Writedowns lead to Transfield loss

CONSTRUCTION and maintenance firm Transfield Services has posted a first half loss of $247 million, after announcing massive writedowns driven by a weakening mining sector.

The company's net loss for the six months to December 31 includes the per-tax impairment of intangible and some tangible assets worth $284.3 million.

Transfield today said the writedowns related mostly to its Easternwell Mineral's Exploration and Marine Geotechnical businesses, whose earnings were affected by a dramatic weakening in the minerals exploration market over the period.

After-tax net profit, excluding these impairments and amortisation, was $26.9 million, down 38 per cent on the previous corresponding period.

Transfield said earnings before interest, tax, depreciation and amortisation (EBITDA) in its core Australia and New Zealand business was up 12 per cent to $61.5 million, despite challenging macro-economic conditions.

First half EBITDA in the company's Americas business was flat compared to the same period last year, while its Middle East and Asia arm posted an earnings loss of $800,000.

Chief executive Graeme Hunt said Transfield had reviewed its portfolio and was now working on creating a clearer direction for the company.

"Our strategic focus is providing high value asset management services to clients in sustainable-growth resources, energy, infrastructure sectors, including government outsourcing," Mr Hunt said. "We are confident the refined strategy will deliver improved long-term returns for shareholders."

On the back of a decline in earnings from parts of its business, Transfield has revised down its full year net profit guidance to be between $85 million and $90 million, pre-amortisation and impairments.

Transfield will pay shareholders an unfranked interim dividend of three cents per share.

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Transfield warns of $285m in writedowns

SHARES in Transfield Services have dived by more than six per cent after it warned it would have to make up to $285 million in asset writedowns.

The construction and maintenance firm today said it expected impairment of intangible and tangible assets totalling $270-$285 million.

The news shocked investors, who pushed Transfield's shares 14.5 cents lower to $1.955 at 10.28am AEDT.

The charges relate to the group's Easternwell Minerals Exploration and Marine Geotechnical businesses, as well as Transfield's downstream maintenance unit in the United States.

"The writedowns are non-cash, do not affect Transfield Services' gearing covenant under its banking agreements and have no impact on operations," the company said. "The company will not need to raise equity as a consequence of these writedowns."

Transfield launched a full business review in late 2012 and sharpened its focus on costs and productivity.

Shareholders were warned last November that the outlook for the remainder of fiscal 2013 was for softer market conditions.

This included a slowdown in the resources sector, falling discretionary expenditure in minerals exploration and development, and delayed timing of some infrastructure opportunities.

At the time, chief executive Graeme Hunt refused to provide any forecasts for the group's full year earnings due to market volatility.

It had previously forecast an operating profit at the lower end of a range between $125 million and $135 million.
Transfield is due to report its first half earnings results on February 26.

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