and transformation.
Recognition and measurement
Goodwill
Goodwill acquired in a business combination is measured at cost and subsequently measured at cost less any
impairment losses. The cost represents the excess of the cost of a business combination over the fair value of the
identifiable assets, liabilities and contingent liabilities acquired.
Customer contracts and relationships on acquisition
Customer contracts and relationships acquired as part of a business combination are recognised separately from
goodwill and are carried at fair value at date of acquisition less accumulated amortisation and any accumulated
impairment losses.
Brand names on acquisition
Brand names acquired as part of a business combination are recognised separately from goodwill and are carried
at fair value at date of acquisition less accumulated amortisation and any accumulated impairment losses.
Intellectual property on acquisition
Intellectual property acquired as part of a business combination is recognised separately from goodwill and is carried
at fair value at date of acquisition less accumulated amortisation and any accumulated impairment losses.
Intellectual property, software and system development
Intangible assets acquired by the Group, including intellectual property (purchased patents and trademarks) and
software are initially recognised at cost, and subsequently measured at cost less accumulated amortisation and any
impairment losses.
Development costs that are directly attributable to the design and testing of an identifiable internally generated
intangible asset controlled by the Group are recognised as an intangible asset where the following criteria are met:
It is technically feasible to complete the intangible asset so that it will be available for use
Management intends to complete the intangible asset and use or sell it
There is an ability to use or sell the intangible asset
It can be demonstrated how the internally generated intangible asset will generate probable future economic
benefits
Adequate technical, financial and other resources to complete the intangible asset are available, and
The expenditure attributable to the intangible asset during its development and testing can be reliably measured.
The costs capitalised include consulting and direct labour costs. Costs incurred in determining project feasibility are
expensed as incurred.
Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is
ready for use.
Software-as-a-Service (SaaS) arrangements
SaaS arrangements are service contracts providing the Group with the right to access the cloud provider’s application
software over the contract period. As such the Group does not receive a software intangible asset at the contract
commencement date.
For SaaS arrangements, the Group assesses if the contract will provide a resource that it can ‘control’ to determine
whether an intangible asset is present. If the Group cannot determine control of the software, the arrangement is
deemed a service contract and any implementation costs including costs to configure or customise the cloud provider’s
application software are recognised as operating expenses when incurred. SaaS development costs have been specified
as individually significant items. Refer Note B3.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
120
121
C _ Operating assets and liabilities
C _ Operating assets and liabilities
Amortisation
Intangible assets with finite useful lives are amortised on a straight-line basis over their useful lives. The estimated useful
lives are generally:
Item
Useful life
Customer contracts and relationships
1-20 years
Brand names
20 years
Intellectual property acquired
15-20 years
Software and system development(i)
1-15 years
Other intangible assets
20 years
(i) Certain software and system development asset useful lives have been revised during the period and accelerated amortisation recognised. Refer Note B3.
The estimated useful life and amortisation method are reviewed at the end of each annual reporting period.
Impairment of assets
The Group assesses at each reporting date, whether there are any indicators that assets may be impaired. If any
indicators exist, the Group estimates the recoverable amount of the asset.
Goodwill and intangible assets that have an indefinite useful life are tested annually for impairment, or more frequently
if events or changes in circumstances indicate that they might be impaired.
Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.
For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash inflows that are largely independent of the cash inflows from other assets or groups of assets (cash-
generating units or CGUs). Non-financial assets other than goodwill that suffered impairment are reviewed for possible
reversal of the impairment at each reporting date.
Goodwill impairment testing is discussed below.
In relation to the Group’s other assets, a number of impairment indicators were identified prior to the testing of CGUs.
These assets were, therefore, tested individually for impairment. The impairment charges recognised are described in
Note B3.
Allocation of goodwill to Groups of Cash-Generating units (CGUs)
Goodwill has been allocated for impairment testing purposes to Groups of CGUs that represent the lowest level within
the Group at which goodwill is monitored for internal management purposes.
No changes in the Group’s CGUs are required. The goodwill allocation to each of the Groups of CGUs is consistent with
prior year and presented below:
Carrying value of
consolidated goodwill
CGU
Segment
2024
$’m
2023
$’m
Transport Australia
Transport
327.1
327.0
Rail & Transit Systems
Transport
55.3
55.3
Utilities Australia
Utilities
350.8
350.8
Social Infrastructure & Citizen Services
Facilities
813.7
813.7
Industrial & Energy
Facilities
154.4
154.0
NZ Building
Transport
61.0
62.0
1,762.3
1,762.8
Key estimates and judgements: Intangible assets
Impairment of assets
Determination of potential impairment requires an estimation of the recoverable amount of each of the CGUs to which
the goodwill and intangible assets with indefinite useful lives are allocated. Key assumptions requiring judgement
include projected cash flows, discount rates, budgeted revenue growth rate, EBIT margin, and long-term growth rate.
Projected cash flows include assumptions on:
contract awards, extensions and renewals, including potentially significant individual contracts (refer to separate
key estimate and judgement below)
contracts assumed to continue to term with no exercise of termination for convenience clauses in contracts
inflation including wage inflation, where the Group’s exposure to inflationary pressures in labour and other costs
in its contracts is partially mitigated by contractual mechanisms and allowances for price movements
no change in government regulation, including in relation to carbon emissions.
Contract awards, extensions and renewals or continuation
Estimated cash flows include assumptions on:
new contract awards from projects being tendered or expected to be tendered in the future and assumptions on
future win rates of projects not specifically identified
contracts with existing customers are extended via exercise of options in existing contracts or negotiated extension
or renewal on reasonably consistent terms
contracts assumed to continue to term with clauses allowing customers to terminate for convenience assumed
not be exercised, noting customers may not be able to find alternative suppliers and the Group does not currently
expect any terminations.
The assumptions above may include significant individual contracts that if not won, extended or renewed, or if
terminated early, it is reasonably possible that this may result in an adjustment to the carrying amount of CGUs.
Social Infrastructure & Citizen Services has made assumptions in relation to new contract awards and contract
extensions where it is reasonably possible that in the event Social Infrastructure & Citizen Services is not successful
that adjustment to the respective CGUs’ carrying value could be required.
Estimation of useful life
The estimation of the economic useful life of software is initially determined based on historical experience. The useful
lives of intangible assets recognised on business combinations are independently determined based on detailed
reviews of similar assets and underlying factors. These useful lives are regularly reassessed for indicators of any change
to the initial assessments. If the economic useful lives are determined to have changed, the amortisation of the assets
is adjusted to reflect the new expected useful life, impacting the future amortisation recognised.
Impairment indicators
Management noted that the impairment indicators identified in 2023 have largely dissipated with marginal decrease in
discount rates (WACC) and the Group’s net asset value not exceeding market capitalisation at any time during the year,
and below budget performance for some CGUs.
Recoverable amount testing
The recoverable amount is defined as the higher of a cash-generating unit’s fair value less costs of disposal (FVLCD) and
its value in use (VIU).
The recoverable amounts of all of the CGUs have been assessed using a VIU methodology in 2024. In 2023, the
recoverable amount of the Transport & Infrastructure, Rail & Transit Systems, Social Infrastructure & Citizen Services,
Industrial & Energy and New Zealand Building CGUs were determined on a VIU basis.
The recoverable amount of Utilities was determined using FVLCD in 2023 as this provided the higher recoverable amount.
For more information on 2023 goodwill impairment testing, refer to the 2023 Annual Report.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
122
123
C _ Operating assets and liabilities
C _ Operating assets and liabilities
Value in use calculation
In assessing VIU, the estimated future cash flows are discounted to their present value using a discount rate that uses
current market assessments of the time value of money and the risks specific to the CGU.
Cash flow projections are determined utilising budgeted Earnings Before Interest and Tax (EBIT) less capital maintenance
spending, corporate cost allocation, tax payments and working capital changes to provide a ‘free cash flow’ estimate.
This calculated ‘free cash flow’ is then discounted to its present value using a post-tax discount rate with consideration
given to the estimated Weighted Average Cost of Capital for the Group, adjusted for busines-specific risks of the CGU.
In the current year, the Group has determined the recoverable amount using cash flow projections based on the FY25
budget and business plan for FY26 and FY27 as approved by the Board. For FY27 onwards, the Group assumes a long-
term growth rate of 2.5% that does not exceed the long-term growth rates of the industry (2023: FY26 onwards 2.5%).
Results of impairment testing
For all CGUs, the recoverable values are greater than the carrying value of their operating assets. No impairment has
been identified.
For the Social Infrastructure & Citizen Services CGU, due to the size of the headroom and impairment in the prior year,
further review has been undertaken as discussed below. Based on VIU testing and additional sensitivity analyses
performed, the CGU’s carrying value has been assessed as not impaired.
Social Infrastructure & Citizen Services CGU
Consistent with the prior year, the forecast cash flows for the Social Infrastructure & Citizen Services CGU are being
impacted by uncertainties associated with the renewal profile of existing contracts and unsecured contract pipeline.
Last year’s changes in Defence spending priorities are impacting our level of programmatic work in the short to
medium term. In light of this information, strategic divestments associated with low margin businesses were executed,
significant reduction in fixed overheads was achieved with further reductions expected and continued sustainable
profit improvement initiatives were undertaken in 2024. These recurring impacts have improved the forecast
performance in the cash flow modelling and increased the CGU’s forecast free cash flow. Further strategic initiatives and
divestments, including assets held for sale at 30 June 2024 (refer to Note F8), are underway and factored into the forecasts
where committed.
Recoverable amount testing – Key assumptions
The table below summarises the key assumptions utilised in the VIU discounted cash flow models.
2024
2023
Revenue
Growth(i)
EBIT
margin(ii)
Long-term
growth rate
Discount
rate
(post-tax)(iv)
Revenue
Growth(iii)
EBIT
margin(ii)
Long-term
growth rate
Discount
rate
(post-tax)
Transport &
Infrastructure
1.8%
8.1%
2.50%
8.9%
(0.6%)
8.0%
2.50%
9.0%
Rail & Transit
Systems
(3.2%)
8.0%
2.50%
8.7%
1.8%
5.6%
2.50%
9.1%
Utilities
3.0%
6.7%
2.50%
9.0%
2.9%
4.7%
2.50%
9.5%
Social
Infrastructure &
Citizen Services
1.1%
5.1%
2.50%
8.7%
2.1%
5.1%
2.50%
9.3%
Industrial & Energy
5.2%
7.0%
2.50%
9.0%
6.3%
6.8%
2.50%
9.3%
NZ Building
(0.7%)
2.9%
2.50%
9.1%
(2.7%)
2.1%
2.50%
9.7%
(i) Budgeted revenue for 2024 is expressed as the compound annual growth rate (CAGR) from FY24 to terminal year forecast based on the CGU’s business plan.
(ii) EBIT margin represents the terminal year forecast margin based on the CGU’s business plan.
(iii) Budgeted revenue for 2023 is expressed as the compound annual growth rates (CAGR) from FY23 to terminal year forecast based on the CGU’s business plan.
(iv) Pre-tax discount rates are 12.2% (Transport & Infrastructure, Industrial & Energy and NZ Building), 11.6% (Rail & Transit Systems), 12.3% (Utilities) and 11.8% (Social Infrastructure & Citizen
Services).
(i) Projected cash flows – including budgeted revenue and EBIT margin
Value in use calculations
Cash flow forecasts
The cash flow projections through to the terminal year are based on the Group’s past experience and assessment
of economic and regulatory factors affecting the business in which the Downer businesses operate.
In preparing the impairment models in 2024, the Group considered the experience in the last 12-months results in
developing the cash flow forecasts.
Specifically, for each CGU, the Group considered the following:
Transport & Infrastructure performance has been impacted by challenging market conditions with New Zealand
government change and reprioritisation of infrastructure expenditure and project pipeline, reduced Transport agency
expenditure in Australia that were partially offset by the one-off New Zealand storm recovery activity in FY24. The
increase in forecast revenue is driven by an ongoing strong pipeline of large infrastructure projects, a recovery in the
historically low levels of State investment in road maintenance in Australia that are expected to be partially offset by
normalisation in New Zealand as storm recovery works come to an end. EBIT margin growth is expected to increase
as the focus on margin improvement continues in the medium term and cost optimisation initiatives result in greater
productivity, rework reduction and minimisation of discretionary spend.
Rail & Transit Systems outlook is expected to benefit from a range of opportunities resulting in a change in the
portfolio mix with increasing contribution from QTMP, reduction in relatively lower margin Passenger Refurbishment
works and relatively higher margin Emerging Market projects.
Utilities cash flow forecast outlook remains relatively consistent as the business turn-around from loss making
to profitable is being executed with growth expected in major transmission projects and broader infrastructure
investment in renewables as well as the water services portfolio. The margin is expected to improve as a result of
overhead cost reduction initiatives and project margin recoveries in the pipeline as underperforming/loss making
contracts are completed.
Social Infrastructure & Citizen Services has performed well and in line with expectations. The revenue growth rate
has been impacted by the executed and planned divestments of underperforming businesses. The EBIT margin is
consistent with prior year reflecting the focus of margin improvements within the CGU that commenced in 2024 with
the aforementioned divestments, cost reductions and profit improvement initiatives. Assumptions have been made
about renewal of significant contracts at expected market pricing.
Industrial & Energy sector is well placed to capitalise on the opportunities the energy transition will bring, such as
the decarbonisation of energy generators as well as from opportunities linked to long-term relationships with key
customers and further customer diversification.
New Zealand Building cash flows forecast reflects the expected impact of right-sizing of the business and coming off
a period of high revenues in the medium term with partial revenue recovery at the tail end of the forecast. EBIT margin
is expected to increase marginally as the immediate focus on risk guardrails and margin improvement comes to
fruition.
(ii) Long-term growth rates
The long-term annual growth rates, applicable for the periods after which detailed forecasts have been prepared, are
based on the long-term expected GDP rates for the country of operation, adjusted as necessary to reflect industry-
specific considerations. The Group assumes a long-term growth rate of 2.50% (FY23: 2.50%) to allow for organic growth
on the existing asset base.
(iii) Discount rates
Discount rates reflect the Group’s estimate of the time value of money and risks associated with each CGU. In
determining the appropriate discount rate for each CGU, consideration has been given to the estimated weighted
average cost of capital (WACC) for the Group adjusted for country and business risks specific to that CGU. The post-tax
discount rate is applied to post-tax cash flows that include an allowance for tax based on the respective jurisdiction’s tax
rate. This method is used to approximate the requirement of the accounting standards to apply a pre-tax discount rate
to pre-tax cash flows.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
124
125
C _ Operating assets and liabilities
C _ Operating assets and liabilities
Compared to 2023, WACCs have decreased between 10 to 60 basis points for the Australian CGUs and 60 basis points
for the New Zealand group of CGUs. This resulted in 2024 post-tax discount rates to be between 8.7% and 9.1% (June 2023:
between 9.0% and 9.7%). The decrease is due to assessed decrease in equity market risk premium being partially offset
by increase in risk free rate and reduction in assessed observable Beta.
(iv) Budgeted capital expenditure
The expected cash flows for capital expenditure are based on planned future purchases and current asset profile.
The amounts included in the terminal year calculation are for maintenance capital and leases used for existing plant
and replacement of plant as it is retired from service. The resulting expenditure has been compared against the annual
depreciation charge to confirm that it is reasonable.
(v) Budgeted working capital
Working capital has been maintained at a level required to support the business activities of each CGU, considering
changes in the business cycle. It has been assumed to be in line with historic trends given the level of operating activity.
(vi) Corporate costs
Corporate costs, as well as corporate assets, have been applied across each CGU.
Impact of climate change
The Group's approach to Environmental, Social and Governance (ESG) risks including those related to climate change
is discussed in Downer’s Climate Statement contained in the 2024 Sustainability Report.
For impairment assessment the Group has assessed the following:
Physical risks to Downer’s non-current assets, including key sites and locations, arise from events such as extreme
heat, and increased frequency and severity of bushfires and flooding. The Group estimates physical climate change
impact, principally due to flooding, to be immaterial to the Group’s future cash flows. Whilst prolonged periods of wet
weather can impact short-term prospects, the assessment indicates Downer is resilient to physical risks due to the
Group operating across multiple industries and diverse locations, insurance coverage and contract pass through
mechanisms.
Transition risks are primarily associated with the Group's current emissions profile. The principal sources of Scope 1 and
2 carbon emissions are liquid fuels (including subcontractor usage) and asphalt plant burners (79%), gas for asphalt
plants and ancillary use (10%) and electricity (11%). Transition risks include the impact of carbon pricing legislation,
direct price increases of equipment and fuel usage.
Vehicle emissions stem from both internal operations and logistics suppliers. The Group’s strategy to reduce
these emissions focuses on the potential use of lower emission fuels and a phased transition to alternative fuel
(lower emissions) vehicles. This transition will occur gradually, with replacements aligned with lease renewals and
procurement for new contracts. Light vehicles are expected to transition sooner than heavy vehicles, contingent on
the availability of alternative fuels or recharging infrastructure, especially in remote areas, and advances in heavy
vehicle technology. The Group assesses that any additional cost as a result of a requirement by customers to specify
use of low or no emission vehicles in advance of wider adoption would be recoverable from the customer. There is no
material impact on current carrying value of existing vehicle fleet.
Emissions from fuel, gas and electricity are primarily generated by asphalt production. The Group continues to
introduce solar panels and explore the use of alternative fuels in asphalt production. However, the transition to
alternative fuels will depend on technological advancements and availability at scale. Currently, asphalt plants are
not covered by the Australian Safeguard Mechanism, meaning they are not required to reduce emissions below
a decreasing baseline, which would otherwise impose additional direct costs or necessitate purchasing carbon
credits. The Group anticipates that any customer-driven requirements to offset and/or reduce emissions would be
recoverable from the customer. Furthermore, the Group is confident that any customer demand for increased use of
Reclaimed Asphalt Pavement (RAP) in production can be met, as the majority of existing plants are equipped for RAP
integration. There is no material impact on the current carrying value of asphalt plants.
The Group has identified that capturing opportunities relating to the energy transition and decarbonisation is a core
component of its strategic plan.
Sensitivities
For all CGUs, the base line modelling was subject to sensitivity analyses around discount rate, long-term growth rate and
cash flow assumptions as discussed below.
Should the scale of any CGU decline as a result of change in a key assumption, it is likely that the Group would review the
corporate and overhead structures to ensure they are appropriate for the scale of business and opportunities available.
For all CGUs, except Social Infrastructure & Citizen Services, management believe that any reasonable change in the key
assumptions would not cause the carrying value of the CGUs to exceed their recoverable amount.
For Social Infrastructure & Citizen Services, following the impairment in the prior year it is reasonably possible that a
change in the key assumptions would cause the CGU’s carrying amount to exceed its recoverable amount. The forecast
cash flows include significant existing contracts that are subject to tender processes in the short to medium term.
These contract renewal risks and/or potential risk of scope modifications could result in an impairment.
The recoverable amount exceeds its carrying amount by $29.3 million. A change in the key assumptions listed above to
the following amounts would result in the recoverable amount equalling the carrying value:
Long term growth rate change to 2.27%.
Discount rate change to 8.81%.
C8. Other provisions
2024
$’m
Note
Decommissioning
and restoration
Onerous
contracts
Warranties
and other
Total
Balance as at 1 July 2023
23.2
15.7
54.7
93.6
Additional provisions recognised
14.2
43.4
89.2
146.8
Unused provisions reversed
(4.6)
–
(3.4)
(8.0)
Utilisation of provisions
(2.8)
(14.4)
(26.0)
(43.2)
Disposal of businesses
F7
–
–
(0.2)
(0.2)
Net foreign currency exchange differences
–
–
(0.2)
(0.2)
Balance as at 30 June 2024
30.0
44.7
114.1
188.8
Included in the financial statements as:
Current
8.9
43.9
106.1
158.9
Non-current
21.1
0.8
8.0
29.9
Recognition and measurement
Provisions
Provisions are recognised when:
The Group has a present obligation as a result of a past event,
It is probable that resources will be expended to settle the obligation, and
The amount of the provision can be measured reliably.
(i) Decommissioning and restoration
Provisions for decommissioning and restoration are made for close down, restoration and environmental rehabilitation
costs, including the cost of dismantling and demolition of infrastructure, removal of residual materials and remediation
of disturbed areas.
Future rectification costs are reviewed annually and any changes are reflected in the present value of the rectification
provision at the end of the reporting period.
The provision is discounted using a pre-tax rate that reflects current market assessments of the time value of money
and the risks specific to the liability.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
126
127
C _ Operating assets and liabilities
C _ Operating assets and liabilities
(ii) Onerous contracts
Provisions include amounts recognised in relation to onerous customer contracts.
The onerous contract provision is discounted using a pre-tax rate that reflects current market assessments of the time
value of money and the risks specific to the liability. The onerous contract provision is measured using the full cost
method, based on incremental costs and an allocation of other direct costs.
(iii) Warranties and other
Provisions primarily includes amounts recognised for warranties and divestment-related provisions. Warranty provisions
are made for the estimated liability on all products still under warranty and provisions for defect liabilities at balance
sheet date.
Key estimates and judgements: Other provisions
Decommissioning and restoration
Judgement is required in determining the expected expenditure required to settle rectification obligations at the
reporting date, based on current legal requirements, technology and estimates of inflation.
Onerous contracts
These provisions have been calculated based on management’s best estimate of net cash outflows required to fulfil
the contracts. The status of these contracts and the adequacy of provisions are assessed at each reporting date.
Any change in the assessment of provisions impacts the results of the business.
Warranties and other
The provision is estimated having regard to previous claims experience. For further explanation of judgements on
warranty provisions refer to Note B2.
C9. Contingent liabilities
Bonding
Note
2024
$’m
2023
$’m
The Group has bid bonds and performance bonds issued in respect of contract
performance in the normal course of business for controlled entities
E2
1,318.4
1,517.2
In addition, the Group is called upon to give guarantees and indemnities to counterparties, relating to the performance
of contractual and financial obligations (including for controlled entities and related parties). Other than as noted, these
guarantees and indemnities are indeterminable in amount.
