Wow, so this was the first time I had to 1) read a financial statement and 2) note the KCQs that occurred to me. I actually found this difficult to complete. You’d think I’d be able to voice, or in this case write, my opinions etc but I really had trouble completing this.
Please bare with me… I hope you don’t fall asleep reading it! Have a read and comment… I’d like to know what you all think and whether I’m on the right track with noting KCQs.
- The mining and infrastructure industry is such a competitive one, how is Downer going to improve on previous years?
- I believe the below information found is a big step in the right direction in order to improve the company’s performance. Targeting specific opportunities in the market and driving the company’s performance is a great start.
- What I love about Downer is that they focus on selling and providing solutions not just products. They work with their customers to ensure satisfaction all while ensuring they provide sustainable, environmentally friendly solutions and safe work places for employees. Downers seems like a company who care not only about the ‘bottom line’ but about the customers and employees.
- In marketing, customer service is a key factor in a successful business. Downer addresses this an article describing the company’s re-branding (see article: Makeover and re-branding).
- How will Downer improve in each service division?
- Prospect – potential for outsourcing as, government seek efficiency and smarter solutions
- Downer response – Joint venture with Mouchel (see article: DownerMouchel) opening opportunities up in other states other than WA.
- Provide an integrated roads business with an end-to-end service
- An interesting article written on the re-branding of the company also mentioned the decline in the infrastructure industry for Downer. A way that the company plans on addressing this, is by expansion though transportation (see article: Makeover and rebranding).
- Keolis Downer, a joint venture between Keolis and Downer EDI, have acquired ATE further increasing expansion and paving the way into other modes of transport e.g. bus transport (see article: Keolis Downer acquires ATE).
My thoughts and suggestions on transport:
This is great, I believe that there will always be opportunities in the transport industry particularly with the growth in population. In addition to road services, delving into bus transport can also bring in revenue. With one of the company’s pillars being ‘no-harm’ to environment and the increase in global warming, a great opportunity to address this is through public transport. Providing a solution and end-to-end service can decrease CO2 emissions from the use of numerous cars while providing customers with an efficient, cost-effective public transport service.
- Technology and Communications
- Prospect – Customers developing new performance-based contracting models. This is generating longer term construction, operations and maintenance opportunities
- Downer response – recently awarded a contract with NBN to continue rolling out the network.
- Also entered an agreement with NZ telecoms network operator to continue the roll-out of their ultra-fast broadband
My thoughts and suggestions on Tech and Comms:
Obtaining the network rollout in both Aust. And NZ, although contracted for certain period, was great. These networks are only a fairly new concept and therefore will increase in use over the coming years. With Downer being awarded these contracts, there’s now possibilities of future opportunities and expansions with the Networks. With the growing demand in broadband services, particularly NBN, I feel that this puts Downer in a good position.
- Prospect – Power, gas, water offer long-term operations and maintenance contract opportunities – potential growth in outsourcing
- New legislation in renewable energy targets = increased potential for new projects
- Downer response – With acquisition of Tenix Holdings, Downer hold a strong position in this division
- Recently awarded a contract on wind farm in VIC, pursuing several renewable energy opportunities
My thoughts and suggestions on Utilities:
I believe with the current contracts and acquisitions Downer has aligned themselves well with the company’s pillars. I feel that by doing so, they’ve placed themselves in a good position to increase, at the most maintain, their current financial position in this division.
- Prospect – Work in oil and gas sector
- Opportunities in developing across different stages of investment/ asset life cycle
- Downer response –building on its leading, multi-discipline capability, working with customers to provide the best project management delivery mode, and developing its asset management capabilities to become a strategic solutions provider across the complete asset lifecycle
- Also focused on optimising its performance on existing LNG projects
My thoughts and suggestions on EC&M:
I don’t know enough about this division to comment. However, as mentioned previously, the focus on solution selling and customer service is a major factor in increasing success, therefore revenue and long-term contracts.
- Prospect – Depressed commodity prices have led to reduced volumes and lower levels of investment, increasing the industry’s focus on cost reduction. However, opportunities exist for mining contractors that can work collaboratively with customers to help drive productivity improvements and reduce production costs.
- Downer response – continues to perform strongly by focusing on cost reduction, increased efficiencies and close collaboration with customers. During the year, it was awarded an expanded contract at Christmas Creek and contract extensions on other sites
My thoughts and suggestions on EC&M:
Like EC&M not much to comment here. I am hopeful that Downers approach will work in their favour. It seems as though it may and I guess with an awarded expanded contract, this will hopefully increase performance in this division.
- Prospect – Governments are seeking value through: – the procurement of large orders of passenger rolling stock and long-term maintenance contracts; – the franchising of operations and maintenance of heavy rail, light rail and bus transport networks; and – the development of multi-modal transport infrastructure solutions.
- Freight customers are seeking continual improvements to fleet performance and reliability, with a strong focus on technology and innovation
- Downer response – Downer’s rail asset management model has a strong focus on “return on investment” – i.e. increasing fleet availability and reliability.
- Downer maintains strong strategic partnerships with leading global transport solutions providers and, through this model, is pursuing opportunities in rolling stock manufacture and maintenance and transport network operations and maintenance
My thoughts and suggestions on EC&M:
Like transport division, I believe that Downer’s response to opportunities/ prospects in the rail division will maintain, if not increase, the company’s performance on last year.
What I don’t quite understand (After researching further, I have answered these questions where I can):
- 2015 Annual report stated: Cash and cash equivalents decreased by $59.6 million or 13.8% to $372.2 million, reflecting debt repayments and the on-market share buy-back. I understand that debt had to be paid but what is ‘on-market share buy-back?
- Buy-back share is when the company will ‘repurchase’ outstanding shares, for reasons such as investment into the company, reducing amount of shares on the market or simply reduce the risk of shareholders who might be looking to a controllable stake
- What is depreciation and amortisation?
- Both are reductions on net income. Unfortunately, this description didn’t help me understand what it is.
- Trade debtor days?
- How many days it takes for a company to get paid for its products/ services sold
- What does non-current assets mean?
- The definition of a non-current asset is an asset that’s not to be converted to cash within the 12months. I haven’t been able to find where the asset gets converted in the following year. I think there may be more to it than just a simple transfer from asset to the cash section of the report but I can only assume.
- What’s an intangible asset?
- Intangible asset is an asset that’s not physical in nature. Copyrights, patents, brand recognition etc. are multiple form of intangible assets.
- If intangible assets are not physical, is this why they’re in the non-current asset section of the reports? Is it because there is nothing ‘physical’ to sell it can’t be added to cash? I’d like to understand a little bit more about this.
- I don’t understand the entire remuneration section of the reports. What I do know is that remuneration is money paid out. I assume it’s the money paid to the executives but I’m not sure. at this stage given my level of knowledge.
- Obviously this understanding will come as my learning journey continues through the subject.
- What I’d really like to understand is the notes sections of the financial statement and how it is used to understand the annual report.