Any news?, page-12

A guide to the strength of the rail industry can be found in the segmental reporting of Downer EDI (DOW). The rail division of DOW operates in a similar space to Engenco, albeit only on the east coast of Australia (and NZ).

Revenue increased 38% year on year and 39% over the prior corresponding period. This despite the loss of around 5 months revenue after sale of its freight rail business in January. EBIT was up 30% (29% on PCP) and was impacted by a $40M write off from the rail freight sale.

Downer's outlook stated: "Downer will continue to benefit from significant state government investment in public transport and in particular light and heavy rail." Their rail division was the fasted growing of DOW's stable over the last year.

On a sequential basis, that is second half v first half, Downer's growth was lower at 15% growth in revenue and 18% growth in EBIT. However, taking into account the adjustments from the rail freight sale (for which the impact was not provided), I think the growth for the second half was more than healthy.