Other contingent liabilities
(i)
The Group is subject to design liability in relation to completed design and construction projects. It is not possible to
reliably estimate these claims and the Directors are of the opinion that there is adequate insurance to cover this area
and accordingly, no amounts are recognised in the financial statements.
(ii) The Group is subject to ongoing fitness for purpose and defect liability obligations in relation to contracts. It is not
possible to reliably estimate these obligations.
(iii) The Group is subject to product liability claims. Provision is made for the potential costs of carrying out rectification
works based on known claims and previous claims history.
(iv) Controlled entities have entered into various joint arrangements under which the controlled entity is jointly and
severally liable for the obligations of the relevant joint arrangements.
(v) The Group carries the normal contractors’ and consultants’ liability in relation to services, supply and construction
contracts (for example, liability relating to professional advice, design, completion, workmanship and damage), as
well as liability for personal injury/property damage during the course of a project. Potential liability may arise from
claims, disputes and/or litigation/arbitration by or against Group companies and/or joint venture arrangements
in which the Group has an interest. The Group is currently managing a number of claims and dispute processes
in relation to services, supply and design and construction contracts as well as in relation to personal injury and
property damage claims arising from project delivery.
(vi) In the ordinary course of business, contingent liabilities exist in respect of claims and potential claims against entities
in the consolidated entity. The consolidated entity does not consider that the outcomes of any such claims known to
exist at the date of this report, either individually or in aggregate, are likely to have a material effect on its operations
or financial position.
(vii) In December 2022, Downer received correspondence notifying an alleged stray current defect in the depot
constructed by Downer for the High Capacity Metro Trains Project and has received subsequent correspondence
alleging that Downer is responsible for the costs of rectification. The Directors are of the opinion that disclosure of any
further information relating to this matter would be prejudicial to the interests of the Group.
(viii) In early 2023, four competing shareholder class actions were filed against Downer following announcements it
published with ASX on 8 December 2022 and 27 February 2023. Each class action alleged a breach of Downer’s
continuous disclosure obligations and that it engaged in misleading or deceptive conduct by making and/or failing
to correct or qualify various statements in connection with a maintenance contract in its Australian Utilities business
and Downer’s financial performance.
On 1 March 2024, Downer filed its defence to the plaintiffs’ claim (which included a proportionate liability defence
identifying Downer’s former auditor as a concurrent wrongdoer) and a third party claim against the former auditor.
On 9 August 2024, Downer filed amendments to those pleadings which included additional claims against its former
auditor, which is yet to file a defence.
On 8 May, the Court of Appeal heard Quinn Emanuel’s application to appeal the decision awarding carriage of the
class action to the consolidated proceeding led by Maurice Blackburn. The Court has reserved judgement.
Downer intends to vigorously defend whichever class action ultimately proceeds.
Key judgements: Contingent liabilities
Obligation
Judgement is required in determining if a possible obligation or present obligation arises from past events.
Probability of outflow
Judgement is required in determining if the probability of outflow is between remote, where no disclosure is required,
and probable, where provision recognition is required.
Reliability of measurement
Judgement is required in determining if an obligation cannot be measured with sufficient reliability for disclosure
as a contingent liability.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
128
129
D _ Employee benefits
D _ Employee benefits
D_Employee benefits
This section provides a breakdown of the various programs Downer uses to reward and recognise employees and
key executives, including Key Management Personnel (KMP). Downer believes that these programs reinforce the
value of ownership and incentives and drive performance both individually and collectively to deliver better returns
to shareholders.
D1. Employee benefits
D2. Defined benefit plan
D3. Key management personnel compensation
D4. Employee discount share plan
D1. Employee benefits
2024
$’m
2023
$’m
Employee benefits expense:
– Defined contribution plans costs
194.6
207.3
– Share-based employee benefits expense/(income)(i)
3.2
(0.8)
– Employee benefits
3,204.7
3,421.1
– Redundancy costs
26.9
10.9
– Defined benefit plan costs
1.4
1.5
Total employee benefits expense
3,430.8
3,640.0
Employee benefits provision:
– Current
274.1
268.2
– Non-current
24.3
22.7
Total employee benefits provision
298.4
290.9
(i) Share-based payments net benefit for prior year includes the reversal for the 2021 and 2022 Long-Term Incentive Plan performance rights due to forfeiture.
Recognition and measurement
The employee benefits liability represents accrued wages and salaries, leave entitlements and other incentives
recognised in respect of employees’ services and redundancy costs up to the end of the reporting period. These liabilities
are measured at the amounts expected to be paid when they are settled and include related on-costs, such as workers
compensation insurance, superannuation and payroll tax.
Key estimates and judgements: Employee benefits obligations
Annual leave and long service leave
Long-term employee benefits are measured at the present value of estimated future payments for the services
provided by employees up to the end of the reporting period. This calculation requires judgement in determining
the following key assumptions:
Future increase in wages and salary rates
Future on-cost rates
Expected settlement dates based on staff turnover history.
The liability is discounted using the Australian corporate bond rates which most closely match the terms to maturity
of the entitlement.
For New Zealand employees the liability is discounted using long-term government bond rates given there is no deep
corporate bond market.
D2. Defined benefit plan
The Group participates in the Equipsuper Defined Benefit Scheme which provides participants (<100 employees) with
a lump sum benefit on retirement, death, disablement or withdrawal. The scheme operates under the Superannuation
Industry legislation, and is governed by The Scheme Trustees, in compliance with Australian Prudential Regulation
Authority framework. The scheme is closed to new employees.
As at 30 June 2024, the fair value of plan assets (comprising Investment Funds) was $65.4 million. The plan obligation
balance was $53.6 million. The net asset of $11.8 million (2023: $8.4 million) is included in Non-current prepayments and
other assets. These balances were subject to an independent actuarial review as at 30 June 2024.
The main movements during the year were $1.4 million of services costs expensed to the profit and loss, $0.5 million of net
interest, $2.1 million of actuarial gains on the obligation recorded were recorded in equity, and the Group contributions of
$2.3 million (all pre-tax amounts).
Key actuarial assumptions used in determining the values were a discount rate of 5.4% and an expected salary increase
rate of 3.0%. Sensitivity analysis shows a 0.5 percentage point reduction in the discount rate would increase the obligation
by 3.3%, and a 0.5 percentage point increase in the expected salary increase rate would increase the obligation by 2.8%.
D3. Key management personnel compensation
2024
$'000
2023
$'000
Short-term employee benefits
4,504
5,468
Post-employment benefits
183
213
Other long-term benefits
28
192
Share-based payments(i)
994
(724)
Total
5,709
5,149
(i) Share-based payments net benefit for the prior year includes the reversal for the 2021 and 2022 Long-Term Incentive Plan performance rights due to forfeiture.
Recognition and measurement
Equity-settled transactions
Equity-settled share-based transactions are measured at fair value at the date of grant. The cost of these transactions is
recognised in profit or loss and credited to equity over the vesting period. At each balance sheet date, the Group revises
its estimates of the number of rights that are expected to vest for service and non-market performance conditions.
The expense recognised each year takes into account the most recent estimate.
The fair value at grant date is independently determined using an option pricing model and takes into account any
market-related performance conditions. Non-market vesting conditions are not considered when determining value;
however they are included in assumptions about the number of rights that are expected to vest.
Cash-settled transactions
The amount payable to employees in respect of cash-settled share-based payments is recognised as an expense, with
a corresponding increase in liabilities, over the period during which the employees become unconditionally entitled to
the payment. The liability is remeasured at each reporting date and at settlement date based on the fair value, with any
changes in the liability being recognised in profit or loss.
D4. Employee Discount Share Plan
No shares were issued under the Employee Discount Share Plan during the years ended 30 June 2024 and 30 June 2023.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
130
131
E _ Capital structure and financing
E _ Capital structure and financing
E_Capital structure and financing
This section provides information relating to the Group’s capital structure and its exposure to financial risks,
how they affect the Group’s financial position and performance and how the risks are managed.
The capital structure of the Group consists of debt and equity. The Directors determine the appropriate capital
structure of Downer, specifically how much is raised from shareholders (equity) and how much is borrowed from
financial institutions (debt) in order to finance the current and future activities of the Group. The Directors review the
Group’s capital structure and dividend policy regularly and do so in the context of the Group’s ability to continue as
a going concern, to invest in opportunities that grow the business and enhance shareholder value.
E1. Borrowings
E2. Financing facilities
E3. Lease liabilities
E4. Commitments
E5. Issued capital and non-controlling interest
E6. Reserves
E7. Dividends
E1. Borrowings
2024
$’m
2023
$’m
Non-current
Unsecured:
– Bank loans
522.0
812.0
– USD private placement notes
151.0
150.8
– AUD private placement notes
30.0
30.0
– AUD medium term notes
504.2
506.4
– JPY medium term notes
93.8
104.3
– Deferred finance charges
(7.0)
(7.1)
Total non-current borrowings
1,294.0
1,596.4
Total borrowings
1,294.0
1,596.4
Fair value of total borrowings(i)
1,300.3
1,603.2
(i) Excludes lease liabilities.
Recognition and measurement
Borrowings
Borrowings are initially recognised at fair value, net of transaction costs. They are subsequently measured at amortised
cost using the effective interest rate method.
Fair value
The cash flows under the Group’s debt instruments are discounted using current market base interest rates and adjusted
for current market credit default swap spreads for companies with a BBB credit rating.
E2. Financing facilities
At reporting date, the Group had the following facilities that were unutilised:
2024
$’m
2023
$’m
Syndicated loan facilities
1,100.0
830.0
Bilateral loan facilities
165.0
145.0
Total unutilised loan facilities
1,265.0
975.0
Syndicated bank guarantee facilities
104.6
75.1
Bilateral bank guarantee and insurance bonding facilities
681.0
652.2
Total unutilised bonding facilities
785.6
727.3
Summary of borrowing arrangements
The Group’s borrowing arrangements are as follows:
Bank loan facilities
Bilateral loan facilities:
The Group has a total of $387.0 million (2023: $387.0 million) in bilateral loan facilities which are unsecured, committed
facilities.
Syndicated loan facilities:
The Group has $1,400.0 million (2023: $1,400.0 million) of syndicated bank loan facilities which are unsecured, committed
facilities.
USD private placement notes
USD unsecured private placement notes are on issue for a total amount of US$100.0 million with a maturity date of
July 2025. The USD denominated principal and interest amounts have been fully hedged against the Australian dollar
through cross-currency interest rate swaps.
AUD private placement notes
AUD unsecured private placement notes are on issue for a total amount of $30.0 million with a maturity date of July 2025.
Medium Term Notes (MTNs)
The Group has the following unsecured MTNs on issue:
$500.0 million maturing April 2026
JPY 10.0 billion maturing May 2033
The carrying value of the AUD MTNs maturing April 2026 includes a premium of $4.2 million over the face value owing to
the differential between the coupon rate for that instrument and the prevailing market interest rate at the date of issue.
The JPY denominated principal and interest amounts have been fully hedged against the Australian dollar through
a cross-currency interest rate swap.
The above loan facilities and note issuances are supported by guarantees from certain Group subsidiaries.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
132
133
E _ Capital structure and financing
E _ Capital structure and financing
The maturity profile of the Group’s borrowing arrangements by financial year is represented in the below table by
facility limit:
Maturing in the period
$’m
Bilateral
Loan
Facilities
Syndicated
Loan
Facilities
USD Private
Placement
Notes
AUD Private
Placement
Notes
Medium
Term Notes
Total
1 July 2025 to 30 June 2026
192.0
–
151.0
30.0
500.0
873.0
1 July 2026 to 30 June 2027
195.0
600.0
–
–
–
795.0
1 July 2027 to 30 June 2028
–
500.0
–
–
–
500.0
1 July 2028 to 30 June 2029
–
300.0
–
–
–
300.0
1 July 2032 to 30 June 2033
–
–
–
–
93.8
93.8
Total
387.0
1,400.0
151.0
30.0
593.8
2,561.8
Covenants on financing facilities
Downer Group’s financing facilities contain undertakings to comply with financial covenants so that Group guarantors of
these facilities collectively meet certain minimum threshold amounts of Group EBITA and Group Total Tangible Assets.
The main financial covenants which the Group is subject to are Net Worth, Interest Service Coverage and Leverage.
Financial covenants testing is undertaken monthly and reported at the Downer Board meetings. Reporting of financial
covenants to financiers occurs semi-annually for the rolling 12-month periods to 30 June and 31 December. Downer Group
was in compliance with all its financial covenants as at 30 June 2024.
Bank guarantees and insurance bonds
The Group has $2,104.0 million (2023: $2,244.5 million) of bank guarantee and insurance bond facilities to support its
contracting activities. $1,224.2 million (2023: $1,341.8 million) of these facilities are provided to the Group on a committed
basis and $879.8 million (2023: $902.7 million) on an uncommitted basis.
The Group’s facilities are provided by a number of banks and insurance companies on an unsecured and revolving basis.
$1,318.4 million (2023: $1,517.2 million) (refer to Note C9) of these facilities were utilised as at 30 June 2024 with $785.6 million
(2023: $727.3 million) unutilised. These facilities have varying maturity dates that occur between financial years 2025, 2026,
2027 and 2028.
The underlying risk being assumed by the relevant financier under all bank guarantees and insurance bonds is corporate
credit risk rather than project-specific risk.
The Group has flexibility in respect of certain committed facility amounts (shown as part of the unutilised bilateral loan
facilities) which can, at the election of the Group, be utilised to provide additional bank guarantee capacity.
Refinancing requirements
The Group will negotiate with existing and, where required, new financiers to extend the maturity date or refinance
facilities maturing within the next 12 months. The Group’s financial metrics and credit rating as well as conditions in
financial markets and other factors may influence the outcome of these negotiations. As at 30 June 2024, the Group
has no debt facilities maturing within the 12 months to 30 June 2025.
Credit ratings
In May 2024, the outlook on the Group’s external credit rating was revised by Fitch Ratings from BBB (Outlook Negative) to
BBB (Outlook Stable) reflecting an expectation of improved earnings margins, strengthened balance sheet and leverage
metrics, and resolution of outstanding governance matters. The stabilisation of our investment grade credit rating is
positive for our customers and suppliers when they contract with the Group. Furthermore, banks and other lending
institutions will have more confidence in our stabilised credit risk profile which positively impacts their assessment of
pricing, tenor and facility limits on financing facilities.
E3. Lease liabilities
2024
$’m
2023
$’m
Contractual undiscounted cash flows
– Within one year
149.3
156.7
– Between one and five years
305.6
309.3
– Greater than five years
143.4
156.4
Total undiscounted lease liabilities
598.3
622.4
– Current
126.9
135.2
– Non-current
385.0
402.0
Total lease liabilities
511.9
537.2
Recognition and measurement
Lease liabilities
The lease liability is initially measured at the present value of future lease payments that are not paid at the
commencement date, discounted using the interest rate implicit in the lease or if this rate cannot be readily determined
the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.
Lease payments included in the measurement of the lease liability comprise:
Fixed payments (including in-substance fixed payments), less any lease incentives receivable
Variable lease payments that depend on an index or a rate
The exercise price of a purchase option if the Group is reasonably certain to exercise that option
The amount expected to be payable under a residual value guarantee
Payments of penalties for termination of the lease, if the lease term reflects the lessee exercising an option to
terminate the lease.
Variable lease payments not included in the initial measurement of the lease liability are recognised directly in profit or loss.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability
(using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset)
whenever:
The lease term has changed or there is a significant event or change in circumstances resulting in a change in the
assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised
lease payments using a revised discount rate
The lease payments change due to changes in an index or rate or a change in the amount expected to be payable
under a residual value guarantee
A lease contract is modified, and the lease modification is not accounted for as a separate lease, in which case the
lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments
using a revised discount rate at the effective date of the modification.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
134
135
E _ Capital structure and financing
E _ Capital structure and financing
The expense charged to profit or loss for low value and short-term leases (excluded from lease liabilities and right-of-use
assets), and variable lease expenses is outlined below:
2024
$’m
2023
$’m
Lease expenses
Land and buildings
– Short-term
3.0
3.2
Plant and equipment
– Low value
4.3
5.2
– Short-term
29.8
18.6
– Variable
12.1
15.9
Total lease expenses
49.2
42.9
Key estimate and judgement: Lease liabilities
Extension option
In determining the lease term, the Group considers all facts and circumstances that create an economic incentive
to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination
options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).
Incremental borrowing rate
In determining the present value of the future lease payments, the Group discounts the lease payments using an
incremental borrowing rate (IBR). The IBR reflects the financing characteristics and duration of the underlying lease.
Once a discount rate has been set for a leased asset (or portfolio of assets with similar characteristics), this rate will
remain unchanged for the term of that lease. When a lease modification occurs, and it is not accounted for as a
separate lease, a new IBR will be assigned to reflect the new characteristics of the lease.
E4. Commitments
2024
$’m
2023
$’m
Capital expenditure commitments(i)
Plant and equipment and other
– Within one year
33.8
30.1
– Between one and five years
0.3
3.7
– Greater than five years
0.2
–
Total
34.3
33.8
Catering rights
Catering rights relates to exclusive secured catering rights arrangements with customers.
– Within one year
1.6
1.7
– Between one and five years
4.1
6.9
Total
5.7
8.6
(i) Includes commitments for joint ventures. Refer also to Note F1(a).
E5. Issued capital and non-controlling interest
2024
2023
No.
$’m
No.
$’m
Ordinary shares
671,573,679
2,471.1
671,573,679
2,471.1
Unvested executive incentive shares
1,173,846
(7.2)
1,193,978
(7.3)
Total
2,463.9
2,463.8
(a) Fully paid ordinary share capital
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
2024
2023
m’s
$’m
m’s
$’m
Fully paid ordinary share capital
Balance at the beginning of the financial year
671.6
2,471.1
675.4
2,488.9
Group on-market share buy-back
–
–
(3.8)
(17.8)
Balance at the end of the financial year
671.6
2,471.1
671.6
2,471.1
(b) Unvested executive incentive shares
2024
2023
m’s
$’m
m’s
$’m
Unvested executive incentive shares
Balance at the beginning of the financial year
1.19
(7.3)
1.19
(7.3)
Vested executive incentive share transactions(i)
(0.02)
0.1
–
–
Balance at the end of the financial year
1.17
(7.2)
1.19
(7.3)
(i) June 2024 figures relate to the second deferred component of the 2021 STI award of 20,132 vested shares for a value of $101,578.
Unvested executive incentive shares are stock market purchases and are held by the Executive Employee Share Plan
Trust under the Long-Term Incentive (LTI) plan. From the 2011 LTI plan onwards, no dividends will be distributed on shares
held in trust during the performance measurement and service periods. Accumulated dividends will be paid out to
executives after all vesting conditions have been met. Otherwise, excess net dividends are retained in the trust to be
used by the Company to acquire additional shares on the market for employee equity plans.
(c) Non-controlling interest – Redeemable Optionally Adjustable Distributing Securities (ROADS)
The following table summarises the information relating to each of the Group’s subsidiaries that has material
non‑controlling interest (NCI), before any intra-Group eliminations.
Revised(i)
2024
$’m
2023
$’m
200,000,000 ROADS (2023: 200,000,000)
(178.6)
(178.6)
Total
(178.6)
(178.6)
(i) Comparative information has been revised to reflect the changes in presentation detailed in Note A.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
136
137
E _ Capital structure and financing
E _ Capital structure and financing
The non-controlling interest relates to the issue of 200,000,000 fully paid Redeemable Optionally Adjustable Distributing
Securities (ROADS) with a nominal value of NZ$1 each in Works Finance (NZ) Limited. ROADS are classified as equity as
they bear discretionary dividends, are only redeemable into shares of the Company at the option of Works Finance (NZ)
Limited, holders cannot request redemption, they do not contain any contractual obligations to deliver cash or financial
assets and do not require settlement in a variable number of equity instruments of Works Finance (NZ) Limited.
In accordance with the terms of the ROADS preference shares, the dividend rate for the one year commencing
15 June 2024 is 9.43% per annum (2023: 9.81% per annum) which is equivalent to the one year swap rate on 17 June 2024
of 5.38% per annum plus the step-up margin of 4.05% per annum. ROADS distribution net of imputation credit of 28% is
6.79% (2023: 7.06%).
(d) Share options and performance rights
Executives participate in a LTI plan. This is an equity-based plan that provides for a reward that varies with Company
performance over three-year measures of performance. On 4 July 2024 2,111,832 performance rights (2023: 2,711,709)
in relation to unissued shares were granted to senior executives of the Group under the LTI plan. There are three
performance conditions applicable to the 2022, 2023 and 2024 LTI plan years.
Total shareholder return (TSR) – this condition is based on the Company’s TSR performance relative to the TSR of
companies comprising the ASX 100 index, excluding financial services companies, at the start of the performance
period, measured over the three years to exercise date. The performance rights will vest pro-rata between the median
and 75th percentile. That is, 30% of the tranche vest at the 50th percentile, 32.8% at the 51st percentile, 35.6% at the
52nd percentile and so on until 100% vest at the 75th percentile.
Earnings per share (EPS) – this condition is based on the Company’s compound annual EPS growth over the three
years to exercise date. The performance rights will vest pro-rata between 5% compound annual EPS growth and 10%
compound annual EPS growth. Vesting applies on a pro-rata basis from 30% upon meeting the minimum compound
annual EPS growth performance level of 5% to 10% and 100% at 10% compound annual EPS growth.
Scorecard – this condition is based on the Group’s net profit after tax and amortisation (NPATA) and funds from
operations (FFO) for each of the three years to exercise date. The 2024 LTI plan also introduced a margin gate based
on the Group achieving a minimum EBITA margin performance target. The performance rights will vest on a pro-
rata basis from 30% upon meeting the minimum three-year average component performance level of 90% to 110%
of target and 100% at the capped maximum three-year average component performance level of 110% or more
of target.
The variables in the table below are used as inputs into the model to determine the fair value of performance rights.
