• Strong earnings growth, delivering 90 bps EBITA margin expansion to 4.6%
• 7% increase in underlying NPATA to $136.1 million
• Improved cash conversion and balance sheet, with net debt to EBITDA reduced to 0.8x

Downer EDI Limited (ASX:DOW) has released its financial results for the six months ended 31 December 2025 (1H26), reporting strong earnings growth and margin expansion. The company delivered a 29.8% increase in statutory NPAT to $98 million, a 7.0% increase in underlying NPATA to $136.1 million, and an 11.2% increase in underlying EBITA to $227.1 million. This was driven by a 90 basis point expansion in EBITA margin to 4.6%, exceeding the management target of >4.5%. Other highlights include a 10% uplift in underlying EPS to 18.7 cents per share, cash conversion of 90.5% exceeding the >90% target, and an improvement in gearing with net debt to EBITDA reducing to 0.8x. The company's portfolio simplification strategy, with the divestment of its interest in Keolis Downer and the disposal of a non-core business, has sharpened the group's focus on core markets and growth opportunities. While revenue declined during the period, work-in-hand increased by 8.9% to $38.2 billion, driven by strategic wins across energy, water, defence and transport. The company's outlook remains positive, with a targeted return to growth in future periods supported by active tendering across core markets.

For FY26, on an underlying basis, Downer is targeting: revenue to be slightly lower than FY25 pro forma revenue, earnings and EBITA margin improvement, and NPATA of $295 million to $315 million, assuming no material change in economic conditions or market demand, and no material weather disruptions.

The medium-term outlook is positive, underpinned by active tendering across core markets including NZ Infrastructure, Road Services, Water, Power, Rail and Facilities Management which supports Downer's management ambition of a 4%-5% revenue compound annual growth rate from FY26 to FY30.