Transfield Services enters into agreement to sell USM

  • Total cash value of US$255 million
  • Transaction consistent with strategy
  • FY11 guidance re-iterated

Transfield Services today announced that it has entered into an agreement to sell its North American Facilities Maintenance business USM to US-based mechanical, electrical and construction services company, EMCOR Group, Inc. The total cash value of the transaction will be US$255 million, inclusive of payment for related tax benefits.

Transfield Services Managing Director and Chief Executive Officer, Peter Goode, said: “This transaction represents the latest step in our strategy to focus our Americas’ business on higher value services in the two key sectors of Resources and Infrastructure Services.”

The proceeds will be used to initially pay down debt. This transaction places Transfield Services in an even stronger position to take advantage of further growth opportunities, and is consistent with the Company strategy.

Completion of the transaction is scheduled to occur by 30 June, 2011 and is subject to customary conditions precedent including Hart-Scott-Rodino (US anti-trust) approval.

Impact on FY11 statutory results

The expected impact of the sale of USM on the statutory profit of Transfield Services for the full year ended 31 June 2011 will include a non-cash underlying net loss on sale of discontinued operations of $16 million, including transaction costs. Further to this, Australian Accounting Standards require accumulated currency translation losses of $45 million to $50 million relating to USM to be reclassified to retained earnings (refer Appendix below). These aggregated non-cash accounting losses will be included in the 2011 financial year end statutory profit and do not affect the underlying earnings of Transfield Services.

Guidance

Transfield Services reiterates a target of mid-single digit percentage growth for FY2011 NPAT (normalised to exclude one-off significant items), based on FY2010 normalised NPAT of $96 million and an 87 cent AUD/USD exchange rate. This excludes any contribution from Easternwell and is subject to no deterioration in economic conditions. The expected EBITDA contribution from USM for the FY11 year was circa $24 million.

The Company expects to continue to pay dividends within the previously disclosed target range of 50 – 70% of operational NPAT.

Appendix

Australian Accounting Standards require that accumulated currency translation losses associated with the ownership of USM since acquisition in 2006, be reclassified from the Foreign Currency Translation Reserve (FCTR) in the equity section of the balance sheet to the statutory profit and loss account at 30 June 2011 as a result of the completion of this transaction. This accounting treatment is designed to move the already accumulated losses from Reserves into Retained Earnings.

These losses have accumulated in the FCTR every year from the appreciation of the Australian dollar from about 74 cents in 2006 at the time of acquisition to the current rate of approximately 106 cents.

The actual AUD/USD rate at the date of completion will dictate the actual loss reclassified in this manner.

Footnote: all numbers are subject to year end audit.


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Transfield Services employs over 19,000 people across 18 industries and 10 countries. We are a global provider of operations, maintenance and construction services to the Resources, Energy, Industrial, Infrastructure, Property and Defence sectors.
We deliver asset management services across all phases of the asset lifecycle, from concept and creation, to services that sustain, optimise and enhance our Client’s assets. With diverse global experience and expertise, we share our knowledge and challenge thinking to develop and implement innovative solutions that deliver real value for our Clients. Our unique approach enables us to deliver continuous improvements in asset performance and sustain long term relationships with our Clients and partners.