2024 Plan
2023 Plan(iii)
2022 Plan
Grant date(i)
4 July 2024
31 May 2023
30 September 2022
Performance period
1 July 2023 to 30 June 2026
1 July 2022 to 30 June 2025
1 July 2021 to 30 June 2024
Exercise date
1 July 2027
1 July 2026
1 July 2025
Expected volatility(ii)
32%
30%
30%
Expected dividend yield
4.90%
6.50%
6.23%
Risk-free interest rate
4.11%
3.71%
3.53%
Share price at grant date
$4.74
$3.59
$4.57
Fair value per right
EPS $4.09, TSR $2.80
and Scorecard $4.09
EPS $2.94, TSR $0.57
and Scorecard $2.94
EPS $3.85, TSR $1.80
and Scorecard $3.85
(i) Grant date represents the date of shared understanding of the Option Deed between parties.
(ii) The expected volatility is based on the volatility of Downer’s share price calculated based on the historical three-year normalised rolling volatility.
(iii) The 2023 LTI Plan for the CEO was granted on 4 July 2024 applying expected volatility at 32%, expected dividend yield at 4.90%, risk-free interest rate at 4.18%, share price at grant
date $4.74, fair value per right: EPS $4.30, TSR $1.17 and Scorecard $4.30.
The performance rights do not have any dividend entitlements or voting rights. If all the vesting requirements are
satisfied, the performance rights will vest and the executives will receive shares in the Company or cash at the discretion
of the Board.
Where an executive ceases employment with the Group prior to the vesting date, the rights will be forfeited. However,
the Board will retain the discretion to retain executives in the plan in certain circumstances such as the death, total and
permanent disability or retirement of an executive. In these circumstances, the Board will also retain the discretion to vest
awards in the form of cash.
Recognition and measurement
Ordinary shares
Incremental costs directly attributed to the issue of ordinary shares are accounted for as a deduction from equity, net of
any tax effects.
Executive incentive shares
When executive incentive shares subsequently vest to employees under the Downer employee share plans, the carrying
value of the vested shares is transferred from the Employee benefits reserve.
E6. Reserves
2024
$’m
Hedge
reserve
Foreign
currency
translation
reserve
Employee
benefits
reserve
Equity
reserve
Fair value
through
OCI reserve
Total
attributable
to owners of
the parent
Balance at 1 July 2023
3.0
(30.6)
23.3
25.5
(2.2)
19.0
Foreign currency translation difference
–
(3.5)
–
–
–
(3.5)
Actuarial movement on net defined
benefit plan obligations
–
–
2.1
–
–
2.1
Income tax effect of actuarial movement
on defined benefit plan obligations
–
–
(0.6)
–
–
(0.6)
Change in fair value of cash flow
hedges (net of tax)
(5.5)
–
–
–
–
(5.5)
Change in fair value of unquoted
equity investments
–
–
–
–
0.8
0.8
Total comprehensive income/(loss)
for the year
(5.5)
(3.5)
1.5
–
0.8
(6.7)
Vested executive incentive share
transactions
–
–
(0.1)
–
–
(0.1)
Share-based employee benefits expense
–
–
3.2
–
–
3.2
Income tax relating to share-based
transactions during the year
–
–
(2.0)
–
–
(2.0)
Balance at 30 June 2024
(2.5)
(34.1)
25.9
25.5
(1.4)
13.4
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
138
139
E _ Capital structure and financing
E _ Capital structure and financing
2023
$’m
Hedge
reserve
Foreign
currency
translation
reserve
Employee
benefits
reserve
Equity
reserve
Fair value
through
OCI reserve
Total
attributable
to owners of
the parent
Balance at 1 July 2022
7.4
(39.1)
20.7
25.5
(2.4)
12.1
Foreign currency translation difference
–
8.5
–
–
–
8.5
Actuarial movement on net defined
benefit plan obligations
–
–
2.6
–
–
2.6
Income tax effect of actuarial movement
on defined benefit plan obligations
–
–
(0.8)
–
–
(0.8)
Change in fair value of cash flow
hedges (net of tax)
(4.4)
–
–
–
–
(4.4)
Change in fair value of unquoted
equity investments
–
–
–
–
0.2
0.2
Total comprehensive (loss)/income
for the year
(4.4)
8.5
1.8
–
0.2
6.1
Share-based employee benefits income
–
–
(0.8)
–
–
(0.8)
Income tax relating to share-based
transactions during the year
–
–
1.6
–
–
1.6
Balance at 30 June 2023
3.0
(30.6)
23.3
25.5
(2.2)
19.0
Hedge reserve
The hedge reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging
instruments relating to future transactions.
Foreign currency translation reserve
The foreign currency translation reserve comprises foreign exchange differences arising from the translation of the
financial statements of operations where their functional currency is different to the presentation currency of the Group.
Employee benefits reserve
The employee benefits reserve is used to recognise the fair value of share-based payments issued to employees over
the vesting period, and to recognise the value attributable to the share‑based payments during the reporting period.
This reserve also includes the actuarial gain/loss arisen on the defined benefit plan (refer to Note D2).
Equity reserve
The equity reserve accounts for the difference between the fair value of, and the amounts paid or received for, equity
transactions with non-controlling interests.
Fair value through OCI reserve
The fair value through OCI reserve comprises the cumulative net change in the fair value of equity investments
designated as FVOCI.
E7. Dividends
(a) Ordinary shares
2024
Final
2024
Interim
2023
Final
2023
Interim
Dividend per share (in Australian cents)
11.0
6.0
8.0
5.0
Franking percentage
50%
0%
0%
0%
Cost (in $’m)
73.9
40.3
53.7
33.6
Dividend record date
16/9/24
14/3/24
24/8/23
13/3/23
Payment date
15/10/24
11/4/24
21/9/23
11/4/23
Recognition and measurement
A liability is recognised for the amount of any dividend declared, being appropriately authorised and no longer at the
discretion of the entity, before or at the end of the financial year but not distributed at balance sheet date.
The final 2024 dividend has not been declared at the reporting date and therefore is not reflected in the consolidated
financial statements.
(b) Redeemable Optionally Adjustable Distributing Securities (ROADS)
2024
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Total
Dividend per ROADS (in Australian cents)
1.64
1.64
1.62
1.62
6.52
New Zealand imputation credit percentage
100%
100%
100%
100%
100%
Cost (in A$’m)
3.3
3.3
3.2
3.2
13.0
Payment date
15/9/23
15/12/23
15/3/24
17/6/24
2023
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Total
Dividend per ROADS (in Australian cents)
1.29
1.37
1.37
1.35
5.38
New Zealand imputation credit percentage
100%
100%
100%
100%
100%
Cost (in A$’m)
2.6
2.7
2.7
2.7
10.7
Payment date
15/9/22
15/12/22
15/3/23
15/6/23
(c) Franking credits
The franking account balance as at 30 June 2024 is $45.6 million (2023: $10.7 million).
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
140
141
F _ Group structure
F _ Group structure
F_Group structure
This section explains significant aspects of Downer’s Group structure, including joint arrangements where the Group
has interest in its controlled entities and how changes have affected the Group structure. It also provides information
on business acquisitions and disposals made during the financial year as well as information relating to Downer’s
related parties, the extent of related party transactions and the impact they had on the Group’s financial performance
and position.
F1. Joint arrangements and associate entities
F2. Controlled entities
F3. Related party information
F4. Parent entity disclosures
F5. Deed of cross guarantee
F6. Acquisition of businesses
F7. Disposal of businesses
F8. Disposal group held for sale
F1. Joint arrangements and associate entities
(a) Interest in joint ventures and associate entities
Note
2024
$’m
2023
$’m
Interest in joint ventures at the beginning of the financial year
39.1
31.9
Share of net profit(i)
10.9
20.0
Share of distributions
(11.5)
(12.8)
Interest in joint venture divested
F7
(28.5)
–
Interest in joint ventures at the end of the financial year
10.0
39.1
Interest in associates at the beginning of the financial year
120.1
130.9
Share of net (loss)/profit(i)
(0.9)
9.8
Share of distributions
(7.4)
(20.6)
Interest in associates at the end of the financial year
111.8
120.1
Total interest in joint ventures and associates
121.8
159.2
(i) The share of net profit is equal to the share of total comprehensive income for all joint ventures and associates.
The Group has interests in the following joint ventures and associates which are equity accounted:
Ownership interest
Name of arrangement
Principal activity
Principal place
of business
2024
%
2023
%
Joint Ventures
Allied Asphalt Limited
Asphalt plant
New Zealand
50
50
Bitumen Importers Australia Joint
Venture
Bitumen importer
Australia
50
50
Bitumen Importers Australia Pty Ltd
Bitumen importer
Australia
50
50
EDI Rail-Alstom Transport Pty Ltd
Sale and maintenance of railway
rollingstock
Australia
50
50
Emulco Limited
Emulsion plant
New Zealand
50
50
Isaac Asphalt Limited
Manufacture and supply of asphalt
New Zealand
50
50
Repurpose It Holdings Pty Ltd(i)
Waste recycling
Australia
–
45
Associates
Keolis Downer Pty Ltd
Operation and maintenance of Gold
Coast light rail, Melbourne tram network,
Adelaide metro, and bus operations
Australia
49
49
HT HoldCo Pty Ltd
Laundries services
Australia
30
30
(i) Downer’s interest in this joint venture was disposed of during the year ended 30 June 2024.
Commitments for joint ventures
2024
$’m
2023
$’m
– Within one year
6.2
3.9
– Between one and five years
0.2
3.7
– Greater than five years
0.2
–
Total
6.6
7.6
All joint ventures and associates have a statutory reporting date of 30 June.
Information relating to joint ventures and associates that are material to the consolidated entity is set out below,
adjusted for fair value adjustments at acquisition and differences in accounting policies:
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
142
143
F _ Group structure
F _ Group structure
Material associates
Keolis Downer (at 100%)
2024
$m
2023
$m
Revenue
1,391.2
1,259.8
Profit before income tax
12.9
26.9
Total comprehensive income for the year (100%)
5.3
19.0
Percentage ownership interest
49%
49%
Group’s share of total comprehensive income for the year (49%)
2.6
9.3
Share of distributions
7.4
20.6
Current assets
463.5
439.3
Non-current assets
225.6
244.1
Current liabilities
(325.9)
(303.1)
Non-current liabilities
(185.9)
(204.3)
Net assets (100%)
177.3
176.0
Group’s share of net assets (49%)
86.9
86.2
Adjustment to align accounting policies and other
(0.6)
4.9
Carrying amount of interest in associate (49%)
86.3
91.1
Reconciliation of the consolidated entity’s carrying amount
Interest in associates at the beginning of the financial year
91.1
102.4
Share of net profit
2.6
9.3
Share of distributions
(7.4)
(20.6)
Interest in associates at the end of the financial year
86.3
91.1
The Group does not disclose the details of the other individual joint ventures and associates on the basis these are
individually immaterial.
The carrying amounts of interests in individually immaterial joint ventures are $10.0 million and associates are $25.5 million
(2023: $39.1 million and $29.0 million). The aggregate share of profit and total comprehensive income of joint ventures are
$10.9 million (2023: $20.0 million) and of associates are $3.5 million share of net loss (2023: share of net profit $0.5 million).
Recognition and measurement
Equity accounting
Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to
recognise the Group’s share of the post-acquisition profits or losses of the investee in the Consolidated Statement of
Profit or Loss, and the Group’s share of movements of the investee’s other comprehensive income in the Consolidated
Statement of Other Comprehensive Income. Dividends received or receivable from associates and joint ventures are
recognised as a reduction in the carrying amount of the investment.
Where the Group’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including
any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations
or made payments on behalf of the other entity.
(i) Investments in joint ventures
Investments in joint ventures are accounted for using the equity method of accounting.
(ii) Investments in associates
Investments in entities over which the Group has the ability to exercise significant influence, but not control, are
accounted for using the equity method of accounting. The investment in associates is carried at cost plus post-
acquisition changes in the Group’s share of the associates’ net assets, less any impairment in value.
(b) Interest in joint operations
The Group recognises its interest in the assets, liabilities, revenue and expenses of joint operations.
Ownership interest
Name of joint operation
Principal activity
Principal place
of business
2024
%
2023
%
Ausenco Downer Joint Venture
Enabling works for
Carrapateena Project
Australia
50
50
Bama Civil Pty Ltd & Downer
EDI Works Pty Ltd
Civil Infrastructure design
and/or construction activities
Australia
50
50
Cameron Road Joint Venture
Cameron Road construction
New Zealand
50
50
China Hawkins Construction JV
Building construction
New Zealand
50
50
City Rail JV
Enabling works for Auckland
City Rail Link
New Zealand
50
50
Confluence Water JV
Sydney Water services
Australia
43
43
CPB Contractors Pty Ltd &
Spotless Facility Services Pty Ltd
Riverina Redevelopment Program
Australia
50
50
CPB Downer Joint Venture
Parramatta Light Rail construction
Australia
50
50
CRL Construction Joint Venture
Construction of the City Rail Link
Alliance Project
New Zealand
30
30
Dampier Highway Joint Venture
Highway construction and design
Australia
50
50
Downer BMD Joint Venture
West Camden Water Recycling
Plant Upgrade
Australia
50
50
Downer EDI Works Pty Ltd &
CPB Contractors Pty Ltd(iii)
Warringah Freeway Upgrade Project
Australia
–
33
Downer EDI Works Pty Ltd & McConnell
Dowell Constructors (Aust) Pty Ltd(iii)
Waurn Ponds Duplication
Australia
–
50
Downer Electrical GHD JV(ii)
Traffic control infrastructure
Australia
90
90
Downer FKG JV
Major civil and roadworks
Australia
50
50
Downer HEB Joint Venture
(Te Ara Tupua)
Te Ara Tupua Alliance
New Zealand
50
50
Downer Fulton Hogan Higgins
Joint Venture (Transport Recovery
East Coast)(i)
Transport Recovery East Coast
New Zealand
33
–
Downer Fulton Hogan Joint Venture
(Wakatipu Transport Alliance)
Wakatipu Transport Alliance
New Zealand
50
50
Downer HEB Joint Venture (iRex Project)
iRex Ferry Construction project
New Zealand
50
50
Downer HEB Joint Venture
(Memorial Park Alliance)
Design and build of the New Zealand
National War Memorial Park
New Zealand
50
50
Downer HEB Joint Venture
(Mt Messenger Project)
Design and build of the
Mt Messenger Project
New Zealand
50
50
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
144
145
F _ Group structure
F _ Group structure
Ownership interest
Name of joint operation
Principal activity
Principal place
of business
2024
%
2023
%
Downer MCD Wynyard Edge JV
(Americas Cup Project)
Design and build on Americas Cup
Project
New Zealand
50
50
Downer Seymour Whyte JV
Road construction
Australia
50
50
Downer Utilities Australia Pty Ltd
& Ventia Utility Services Pty Ltd
(Gold Coast Infrastructure Solutions)
Gold Coast Asset Lifecycle Services
Australia
50
50
Downtown Infrastructure Development
Project JV(iii)
Downtown infrastructure
development program
New Zealand
–
33
HCMT Supplier JV
Rail build supplier
Australia
50
50
John Holland Pty Ltd & Downer Utilities
Australia Pty Ltd Partnership
Operation of water recycling plant
at Mackay
Australia
50
50
Macdow Downer Joint Venture
(Connectus)
Rail construction
New Zealand
50
50
Macdow Downer Joint Venture (CSM2)
Road construction
New Zealand
50
50
Macdow Downer Joint Venture
(Russley Road)
Road construction
New Zealand
50
50
NEWest Alliance(iii)
Construction activities as part of
Perth’s METRONET program
Australia
–
50
North Canterbury Transport
Infrastructure Economic Recovery
Alliance ‘NCTIER’ JV
Kaikoura earthquake works
New Zealand
25
25
Rollingstock JV(i)
Rail build supplier
Australia
14
–
Safety Focused Performance JV
Water and sewerage capital works
Australia
45
45
Thiess VEC Joint Venture
Highway construction
Australia
50
50
Utilita Water JV
Plant maintenance
Australia
50
50
VEC Shaw Joint Venture
Road construction
Australia
50
50
Wiri Train Depot Joint Venture
Construction of the Wiri train depot
New Zealand
50
50
(i) Joint operation entered into during the year ended 30 June 2024.
(ii) Contractual arrangement prevents control despite ownership of more than 50% of this joint operation.
(iii) Joint operation terminated/novated during the year ended 30 June 2024.
Recognition and measurement
The Group recognises its direct right to the assets, liabilities, revenues and expenses of joint operations and its share
of any jointly held or incurred assets, liabilities, revenues and expenses. These have been incorporated in the financial
statements under the appropriate headings.
F2. Controlled entities
The controlled entities of the Group listed below were wholly owned during the current and prior year, unless
otherwise stated:
Australia
A E Smith & Son (NQ) Pty Ltd(v) (vi)
A E Smith & Son (SEQ) Pty Ltd(v) (vi)
A.E. Smith & Son Proprietary Limited(v) (vi)
AE Smith Building Technologies Pty Ltd(v) (vi)
A.E. Smith Service (SEQ) Pty Ltd(v) (vi)
A.E. Smith Service Holdings Pty Ltd(v) (vi)
A.E. Smith Service Pty Ltd(v) (vi)
ACN 009 173 040 Pty Ltd
Airparts Fabrication Pty Ltd(v) (vi)
Airparts Fabrication Unit Trust(v) (vi)
Airparts Holdings Pty Ltd(v) (vi)
Aladdin Group Services Pty Limited
Aladdin Laundry Pty Limited
Aladdin Linen Supply Pty Limited
Aladdins Holdings Pty. Limited
ASPIC Infrastructure Pty Ltd
Asset Services (Aust) Pty Ltd
Berkeley Challenge (Management) Pty Limited
Berkeley Challenge Pty Limited
Berkeley Railcar Services Pty Ltd
Berkeleys Franchise Services Pty Ltd
Bonnyrigg Management Pty. Limited
Cleandomain Proprietary Limited
Cleanevent Australia Pty. Ltd.
Cleanevent Holdings Pty. Limited
Cleanevent International Pty. Limited
Cleanevent Technology Pty Ltd
Concrete Pavement Recycling Pty Ltd
DM Roads Services Pty Ltd
DMH Electrical Services Pty Ltd
DMH Maintenance and Technology Services Pty Ltd
DMH Plant Services Pty Ltd
Downer Australia Pty Ltd
Downer EDI Associated Investments Pty Ltd
Downer EDI Engineering Company Pty Limited
Downer EDI Engineering CWH Pty Limited
Downer EDI Engineering Electrical Pty Ltd
Downer EDI Engineering Group Pty Limited
Downer EDI Engineering Holdings Pty Ltd
Downer EDI Engineering Power Pty Ltd
Downer EDI Engineering Pty Limited
Downer EDI Limited Tax Deferred Employee Share Plan
Downer EDI Mining Pty Ltd
Downer EDI Mining-Minerals Exploration Pty Ltd
Downer EDI Rail Pty Ltd
Downer EDI Services Pty Ltd
Downer EDI Works Pty Ltd
Downer Energy Systems Pty Limited
Downer Group Finance Pty Limited
Downer Holdings Pty Limited
Downer Investments Holdings Pty Ltd
Downer Mining Regional NSW Pty Ltd
Downer PipeTech Pty Limited
Downer PPP Investments Pty Ltd
Downer Professional Services Pty Ltd
Downer QTMP Pty Ltd(iii)
Downer Utilities Australia Pty Ltd
Downer Utilities Holdings Australia Pty Ltd
Downer Utilities New Zealand Pty Ltd
Downer Utilities SDR Pty Ltd
Downer Victoria PPP Maintenance Pty Ltd
EDI Rail PPP Maintenance Pty Ltd
EDICO Pty Ltd
Emerald ESP Pty Ltd(v) (vi)
Emoleum Partnership
Emoleum Road Services Pty Ltd
Emoleum Roads Group Pty Ltd
Envar Engineers and Contractors Pty Ltd(v) (vi)
Envar Holdings Pty Ltd(v) (vi)
Envar Installation Pty Ltd(v) (vi)
Envar Service Pty Ltd(v) (vi)
Envista Pty Limited
Errolon Pty Ltd
Evans Deakin Industries Pty Ltd
Fieldforce Services Pty Ltd
Fowlers Asphalting Pty. Limited
Gippsland Asphalt Pty. Ltd.
Infrastructure Constructions Pty Ltd
International Linen Service Pty Ltd
LNK Group Pty Ltd
Lowan (Management) Pty. Ltd.
Maclab Services Pty Ltd
Mineral Technologies (Holdings) Pty Ltd
Mineral Technologies Pty Ltd
Monteon Pty Ltd
Nationwide Venue Management Pty Limited
New South Wales Spray Seal Pty Ltd
NG-Serv Pty Ltd(v) (vi)
Nuvogroup (Australia) Pty Ltd(v) (vi)
Pacific Industrial Services BidCo Pty Ltd
Pacific Industrial Services FinCo Pty Ltd
Primary Producers Improvers Pty. Ltd.
Rail Services Victoria Pty Ltd
Riley Shelley Services Pty Limited
Roche Services Pty Ltd
RPC Roads Pty Ltd
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
146
147
F _ Group structure
F _ Group structure
Australia continued
RPQ Asphalt Pty. Ltd.
RPQ Mackay Pty Ltd
RPQ North Coast Pty. Ltd.
RPQ Pty Ltd
RPQ Services Pty. Ltd.
RPQ Spray Seal Pty. Ltd.
Skilltech Consulting Services Pty. Ltd.
Skilltech Metering Solutions Pty Ltd.
Smarter Contracting Pty Ltd
Southern Asphalters Pty Ltd
Sports Venue Services Pty Ltd
Spotless Defence Services Pty Ltd
Spotless Facility Services Pty Ltd
Spotless Financing Pty Limited
Spotless Group Holdings Limited
Spotless Group Limited
Spotless Investment Holdings Pty Ltd
Spotless Management Services Pty Ltd
Spotless Property Cleaning Services Pty Ltd
Spotless Securities Plan Pty Ltd
Spotless Services Australia Limited
Spotless Services International Pty Ltd
Spotless Services Limited
Spotless Treasury Pty Limited
SSL Asset Services (Management) Pty Ltd
SSL Facilities Management Real Estate Services Pty Ltd
SSL Security Services Pty Ltd
Tarmac Linemarking Pty Ltd
Taylors Two Two Seven Pty Ltd
Trenchless Group Pty Ltd
Trico Asphalt Pty. Ltd.
