Transfield still suffering from American push

The infrastructure services and facilities management company said yesterday that the deterioration in economic conditions and "higher risk premiums specific to" its US business were responsible for the write-down.

Transfield Services acquired US Maintenance for $372 million in 2006. US Maintenance now also includes Horizon Contract Services and the Whelan's facility maintenance businesses that Transfield Services acquired for $US147.5 million in late 2007.

Despite the write-down, which is expected to result in the company posting its first full-year loss since 2001, investors were heartened that Transfield Services maintained its underlying earnings forecasts.

The company reiterated its forecasts that its net profit (before write-downs) would be more than 10 per cent above the previous year.

"This demonstrates the resilience of our business model," Transfield's chief executive, Peter Goode, said in a statement.

He added: "Our North American businesses, including USM, are well positioned to respond to improvements in conditions. "Our business in Canada continues to exceed expectations."

Transfield's shares rose 5.6 per cent, closing 13c higher at $2.45 yesterday, after the company said the write-down would not affect its "ability to pay dividends". The market also appeared relieved that the recently accident-prone company had maintained its forecasts and was showing signs of continuing to cut its debts.

"The consensus was that they weren't going to hit guidance," said the Austock Securities analyst Heath Andrews. Mr Andrews said Transfield's update on its net debt being reduced from $584 million to $390 million in the 12 months to June 30 was a "sign that cash flow is far better than what it was in the past". Excluding the impact of foreign exchange rates, Transfield said its net debt fell $325 million.

The reduction in debt was also helped by a heavily discounted share placement and entitlement offer last December, which raised more than $200 million.

Aside from its balance sheet concerns, Transfield's problems over the past year have been compounded by the loss of several key contracts.

Last month Transfield and its venture partner Transderv lost their tender to operate Melbourne's Yarra Trams. The contract was worth $8 million in annual earnings before interest, tax and amortisation for Transfield. The firm also lost a key Roads and Traffic Authority contract in NSW last year.

The company will report its full-year results on August 26.