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Detention centre operator Broadspectrum triples its profit

A rally in Melbourne, protesting the High Court’s decision refusing to stop the deportation of 267 refugees to detention camps on Manus Island and Nauru. Chris Hopkins/Getty Images

Broadspectrum, which was Transfield Services until its changed its name because of controversy over its role running offshore detention centres, has just posted a statutory profit of $25 million, up from $8.4 million the year before.

In early trade, its shares were up almost 9% to $1.16.

The financial results for the half year to December show underlying profit of $27.9 million, up 54%, and the company also cut net debt to $460 million from $569 million, driven by strong cash flow.

Debt is expected to fall to between $370 million and $390 million by the end of the financial year.

On the back of a 12 month extension to its $1.2 billion contract running Australia’s detention centres in Nauru and Papua New Guinea, the company upgraded underlying EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation) guidance to between $280 million and $300 million for the full year and $300 million for 2017.

Revenue for the six months was down 1.8% to $1.861 billion but the company has a strong book of business with $2.8 billion contracted for 2017.

CEO Graeme Hunt says this extension means the company is well placed to secure a new five-year contract with the Department of Immigration and Border Protection. Broadspectrum is up against a second, so far unnamed company, in the tender process.

Source: Broadspectrum

The company had previously said it was the preferred tenderer for a new contract it has run since 2012 but the Department of Immigration and Border Protection says the scope of the contract has been changed and that one other company will be asked to submit a tender.

Broadspectrum has had recent major contract wins with NSW Housing, AGL Energy and Queensland Urban Utilities.

Hunt says the Americas business reported solid earnings growth with revenue increasing 48% to $262 million.

Broadspectrum is still recommending shareholders not accept a $715 million cash takeover offer from Ferrovial, a Spanish infrastructure company.

The company says the $1.35 per share is inadequate. Broadspectrum says an independent expert said the offer should be between $1.60 and $1.85.

Transfield changed its name to Broadspectrum after its founding family withdrew rights to use the Transfield name. The private company Transfield Holdings, owned by the Belgiorno-Nettis family, wanted to distance itself from Transfield because of the detention centre contracts.

Last year the HESTA industry super fund sold its 3.5% stake in the company, then worth $23 million, because of reported human rights violations against asylum seekers at detention centres.

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