UAM Pty Ltd
Utility Services Group Holdings Pty Ltd
Utility Services Group Limited
VEC Civil Engineering Pty Ltd
VEC Plant & Equipment Pty Ltd
New Zealand and Pacific
DGL Investments Limited
Downer Construction (Fiji) Pte Limited
Downer Construction (New Zealand) Limited
Downer EDI Engineering PNG Limited
Downer EDI Engineering Power Limited
Downer EDI Works Vanuatu Limited
Downer New Zealand Limited
Downer New Zealand Projects 1 Limited
Downer New Zealand Projects 2 Limited
Downer Utilities New Zealand Limited
Green Vision Recycling Limited
Hawkins Limited
Hawkins Projects 1 Limited
ITS Pipetech Pacific (Fiji) Pte Limited
Richter Drilling (PNG) Limited
Spotless Facility Services (NZ) Limited
Spotless Holdings (NZ) Limited
Techtel Training & Development Limited
The Roading Company Limited
Waste Solutions Limited
Works Finance (NZ) Limited
Africa
Downer EDI Mining – Ghana Limited
MD Mineral Technologies Africa (Pty) Ltd
MD Mining and Mineral Services (Pty) Ltd(i)
Asia
Chang Chun Ao Hua Technical Consulting Co Ltd
Cleanevent Middle East FZ-LLC(ii)
Downer EDI Engineering (S) Pte. Ltd.
Downer EDI Engineering Holdings (Thailand) Limited
Downer EDI Engineering Thailand Ltd
Downer EDI Group Insurance Pte. Ltd.
Downer EDI Rail (Hong Kong) Limited
Downer EDI Works (Hong Kong) Limited
Downer Pte. Ltd.
Downer Singapore Pte. Ltd.
MD Mineral Technologies Private Limited
PT Duffill Watts Indonesia
Americas
Mineral Technologies Comercio de Equipamentos para
Processamento de Minerais LTDA
Mineral Technologies Inc.(iii)
Mineral Technologies, Inc.
United Kingdom and Channel Islands
KHSA Limited
Sillars (B. & C.E.) Limited(iv)
Sillars (TMWD) Limited(iv)
Sillars Holdings Limited(iv)
Sillars Road Construction Limited(iv)
Works Infrastructure (Holdings) Limited(iv)
Works Infrastructure Limited(iv)
(i) 70% ownership interest.
(ii) Entity is currently undergoing liquidation/dissolution.
(iii) Entity incorporated during the financial year ended 30 June 2024.
(iv) Entity dissolved/de-registered during the financial year ended 30 June 2024.
(v) Entity disposed during the financial year ended 30 June 2024.
(vi) These Spotless controlled entities did not form part of the tax-consolidated group of which Downer EDI Limited is the head entity.
F3. Related party information
(a) Transactions with controlled entities
Aggregate amounts receivable from and payable to controlled entities by the parent entity are included within total
assets and liabilities balances as disclosed in Note F4.
(b) Equity interests in related parties
Equity interests in subsidiaries
Details of the percentage of ordinary shares held in controlled entities are disclosed in Note F2.
Equity interests in joint arrangements and associate entities
Details of interests in joint arrangements and associate entities are disclosed in Note F1. The business activities of
a number of these entities are conducted under joint venture arrangements. Associated entities conduct business
transactions with various controlled entities. Such transactions include purchases and sales, dividends and interest.
(c) Other related party transactions
The aggregate transactions with related parties is set out below:
2024
$’000
2023
$’000
Sales of goods and services
Joint Ventures
31,540
34,703
Associates
60,235
65,504
Purchases of goods and services
Joint Ventures
104,970
124,973
Associates
7,463
6,102
Receivables from related parties
Joint Ventures
2,030
2,287
Associates
6,991
10,036
Payables to related parties
Joint Ventures
6,542
12,930
Associates
386
843
Loans and other advances from related parties
Joint Ventures
2,490
3,550
Loans and other advances to related parties
Joint Ventures
8,799
4,208
Associates
16,660
16,660
All transactions were made on normal commercial terms and conditions and at market rates. No expense has been
recognised in the current year or prior year for bad or doubtful debts in respect of amounts owed by related parties.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
148
149
F _ Group structure
F _ Group structure
F4. Parent entity disclosures
(a) Financial position
Company
2024
$’m
2023
$’m
Assets
Current assets
25.6
8.7
Non-current assets
2,664.4
2,665.1
Total assets
2,690.0
2,673.8
Liabilities
Current liabilities
23.3
10.2
Non-current liabilities
6.8
–
Total liabilities
30.1
10.2
Net assets
2,659.9
2,663.6
Equity
Issued capital
2,463.9
2,463.8
Retained earnings
166.1
171.1
Reserves
Employee benefits reserve
13.9
12.7
Equity reserve
16.0
16.0
Total equity
2,659.9
2,663.6
In 2023, the parent entity was in a net current liabilities position largely due to the recognition of the fair value on the
Downer Contingent Share Options (DCSO) of $3.7 million financial instrument at reporting date which would be settled
in equity. The parent entity can meet all its financial obligations when they fall due since it has the ability to control the
timing of the funding from its controlled entities.
(b) Financial performance
Company
2024
$’m
2023
$’m
Profit for the year
89.0
32.3
Total comprehensive income
89.0
32.3
(c) Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity has, in the normal course of business, entered into guarantees in relation to the debts of its subsidiaries
during the financial year.
(d) Contingent liabilities of the parent entity
The parent entity has no contingent liabilities as at 30 June 2024 (2023: nil) other than those disclosed in Note C9 to the
financial statements.
(e) Commitments for the acquisition of property, plant and equipment by the parent entity
The parent entity does not have any commitments for acquisition of property, plant and equipment as at 30 June 2024
(2023: nil).
F5. Deed of cross guarantee
The following entities entered into a deed of cross guarantee with Downer EDI Limited under which each company
guarantees the debts of the others:
Downer Australia Pty Ltd
Evans Deakin Industries Pty Ltd
Downer EDI Engineering Electrical Pty Ltd
Mineral Technologies (Holdings) Pty Ltd
Downer EDI Engineering Group Pty Limited
Mineral Technologies Pty Ltd
Downer EDI Engineering Holdings Pty Ltd
New South Wales Spray Seal Pty Ltd
Downer EDI Engineering Power Pty Ltd
Pacific Industrial Services Bidco Pty Ltd
Downer EDI Engineering Pty Limited
Pacific Industrial Services Finco Pty Ltd
Downer EDI Rail Pty Ltd
RPQ Mackay Pty Ltd
Downer EDI Services Pty Ltd
RPQ Spray Seal Pty. Ltd.
Downer EDI Works Pty Ltd
Skilltech Consulting Services Pty. Ltd.
Downer Group Finance Pty Limited
Spotless Facility Services Pty Ltd
Downer Holdings Pty Limited
Spotless Group Holdings Limited
Downer Professional Services Pty Ltd
Spotless Group Limited
Downer QTMP Pty Ltd
Spotless Services Australia Limited
Downer Utilities Australia Pty Ltd
Spotless Services Limited
Downer Utilities Holdings Australia Pty Ltd
Spotless Treasury Pty Limited
Downer Victoria PPP Maintenance Pty Ltd
UAM Pty Ltd
EDI Rail PPP Maintenance Pty Ltd
Utility Services Group Holdings Pty Ltd
EDICO Pty Ltd
Utility Services Group Limited
By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare financial
statements and Directors’ reports under Corporations Instrument 2016/785 issued by the Australian Securities and
Investments Commission.
The above companies represent a ‘Closed Group’ for the purposes of the Corporations Instrument, and as there are no
other parties to the deed of cross guarantee that are controlled by Downer EDI Limited, they also represent the ‘Extended
Closed Group’.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
150
151
F _ Group structure
F _ Group structure
Set out below is a Consolidated Statement of Profit or Loss and Other Comprehensive Income and Consolidated
Statement of Financial Position of the ‘Closed Group’.
(a) Consolidated Statement of Profit and Loss
2024
$’m
Revenue
7,459.8
Other income
105.2
Total revenue and other income
7,565.0
Employee benefits expense
(2,381.5)
Subcontractor costs
(3,101.8)
Raw materials and consumables used
(899.4)
Plant and equipment costs
(250.0)
Depreciation on leased assets
(74.2)
Other depreciation and amortisation
(147.7)
Impairment of non-current assets
(69.1)
Other expenses from ordinary activities
(595.8)
Total expenses
(7,519.5)
Share of net profit of joint ventures and associates
6.5
Earnings before interest and tax
52.0
Finance income
40.0
Lease finance costs
(13.7)
Other finance costs
(95.8)
Net finance costs
(69.5)
Loss before income tax
(17.5)
Income tax benefit
2.5
Loss after income tax
(15.0)
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss:
– Actuarial movement on net defined benefit plan obligations
2.1
– Income tax effect of actuarial movement on defined benefit plan obligations
(0.6)
– Change in fair value of unquoted equity investments
0.8
Items that may be reclassified subsequently to profit or loss:
– Net loss on foreign currency forward contracts taken to equity
(1.5)
– Net loss on cross currency and interest rate swaps taken to equity
(6.4)
– Income tax effect of items above
2.4
Other comprehensive loss for the year (net of tax)
(3.2)
Total comprehensive loss for the year (net of tax)
(18.2)
Summary of movements in retained earnings
Opening retained earnings brought forward
166.6
Loss after income tax
(15.0)
Dividends paid
(94.0)
Retained earnings at reporting date
57.6
(b) Consolidated Statement of Financial Position
2024
$’m
ASSETS
Current assets
Cash and cash equivalents
604.2
Trade receivables and contract assets
1,377.0
Other financial assets
16.5
Inventories
159.2
Prepayments and other assets
43.6
Total current assets
2,200.5
Non-current assets
Trade receivables and contract assets
138.2
Equity accounted investments
29.2
Property, plant and equipment
615.8
Right-of-use assets
231.9
Intangible assets
1,669.5
Other financial assets
1,747.7
Deferred tax assets
12.4
Prepayments and other assets
29.1
Total non-current assets
4,473.8
Total assets
6,674.3
LIABILITIES
Current liabilities
Trade payables and contract liabilities
1,473.5
Lease liabilities
66.1
Other financial liabilities
10.9
Current tax liabilities
19.0
Employee benefits provision
216.8
Other provisions
126.4
Total current liabilities
1,912.7
Non-current liabilities
Trade payables and contract liabilities
46.5
Borrowings
1,294.0
Lease liabilities
235.1
Other financial liabilities
565.4
Employee benefits provision
22.4
Other provisions
26.2
Total non-current liabilities
2,189.6
Total liabilities
4,102.3
Net assets
2,572.0
EQUITY
Issued capital
2,463.9
Reserves
50.5
Retained earnings
57.6
Total equity
2,572.0
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
152
153
F _ Group structure
F _ Group structure
F6. Acquisition of businesses
Current year acquisitions
There have been no acquisitions during the year ended 30 June 2024.
During the year, deferred consideration payments of $1.3 million (2023: nil) were made in relation to acquisitions
completed in previous periods.
Prior year acquisition
Concrete Pavement Recycling Pty Ltd
On 14 April 2023, the Group acquired the remaining 50.5% interest in Concrete Pavement Recycling Pty Ltd (CPR).
The acquisition accounting for CPR was provisionally accounted at 30 June 2023, and is now finalised at 30 June 2024.
Goodwill from acquisition
The goodwill resulting from the above acquisition represents the future market development, expected revenue growth
opportunities, technical talent and expertise, and the benefits of expected synergies. These benefits are not recognised
separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets.
Measurement of fair values
The valuation techniques used for measuring the fair value of material assets acquired were as follows:
Asset/liability acquired
Valuation technique
Trade receivables
and contract assets
Cost technique – considers the expected economic benefits receivable when due.
Property, plant
and equipment
Market comparison technique and cost technique – the valuation model considers
quoted market prices for similar items when available and current replacement cost
when appropriate.
Intangible assets
Multi-period excess earnings method – considers the present value of net cash flows
expected to be generated by the customer contracts and relationships, intellectual
property and brand names, excluding any cash flows related to contributory assets. For
the valuation of certain brand names, discounted cash flow under the relief from royalty
valuation methodology has been utilised.
Trade payables
and other payables
Cost technique – considers the expected economic outflow of resources when due.
Borrowings
Cost technique – considers the expected economic outflow of resources when due.
Provisions
Cost technique – considers the probable economic outflow of resources when the
obligation arises.
Recognition and measurement
Business combinations
The acquisition method of accounting is used to account for all business combinations, regardless of whether equity
instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the:
Fair values of the assets transferred
Liabilities incurred to the former owners of the acquired business
Equity interests issued by the Group
Fair value of any asset or liability resulting from a contingent consideration arrangement
Fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited
exceptions, measured initially at their fair values at the acquisition date. The Group recognises any non-controlling
interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s
proportionate share of the acquired entity’s net identifiable assets.
Acquisition-related costs are expensed as incurred.
(i) Acquisition achieved in stages
Where a business combination is achieved in stages, the Group’s previously held equity interest in the acquiree is
remeasured to fair value at the acquisition date (i.e. the date when the Group attains control) and the resulting gain or
loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that
have previously been recognised in other comprehensive income are reclassified to profit or loss where such treatment
would be appropriate if that interest were disposed of or control of the acquiree obtained.
(ii) Contingent consideration
The subsequent accounting for changes in the fair value of contingent consideration that do not qualify as
measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration
that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted
for within equity. Contingent consideration that is classified as an asset or liability is remeasured at subsequent reporting
dates with the corresponding gain or loss being recognised in profit or loss.
(iii) Non-controlling interest
The Group can elect, on an acquisition by acquisition basis, to recognise non-controlling interests in an acquired entity
either at fair value or at the non-controlling interest’s share of the acquired entity’s net identifiable assets/(liabilities).
F7. Disposal of businesses
Current year divestments
Transport Projects
On 20 June 2023, Downer announced it had completed the sale of its Australian Transport Projects business to DT
Infrastructure Pty Ltd, a Gamuda Berhad group company (Gamuda). The remaining number of contracts with customer
consents that were outstanding at the date of completion have been received in the period, the contracts have been
novated and deferred settlement paid.
As at June 2024, a net payment on the first completion (inclusive of transaction costs) of $23.3 million, and a net payment
on the second completion (after transactions costs) of $2.3 million has been paid with a $1.2 million pre-tax gain on
disposal recognised.
As part of the divestment, Downer’s interest in the following joint operations has been novated in the period:
Downer EDI Works Pty Ltd & CPB Contractors Pty Ltd
NEWest Alliance.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
154
155
F _ Group structure
F _ Group structure
Asset and Development Services
Downer completed the agreement to sell the remaining part of the Asset and Development Services business to a
Management Buy Out Consortium on 31 August 2023. As at June 2024, a net payment (after transactions costs) of
$11.4 million has been paid with a $19.2 million pre-tax loss on disposal recognised.
The following controlled entities have been divested as part of the transaction:
A.E. Smith & Son Proprietary Limited
A.E. Smith Service Holdings Pty Ltd
A.E. Smith Service Pty Ltd
A.E. Smith Service (SEQ) Pty Ltd
AE Smith Building Technologies Pty Ltd
A E Smith & Son (SEQ) Pty Ltd
A E Smith & Son (NQ) Pty Ltd
Airparts Holdings Pty Ltd
Airparts Fabrication Pty Ltd
Airparts Fabrication Unit Trust
Emerald ESP Pty Ltd
Envar Installation Pty Ltd
Envar Service Pty Ltd
Envar Holdings Pty Ltd
Envar Engineers and Contractors Pty Ltd
Nuvogroup (Australia) Pty Ltd
NG-Serv Pty Ltd
Downer’s interest in Repurpose It
During the period, Downer completed the sale of its 45% interest in Repurpose It Holdings Pty Ltd, to Australian
infrastructure investment manager, Palisade Impact Pty Ltd and its affiliates (Palisade). As at June 2024, net proceeds
(after transaction costs) of $84.4 million has been received with a $55.9 million pre-tax gain on disposal.
VEC Contracts
On 30 November 2023, Downer completed the sale of all current contracts, assets and the transfer of employees for VEC
Civil Engineering Pty Ltd to Hazell Bros Group Pty Ltd and Hazell Bros Resources Pty Ltd. The sale consideration for this
transaction is $1.2 million. As at June 2024, net proceeds of $1.2 million had been received.
AE Smith New Zealand
On 30 November 2023, Downer completed the sale of its AE Smith New Zealand contracts to a member company of the
Horizon Energy Group. As at June 2024, a net payment (after transactions costs) to the purchaser of $1.4 million has been
paid with a $2.3 million pre-tax loss on disposal.
Metering Services
On 22 December 2023, Downer completed an agreement for the sale of its Advance Metering (smart meter) assets and
contracts to Intellihub Australia Pty Ltd. As at June 2024, net proceeds of $21.3 million have been received.
The below table summarises the impact of divestments during the 2024 financial year:
2024
$’m
Note
Transport
Projects(ii)
Asset and
Development
Services
Downer’s
interest in
Repurpose It
VEC
Contracts
AE Smith
New
Zealand
Metering
Services
Total
Proceeds on disposal
(net of transaction costs)
28.5
2.2
84.4
1.2
(1.4)
21.3
136.2
Less cash disposed
(30.8)
(11.9)
–
–
–
–
(42.7)
Deferred settlement paid and
transaction costs
(23.3)
(1.7)
–
–
–
–
(25.0)
Net proceeds (as per the Consolidated
Statement of Cash Flows)
(25.6)
(11.4)
84.4
1.2
(1.4)
21.3
68.5
Deferred consideration
–
(0.9)
–
–
(2.0)
–
(2.9)
Total net proceeds on disposal
(25.6)
(12.3)
84.4
1.2
(3.4)
21.3
65.6
Consideration for divested business
(net of transaction costs)
22.1
(0.4)
84.4
1.2
(3.4)
21.3
125.2
Cash and cash equivalents
30.8
11.9
–
–
–
–
42.7
Trade receivables and contract
assets
40.8
50.9
–
–
0.2
–
91.9
Equity accounted investments
F1
–
–
28.5
–
–
–
28.5
Property, plant and equipment(i)
C5
–
0.3
–
1.5
0.3
17.2
19.3
Right-of-use assets(i)
C6
0.6
0.8
–
–
0.2
–
1.6
Intangible assets
C7
–
0.4
–
–
–
–
0.4
Inventories
–
0.2
–
0.1
0.1
3.6
4.0
Current tax assets
–
2.5
–
–
–
–
2.5
Deferred tax assets(i)
B5(b)
1.0
2.2
–
0.2
–
–
3.4
Prepayments and other assets
0.6
0.3
–
–
–
–
0.9
Assets disposed
73.8
69.5
28.5
1.8
0.8
20.8
195.2
Trade payables and contract
liabilities
48.3
40.6
–
0.4
0.6
–
89.9
Lease liabilities
C1(b)
0.6
0.8
–
–
0.3
–
1.7
Employee benefits provision
3.2
7.8
–
0.2
1.0
–
12.2
Other provisions(i)
C8
0.8
1.1
–
–
–
–
1.9
Deferred tax liabilities(i)
B5(b)
–
0.4
–
–
–
–
0.4
Liabilities disposed
52.9
50.7
–
0.6
1.9
–
106.1
Net assets disposed
20.9
18.8
28.5
1.2
(1.1)
20.8
89.1
Gain/(loss) on disposal
before tax
B3
1.2
(19.2)
55.9
–
(2.3)
0.5
36.1
Other exit-related costs
–
–
(4.5)
–
(9.4)
(0.5)
(14.4)
Gain/(loss) on disposal
after exit costs before tax
B3
1.2
(19.2)
51.4
–
(11.7)
–
21.7
(i)
The assets and liabilities that were classified as Assets/Liabilities Held for Sale at 30 June 2023 may have been disposed at a different value due to business as usual transactions
occurring between 1 July 2024 and date of divestment.
(ii) Transport Projects represents the net impact of deferred cash flows of $23.3 million associated with the first stage completion (transaction completed and recognised in FY23),
together with the disposal and associated cash flows with the second stage completion (transaction completed and recognised in FY24).
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
156
157
F _ Group structure
F _ Group structure
Prior year divestments
Transport Projects
On 20 June 2023, Downer completed the sale of its Australian Transport Projects business to DT Infrastructure Pty Ltd, a
Gamuda Berhad group company (Gamuda). The sale price represents an enterprise value of $212 million. There remained
a number of customer consents outstanding at the date of completion and these contracts will remain with Downer until
the consents are received and Downer has agreed to defer $20.0 million of the proceeds until the remaining customer
consents are received and the contracts novated. As at June 2023, net proceeds (after transaction costs) of $160.5 million
had been received with a $44.4 million pre-tax gain on disposal.
The below table summarises the impact of divestments during the 2023 financial year:
2023
$’m
Transport
Projects
Proceeds on disposal (net of transaction costs)
214.9
Less cash disposed
(54.4)
Proceeds net of disposal costs
160.5
Proceeds on disposal (net of transaction costs)
164.9
Cash and cash equivalents
54.4
Trade receivables and contract assets
70.5
Property, plant and equipment
36.7
Right-of-use assets
1.7
Intangible assets
44.1
Inventories
0.9
Deferred tax assets
3.5
Assets disposed
211.8
Trade payables and contract liabilities
77.7
Lease liabilities
1.8
Employee benefits provision
11.8
Liabilities disposed
91.3
Net assets disposed
120.5
Profit on disposal before tax
44.4
F8. Disposal group held for sale
Current year
Catering NZ
At the financial year end, assets and liabilities relating to Catering NZ in the Facilities segment have been classified as
assets and liabilities held for sale. The assets are expected to be sold after receipt of customer consent expected within
12 months.
