Transfield Services (ASX: TSE) recently announced a profit downgrade after wet weather affected its Easternwell business while it will also book a $16 million provision for a legacy contract.
Extreme weather events in WA, SA and QLD negatively affected operating conditions resulting in a $9 million negative impact, while the $16 million provision relates to extra costs incurred to meet changes in scope, delays in material supply and geotechnical problems associated with a project which is 85% complete.
TSE’s reported net profit (pre amortisation) for the year to 30 June 2012 (FY12) is now expected to come in at $105 million, down from the previous guidance of $130 million to $135 million.
The Easternwell business has proved problematic for TSE since its acquisition, an acquisition which was meant to provide exposure to higher value work within Australia’s iron ore, oil & gas and coal seam gas sectors.
Contractors such as TSE, tend to periodically report problems with projects which always tends to come as a nasty surprise to shareholders as the share price is sent spiraling downwards.
TSE has initiated a share buy back given the steep slide in its share price while its review and remediation of legacy contracts is now complete.
About Transfield Services: TSE provides operations, maintenance and construction services to the resources, energy, industrial, infrastructure, property and defence sectors. Listed on the ASX is May 2001, TSE delivers asset management services across all phases of the asset lifecycle, from concept and creation, with over 27,000 employees in 21 industries and 13 countries, including New Zealand. Its New Zealand clients include Transpower, Meridian Energy, Contact Energy, Wellington Electricity and the NZ Transport Agency.
TSE’s shares today traded at $2.06
For portfolio, sharemarket and fixed income enquires contact: Dan Stratful at Investment Research Group (IRG) Authorised Financial Adviser (AFA) 0800 437 8489, 09 304 0232, email@example.com **A disclosure statement is available, on request and free of charge.
Disclaimer In accordance with the Financial Advisers Act 2008 (“the Act”) Sharechat is “Class Advice” and any advice or recommendations contained on this webpage is not “Personalised Advice” as defined by the Act. This means Sharechat does not take into account an investor’s particular financial position, financial needs, financial goals, risk profile or asset allocation. Investor’s who require “Personalised Advice” should contact an Authorised Financial Adviser (AFA).
DISCLAIMER: To the extent that any of the content above constitutes advice, it is general advice that has been prepared without reference to investor’s objectives, financial situation or needs. Before acting on any advice, investors should consider the appropriateness of the advice and IRG recommend that investors should obtain appropriate financial, legal and taxation advice before making any financial investment decision. The report is based on information compiled from public information and private research. IRG have completed the report on a best endeavours basis and do not accept any liability of loss or damage. IRG suggest that clients use this as part of a decision making process and check key data before making any investment decisions.
Employees may have an interest in the securities discussed in this report.