Transfield Services announces 13 per cent NPAT increase, reiterates guidance and maintains new business momentum

  • First half operating NPAT of A$44 million pre‐amortisation, up 13 per cent
  • FY12 NPAT guidance confirmed at the lower end of A$130 – $135 million, pre‐amortisation
  • Group EBITDA margin increased to 5.8 per cent, up from 4.5 per cent
  • Gearing at 27 per cent ‐ capacity to pursue growth opportunities
  • Strategy delivering major contract wins and broadened revenue base
  • Interim dividend of 5 cents per share payable on 24 April 2012

Confirming its announcement to the market on 10 February 2012, Transfield Services has delivered first half operating NPAT of A$44 million, up 13 per cent on the prior comparable period. Group proportionately consolidated EBITDA margins increased to 5.8 per cent, from 4.5 per cent. Earnings and margin growth were driven by increased contributions from the core Australia and New Zealand operations, and six‐months of earnings from Easternwell, which more than offset the lost earnings from the sale of USM and the sell down of Transfield Services Infrastructure Fund, as well as increased earnings from the Americas (ex‐USM) and Middle East and Asia.

Transfield Services’ forward order book was marginally down on the prior period, to $10.9 billion as at 31 December 2011. However the Company secured a number of key contract wins and renewals, including with Santos, NBN and WA Water.

Easternwell delivered first half EBITDA of A$37.5 million, as it won work with all major players in the CSG industry, including Santos, QGC and Arrow. Revenue synergies have also been gained between Transfield Services’ Resources & Energy division, and several other oil and gas contracts. US$ EBITDA for the Americas region was up 22 per cent at US$11.3 million (after backing out USM from the prior period) and margins were up 60 points to 4.3 per cent. Growth in the Infrastructure roads business was offset by lower volumes in the Resources and Energy business, due to lower levels of scheduled
maintenance.

The Middle East and Asia business delivered a 29 per cent increase in EBITDA to A$2.2 million due to strong contract performance and additional key performance indicators on closeout of the Rasgas contract. Transfield Services has received credit commitments from existing lenders to extend the full $249 million debt facility scheduled to mature in December 2012 until December 2016. Final documentation will be completed in coming weeks. Following this extension, the Group’s average debt maturity profile will increase from 2.7 years to 3.6 years. The Group now has no significant debt outstanding until FY14. The Board declared an interim dividend of 5 cents per share, franked to 25 per cent and payable on 24 April 2012. This is in line with the prior year and is expected to contribute towards a year on year dividend payout ratio of between 50‐70 per cent of full year operating NPAT.

Transfield Services launched a share buy back in October 2011, with the intention of buying back up to 44 million shares within the following 12 month period. 5.1 million shares were acquired in the period to 31 December 2011 at which time Transfield Services suspended the buy back, pending release of its interim result. On 10 February 2012, the buy back recommenced following the release of the Group’s Full Year 2012 guidance update and interim financial result to the market. The buy back is on target for completion by October 2012. 

“Our strategy of moving up the value curve, making our business more efficient and expanding into growth sectors is now delivering financial results,” said Transfield Services Managing Director and CEO, Peter Goode. “With Easternwell, we have boosted our exposure to the resource and energy sector ‐ the growth engine of Australia’s economy. This is complemented by our long‐term contract profile with blue chip clients in other essential service industries around the world,” said Mr Goode.

Transfield Services’ balance sheet remains strong, with gearing at 27 per cent providing flexibility to pursue growth opportunities. Growth capital expenditure (capex) during the half was A$58 million, including A$29 million on rigs and associated equipment in Easternwell, which is set to deliver earnings benefit in the second half of FY12. Group maintenance capex was A$35 million, in‐line with guidance. Excluding Easternwell, EBITDA for the core Australia and New Zealand business was A$54.9 million, up 8.8 per cent. This was driven by strong growth in the Infrastructure Services and the Property and Asset services business and moderate growth in the Resources and Energy business.

 Easternwell delivered first half EBITDA of A$37.5 million, as it won work with all major players in the CSG industry, including Santos, QGC and Arrow. Revenue synergies have also been gained between Transfield Services’ Resources & Energy division, and several other oil and gas contracts. US$ EBITDA for the Americas region was up 22 per cent at US$11.3 million (after backing out USM from the prior period) and margins were up 60 points to 4.3 per cent. Growth in the Infrastructure roads business was offset by lower volumes in the Resources and Energy business, due to lower levels of scheduled maintenance.

The Middle East and Asia business delivered a 29 per cent increase in EBITDA to A$2.2 million due to strong contract performance and additional key performance indicators on closeout of the Rasgas contract. Transfield Services has received credit commitments from existing lenders to extend the full $249 million debt facility scheduled to mature in December 2012 until December 2016. Final documentation will be completed in coming weeks. Following this extension, the Group’s average debt maturity profile will increase from 2.7 years to 3.6 years. The Group now has no significant debt outstanding until FY14.

The Board declared an interim dividend of 5 cents per share, franked to 25 per cent and payable on 24 April 2012. This is in line with the prior year and is expected to contribute towards a year on year dividend payout ratio of between 50‐70 per cent of full year operating NPAT.

Transfield Services launched a share buy back in October 2011, with the intention of buying back up to 44 million shares within the following 12 month period. 5.1 million shares were acquired in the period to 31 December 2011 at which time Transfield Services suspended the buy back, pending release of its interim result. On 10 February 2012, the buy back recommenced following the release of the Group’s Full Year 2012 guidance update and interim financial result to the market. The buy back is on target for completion by October 2012.

Outlook

As announced to the market on 10 February 2012, for the 2012 financial year NPAT pre‐amortisation is expected to be at the lower end of the Company’s guidance range of A$130 – 135 million.