At 30 June 2024, the disposal groups were stated at the lower of their carrying amount and fair value less costs of disposal,
and consisted of the following assets and liabilities:
2024
$’m
Note
Catering NZ
Trade receivables and contract assets
8.1
Inventories
1.2
Prepayments and other assets
0.2
Property, plant and equipment
C5
1.0
Right-of-use assets
C6
0.1
Assets held for sale
10.6
Trade payables and contract liabilities
8.3
Lease liabilities
0.1
Employee benefits provision
2.2
Liabilities held for sale
10.6
Prior year
Transport Projects
On 20 June 2023, Downer announced it had completed the sale of its Australian Transport Projects business to
DT Infrastructure Pty Ltd, a Gamuda Berhad group company (Gamuda). There remained a number of contracts with
customer consents outstanding at the date of completion, some of which remained outstanding as at 30 June 2023.
Asset & Development Services
Downer had entered into an agreement to sell the remaining part of its Australian Mechanical and Electrical Commercial
Projects business (‘Asset & Development Services’) to existing managers of the business.
The assets and liabilities of the contracts to be divested were reclassified as current assets and liabilities held for sale at
30 June 2023.
Recognition and measurement
Disposal groups are recognised when a sale is considered highly probable. The assets and liabilities of these disposal
groups are disclosed separately on the basis that their value is expected to be realised through a sale event rather than
continued use. Disposal group assets are presented at the lower of their carrying value or the value expected to be
realised through the sale. Any impairment to the carrying value of the assets is recognised through the Consolidated
Statement of Profit or Loss and Other Comprehensive Income.
The Assets held for sale do not include any recognition of divestment and exit costs.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
158
159
G _ Other
G _ Other
G_Other
This section provides details on other required disclosures relating to the Group to comply with the accounting
standards and other pronouncements including the Group’s capital and financial risk management disclosure.
This disclosure provides information around the Group’s risk management policies and how Downer uses derivatives
to hedge the underlying exposure to changes in interest rates and to foreign exchange rate fluctuations.
G1. New accounting standards
G2. Capital and financial risk management
G3. Other financial assets and liabilities
G1. New accounting standards
(a) New and amended accounting standards adopted by the Group
During the year, the Group has applied a number of new and revised accounting standards issued by the Australian
Accounting Standards Board (AASB) that are mandatorily effective for an accounting period that begins on or after
1 July 2023, as follows:
AASB 17 Insurance Contracts and associated amendments
AASB 2021-5 Amendments to Australian Accounting Standards – Deferred Tax related to Assets and Liabilities arising from
a Single Transaction
AASB 2021-2 Amendments to Australian Accounting Standards – Disclosure of Accounting Policies and Definition of
Accounting Estimates
AASB 2023-2 Amendments to Australian Accounting Standards – International Tax Reform – Pillar Two Model Rules.
Amendments to AASB 112 ‘Income Taxes’ (AASB 112)
At 30 June 2024, the Group has adopted amendments to AASB 112 issued by the IASB and AASB on 23 May 2023 and
27 June 2023, respectively, in relation to the Organisation for Economic Co-operation and Development (OECD)/G20
Inclusive Framework on Base Erosion and Profit Shifting (BEPS) Pillar Two income tax. The amendments introduced a
temporary exception to the requirements of AASB 112 under which a company does not recognise or disclose information
about deferred tax assets and liabilities related to the proposed Pillar Two model rules.
Refer to Note B5 ‘income tax expense’ for more information.
None of the above new and amended accounting standards have had a significant impact on the Group’s consolidated
financial statements.
(b) New accounting standards and interpretations not yet adopted
The following new or amended Accounting Standards or Interpretations that are not yet mandatory and have not been
early adopted.
The following are not expected to have a material impact on the Group’s financial report on adoption and may result in
additional disclosure in the financial statements:
Amendments to AASB 101 Classification of liabilities as current or non-current
AASB 18 Presentation and Disclosures in Financial Statements.
Management is still in the process of determining the impact of the following:
ASRS 1 General Requirements for Disclosure of Sustainability-related Financial Information
ASRS 2 Climate-related Disclosures.
G2. Capital and financial risk management
(a) Capital risk management
The capital structure of the Group consists of debt and equity. The Group may vary its capital structure by adjusting the
amount of dividends, returning capital to shareholders, issuing new shares or increasing or reducing debt.
The Group’s objectives when managing capital are to safeguard its ability to operate as a going concern so that it can
meet all its financial obligations when they fall due, provide adequate returns to shareholders, maintain an appropriate
capital structure to optimise its cost of capital and maintain an investment grade credit rating for ongoing access to
funding.
(b) Financial risk management objectives
The Group’s Treasury function manages the funding, liquidity and financial risks of the Group under a Board approved
Treasury Policy. These risks include foreign exchange, interest rate, commodity and financial counterparty credit risk.
The Group enters into a variety of derivative financial instruments to manage its exposures including:
(i)
Forward foreign exchange contracts to hedge the exchange rate risk arising from cross-border trade flows, foreign
income and debt service obligations
(ii) Cross-currency interest rate swaps to manage the interest rate and currency risk associated with foreign currency
denominated borrowings
(iii) Interest rate swaps to manage interest rate risk
(iv) Commodity forward contracts to manage commodity price movements in contracts.
The Group does not enter into or trade derivative financial instruments for speculative purposes.
Financial assets and liabilities are offset and the net amount reported in the Consolidated Statement of Financial
Position, when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle
on a net basis or realise the asset and settle the liability simultaneously. No material amounts with a right to offset were
identified in the Consolidated Statement of Financial Position.
(c) Foreign currency risk management
The Group undertakes certain transactions denominated in foreign currencies. As a result, exposures to exchange rate
fluctuations arise. Exchange rate exposures are managed within approved policy parameters, utilising forward foreign
exchange contracts and cross-currency swaps.
The carrying amounts of the Group’s unhedged foreign currency denominated financial assets and financial liabilities
at the reporting date are as follows:
Financial assets(i)
Financial liabilities(i)
2024
$’m
2023
$’m
2024
$’m
2023
$’m
US Dollar (USD)
3.1
2.3
0.1
0.2
Euro (EUR)
0.9
0.5
0.6
0.1
Japanese Yen (JPY)
0.4
0.3
0.5
–
Western Samoa Tala (WST)
1.5
–
–
–
Chinese Yuan (CNY)
–
–
0.3
–
Solomon Island Dollar (SBD)
0.1
–
0.2
–
South Africa Rand (ZAR)
1.6
0.3
–
–
(i) The above table shows foreign currency financial assets and liabilities in Australian dollar equivalent.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
160
161
G _ Other
G _ Other
Foreign currency forward contracts
The following table summarises, by currency pairs, the Australian dollar value (unless otherwise stated) of forward
exchange contracts outstanding as at the reporting date:
Weighted average
exchange rate
Foreign currency
Contract value
Fair value
Outstanding contracts
2024
2023
2024
FC’m
2023
FC’m
2024
$’m
2023
$’m
2024
$’m
2023
$’m
Buy USD/Sell AUD
Less than 3 months
0.6704
0.6807
4.4
3.1
6.5
4.6
0.1
0.1
3 to 6 months
0.6646
0.7287
5.0
2.1
7.5
2.9
–
0.3
Later than 6 months
0.6610
0.6929
8.9
3.9
13.5
5.6
(0.1)
0.2
18.3
9.1
27.5
13.1
–
0.6
Sell USD/Buy AUD
Less than 3 months
0.6491
0.6768
2.4
0.9
3.7
1.3
0.1
–
3 to 6 months
0.6357
0.6888
5.4
8.2
8.6
11.8
0.4
(0.4)
Later than 6 months
0.6685
0.6514
1.0
7.6
1.5
11.6
–
0.3
8.8
16.7
13.8
24.7
0.5
(0.1)
Buy EUR/Sell AUD
Less than 3 months
0.6156
0.6328
1.6
0.8
2.6
1.3
–
0.1
3 to 6 months
0.6047
0.6198
2.2
0.5
3.7
0.9
(0.1)
–
Later than 6 months
0.5928
0.6201
7.9
0.6
13.4
1.0
(0.3)
–
11.7
1.9
19.7
3.2
(0.4)
0.1
Buy JPY/Sell AUD
Less than 3 months
100.79
85.32
489.2
435.1
4.9
5.1
(0.3)
(0.6)
3 to 6 months
98.05
87.65
510.5
164.6
5.2
1.9
(0.3)
(0.1)
Later than 6 months
87.13
84.48
636.7
560.9
7.3
6.6
(1.1)
(0.4)
1,636.4
1,160.6
17.4
13.6
(1.7)
(1.1)
Sell JPY/Buy AUD
Less than 3 months
96.11
90.50
49.3
25.0
0.5
0.3
–
–
3 to 6 months
90.84
80.88
80.8
70.2
0.9
0.9
0.1
0.1
Later than 6 months
92.15
87.83
66.1
21.4
0.7
0.2
0.1
–
196.2
116.6
2.1
1.4
0.2
0.1
Buy NZD/Sell AUD
Less than 3 months
1.0836
1.0854
190.0
40.0
175.4
36.9
(1.5)
(0.1)
Sell NZD/Buy AUD
Less than 3 months
–
1.0895
–
20.0
–
18.4
–
–
Buy GBP/Sell AUD
Less than 3 months
0.5189
–
0.5
–
0.9
–
–
–
Later than 6 months
0.5208
–
2.1
–
4.1
–
–
–
2.6
–
5.0
–
–
–
Weighted average
exchange rate
Foreign currency
Contract value
Fair value
Outstanding contracts
2024
2023
2024
FC’m
2023
FC’m
2024
$’m
2023
$’m
2024
$’m
2023
$’m
BUY CNY/Sell AUD
Less than 3 months
4.8117
–
2.6
–
0.5
–
–
–
3 to 6 months
4.7104
4.6580
13.6
21.1
2.9
4.5
(0.1)
(0.1)
Later than 6 months
4.5417
–
46.5
–
10.2
–
(0.2)
–
62.7
21.1
13.6
4.5
(0.3)
(0.1)
BUY ZAR/Sell AUD
Less than 3 months
12.4584
12.8198
14.5
3.4
1.2
0.3
–
–
3 to 6 months
12.6895
12.8855
19.3
5.6
1.5
0.4
–
–
33.8
9.0
2.7
0.7
–
–
Total
(3.2)
(0.6)
Cross-currency interest rate swaps
Under cross-currency interest rate swaps, the Group is committed to exchange certain foreign currency loan principal
and interest amounts at agreed future dates at fixed foreign exchange and interest rates. Such contracts enable the
Group to eliminate the risk of adverse movements in foreign exchange and interest rates related to foreign currency
denominated borrowings.
The following table details the Australian dollar equivalent of cross-currency interest rate swaps outstanding as at the
reporting date:
Weighted average AUD
equivalent interest rate
(including credit margin)
Weighted average
exchange rate
Contract value
Fair value
Outstanding contracts
2024
%
2023
%
2024
2023
2024
$’m
2023
$’m
2024
$’m
2023
$’m
Buy USD/Sell AUD
1 to 5 years
5.9
5.9
0.7739
0.7739
129.2
129.2
19.2
17.3
Buy JPY/Sell AUD
5 years or more
5.2
5.2
83.12
83.12
120.3
120.3
(25.4)
(9.9)
The above cross-currency interest rate swaps are designated as effective cash flow hedges.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
162
163
G _ Other
G _ Other
Foreign currency sensitivity analysis
The Group is mainly exposed to the movement in United States dollar (USD), New Zealand dollar (NZD), Euro (EUR), Chinese
Yuan (CNY) and Japanese Yen (JPY) arising from cross-border trade and intercompany flows.
The following table details the Group’s sensitivity to movements in the Australian dollar against relevant foreign currencies.
The percentages disclosed below represent the Group’s assessment of the possible changes in spot foreign exchange
rates (i.e. forward exchange points and discount factors have been kept constant). The sensitivity analysis includes only
outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a given
percentage change in foreign exchange rates. A rate change indicates an appreciation or depreciation of the Australian
dollar spot exchange rate against the foreign currency of the exposure.
A positive number indicates a before-tax increase in profit and equity and a negative number indicates a before-tax
decrease in profit and equity.
Profit/(loss)(i)
Equity(ii)
2024
$’m
2023
$’m
2024
$’m
2023
$’m
USD impact
- 15% rate change
0.5
0.4
2.4
(1.9)
+ 15% rate change
(0.4)
(0.3)
(1.8)
1.4
NZD impact
- 15% rate change
–
–
30.7
6.5
+ 15% rate change
–
–
(22.7)
(4.8)
EUR impact
- 15% rate change
0.1
–
3.1
–
+ 15% rate change
–
–
(2.3)
–
JPY impact
- 15% rate change
–
–
2.4
1.9
+ 15% rate change
–
–
(1.8)
(1.4)
CNY impact
- 15% rate change
–
–
2.2
–
+ 15% rate change
–
–
(1.6)
–
ZAR impact
- 15% rate change
0.3
–
(0.4)
–
+ 15% rate change
(0.2)
–
0.3
–
(i) This is mainly as a result of the changes in the value of unhedged foreign currency denominated financial assets and liabilities.
(ii) This is as a result of the changes in the value of forward foreign exchange contracts designated as cash flow hedges.
(d) Interest rate risk management
The Group is exposed to interest rate risk as entities borrow funds at floating interest rates. Management of this risk is
governed by a Board approved Treasury Policy that requires an appropriate mix of fixed and floating rate borrowings
and hedging be maintained utilising cross-currency interest rate swaps and interest rate swap contracts and the issue
of long-term fixed rate debt securities.
The Group’s exposure to interest rates on financial assets and financial liabilities is detailed in the table below:
Weighted average AUD
equivalent interest rate
(including credit margin)
Liability/(asset)
2024
%
2023
%
2024
$’m
2023
$’m
Floating interest rates – income and cash flow exposure
Bank loans(i) (ii)
5.3
5.3
522.1
587.0
Cash and cash equivalents
3.7
2.3
(837.6)
(889.1)
Total cash flow exposure
(315.5)
(302.1)
Fixed interest rates – fair value exposure
Bank loans(i) (ii)
–
5.0
–
221.8
USD private placement notes(ii)
5.9
5.9
131.8
133.5
AUD private placement notes
5.8
5.8
30.0
30.0
Medium term notes(ii)
3.6
3.6
623.4
620.5
Total fair value exposure
785.2
1,005.8
(i) Swaps currently in place cover approximately 100% (30 June 2023: 28%) of the variable loan principal outstanding. The swaps's maturity range from July 2024 to March 2025. The
fixed interest rates of the swaps range between 3.23% and 4.68% (30 June 2023: 3.23% and 3.45%) and the variable rates of the loans are set at a margin above the relevant floating
rate.
(ii) The marked to market values of the interest rate and cross-currency swaps have been included in the debt amounts.
All interest rates in the above table reflect rates in the currency of the relevant loan other than USD private placement
notes and JPY medium term notes, where the AUD rates under the relevant cross-currency swaps are used.
The table above relates to amounts that are drawn. The Group has a number of undrawn facilities, which if utilised would
be on a floating rate basis.
The Group uses cross-currency interest rate swaps and interest rate swap contracts to manage interest rate exposures.
Under these contracts, the Group commits to exchange the difference between fixed and floating rate interest amounts
calculated on notional principal amounts. The principal and interest amounts on USD private placement notes and JPY
medium term notes have been fully hedged against the Australian dollar through cross-currency interest rate swaps.
The fair values of interest rate swaps are based on market values of equivalent instruments at the reporting date.
The following table details the interest rate swap contracts and related notional principal amounts as at the reporting date:
Weighted average
interest rate
Notional principal amount
Fair value
Outstanding floating to fixed swap
contracts
2024
%
2023
%
2024
$’m
2023
$’m
2024
$’m
2023
$’m
AUD interest rate swaps
Less than 1 year
4.1
3.3
525.0
225.0
0.1
3.2
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
164
165
G _ Other
G _ Other
Interest rate sensitivity analysis
The sensitivity analysis has been determined based on the exposure to interest rates at the reporting date and assuming
that the rate change occurs at the beginning of the financial year and is then held constant throughout the reporting period.
Sensitivities have been based on a movement in interest rates of 100 basis points across the yield curve of the relevant
currencies. The selected basis point increase or decrease represents the Group’s assessment of the possible change in
interest rates based on the current observable market environment for variable rate instruments, cross-currency interest
rate swaps and interest rate swaps. An increase or decrease in interest rates of 100 basis points on the unhedged position
(mostly cash and cash equivalents) will decrease or increase net interest expense by $4.8 million (2023: $3.0 million)
respectively for the next 12 months based on the closing cash and floating rate debt balances and assuming no
changes to the existing rate hedges.
For hedged positions designated as cash flow hedges, an increase and decrease in interest rates of 100 basis points
will generate an increase and decrease in equity of $1.3 million (2023: $1.4 million) and $1.2 million (2023: $1.2 million)
respectively.
(e) Credit risk management
Credit risk refers to the risk that a financial counterparty will default on its contractual obligations in respect of a financial
instrument, resulting in a potential loss to the Group.
Trade receivables and contract assets arise from a large number of customers, spread across diverse industries
and geographical areas. A credit risk assessment is performed at the onset of material contracts to assess the
financial condition of the counterparty and reviewed annually to take account of any changes in the risk profile of
the counterparty. Where possible, a bank guarantee or performance bond, or parent guarantee from a creditworthy
counterparty, is sought to secure a counterparty’s contractual payment obligations. Refer to Note C2 for details on credit
risk arising from trade receivables and contract assets.
Financial counterparty credit limits and the related credit acceptability of financial counterparties are set by a Board
approved Treasury Policy that is subject to annual review to remain relevant to the external environment and reflects
the Group’s risk appetite at all times. The Treasury Policy sets clear parameters for determining acceptable financial
counterparties and limits the exposure the Group may have at any one time to any financial counterparties to mitigate
financial loss due to a default by a counterparty. No material exposure is considered to exist by virtue of the non-
performance of any financial counterparty.
Credit risk on derivative financial instruments and cash balances held with financial counterparties is managed by Group
Treasury with transactions only made with approved counterparties that have a minimum investment grade rating from
Standard & Poor’s of A- (or equivalent from Moody’s or Fitch rating agencies). In limited circumstances, surplus cash may
be held in foreign jurisdictions with financial counterparties that do not meet the minimum rating threshold where there is
no other alternative.
The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents
the Group’s maximum exposure to credit risk.
(f) Liquidity risk management
Liquidity risk is the risk that the Group is unable to meet its financial obligations as and when they fall due. The Group’s
liquidity risk is managed under a Board approved Treasury Policy that sets clear parameters governing the Group’s
continued access to liquidity.
The Group manages liquidity risk by maintaining a minimum level of liquidity to meet the Group’s financial obligations in
the form of available liquid cash balances and access to committed undrawn debt facilities and other forms of capital,
monitoring forecast and actual cash flows and matching the maturity profile of financial assets and liabilities.
The Group seeks to mitigate its exposure to liquidity risk by using debt facilities provided by strong investment grade rated
financial counterparties and by the early refinancing of debt facilities for continued access to capital over the medium term.
As at 30 June 2024, the Group has no debt facilities maturing within the 12 months to 30 June 2025. The maturity profile
and quantum of the Group’s debt facilities will continue to be monitored and refinanced in advance subject to credit
market conditions and the support of its financial counterparties. Included in Note E2 is a summary of committed
undrawn bank loan facilities.
Liquidity risk tables
The following tables detail the contractual maturity of the Group’s financial liabilities. The tables are based on the
undiscounted cash flows of financial liabilities and include both interest and principal cash flows.
2024
$’m
Less than
1 year
1 to 2
years
2 to 3
years
3 to 4
years
4 to 5
years
More than
5 years
Bank loans(i)
31.0
166.2
99.6
307.4
–
–
USD notes
6.9
154.4
–
–
–
–
AUD notes
1.7
30.9
–
–
–
–
Medium term notes
19.5
519.5
1.0
1.0
1.0
98.0
Total borrowings including interest
59.1
871.0
100.6
308.4
1.0
98.0
Cross-currency interest rate swaps
5.9
(16.2)
5.2
5.2
5.2
47.3
Interest rate swaps
(0.5)
–
–
–
–
–
Foreign currency forward contracts
21.6
4.0
4.1
1.1
–
–
Total derivative instruments(ii)
27.0
(12.2)
9.3
6.3
5.2
47.3
Trade and other payables
1,826.0
14.9
7.7
0.6
0.3
5.7
Lease liabilities
149.3
112.1
85.1
62.8
45.6
143.4
Total financial liabilities
2,061.4
985.8
202.7
378.1
52.1
294.4
2023
$’m
Less than
1 year
1 to 2
years
2 to 3
years
3 to 4
years
4 to 5
years
More than
5 years
Bank loans(i)
45.7
403.9
162.2
18.0
307.4
–
USD notes
6.9
6.9
154.3
–
–
–
AUD notes
1.7
1.7
30.9
–
–
–
Medium term notes
19.7
19.7
519.7
1.2
1.2
110.0
Total borrowings including interest
74.0
432.2
867.1
19.2
308.6
110.0
Cross-currency interest rate swaps
5.8
5.8
(16.2)
5.1
5.1
41.5
Interest rate swaps
(2.5)
(0.9)
–
–
–
–
Foreign currency forward contracts
4.8
0.2
–
–
–
–
Total derivative instruments(ii)
8.1
5.1
(16.2)
5.1
5.1
41.5
Trade and other payables
1,944.4
15.4
7.0
1.3
0.7
5.2
Lease liabilities
156.7
115.0
86.1
63.0
45.2
156.4
Total financial liabilities
2,183.2
567.7
944.0
88.6
359.6
313.1
(i) $522 million (2023: $812 million) of the bank loan liabilities relate to loan principal obligations with the balance relating to interest obligations for the current drawn profile.
These interest obligations are set by reference to the relevant quarterly or monthly floating interest rate at the reporting date. Note that the principal and interest obligations
are subject to change based on the actual drawn profile and changes in market interest rate.
(ii) Includes assets and liabilities. The derivative instruments are subject to change as interest rates and exchange rates change.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
166
167
G _ Other
G _ Other
Recognition and measurement
Derivative financial instruments
Derivative financial instruments are initially recognised at fair value on the date a derivative contract is entered into and
are subsequently re-measured at their fair value at each reporting date. Any gains or losses arising from changes in fair
value of derivatives, except those that qualify as effective hedges, are immediately recognised in profit or loss. These are
presented as current assets or liabilities to the extent they are expected to settle within 12 months after the end of the
reporting period. There were no fair value hedges in the year ended 30 June 2024.
