Today I thought I would share a few more interesting things about my company. Is anyone else spending way toooooo much time on this unit compared to their other units? I did the same thing last term, I hear my other 3 subject calling out my name, but I keep getting side tracked doing work for this unit. Oh well, there is always tomorrow, right!
So, picking up from the last post about Downers financial reports, I wanted to do a little digging into their Total Comprehensive Income for the last 4 financial years. I have already gone over the revenue and percentages that each sector contribute to that, so the big question is does Downer make a significant profit compared to the revenue they receive?
Everything seemed to be swimming along nicely from what I had read. Total Comprehensive Income for the 2015, 2016 and 2017 were:
$199.9 million, $187.7 million and $177.5 million. Tracking slight downward but nothing that alarmed me. Then the 2018 figure came along. $54.4 million. WTF? how is total comprehensive income down $123.10 million from 2017-2018?
I looked at the revenue and it was significantly larger than the 2017 period, so this increase in revenue lead to an increase in expenses. There was a $73 million difference between earnings before interest and tax. Now to generate more revenue it comes at a cost. Has downer surpassed it’s sticking point where additional revenue isn’t worth the additional expense amount? In all honesty, at this stage I don’t think so. It will be interesting to read 2019’s reports to see how they tracked for the most recent financial year. Another big difference is the 47 million increase in finance costs. Now in the case of Downer their finance costs include:
‘Finance costs comprise interest expense on borrowings, 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’
After going over the financial report for 2018, I can conclude that I am not concerned over the relevant increases and decreases. Either that or my brain just didn’t want to read the pages over and over and over. I’m pretty confident with how Downer are tracking. They will come up against obstacles. I will blog a little more about the possibilities in my next blog but overall, I’m still impressed with the company. I think they are diversified enough to continue to grow and make profits.
After more investigation I also found this:
‘During the period, the Group identified Individually Significant Items totalling $178.6 million after tax including: – $76.4 million Mining goodwill impairment; – $40.6 million loss on divestment of freight rail; – $17.5 million unsuccessful Auburn rail claim; – $20.0 million Divisional merger costs; and – $24.1 million related to Spotless management redundancies, transaction costs and residual Strategy Reset costs.’
There is a lot that goes into these reports and I am fully aware that I may not be at a stage to fully comprehend the financial position of the company but I’m still confident in Downer’s financial position at this stage. I have provided links to the reports if you would like to have a look.
https://www.downergroup.com/Content/cms/ResultsCentre/Annual-Report.pdf
I’m still extremely happy with being given this company. However at this stage my step 4 and 5 in addition to my word document are tracking along rather slowly 😂. Slow and steady wins the race right. There is so much information I could do around 78 blog posts, but I think it’s time to establish some boundaries.
Lisa.
I'm accounting on you! 
Lisa – great to see you engaging well with your firm and getting to understand aspects of its business. This will stand you in great stead when we start analysing our firms and forming a view of its value. Martin
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