COVID-19 Restrictions Crimp No-Moat Downer’s Earnings, Dividends Resume, No Change to AUD 6.00 FVE

We make no change to our AUD 6.00 fair value estimate for no-moat Downer. The morphing urban services company reported a 9% increase in underlying first-half fiscal 2021 NPAT to AUD 94 million, considerably below our expectations. Lower than anticipated revenue across all segments bar transport reflects challenging market conditions with impacts from COVID-19. Transport, however, enjoyed strong operating performance in surfacing, bituminous products, and network maintenance, with an expanded South Australian road network management contract. Utilities revenue faded following roll-off of NBN and UFB construction contracts, while facilities revenue trod water with State Government contracts benefiting from COVID-19 response.