Hedge accounting
AASB 9 aligns the accounting for hedging instruments closely with the Group’s risk management objectives and strategy
and applies a more qualitative and forward-looking approach to assessing hedge effectiveness. The Group has
elected to adopt the general hedge accounting model in AASB 9. AASB 9 includes requirements on rebalancing hedge
relationships and prohibiting voluntary discontinuation of hedge accounting.
Fair value hedges
Fair value hedges are used to hedge the exposure to changes in the fair value of a recognised asset, liability or firm
commitment. For fair value hedges, changes in the fair value of the derivative, together with any changes in the fair value
of the hedged asset or liability that is attributable to the hedged risk, are immediately recorded in profit or loss. Hedge
accounting is discontinued when the hedge instrument expires or is sold, terminated, exercised, or no longer qualifies for
hedge accounting.
Cash flow hedges
Cash flow hedges are used to hedge risks associated with contracted and highly probable forecast transactions.
For cash flow hedges, the effective portion of changes in the fair value of the derivative is deferred in equity and the
gain or loss relating to the ineffective portion is recognised immediately in profit or loss.
Amounts deferred in equity are transferred to profit or loss in the same period the hedged item is recognised in profit or
loss. When the forecast transaction that is hedged results in the recognition of a non-financial asset or liability, the gains
and losses previously deferred in equity are transferred to form part of the initial measurement of the cost of the non-
financial asset or liability.
If the forecast transaction is no longer expected to occur, the cumulative gain or loss that was deferred in equity is
recognised immediately in profit or loss. If the hedge instrument expires or is sold, terminated, exercised, or no longer
qualifies for hedge accounting, any gain or loss deferred in equity remains in equity until the forecast transaction occurs.
G3. Other financial assets and liabilities
2024
$’m
Financial assets
Financial liabilities
Current
Non-current
Current
Non-current
At amortised cost(i):
Level 1
Other financial assets
13.2
5.7
–
–
Advances to/from joint ventures and associates
5.9
2.9
2.5
–
Deferred consideration
–
–
2.0
–
19.1
8.6
4.5
–
At fair value:
Level 2
Foreign currency forward contracts – Cash flow hedge
0.7
0.1
3.6
0.5
Cross-currency and interest rate swaps – Cash flow hedge
0.3
19.6
5.1
20.9
1.0
19.7
8.7
21.4
Level 3
Unquoted equity investments – Fair value through OCI
–
17.8
–
–
–
17.8
–
–
Total
20.1
46.1
13.2
21.4
(i) Due to the short-term nature of the other current receivables, their carrying amount is considered to be the same as their fair value. For the majority of the non-current receivables,
the fair values are also not significantly different from their carrying amounts.
2023
$’m
Financial assets
Financial liabilities
Current
Non-current
Current
Non-current
At amortised cost(i):
Level 1
Other financial assets
3.4
14.4
–
–
Advances to/from joint ventures and associates
4.2
–
3.6
–
Deferred consideration
–
–
1.3
–
7.6
14.4
4.9
–
At fair value:
Level 2
Foreign currency forward contracts – Cash flow hedge
0.8
0.5
1.5
0.3
Cross-currency and interest rate swaps – Cash flow hedge
2.3
18.6
4.9
5.4
Downer Contingent Share Options (DCSO) financial instrument
–
–
3.7
–
3.1
19.1
10.1
5.7
Level 3
Unquoted equity investments – Fair value through OCI
–
18.0
–
–
–
18.0
–
–
Total
10.7
51.5
15.0
5.7
(i) Due to the short-term nature of the other current receivables, their carrying amount is considered to be the same as their fair value. For the majority of the non-current receivables,
the fair values are also not significantly different from their carrying amounts.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
168
169
G _ Other
Reconciliation of Level 3 fair value measurements of financial assets
The fair value of Level 3 investments has decreased by $0.2 million from prior year (2023: $8.3 million increase) due to
revaluation and return on investment.
Recognition and measurement
Fair value measurement
When a derivative is designated as the cash flow hedging instrument, the effective portion of changes in the fair value
of the derivative is recognised in Other comprehensive income and accumulated in the hedging reserve. Any ineffective
portion of changes in the fair value of the derivative is recognised immediately in profit or loss.
Valuation of financial instruments
For financial instruments measured and carried at fair value, the Group uses the following to categorise the methods used:
Level 1: fair value is calculated using quoted prices in active markets for identical assets or liabilities
Level 2: fair value is estimated using inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly (as prices) or indirectly (derived from prices)
Level 3: fair value is estimated using inputs for the asset or liability that are not based on observable market data.
During the year there were no transfers between Level 1, Level 2 and Level 3 fair value hierarchies.
The following table shows the valuation technique used in measuring Level 2 and 3 fair values, as well as significant
unobservable inputs used:
Type
Valuation technique
Significant unobservable input
Cross-currency and
interest rate swaps
Calculated using the present value of the
estimated future cash flows based on
observable yield curves.
Not applicable.
Foreign currency
forward contracts
Calculated using forward exchange rates
prevailing at the balance sheet date.
Not applicable.
Unquoted equity
investments
Calculated based on the Group’s interest
in the net assets of the unquoted entities.
Assumptions are made with regard to future
expected revenues and discount rates.
Changing the inputs to the valuations to
reasonably possible alternative assumptions
would not significantly change the amounts
recognised in profit or loss, total assets or
total liabilities, or total equity.
Basis for preparation
The consolidated entity disclosure statement has been prepared in accordance with the Corporations Act 2001 (Cth),
includes information for each entity that was part of the consolidated entity as at 30 June 2024 and has regard to the
Australian Taxation Office’s Practical Compliance Guidance 2018/9.
Determination of tax residency
Section 294(3A)(vi) of the Corporations Act 2001 (Cth) defines tax residency as having the meaning in the Income Tax
Assessment Act 1997. The determination of tax residency involves judgement as there are different interpretations that
could be adopted and which could give rise to a different conclusion on residency.
In determining residency, the consolidated entity has applied the following interpretations:
Australian tax residency
The consolidated entity has applied the current legislation and guidance including having regard to the Australian
Taxation Office’s public guidance in Tax Ruling TR 2018/5.
Foreign tax residency
The consolidated entity has applied current legislation and relevant revenue authority guidance in the determination
of foreign tax residency.
Partnerships and trusts in Australia
Australian tax law generally does not contain corresponding residency tests for partnerships and trusts and these entities
are typically taxed on a flow-through basis.
Bodies Corporate
Tax residency
Entity name
Entity type
Place
incorporated
or formed
Ownership
interest
Australian
or foreign
Foreign
Jurisdiction
Downer EDI Limited (the Parent)
Body Corporate
Australia
100%
Australian
N/A
ACN 009 173 040 Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Aladdin Group Services Pty Limited
Body Corporate
Australia
100%
Australian
N/A
Aladdin Laundry Pty Limited
Body Corporate
Australia
100%
Australian
N/A
Aladdin Linen Supply Pty Limited
Body Corporate
Australia
100%
Australian
N/A
Aladdins Holdings Pty. Limited
Body Corporate
Australia
100%
Australian
N/A
ASPIC Infrastructure Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Asset Services (Aust) Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Berkeley Challenge (Management)
Pty Limited
Body Corporate
Australia
100%
Australian
N/A
Berkeley Challenge Pty Limited
Body Corporate
Australia
100%
Australian
N/A
Berkeley Railcar Services Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Berkeleys Franchise Services Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Bonnyrigg Management Pty. Limited
Body Corporate
Australia
100%
Australian
N/A
Chang Chun Ao Hua Technical Consulting
Co Ltd
Body Corporate
China
100%
Foreign
China
Cleandomain Proprietary Limited
Body Corporate
Australia
100%
Australian
N/A
Cleanevent Australia Pty. Ltd.
Body Corporate
Australia
100%
Australian
N/A
Cleanevent Holdings Pty. Limited
Body Corporate
Australia
100%
Australian
N/A
Consolidated entity
disclosure statement
for the year ended 30 June 2024
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
170
171
Consolidated entity disclosure statement
Consolidated entity disclosure statement
Bodies Corporate
Tax residency
Entity name
Entity type
Place
incorporated
or formed
Ownership
interest
Australian
or foreign
Foreign
Jurisdiction
Cleanevent International Pty. Limited
Body Corporate
Australia
100%
Australian
N/A
Cleanevent Middle East FZ-LLC
Body Corporate
United Arab
Emirates
(Dubai)
100%
Foreign
United Arab
Emirates
(Dubai)
Cleanevent Technology Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Concrete Pavement Recycling Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
DGL Investments Limited
Body Corporate
New Zealand
100%
Foreign
New Zealand
DM Roads Services Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
DMH Electrical Services Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
DMH Maintenance and Technology Services
Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
DMH Plant Services Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Downer Australia Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Downer Construction (Fiji) Pte Limited
Body Corporate
Fiji
100%
Foreign
Fiji
Downer Construction (New Zealand) Limited
Body Corporate
New Zealand
100%
Foreign
New Zealand
Downer EDI Associated Investments Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Downer EDI Engineering (S) Pte. Ltd.
Body Corporate
Singapore
100%
Foreign
Singapore
Downer EDI Engineering Company
Pty Limited
Body Corporate
Australia
100%
Australian
N/A
Downer EDI Engineering CWH Pty Limited
Body Corporate
Australia
100%
Australian
N/A
Downer EDI Engineering Electrical Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Downer EDI Engineering Group Pty Limited
Body Corporate
Australia
100%
Australian
N/A
Downer EDI Engineering Holdings
(Thailand) Limited
Body Corporate
Thailand
100%
Foreign
Thailand
Downer EDI Engineering Holdings Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Downer EDI Engineering PNG Limited
Body Corporate
Papua New
Guinea
100%
Foreign
Papua New
Guinea
Downer EDI Engineering Power Limited
Body Corporate
New Zealand
100%
Foreign
New Zealand
Downer EDI Engineering Power Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Downer EDI Engineering Pty Limited
Body Corporate
Australia
100%
Australian
N/A
Downer EDI Engineering Thailand Ltd
Body Corporate
Thailand
100%
Foreign
Thailand
Downer EDI Group Insurance Pte. Ltd.
Body Corporate
Singapore
100%
Foreign
Singapore
Downer EDI Limited Tax Deferred
Employee Share Plan
Trust
N/A
N/A
N/A
N/A
Downer EDI Mining - Ghana Limited
Body Corporate
Ghana
100%
Foreign
Ghana
Downer EDI Mining Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Downer EDI Mining – Minerals Exploration
Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Downer EDI Rail (Hong Kong) Limited
Body Corporate
Hong Kong
100%
Foreign
Hong Kong
Bodies Corporate
Tax residency
Entity name
Entity type
Place
incorporated
or formed
Ownership
interest
Australian
or foreign
Foreign
Jurisdiction
Downer EDI Rail Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Downer EDI Services Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Downer EDI Works (Hong Kong) Limited
Body Corporate
Hong Kong
100%
Foreign
Hong Kong
Downer EDI Works Pty Ltd
Body Corporate –
Partner in Partnership
Australia
100%
Australian
N/A
Downer EDI Works Vanuatu Limited
Body Corporate
Vanuatu
100%
Foreign
Vanuatu
Downer Energy Systems Pty Limited
Body Corporate
Australia
100%
Australian
N/A
Downer Group Finance Pty Limited
Body Corporate
Australia
100%
Australian
N/A
Downer Holdings Pty Limited
Body Corporate
Australia
100%
Australian
N/A
Downer Investments Holdings Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Downer KHSA JV
Partnership
Australia
N/A
N/A
N/A
Downer Mining Regional NSW Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Downer New Zealand Limited
Body Corporate
New Zealand
100%
Foreign
New Zealand
Downer New Zealand Projects 1 Limited
Body Corporate
New Zealand
100%
Foreign
New Zealand
Downer New Zealand Projects 2 Limited
Body Corporate
New Zealand
100%
Foreign
New Zealand
Downer PipeTech Pty Limited
Body Corporate
Australia
100%
Australian
N/A
Downer PPP Investments Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Downer Professional Services Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Downer Pte. Ltd.
Body Corporate
Singapore
100%
Foreign
Singapore
Downer QTMP Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Downer Singapore Pte. Ltd.
Body Corporate
Singapore
100%
Foreign
Singapore
Downer Utilities Australia Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Downer Utilities Holdings Australia Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Downer Utilities New Zealand Limited
Body Corporate
New Zealand
100%
Foreign
New Zealand
Downer Utilities New Zealand Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Downer Utilities SDR Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Downer Victoria PPP Maintenance Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
EDI Rail PPP Maintenance Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
EDICO Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Emoleum Partnership
Partnership
Australia
N/A
N/A
N/A
Emoleum Road Services Pty Ltd
Body Corporate –
Partner in Partnership
Australia
100%
Australian
N/A
Emoleum Roads Group Pty Ltd
Body Corporate –
Partner in Partnership
Australia
100%
Australian
N/A
Envista Pty Limited
Body Corporate
Australia
100%
Australian
N/A
Errolon Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Evans Deakin Industries Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
172
173
Consolidated entity disclosure statement
Consolidated entity disclosure statement
Bodies Corporate
Tax residency
Entity name
Entity type
Place
incorporated
or formed
Ownership
interest
Australian
or foreign
Foreign
Jurisdiction
Fieldforce Services Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Fowlers Asphalting Pty. Limited
Body Corporate
Australia
100%
Australian
N/A
Gippsland Asphalt Pty. Ltd.
Body Corporate
Australia
100%
Australian
N/A
Green Vision Recycling Limited
Body Corporate
New Zealand
100%
Foreign
New Zealand
Hawkins Limited
Body Corporate
New Zealand
100%
Foreign
New Zealand
Hawkins Projects 1 Limited
Body Corporate
New Zealand
100%
Foreign
New Zealand
Infrastructure Constructions Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
International Linen Service Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
ITS Pipetech Pacific (Fiji) Pte Limited
Body Corporate
Fiji
100%
Foreign
Fiji
KHSA Limited
Body Corporate –
Partner in Partnership
Jersey
100%
Australian
N/A
LNK Group Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Lowan (Management) Pty. Ltd.
Body Corporate
Australia
100%
Australian
N/A
Maclab Services Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
MD Mineral Technologies Africa (Pty) Ltd
Body Corporate
South Africa
100%
Foreign
South Africa
MD Mineral Technologies Private Limited
Body Corporate
India
100%
Foreign
India
MD Mining and Mineral Services (Pty) Ltd
Body Corporate
South Africa
70%
Foreign
South Africa
Mineral Technologies (Holdings) Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Mineral Technologies Comercio de
Equipamentos para Processamento de
Minerais LTDA
Body Corporate
Brazil
100%
Foreign
Brazil
Mineral Technologies Inc.
Body Corporate
Canada
100%
Foreign
Canada
Mineral Technologies Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Mineral Technologies, Inc.
Body Corporate
USA
100%
Foreign
USA
Monteon Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Nationwide Venue Management Pty Limited
Body Corporate
Australia
100%
Australian
N/A
New South Wales Spray Seal Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Pacific Industrial Services BidCo Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Pacific Industrial Services FinCo Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Primary Producers Improvers Pty. Ltd.
Body Corporate
Australia
100%
Australian
N/A
PT Duffill Watts Indonesia
Body Corporate
Indonesia
100%
Foreign
Indonesia
Rail Services Victoria Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Richter Drilling (PNG) Limited
Body Corporate
Papua New
Guinea
100%
Foreign
Papua New
Guinea
Riley Shelley Services Pty Limited
Body Corporate
Australia
100%
Australian
N/A
Roche Services Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
RPC Roads Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Bodies Corporate
Tax residency
Entity name
Entity type
Place
incorporated
or formed
Ownership
interest
Australian
or foreign
Foreign
Jurisdiction
RPQ Asphalt Pty. Ltd.
Body Corporate –
Partner in Partnership
Australia
100%
Australian
N/A
RPQ JV
Partnership
Australia
N/A
N/A
N/A
RPQ Mackay Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
RPQ North Coast Pty. Ltd.
Body Corporate
Australia
100%
Australian
N/A
RPQ Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
RPQ Services Pty. Ltd.
Body Corporate
Australia
100%
Australian
N/A
RPQ Spray Seal Pty. Ltd.
Body Corporate
Australia
100%
Australian
N/A
Skilltech Consulting Services Pty. Ltd.
Body Corporate
Australia
100%
Australian
N/A
Skilltech Metering Solutions Pty Ltd.
Body Corporate
Australia
100%
Australian
N/A
Smarter Contracting Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Southern Asphalters Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Sports Venue Services Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Spotless Defence Services Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Spotless Facility Services (NZ) Limited
Body Corporate
New Zealand
100%
Foreign
New Zealand
Spotless Facility Services Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Spotless Financing Pty Limited
Body Corporate
Australia
100%
Australian
N/A
Spotless Group Holdings Limited
Body Corporate
Australia
100%
Australian
N/A
Spotless Group Limited
Body Corporate
Australia
100%
Australian
N/A
Spotless Holdings (NZ) Limited
Body Corporate
New Zealand
100%
Foreign
New Zealand
Spotless Investment Holdings Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Spotless Management Services Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Spotless Property Cleaning Services Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Spotless Securities Plan Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Spotless Services Australia Limited
Body Corporate
Australia
100%
Australian
N/A
Spotless Services International Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Spotless Services Limited
Body Corporate
Australia
100%
Australian
N/A
Spotless Treasury Pty Limited
Body Corporate
Australia
100%
Australian
N/A
SSL Asset Services (Management) Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
SSL Facilities Management Real Estate
Services Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
SSL Security Services Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Tarmac Linemarking Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Taylors Two Two Seven Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Techtel Training & Development Limited
Body Corporate
New Zealand
100%
Foreign
New Zealand
The Roading Company Limited
Body Corporate
New Zealand
100%
Foreign
New Zealand
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
174
175
Consolidated entity disclosure statement
Bodies Corporate
Tax residency
Entity name
Entity type
Place
incorporated
or formed
Ownership
interest
Australian
or foreign
Foreign
Jurisdiction
Trenchless Group Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Trico Asphalt Pty. Ltd.
Body Corporate –
Partner in Partnership
Australia
100%
Australian
N/A
UAM Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Utility Services Group Holdings Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Utility Services Group Limited
Body Corporate
Australia
100%
Australian
N/A
VEC Civil Engineering Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
VEC Plant & Equipment Pty Ltd
Body Corporate
Australia
100%
Australian
N/A
Waste Solutions Limited
Body Corporate
New Zealand
100%
Foreign
New Zealand
Works Finance (NZ) Limited
Body Corporate
New Zealand
100%
Foreign
New Zealand
In the opinion of the Directors of Downer EDI Limited:
(a) The financial statements and notes set out on pages 87 to 170 are in accordance with the Australian Corporations
Act 2001 (Cth), including:
(i)
Complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements; and
(ii) The financial statements and notes thereto give a true and fair view of the financial position and performance
of the Company and the consolidated entity;
(b) There are reasonable grounds to believe that Downer EDI Limited will be able to pay its debts as and when they
become due and payable;
(c) The Directors have been given the declarations required by section 295A of the Corporations Act 2001 (Cth);
(d) The attached financial statements are in compliance with International Financial Reporting Standards, as noted
in Note A to the financial statements; and
(e) The consolidated entity disclosure statement is true and correct.
At the date of this declaration, there are reasonable grounds to believe that the Company and the companies to
which ASIC Corporations (Wholly owned Companies) Instrument 2016/785 applies, as detailed in Note F5 to the financial
statements will, as a group, be able to meet any liabilities to which they are, or may become, subject because of the deed
of cross guarantee.
Signed in accordance with a resolution of the Directors made pursuant to Section 295(5) of the Corporations Act 2001 (Cth).
On behalf of the Directors
Mark Menhinnitt
Peter Tompkins
Chairman
Managing Director and Chief Executive Officer
Sydney, 30 August 2024
Directors’ Declaration
for the year ended 30 June 2024
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
176
177
Corporate Governance
Overview
Downer’s corporate governance framework provides the platform from which:
The Board is accountable to shareholders for the operations, performance and growth of the Company
Downer management is accountable to the Board
The risks to Downer’s business are identified and managed
Downer effectively communicates with its shareholders and the investment community.
Downer continues to enhance its policies and processes to promote leading corporate governance practices.
The Board endorses the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations
(ASX Principles).
Principle 1: Lay solid foundations for management and oversight
The Downer Board Charter sets out the functions and responsibilities of the Board and is available on the Downer website
at www.downergroup.com.
The Board Charter states that the role of the Board is to provide strategic guidance and to effectively oversee
management of the Company. Among other things, the Board is responsible for:
Overseeing the Company, including its control and accountability systems
Appointing and removing the Group CEO and senior executives
Monitoring performance of the Group CEO and senior executives
Reviewing, ratifying and monitoring systems of risk management and internal control, codes of conduct and legal
compliance.
Before appointing a Director or senior executive, the Board undertakes appropriate checks.
The Board provides shareholders with all material information which is relevant to the decision to elect or re-elect
a Director.
Directors receive formal letters of engagement setting out the key terms, conditions and expectations of their
engagement.
As part of its commitment to leading corporate governance practice, The Board undertakes improvement programs,
including externally facilitated periodic reviews of its performance and effectiveness, and that of its Committees and
Directors. The last review was completed during FY22. A review is currently underway and will be completed during 2024.
The review includes consideration of the skills and knowledge of Directors, the role of the Board and its Committees
and their effectiveness, the role of management and relationship with the Board and the effectiveness of the Board’s
governance framework and processes.
The Board Charter also describes the functions delegated to management, led by the Group CEO.
The primary goal set for management by the Board is to focus on enhancing shareholder value, which includes
responsibility for Downer’s economic, environmental and social performance.
The Group CEO is responsible for the day-to-day management of Downer with authority to act delegated and authorised
by the Board.
Downer has written employment agreements with each of its senior executives and the performance of those senior
executives is regularly reviewed against appropriate measures, including performance targets linked to the business plan
and overall corporate objectives. In 2024, Downer’s senior executives participated in periodic performance evaluations
where they received feedback on progress against these targets.
The Company Secretary is responsible for supporting the effectiveness of the Board and is directly accountable to the
Board, through the Chair, on all matters to do with the proper functioning of the Board.
