Downer Appoints 'new Era' Boss

Sydney Morning Herald

Tuesday December 11, 2007

Scott Rochfort

THE engineering and infrastructure group Downer EDI has tried to close the door on its troubles by announcing the appointment of the former head of BHP's engineering arm as its new chief executive officer.

Downer, which is still reeling from the profit downgrade it issued in August, overlooked its interim chief executive Brent Waldron to name Geoff Knox as its new boss.

"I'd like to think we're in a new era, and Geoff Knox will certainly be a leader in that he's an open and inclusive sort of guy," said Downer's chairman, Barry O'Callaghan.

Investors welcomed the appointment, and Downer shares closed up 20c at $5.48.

"Some very good names came forward, but Geoff Knox ticked every box," Mr O'Callaghan said. "In fact he exceeded the box-ticking in every instance."

The appointment also came with a rare admission from the company, which has disappointed investors with its stream of profit downgrades over the past year. "We certainly could have done things better in the past," Mr O'Callaghan said. "I think you will notice a substantial difference going forward."

Mr Knox, 50, now runs the infrastructure arm of the Canadian engineering group Hatch.

Unlike Downer's two previous chief executives, who are accountants and New Zealanders, Mr Knox is an engineer and an Australian.

Aside from the star billing given to Mr Knox, investors are fixated with the business review of Downer's operations, led by UBS, which could see the company sell its profit downgrade-prone contract mining arm Roche. Leighton Holdings, which looked at making a takeover bid for Downer last year before backing away, has been cited as a possible buyer.

The company said it would wait for Mr Knox to get settled in his new job before announcing results of the "now substantially complete" review.

Mr O'Callaghan said he did not expect it to take long for Mr Knox signed the review. "Whether it's the first couple of weeks in February - that might be asking a bit much - but he's the sort of guy who doesn't muck around," he said.

There are expectations the company may provide Mr Knox with a clean slate when he starts in February, in the form of a big writedown.

Investors are also keen for an update on the company's contract to deliver 600-odd rail cars to Railcorp from 2010. There are concerns the $3 billion construction project, which has been largely outsourced to a Chinese rail car manufacturer, could suffer big cost blowouts.

Shares in the company are still down 26 per cent on their high before the profit downgrade in August.

The appointment of Mr Knox is sure to be a big disappointment to Mr Waldron, who had put his hand up for the job.

He resigned from the company as deputy chief executive and New Zealand boss in May. But he was asked by the board to move to Sydney and replace Downer's long-serving boss, Stephen Gillies, who stood down after August.

© 2007 Sydney Morning Herald

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