Downer, the facilities and maintenance, utilities and power company held their AGM today.

Now, we’ve been burned before with Downer, and sold out of our holding back when the “accounting irregularities” in the Utilities division first surfaced.

They appear to have not been as dire as feared (although how can you hold through such a thing, at the time, if the books have even the slightest of chances of being cooked fiduciary duties to protect client capital dominate, in our mind, there’s no “surely fraud won’t be that widespread”, as a basis for advice, in our view); yet it is certainly still not smooth sailing.

(Author’s note; we could have chosen to buy back in after the accountants gave the audit “all clear”, but decided not to, with other opportunities arising).

From today’s trading update, Utilities will remain largely a mess, and hence the 1H will be weaker…

…and it seems reasonable to assume the slowing NZ economy might well represent a drag to the timing and value of contracts as and when they arise, over there.

It is certainly a very interesting opportunity, and if mgmt can hit the 4.5% EBITA target, the stock is worth anywhere between $5-6, which would represent a great return.

So, we will watch, with interest, from the sidelines, for now.

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