Shares of Transfield Services Limited (ASX: TSE) have fallen by more than 10% in early afternoon trade as investors weighed in on the company’s half-year earnings report. While the company confirmed its full-year earnings guidance, it warned of challenges stemming from the commodities crisis as major mining or oil and gas projects are deferred.
So What: For the six-months ended 31 December 2014, the company reported an 80.4% lift in net profit to $8.3 million, although earnings on a continuing operations basis fell 49.4%. This was a result of an $11.8 million loss recorded in 2013 from discontinued operations and could certainly explain the market’s negative reaction today.
Meanwhile, underlying earnings before interest, tax, depreciation and amortisation (EBITDA), which measures the company’s operating performance, rose 51% to $112.2 million. This performance came despite “challenging conditions”.
Transfield Services received more government contracts during the period, which offset declines incurred in its Infrastructure, Americas, and Resources and Industrial divisions. Revenues in its Defence, Social & Property division increased by 53% with EBITDA up $101.2 million period on period. Worryingly, this division now represents 85% of the company’s overall EBITDA.
Now What: Falling commodity prices and curtailed project expenditure will continue to cause headwinds for Transfield Services for the foreseeable future, although management did confirm guidance of full-year underlying EBITDA as being between $260-$280 million. No dividend was declared for the period.
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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned. You can follow Ryan on Twitter @ASXvalueinvest.