Transfield Services Ltd, a provider of maintenance services which has been growing rapidly in the US, says its net profit will grow by up to 20% this year, after meeting reduced guidance for the year to June 30.
The company’s shares were sold off heavily in May when directors said the strength of the Australian dollar and the sluggish US economy would see earnings in the range of $105 million to $110 million, instead of in the forecast range of $115 million to $120 million.
Underlying earnings during the year were $106 million, underpinned by a cash distribution of $24.2 million to Transfield from Transfield Services Infrastructure Fund.
The fund, which holds investments in five power stations, two water filtration plants and four wind farms, was spun-out of Transfield last year.
For that reason, the company said the group consolidated results "are not directly comparable to the previous year."
Profit before the distribution during the 12 months to June 30 fell 25.6% to $82.17 million from the previous year due to a strong Australian dollar, rising input costs and the deferral of work.
Transfield said the outlook for this financial year was "positive" and that it expected net profit to grow in a range of 10% to 20%.
That clear guidance for 2009, something of a rarity this reporting season, saw the shares back in favour. They ended up over 6% or 48 cents at $8.18.
That’s well down on the 52 week high of $16.32, set a year ago, and the $13 the shares were trading at when the earnings update was issued in early may.
"Transfield Services is well positioned for ongoing sustainable growth," managing director Peter Watson said in a statement.
Revenue during the 12 months to June 30 climbed 30.6 per cent on the corresponding period in 2006-07 to $2.99 billion, with the company declaring a final dividend of 18 cents.
"Work-in-hand reached a record level of $11 billion, up 21 per cent on the previous year, driven by strong demand for our essential services and ongoing growth in the key sectors in which we work," Mr Watson said.
Mr Watson said “Our core business grew strongly for the seventh consecutive year, with revenue growing 31 percent to $3.0 Billion. Including our joint ventures, revenue grew by 34 per cent to $3.66 Billion.”
“Our Services EBITA was $151 million, an increase of 33 per cent and in line with guidance. Services EBITA margin was sustained at five per cent.”
“The achievements that demonstrate the high quality of our business are our record work-in-hand and our ongoing earnings growth momentum and strong operating cash flow.”
The company said in its statement to the ASX:
Revenue in Australia
increased by 12 per cent to $2.03 Billion, driven by growth in our infrastructure services and resources and industrial groups. Major project management work included the Western Corridor Recycled Water pipeline in Queensland and the Gippsland Water Factory in Victoria, and shutdowns for Shell, Caltex, Woodside and Santos. Ongoing organic growth was secured with key clients such as Western Power and Goulburn Murray Water through major long-term contracts. In December 2007, Transfield Services purchased a portfolio of wind farm development rights which has the potential to boost Australia’s renewable energy generation capacity by an additional 1,150 megawatts.
Transfield Services New Zealand grew strongly during the year with revenue increasing by 28 per cent to $A535.6 million. Growth was underpinned by major work in the energy sector and investment in our transport infrastructure business. North America
Our North American revenue increased by 133 per cent to $A1.01 Billion. More than 50 per cent of our revenue in this region is generated by the resources and industrial sector. Our Canadian joint venture, Flint Transfield Services, exceeded expectations, delivering more than $A300 million in revenue.
We successfully completed our first major shutdown for Suncor Energy and our Suncor Energy asset management contract was extended to 2012. We also secured a three-year asset management contract with Canadian Natural Resources Limited.
TIMEC achieved ten per cent year on year growth, which was in line with expectations. TIMEC also expanded its range of service offerings with the acquisition of specialty industry services company, HRI, which provides critical maintenance services in ultra high-temperature and confined space environments.
US Maintenance acquired both Horizon and Whelan’s to create an integrated facilities management and maintenance services capability in the world’s largest growing outsourced market.
Revenue in the Gulf Region, India, Chile and Asia grew by 55 per cent to $82.8 million. Our work in Abu Dhabi grew significantly, and we completed a second major shutdown for Gasco.
We secured a new contract in Brunei for Sarawak Shell through joint venture company, Transfield Worley Services. In Chile, we established a new joint venture, INSER Transfield Services, to capitalise on opportunities created by significant investments in the mining sector.
Transfield Services Infrastructure (TSI) Fund performed ahead of PDS guidance in its first year of operations, delivering a cash distribution of $24.2 million to Transfield Services. Our investment in TSI Fund generated the equivalent of an additional 7.0 cents to our underlying Earnings Per Share, when considering cash distributions payable for FY08.
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