Details of Downer’s Directors and the Executive Leadership Team are available on the Downer website at
www.downergroup.com.
Corporate Governance
for the year ended 30 June 2024
Corporate Governance Framework
Downer Board
Sets Downer’s strategy, risk appetite and oversees Management
CEO
Responsible for day-to-day management of the Group within the Group’s Delegations of Authority
Each Committee refers relevant matters to other Board committees as required
Executive Leadership Team
Provides the Group’s organisational direction and executive governance over Group performance
Downer’s People
Responsible for working to deliver Downer’s purpose whilst adhering to the standards of behaviour set out in our values and Code of Conduct
The Committees and Management report to the Board via
recommendation and information papers and minutes
The Board delegates responsibility to its Committees and Management
pursuant to Charters, Delegation of Authority, Risk Appetite Statement,
Policies and other delegations from time to time
Audit and Risk
Committee
Oversee financial
reporting
processes, internal
controls, internal
and external audit
Nominations
Committee
Manage
Non-executive
Director and CEO
appointments and
succession
People and
Culture
Committee
Oversee people
and remuneration
related strategies,
policies,
frameworks and
practices
Project
Governance
Committee
Oversee
Company’s
opportunity and
bid management,
and delivery
processes
Zero Harm
Committee
Oversee workplace
health and safety
and environment
and sustainability
policies and risk
Disclosure
Committee
Oversee disclosure
obligations to ASX
and NZX
Oversight
(2nd Line of Defence)
Risk, Legal, Finance, People & Culture, Zero Harm, Sustainability, Information Technology
Oversight
(3rd Line of Defence)
Internal Audit, external assurance and verification and professional advice
Further information on Downer’s approach to risk management can be found on page 34.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
178
179
Corporate Governance
Corporate Governance
Inclusion and Belonging at Downer
Downer is committed to a diverse and inclusive workforce, which fulfils the expectations of its employees, customers
and shareholders while building a sustainable future for its business. This is formalised through the Downer Inclusion &
Belonging (I&B) Policy which outlines the Company’s commitment to developing a diverse and inclusive workforce.
The I&B Policy is available on the Downer website at www.downergroup.com.
ASX diversity recommendations – diversity statement
This diversity statement outlines Downer’s performance throughout 2024 with respect to its broader diversity program,
but with a particular focus on gender, and specifically includes:
Details of Downer’s key gender representation metrics
An overview of the gender diversity initiatives undertaken by Downer throughout 2024
An outline of Downer’s measurable gender diversity objectives for 2024.
Gender representation metrics
As of 30 June 2024, Downer’s female gender representation metrics were as follows:
Board
57%
Senior Executive1
19%
Management2
21%
Workforce
30%
1. For present purposes, ‘Senior Executive’ refers to CEO, KMP and Other Executives/General Managers as defined in the Workplace Gender Equality Agency Reference Guide to the
workplace profile and reporting questionnaire (WGEA Reference Guide).
2. For present purposes, ‘Management’ refers to CEO, KMP, Other Executives/General Managers, Senior Managers and Other Managers as defined in the WGEA Reference Guide.
Looking back: 2024 measurable objectives
Focus area
Objective
Targets
Initiatives
FY24 Outcomes
Inclusion and
Belonging
Guiding
Frameworks
Develop and
maintain an
overall approach
to Inclusion &
Belonging that
creates sustainable
change
Own Different
Inclusion &
Belonging
Strategy
and Action
Plan reset for
FY25‑27
Update Strategy and
Plan for FY25-27
Strategy and Action Plan for Inclusion and
Belonging FY25 – FY27 has been approved.
The new strategic plan has three key focus
areas being Gender, Indigenous and Inclusion.
Continue to embed
Own Different into
on-going employee
communications and
as a part of culture
development
The Downer Difference (new culture platform)
now embodies Own Different under the
‘We Stand for Each Other’ culture focus area.
The three culture behaviours focused on
achievement, customer centricity and an
inclusive, purpose driven workplace – Own It,
Do It, Make the Difference.
Launch Inclusion &
Belonging SharePoint
as a central hub of
resources, particularly
to support the broader
focus areas of I&B
The Inclusion & Belonging SharePoint hub
has been redeveloped to centrally locate
resources that support broad I&B focus areas
including:
Employee Networks
EmpowHER (women’s network)
Inclusion and Belonging
Summer of Pride
Downer Giving
Indigenous Resources Hub
THRIVE (Women’s development)
Wāhine Kotahitanga and StandOut in NZ
Share&Learn series recommenced.
Focus area
Objective
Targets
Initiatives
FY24 Outcomes
Inclusion and
Belonging
Guiding
Frameworks
continued
Each Business Unit to
have an active Inclusion
& Belonging Committee
with a Plan that aligns
with overall Strategy but
reflects the issues and
opportunities in their
business
Individual Business Units have an Inclusion
& Belonging Action Plan which they govern,
through a specific I&B Committee or existing
management structure. Business Units report
within their BU. Group initiatives are reported
through Group reporting.
Aboriginal,
Torres Strait
Islander
and Māori
peoples
Develop and lead
an Employment
Program for
Aboriginal and
Torres Strait Islander
peoples at Downer
Partner with
Indigenous
businesses to
build relationships,
promote
Best Practice
procurement and
increase supplier
diversity
Streamline data
collection and
reporting and
communication
of ISG Strategy,
outcomes and
metrics internally
and externally
3% Aboriginal
and Torres
Strait Islander
employees
Develop an internal
overarching approach
to achieve employment
target. This will encompass
processes and resources
for talent acquisition,
onboarding, career
development, mentoring
and retention – delivered
through the Downer
Indigenous Employment
Program (DIEP)
A framework approach aligned to the
Operating Model for the DIEP will be
submitted to the Executive for endorsement
in Q1 2025.
The proposed DIEP framework is designed
to support and empower all Business Units
with the required resources and information
to develop employment pathways and
opportunities for Aboriginal and Torres Strait
Islander peoples.
Develop and deliver a
series of information
sessions, awareness packs
and other resources to the
business about Aboriginal,
Torres Strait Islander and
Māori history and cultures,
such as Cultural Learning
Bites
The Indigenous Resources Hub redesigned
and updated with resources and information
to support and educate all employees.
The ICAT learning module promoted and
automatically assigned to all new starters.
Cultural Awareness Share and Learn sessions
have been organised for June and July 2024
linking to NAIDOC week and Matariki.
Establish and maintain
mutually beneficial
relationships with
Aboriginal and Torres Strait
Islander stakeholders and
organisations. Promote
and share outcomes and
achievements with the
business
Renewed partnership agreements with NRL
Cowboys House, STARS Foundation and
Kinaway to support Downer’s Reconciliation
Action Plan and initiatives. Partnership
agreements and strong relationships with
Supply Nation and Reconciliation Australia.
Various engagements are promoted and
highlighted via news stories.
Develop an Indigenous
Business Inclusion
Strategy to increase spend
and build meaningful
relationships enabling
greater Supplier Diversity
Indigenous Procurement Statement has
been developed and will be published on
the Indigenous Resources Hub. Indigenous
Business Directory is available for all Downer
employees to find Indigenous suppliers to
engage in all areas – currently 593 active
suppliers listed (as of June 2024).
In New Zealand, we engaged with Amotai to
deliver Maturity Matrix for Supplier Diversity to
increase awareness.
Continue to deliver
Downer’s Māori Leadership
Development program, Te
Ara Whanake
Te Ara Whanake, Te Hā (wāhine only) and
senior Māori Leadership Ake programs had
68 participants complete and another group
of 22 starting in May.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
180
181
Corporate Governance
Corporate Governance
Focus area
Objective
Targets
Initiatives
FY24 Outcomes
Aboriginal,
Torres Strait
Islander
and Māori
peoples
continued
Continue to deliver the
Te Ara Maramatanga
program to non-Māori
leaders which gives them
a deeper understanding
of Māori history, culture
and Tikanga. Provide this
opportunity to Australian-
based leaders as well
Te Ara Māramatanga was delivered to
116 participants for FY24.
Deliver Indigenous Cultural
Awareness training for all
NZ-based CEO-2 in trans-
Tasman business
ICAT training has been rolled out across
Senior Leaders with trans-Tasman
responsibility.
Gender
Diversity
To improve
opportunities for
women to reach
their potential
through an inclusive
work environment
while positioning
Downer Group as a
preferred employer
for women
40% women
in the
workforce
by 2026
25% women in
management
positions by
2026
25% women
in executive
positions by
2026
30% women
Directors on
the Board
Analyse the WGEA
reporting data and
provide to each of the I&B
Committees to use the
learnings as key inputs to
develop ongoing strategy,
programs and initiatives
WGEA Action Plan has been developed so
that obligations and commitments are met.
EmpowHER, an enterprise-wide women’s
networking group launched as part
of International Women’s Day. Current
membership interest is at 200 across the
business. The EmpowHER Committee, led
by Executive sponsor Murray Robertson,
comprises of women and allies across
Downer. EmpowHER will be a sounding
board/community to explore gender equality
issues and solutions.
New recruitment targets included as part of
the I&B Strategy and Action Plan FY25-27 to
improve gender ratios at all levels.
Executive Mentoring Program launched in
June 2024 providing mentoring by Executive
and Senior Leaders for high potential women
at CEO 2 and 3 level.
Work180 partnership in Australia renewed to
support attraction and retention of women
to Downer.
Support the Wahine
Kotahitanga female
network group and
provide opportunity to
share learnings across
NZ and AU
This employee-led network has several
initiatives to drive awareness and grow
their network base. A few committee
members had their profiles featured for
this year’s International Women’s Day
celebrations. They are participating in the
‘Check your language’ campaign and
a resilience workshop for onsite wāhine
across the business.
Continue to deliver THRIVE,
our women’s personal
and professional growth
program, encompassing
AU and NZ participants
The 2024 THRIVE program commenced
with four cohorts (104 participants) in
Brisbane, Sydney, Melbourne and Auckland.
The revamped program focuses on
accelerating growth of female talent.
Establish the THRIVE
Alumni framework
THRIVE Alumni established November 2023
and connected online to share insights,
learning bites and content.
THRIVE Alumni will be involved in providing
mentorship for the 2024 participants.
Focus area
Objective
Targets
Initiatives
FY24 Outcomes
Generational
Diversity
To establish Downer
Group as a sought-
after employer for
all age groups and
as an organisation
that builds a
talent pipeline of
thought leaders and
continues to value
experience
Increase the
number of
graduate and
apprentice
employees
year-on-year
Engage a new sourcing
channel to attract youth
Partnership in New Zealand with Zeil – a
mobile based app developed for youth
attraction – commenced in October 2023.
Develop a flexible
working framework that
supports retention of
employees approaching
retirement age
Through our Corporate Social Outcomes
Team, we have had 28 Tētēkura participants
graduate this program. It targets Māori
rangatahi (16 to 24 years old) NEETS (not in
education, employment or training). This is
funded through our partnership with
Te Puni Kōkiri.
Flexible working that supports employee
retention approaching retirement is
incorporated into the individual Business
Units’ Inclusion & Belonging plans.
Continue to build a talent
pipeline by investing in
entry-level programs that
align to our generational
diversity focus and priority
areas, including:
Graduate Development
Programs
Cadetships and
further undergraduate
programs
Apprenticeships and
traineeships (mature-
age opportunities,
recognition of prior
learning for experienced
workers without formal
qualifications)
Internships
CSO pre-employment
programs
Continual investment in our youth and entry
level programs managed within Business
Units. Programs include:
Internships, cadetships, traineeships and
apprenticeships and Graduates
In NZ, under the CSO team, the partnership
with the Ministry of Social Development,
placed 24 people through our Road and
Water Ready programs and into full-time
employment.
LGBTIQA+
Create a
welcoming and safe
environment for
all employees who
identify as lesbian,
gay, bisexual,
transgender,
intersex, queer,
asexual and
other diverse
genders, sexes
and sexualities
Increase
confidence
of employees
to identify as
LGBTIQA+
Develop and deliver
information sessions,
awareness packs and
other resources to the
business in relation to
LGBTIQA+ communities,
leveraging relationship
with the Rainbow Tick
Downer Summer of Pride, our annual trans-
Tasman recognition and celebration of
Pride month, was launched in February 2024
including a Share and Learn session on the
Rainbow communities.
Training was rolled out through our
partnership with Rainbow Tick within
New Zealand to enhance awareness and
inclusivity.
StandOut members have presented to
multiple teams on rainbow community
matters and New Zealand Kaitaiki presented
on StandOut at the Senior Leaders Forum.
Downer received recognition at the
New Zealand Rainbow Excellence Awards,
achievements including earning a high
commendation for The ASB Emerging Award;
StandOut’s collective efforts resulted in
securing fourth place in the Overall Supreme
Award categories.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
182
183
Corporate Governance
Corporate Governance
Focus area
Objective
Targets
Initiatives
FY24 Outcomes
LGBTIQA+
continued
Identify new partnerships
and opportunities for
sourcing and recruiting
employees from the
LGBTIQA+ community
Downer Group signed up to Pride Pledge
and the Rainbow Tick has been renewed for
New Zealand.
Sponsorship of Rainbow Engineering Network
benefiting LGBTIQA+ engineering students
at Waipapa Taumata Rau, The University of
Auckland. This sponsorship supports students
through community connection events and
education initiatives, with StandOut members
engaging at their events.
Leverage the work of the
StandOut forum in NZ by
providing wider access to
their SharePoint site and
initiatives
Updated internal StandOut SharePoint site.
197 members and allies on our StandOut
Support Register. SharePoint page total
views 2,084.
Looking ahead: 2025 measurable objectives
Focus area
Objective
Targets
Initiatives
Inclusion
Continue to drive
Inclusion & Belonging
as a key focus for the
organisation to support
Downer culture and an
inclusive workplace,
identifying initiatives
that create sustainable
change
Own Different Inclusion
& Belonging Strategy
and Action Plan reset
for FY25-27
Update I&B Strategy and Plan and identify key group
initiatives that support the three focus areas – Inclusion,
Gender and Indigenous (Aboriginal, Torres Strait Islander
and Māori peoples).
Downer Difference
is embedded in
the organisation
with >80% of the
workforce having at
least one touchpoint
of exposure
Full roll-out of the project and communication plan for
The Downer Difference across the organisation to support
culture transformation.
Design and development of the annual CEO Awards for
launch in July 2024 recognising and reinforcing the three
culture focus areas.
Design and development of the Family Scholarships
program for launch in 2024.
Relaunch of Own Career = Own Performance and
Own Development framework for salaried employees –
a Company-wide approach to performance management
– with the aim of >80% of the salaried workforce completing
the full performance cycle.
Design and develop Downer’s Employee Value Proposition
articulating our culture, employee benefits and career
opportunities – to improve attraction, retention and
employee engagement across all demographics.
Create a welcoming
and safe environment
for all employees who
identify as lesbian, gay,
bisexual, transgender,
intersex, queer, asexual
and other diverse
genders, sexes and
sexualities
Increase confidence
of employees to
identify and/or
actively support
LGBTIQA+, evidenced
through increased
participation and
allyship of the
network group(s)
Launch an LGBTIQA+ employee network across the whole
of Downer – targeting 200 members initially with growing
participation year on year.
Focus area
Objective
Targets
Initiatives
Aboriginal,
Torres Strait
Islander and
Māori peoples
Develop and lead an
Employment Program
for Aboriginal and
Torres Strait Islander
peoples at Downer
3% Aboriginal and
Torres Strait Islander
employees
Development of a framework that supports the employment
of Aboriginal and Torres Strait Islander peoples at Downer.
The Downer Indigenous Employment Program (DIEP) will
provide Business Units with central resources and tools to
support talent acquisition, onboarding, career development,
mentoring and retention – with the aim of achieving the 3%
target by 2026.
Establishment of an Indigenous Employee Network that
supports the engagement and connection of our Aboriginal
and Torres Strait Islander peoples at Downer – with growing
participation year on year.
Development of mutually beneficial engagement plans that
leverage key partnerships with Aboriginal and Torres Strait
Islander organisations including STARS Foundation, NRL
Cowboys House and Kinaway.
Partner with
Indigenous businesses
to build relationships,
promote Best Practice
procurement, and
increase supplier
diversity
Streamline data
collection and
reporting and
communication of ISG
Strategy, outcomes
and metrics internally
and externally
Implementation of our new Reconciliation Action Plan for
2024 to 2026, outlining new initiatives and commitments to
continue Downer’s support and impact on Aboriginal and
Torres Strait Islander peoples, communities and businesses,
with a strong focus on strengthening Downer’s position
as an employer of choice to attract, develop and retain
Aboriginal and Torres Strait Islander peoples to achieve
delivery of the RAP commitments by 2026.
Design and roll out anti-racism learning module across the
Company – targeting >80% of the workforce completing the
appropriate training.
Māori development
programs
Continue to
deliver the current
Māori Leadership
Development program,
Te Ara Whanake, Te Hā
(wāhine leadership
only) and Te Ara
Whanake Ake (Senior
Māori leadership
programs) and Te Ara
Māramatanga
Continue to deliver Downer’s Māori leadership development
program, Te Ara Whanake, Te Hā (wāhine leadership only)
and Te Ara Whanake Ake (Senior Māori leadership program).
Maintaining year-on-year participant numbers.
Continue to deliver the Te Ara Māramatanga program to
non-Māori leaders, which provides a deeper understanding
of the Te Ao Māori (Māori worldview), Tikanga and protocols
through noho-mara immersion. Maintaining year-on-year
participation numbers.
Attendance required from our Australian-based leaders
responsible for trans-Tasman responsibility, where/when possible.
Gender
Diversity
To improve
opportunities for
women to reach their
potential through
an inclusive work
environment while
positioning Downer
Group as a preferred
employer for women
40% women in the
workforce by 2026
25% women in
management
positions by 2026
28% women in
executive positions by
2026
40% women Directors
on the Board
Continue to refresh and refine THRIVE program – our personal
and professional growth program to support women in
Downer – achieving >80% satisfaction from participants.
Continue to deliver Sexual Harassment training to build
knowledge and awareness of bullying and sexual
harassment in the workforce – targeting >80% of the
workforce completing the appropriate training.
Launch the Executive Mentoring Program for Women at
CEO 2 and 3 and develop ongoing framework that supports
the second year of the program for FY26, targeting >80%
satisfaction from mentees and mentors.
Build on the launch of the EmpowHER network with
scheduled events and connection to drive engagement of
women at Downer – maintaining year-on-year increase in
membership and participation in events.
Implement recruitment targets to promote the employment
of women across all levels of the organisation – including but
not limited to:
50% shortlist representation for management and
professional roles
30% shortlist targets for frontline Graduate and
Apprenticeship roles and professional Graduate roles.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
184
185
Corporate Governance
Corporate Governance
Principle 2: Structure the Board to be effective and add value
Throughout the 2024 financial year, the Board was comprised of a majority of independent Directors.
The Board is currently comprised of the Chair (Mark Menhinnitt, an independent, Non-executive Director), six other
independent, Non-executive Directors and an Executive Director (the Group CEO, Peter Tompkins). Details of the members
of the Board, including their skills, experience, status and their term of office are set out in the Directors’ Report on pages 10
to 13 and are also available on the Downer website at www.downergroup.com.
The composition of the Board is reviewed and assessed by the Nominations Committee so that the Board is of a
composition, size and commitment to effectively discharge its responsibilities and duties.
Directors are required to bring their independent judgement to bear on all Board decisions. To facilitate this, it is
Downer’s policy to provide Directors with access to independent professional advice at the Company’s expense in
appropriate circumstances.
Downer’s Non-executive Directors recognise the benefit of conferring regularly without management present, and they
do so at various times throughout the year.
The Board considers that an independent Director is a Non-executive Director who is not a member of management and
who is free of any business or other relationship that could (or could reasonably be perceived to) materially interfere with
the independent exercise of their judgement.
The Board regularly assesses the independence of each Director so that each Director has the capacity to bring
independent judgement to bear on issues before the Board and to act in the best interests of Downer as a whole.
Downer’s governance framework requires each Director to promptly disclose actual and possible conflicts of interest,
any interests in contracts, other directorships or offices held, related party transactions and any dealing in the
Company’s securities.
At least one Director must retire from office at each Annual General Meeting (AGM). No Non-executive Director can serve
more than three years without offering themselves for re-election.
The Chair of the Board is an independent, Non-executive Director. The Chair is responsible for the leadership of the Board
and for the efficient organisation and functioning of the Board.
The Chair is appointed by the Board so that a high standard of values, governance and constructive interaction
is maintained.
The Chair facilitates the effective contribution of all Directors and promotes constructive and respectful relations between
Directors and the Board and management. The Chair also represents the views of the Board to Downer’s shareholders
and conducts the AGM.
The roles of Chair and Group CEO are not exercised by the same person and the division of responsibilities between
the Chair and the Group CEO have been agreed by the Board and are set out in the Board Charter and Downer’s
Delegations Policy.
The Board has established a number of committees to assist the Board to effectively and efficiently execute
its responsibilities. A list of the Board Committees and their current membership is set out in the table below.
Board Committee
Chair
Members
Audit and Risk
Nicole Hollows
Peter Barker
Teresa Handicott
Adelle Howse
Steven MacDonald
Disclosure
Teresa Handicott
Mark Menhinnitt
Peter Tompkins
Nominations
Mark Menhinnitt
Teresa Handicott
Nicole Hollows
Adelle Howse
People and Culture
Adelle Howse
Sheridan Broadbent
Nicole Hollows
Mark Menhinnitt
Project Governance
Mark Menhinnitt
Peter Barker
Sheridan Broadbent
Nicole Hollows
Steven MacDonald
Peter Tompkins
Zero Harm
Sheridan Broadbent
Teresa Handicott
Steven MacDonald
Mark Menhinnitt
Peter Tompkins
The names of members of each Committee, the number of meetings and the attendances by each of the members
of the various committees to which they are appointed is set out in the Directors’ Report on page 44.
The role of the Audit and Risk Committee is set out under Principle 7 on page 192 of this statement.
The Board has established the Nominations Committee to oversee the practices for selection and appointment
of Directors of the Company.
