SYDNEY - [AAP] Engineering group Downer EDI (ASX: DOW) has upgraded its full-year profit guidance after identifying larger-than-expected cost savings following its purchase of an 87.8 per cent stake in Spotless.

Downer upgraded its net profit guidance to $195 million, from April's $190 million, after a review identified $25 million of cost savings.

Revenue opportunities are also significant and continue to increase, Downer says.

But the company expects Spotless's profit to be at the bottom end of its previously issued $85 million to $100 million forecast after deciding to record almost $80 million in costs and impairments at the cleaning and catering firm.

The cost hit includes redundancy and transaction costs, a goodwill impairment against Spotless' laundries business and a write-off of the new Royal Adelaide Hospital.

Downer said its long-term contract at Royal Adelaide Hospital, which is in the first year of a 30-year term, has been underperforming since operations started in September.

The company is working to address the issues and expects the work to take several months.

"It is expected that there will be no earnings from this project recognised in the 2018 financial year," the engineering group said in a statement on Monday.

Downer is also planning a refinance of Spotless' debt and performance bonding facilities for next year.

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