Downer EDI’s largest investor, fund manager Allan Gray, says more work needs to be done to ensure the alleged corruption revealed during an inquiry last week is not a systemic issue, but it believes the company is on the right path to redeem itself.
“I think the working assumption should be that this is more rife than it is isolated and progress on that basis. I think that’s the only way real meaningful changes will take place on the control framework,” said Allan Gray boss Simon Mawhinney.
The NSW Independent Commission Against Corruption hearing was told how Downer employees had received kickbacks for inflating the price of transport contracts in NSW, raising questions about the company’s governance and corporate control measures.
One case included a $100,000 payment to inflate the costs of a project, and demands for a luxury car. Downer is a top 200 business on the local stock exchange, operating across transport, infrastructure and integrated services.
The issue came to light as Downer’s chief financial officer, chairman and other board members exited the company over disastrous profit downgrades that sent the stock plunging.
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Michael Ferguson resigned as chief financial officer two days after Downer reported a 21 per cent drop in profit for the December half-year to $68.1 million, and cut its full-year profit guidance for the second time in two months and its dividend.
Downer nearly halved its market valuation – between August last year and the March interim result – to just $2.2 billion, leaving it vulnerable to opportunistic bids for the company.
It drew a scathing response from Mawhinney, who criticised the company’s “inability to recognise how inept they have been in running a profitable and sustainable business”.
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