The Nominations Committee’s primary purpose is to support and advise the Board on fulfilling its responsibilities to
shareholders so that the Board is comprised of individuals who are best able to discharge the responsibilities of Directors
having regard to the law and leading governance practice.
The Nominations Committee has a charter which sets out its roles and responsibilities, composition, structure,
membership requirements and the procedures for inviting non-committee members to attend meetings.
The Nominations Committee Charter gives the Nominations Committee access to internal and external resources,
including advice from external consultants and specialists. The Nominations Committee Charter is available on the
Downer website at www.downergroup.com.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
186
187
Corporate Governance
Corporate Governance
The Nominations Committee, all members of which are independent Directors, is chaired by an independent Director
and has a minimum of three members.
The Committee’s responsibilities include:
Assessing the skills and competencies required on the Board
Assessing the extent to which the required skills are represented on the Board
Establishing processes for the review of the performance of individual Directors, Board Committees and the Board as
a whole
Establishing processes for identifying suitable candidates for appointment to the Board (including undertaking a
formal due diligence screening process)
Recommending the engagement of nominated persons as Directors.
When appointing Directors, the Nominations Committee aims for an appropriate balance of skills, experience, expertise
and diversity is represented on the Board. This may result in a Non-executive Director with a longer tenure remaining in
office to bring that experience and depth of understanding to matters brought before the Board.
Given the breadth of Downer’s service offerings across a range of markets, the Board seeks to maintain an appropriate
range of technical skills and executive experience across engineering and construction disciplines as well as services
activities, and professional services when considering the appointment of a new Director.
Downer’s Board renewal program is ongoing. The Board identified engineering and operational expertise in utilities, in
particular power and water infrastructure, maintenance and services, financial and accounting expertise and experience,
experience in senior executive roles, as well as knowledge and experience of the New Zealand markets, as key skills
required for the future.
On 1 September 2023, Steven MacDonald joined the Board as a Director. Mr MacDonald is an experienced Non-
executive Director and senior executive with extensive experience in the water and power sectors delivering engineering
maintenance, services and major infrastructure projects ranging from power plants to tunnels to freeways and rail and
has worked in both Australia and New Zealand.
On 2 October 2023, Sheridan Broadbent joined the Board as a Director. Ms Broadbent is an experienced Non-executive
Director and senior executive with experience in business strategy, technology, business development, and health and
safety in the utilities and telecommunications sectors. Having worked in both Australia and New Zealand and being
based in Auckland, Ms Broadbent brings a deep understanding of the New Zealand market.
Peter Barker joined the Board as a Director on 1 July 2024. Mr Barker is an experienced Non-executive Director and senior
executive with experience in finance, risk management, corporate structuring including mergers, acquisitions and
divestments, and systems transformation in complex multi-jurisdictional environments in the engineering, services
and technology sectors.
From time to time, Downer engages external specialists to assist with the selection process as necessary, and the Chair,
Board and Group CEO meet with candidates as part of the appointment process.
Nominations for re-election of Directors are reviewed by the Nominations Committee and Directors are re-elected in
accordance with the Downer Constitution and the ASX Listing Rules.
The role of the People and Culture Committee is set out under Principle 8 on page 193 of this statement.
The Project Governance Committee’s primary purpose is to approve tender opportunities that are above defined value
and risk thresholds at defined stage gates (pursue, prepare, submit tender and execute contract) and monitor overall
performance of the portfolio of projects. The Committee is chaired by an independent Director and comprises six
members, including the Group CEO.
The Zero Harm Committee’s purpose is to assist the Board in its oversight of the Company’s compliance with its health,
safety, environment and sustainability commitments, including Zero Harm, and its legal and regulatory obligations.
The Company has formal induction procedures for both Directors and senior executives. These induction procedures
have been developed to enable new Directors and senior executives to gain an understanding of:
Downer’s financial position, strategies, operations and risk management policies
The respective rights, duties and responsibilities and roles of the Board and senior executives
Downer’s culture and values.
The chart below illustrates the balance achieved with the current Board composition. The Company recognises the value
of diversity which has been a component of the appointment process over the past few years.
Skills
0
1
2
3
4
5
6
7
8
Transformation and Technology
People, Remuneration and Culture
Capital Management, Finance and Accounting
Strategy and Corporate Development
Leadership and Governance
Risk and Commercial Manangement
Health, Safety, Environment and Sustainability
Industry experience
4
3
5
4
3
4
1
3
1
3
3
7
4
1
5
5
3
5
Some
Substantial
Significant
Tenure (years)
Gender Diversity
1
0-3
Male
Female
9+
6-9
3-6
1
6
4
4
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
188
189
Corporate Governance
Corporate Governance
Directors are given an induction briefing by the Company Secretary and an induction pack containing information about
Downer and its business, Board and Committee charters and Downer Group policies. New Directors also meet with key
senior executives to gain an insight into the Company’s business operations and the Downer Group structure.
Directors are encouraged to continually build on their exposure to the Company’s business and a formal program
of Director site visits has been in place since 2009. Directors are also encouraged to attend appropriate training and
professional development courses to update and enhance their skills and knowledge and regular governance and;
other continuing education sessions are organised for the Board.
The Board is provided with the information it needs to discharge its responsibilities effectively. The Directors also have
access to the Company Secretary for all Board and governance-related issues and the appointment and removal of the
Company Secretary is determined by the Board. The Company Secretary is accountable to the Board, through the Chair,
on all governance matters.
Principle 3: Instil a culture of acting lawfully, ethically and responsibly
Downer’s Purpose is to enable communities to thrive, and Downer’s Promise is that our customers’ success is our success.
Downer’s Purpose and Promise are founded on the Pillars of Safety and Sustainability, Delivery, Relationships and
Thought Leadership and define the way it manages its business and are the foundations that support Downer’s culture.
An overview of the Purpose, Promise and Pillars can be found on the Downer website at www.downergroup.com.
Downer strives to attain the highest standards of behaviour and business ethics when engaging in corporate activity.
Downer’s Standards of Business Conduct sets the ethical tone and standards of the Company and deals with matters
such as:
Compliance with the letter and the spirit of the law
Workplace behaviour
Prohibition against bribery and corruption
Protection of confidential information
Engaging with stakeholders
Workplace safety
Inclusion and belonging
Sustainability
Conflicts of interest.
Downer has a formal whistleblower policy and procedures for reporting and investigating breaches of the Standards
of Business Conduct. This includes the Our Voice service, an external and independent reporting service which enables
employees, contractors, suppliers, consultants, or service providers to anonymously report potential breaches of the
Standards of Business Conduct, including misconduct or other unethical behaviour. Reports received through Our Voice
are investigated where appropriate, with senior leaders overseeing the completion of any remedial action. The Board is
informed of material breaches of the Standards of Business Conduct through reporting of incidents reported under the
whistleblower policy, investigations of allegations of fraud and breaches of Downer’s Zero Harm Cardinal Rules.
The Standards of Business Conduct applies to all officers and employees and is available on the Downer website at
www.downergroup.com.
Downer endorses leading governance practices and has in place policies setting out the Company’s approach to
various matters, including:
Securities trading (stipulating ‘closed periods’ for designated employees and a formal process which employees
must adhere to when dealing in securities)
The Company’s disclosure obligations (including continuous disclosure)
Communicating with shareholders and the general investment community
Privacy.
Downer has an Anti-Bribery and Corruption Policy which expands upon the prohibition against bribery and
corruption currently contained in the Standards of Business Conduct, and which addresses key issues such as working
with government, political donations, human rights, conducting business internationally and gifts and benefits.
The Board is informed of material breaches of the Anti-Bribery and Corruption Policy.
As Downer has operations in foreign jurisdictions, Downer employees are confronted by the challenges of doing business
in environments where bribery and corruption are real risks.
However, regardless of the country or culture within which its people work, Downer is committed to compliance with the
law, as well as maintaining its reputation for ethical practice.
All employees receive training on the Standards of Business Conduct, Downer’s Purpose, Promise and Pillars, workplace
behaviour and Zero Harm on commencement of employment as well as routine refresher training thereafter. Further
specific training is also provided depending on the function of particular roles.
These policies are available on the Downer website at www.downergroup.com.
Principle 4: Safeguard the integrity of corporate reports
The Company has in place a structure of review and authorisation which independently verifies and safeguards the
integrity of its financial reporting.
An external limited assurance engagement is performed on selected sustainability information in Downer’s Annual
Sustainability Report. Downer also follows a comprehensive internal verification process to provide assurance over
the integrity of the Sustainability Report and other periodic corporate reports which are not audited or reviewed by
the external auditor, including the Directors’ Report, Corporate Governance Statement, and Information for Investors.
This process involves review of reporting by relevant subject matter experts across the organisation so that it is materially
accurate, balanced and provides investors with appropriate information.
The Audit and Risk Committee assists the Board to fulfil its responsibilities relating to:
The quality and integrity of the accounting, auditing and reporting practices of the Company with a particular focus
on the qualitative aspects of financial reporting to shareholders
The Company’s risk profile and risk policies
The effectiveness of the Company’s system of internal control and framework for risk management.
The Audit and Risk Committee is structured so that it:
Consists of only Non-executive Directors
Consists of a majority of independent Directors
Is chaired by an independent Chair (who is not the Chair of the Board)
Has at least three members.
The Audit and Risk Committee comprises only independent Directors, includes members who are financially literate
and has at least one member who has relevant qualifications and experience.
The Audit and Risk Committee Charter sets out the Audit and Risk Committee’s role and responsibilities, composition,
structure and membership requirements and the procedures for inviting non-committee members to attend meetings.
The Board receives assurances from the Group CEO and the Group CFO that the declarations provided to it in relation
to the annual and half-year financial statements, in accordance with sections 295A and 303(4) of the Corporations Act
2001 (Cth), are founded on a sound system of risk management and internal control and that the system is operating
effectively in all material respects in relation to financial reporting risks. To support these declarations, management has
established the Financial and Corporate Governance Self-Assessment (FCGSA) process, which involves the completion
of an online survey by the key operational and functional executives of the Company, which covers accounting and
financial matters, fraud, policy compliance and Zero Harm, from which a summary of responses is provided to the Board
and informs the declarations.
Downer’s external auditor attends the Company’s AGMs and is available to answer any questions which shareholders
may have about the conduct of the external audit for the relevant financial year and the preparation and content of the
Audit Report.
Information regarding the number of times the Audit and Risk Committee convened in FY24, together with the individual
attendances of members at the meetings, is set out in the Directors’ Report on page 44.
The Audit and Risk Committee Charter is available on the Downer website at www.downergroup.com.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
190
191
Corporate Governance
Corporate Governance
Principle 5: Make timely and balanced disclosure
The Company’s Disclosure Policy sets out processes which assist the Company so that all investors have equal and timely
access to material information about the Company and that Company announcements are factual and presented in a
clear and balanced way. It includes that new and substantive investor or analyst presentations are released on the ASX
Market Announcements Platform ahead of the presentation.
A copy of the Disclosure Policy is available on the Downer website at www.downergroup.com.
The Disclosure Policy also sets out the procedures for identifying and disclosing material and market-sensitive
information in accordance with the Corporations Act 2001 (Cth) and the ASX Listing Rules. The Board receives copies
of all material market announcements promptly after they have been made.
Downer’s Disclosure Committee consists of two independent, Non-executive Directors (one of which is the Chair of the
Board) and the Group CEO. The Disclosure Committee oversees disclosure of information by the Company to the market
and the general investment community.
Principle 6: Respect the rights of security holders
Downer empowers its shareholders by:
Communicating effectively, openly and honestly with shareholders
Giving shareholders ready access to balanced and understandable information about the Company and its
governance
Making it easy for shareholders to participate in general meetings
Giving shareholders the option to receive communications from, and send communications to, the Company
and its security registry electronically.
The Downer Communication Policy sets out the Company’s approach to communicating with shareholders and is
available on the Downer website at www.downergroup.com.
The Company publishes corporate information on its website (www.downergroup.com), including Annual and Half Year
Reports, ASX announcements, investor updates and media releases.
Downer encourages shareholder participation at members’ meetings through its use of electronic communication,
including by making notices of meetings available on its website and audio casting of general meetings and significant
Group presentations. All substantive resolutions at meetings of shareholders are conducted by poll.
The Directors and key members of management attend the Company’s AGMs and are available to answer questions.
Principle 7: Recognise and manage risk
To mitigate the risks that arise through its activities, Downer has various risk management policies and procedures in
place that cover (among other matters) interest rate management, foreign exchange risk management, credit risk
management, tendering and contracting risk and project management.
Downer has controls at the Board, Board Committees, executive and business unit levels that are designed to safeguard
Downer’s interests and the integrity of reporting (including accounting, financial reporting, environmental and workplace
health and safety policies and procedures). These controls are directed at compliance with legal and regulatory
requirements, as well as community standards.
Downer has a Risk Management Framework in place to enable business risks to be identified, evaluated and managed.
The Board ratifies Downer’s approach to managing risk and oversees Downer’s Risk Management Framework, including
the Group risk profile and the effectiveness of the systems being implemented to manage risk. The last review of the Risk
Management Framework was completed in 2024. The Board reviews the Group risk profile twice each year and considers
other risk matters, such as business resilience, tender review processes, risk appetite, and specific risk areas, on a regular
basis, as well as regular reports from senior management, the internal audit team, and the external auditor.
Downer’s annual Sustainability Report provides a detailed overview of Downer’s approach to managing its environmental
and social risks. The Sustainability Report is available on the Downer website at www.downergroup.com/sustainability.
The Company’s internal audit function objectively evaluates and reports on the existence, design and operating
effectiveness of internal controls. Downer’s internal audit team is independent of the external auditor and reports
to the Audit and Risk Committee.
Downer’s Audit and Risk Committee assists the Board in its oversight of Downer’s risk profile and risk policies, the
effectiveness of the systems of internal control and Risk Management Framework and Downer’s compliance with
applicable legal and regulatory obligations. The Audit and Risk Committee Charter is available on the Downer website
at www.downergroup.com.
Management reports regularly to the Audit and Risk Committee on the effectiveness of Downer’s management of its
material business risks and on the progress of mitigation treatments.
Principle 8: Remunerate fairly and responsibly
The Board has established a People and Culture Committee and has adopted the People and Culture Committee
Charter which sets out its role and responsibilities, composition, structure and membership requirements and the
procedures for inviting non-committee members to attend meetings.
The People and Culture Committee is responsible for reviewing and making recommendations to the Board about:
People, culture and conduct
Talent management and succession
Inclusion and belonging
Executive remuneration and incentive policies
The remuneration, recruitment, retention, performance measurement and termination policies and procedures
for all senior executives reporting directly to the Group CEO
Executive and equity-based incentive plans
Superannuation arrangements and retirement payments.
Remuneration of the Non-executive Directors forms part of the responsibilities of the Nominations Committee.
Downer’s remuneration policy is designed to motivate senior executives to pursue the long-term growth and success
of the Company and prescribes a relationship between the performance and remuneration of senior executives.
The People and Culture Committee is structured so that it:
Consists of a majority of independent Directors
Is chaired by an independent Director
Has at least three members.
The Executive Director is not a member of the People and Culture Committee.
The maximum aggregate fee approved by shareholders that can be paid to Non-executive Directors is $2.4 million
per annum.
This cap was approved by shareholders on 3 November 2022. Further details about remuneration paid to Non-executive
Directors are set out in the Remuneration Report at page 76.
Retirement benefits, other than superannuation, are not paid to Non-executive Directors.
Non-executive Directors do not participate in any equity incentive schemes.
The remuneration structure for Executive Directors and senior executives is designed to achieve a balance between fixed
and variable remuneration taking into account the performance of the individual and the performance of the Company.
Executive Directors receive payment of equity-based remuneration as short-term and long-term incentives.
Executive Directors and senior executives are prohibited from entering transactions in associated products which limit
the economic risk of participating in unvested entitlements under any of the Company’s equity-based remuneration
schemes, as set out in the Securities Trading Policy. A copy of the Securities Trading Policy is available on the Downer
website at www.downergroup.com.
Further details about the remuneration of Executive Directors and senior executives are set out in the Remuneration
Report at page 67 and details of Downer shares beneficially owned by Directors are provided in the Directors’ Report
at page 77.
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
192
193
Information for Investors
Information for Investors
for the year ended 30 June 2024
Downer shareholders
Downer had 22,039 ordinary shareholders as at 30 June 2024, of which 20,424 shareholders had a registered address
in Australia.
The largest shareholder, HSBC Custody Nominees (Australia) Limited, held 30.49% of the 671,573,679 fully paid ordinary
shares issued at that date.
Securities exchange listing
Downer is listed on the Australian Securities Exchange (ASX) under the ‘Downer EDI’ market call code 3965, with ASX code
DOW, and is a foreign exempt issuer on the New Zealand Exchange with the ticker code DOW.
Company information
The Company’s website www.downergroup.com offers comprehensive information about Downer and its services.
The site also contains news releases and announcements to the ASX and NZX, financial presentations, Annual Reports,
Half Year Reports and Company news. Downer printed communications for shareholders include the Annual Report which
is available on request.
Dividends
Dividends are determined by the Board having regard to a range of circumstances within the business operations of
Downer including operating profit and capital requirements. The level of franking on dividends is dependent on the level
of taxes paid to the Australian Taxation Office by Downer and its incorporated joint ventures.
Dividends are paid in Australian dollars, other than for shareholders with a registered address in New Zealand, who
receive dividends in New Zealand dollars unless an election is made to receive payment in Australian dollars by providing
Australian bank account details.
International shareholders can use Computershare’s Global Payments System to receive dividend payments in the
currency of their choice at a nominal cost to the shareholder.
Dividend reinvestment plan
Downer’s Dividend Reinvestment Plan (DRP) is a mechanism to allow shareholders to increase their shareholding in the
Company without the usual costs associated with share acquisitions, such as brokerage. Details of the DRP are available
from the Company’s website or at www.computershare.com.au/investor.
The Company’s Dividend Reinvestment Plan remains suspended.
Share registry
Shareholders and investors seeking information about Downer shareholdings or dividends should contact the
Company’s share registry, Computershare Investor Services Pty Ltd (Computershare):
6 Hope St
Ermington NSW 2115
GPO Box 2975
Melbourne VIC 3000
Tel: 1300 556 161 (within Australia)
+61 3 9415 4000 (outside Australia)
Fax: 1300 534 987 (within Australia)
+61 3 9473 2408 (outside Australia)
www.computershare.com
Shareholders must give their holder number (SRN/HIN) when making inquiries. This number is recorded on issuer
sponsored and CHESS statements.
Updating your shareholder details
Shareholders can update their details (including banking and tax information, DRP elections and communication
preferences) online at www.computershare.com/investor. Simply log-in or sign up to create your investor centre account.
Shareholders will require their holder number (SRN/HIN) and postcode to access this site.
Tax file number information
Providing your tax file number to Downer is not compulsory. However, for shareholders who have not supplied their tax file
number, Downer is required to deduct tax at the top marginal rate plus Medicare levy from unfranked dividends paid to
investors residing in Australia. For more information please contact Computershare.
Lost issuer sponsored statement
You are advised to contact Computershare immediately, in writing, if your issuer sponsored statement has been lost or stolen.
Annual Report mailing list
Shareholders must elect to receive a Downer Annual Report by writing to Computershare Investor Services Pty Ltd at the
address provided. Alternatively, shareholders may choose to receive this publication electronically.
Change of address
So that we can keep you informed, and protect your interests in Downer, it is important that you inform Computershare
of any change of your registered address.
Registered office and principal
administration office
Auditor
Downer EDI Limited
PricewaterhouseCoopers
Level 2, Triniti III,
One International Towers Sydney
Triniti Business Campus
Watermans Quay
39 Delhi Road
Barangaroo
North Ryde NSW 2113
Sydney NSW 2000
Tel: +61 2 9468 9700
Fax: +61 2 9813 8915
Australian securities exchange information as at 31 July 2024
Number of holders of equity securities: 21,780
Ordinary share capital
671,573,679 fully paid listed ordinary shares were held by 21,780 shareholders. All issued ordinary shares carry one vote
per share.
Substantial shareholders
The following shareholders have notified that they are substantial shareholders of Downer as at 31 July 2024.
Shareholders
Ordinary
shares held
% of issued
shares
Ubique Asset Management Pty Ltd
65,069,751
9.69
L1 Capital Pty Ltd and L1 Capital Strategic Equity Management Pty Ltd
64,771,386
9.64
Allan Gray Australia Pty Ltd and its related bodies corporate
61,621,897
9.18
Host-Plus Pty Limited as trustee of the Hostplus Pooled Superannuation Trust
43,626,396
6.50
The Vanguard Group, Inc. and its controlled entities
40,966,780
6.10
T Rowe Price Associates, Inc.
40,961,899
6.09
Pendal Group Limited
41,010,826
6.07
State Street Corporation and subsidiaries
40,558,929
6.04
Dimensional Fund Advisors LP and its related bodies corporate
40,335,725
6.00
Annual Report 2024 Downer EDI Limited
Annual Report 2024 Downer EDI Limited
194
195
Information for Investors
Distribution of holders of quoted equity securities
Shareholder distribution of quoted equity securities as at 31 July 2024 is as follows.
Range of holdings
Number of
Shareholders
Shareholders
%
Ordinary
shares held
Shares
%
1 – 1,000
12,262
56.30
5,027,877
0.75
1,001 – 5,000
7,002
32.15
16,492,041
2.46
5,001 – 10,000
1,485
6.82
10,779,623
1.61
10,001 – 100,000
981
4.50
21,497,630
3.20
100,001 and over
50
0.23
617,776,508
91.98
Total
21,780
100.00
671,573,679
100.00
Holding less than a marketable parcel of shares
1,377
Twenty largest shareholders
Downer’s 20 largest shareholders of ordinary fully paid shares as at 31 July 2024 are as follows.
Shareholders
Shares Held
% of shares
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
204,122,817
30.39
CHASE MANHATTAN NOMINEES LIMITED
185,029,341
27.55
CITICORP NOMINEES PTY LIMITED
158,621,100
23.62
BNP PARIBAS NOMINEES PTY LTD
Continue reading text version or see original annual report in PDF format above