Hastie Downgrades, Shares unhurt

  Shares in air-conditioning engineer and contractor, Hastie Group, withstood a nasty 7.6% fall in early trading yesterday after the company revealed a profit downgrade, and the purchase of another company.The shares fell 13c in early trading to a day's low of & #36;1.575, before rebounding to end at & #36;1.715, up a cent.The catalyst for the nervy start was the update & #160;which revealed that the company now expected & #160;operating earnings before interest and tax (EBIT), to be around & #36;75 million for the financial year to 30 June 2010 & quot;due to project delays (where sales have moved into the next financial year), slowdown in retail capital expenditure and some impact from the continuing stronger Australian dollar & quot;. & quot;The Group's Managing Director and Chief Executive Officer, David Harris, said the company expected EBIT for the year to June 30, 2010 would therefore be below the guidance provided to the market earlier this year, & quot; the statement to the ASX read.Mr Harris said Hastie Group expected the deferral of capital expenditure to be temporary, with expenditure expected to flow through to earnings in FY11 and beyond.That seems to be the reason for the recovery in the share price, unlike the sell-offs in two other companies to reveal downgrades yesterday, retailers, Fantastic Furniture on Monday and Clive Peteers.Mr Harris also that the Group had made a strategic acquisition, purchasing the assets of Spectrum Fire & #38; Security, one of the leading services businesses in the sector in Australia, with annual revenues of more than & #36;100 million and over 600 employees.The assets were purchased for & #36;7 million and came after Spectrum had been placed in voluntary administration. & quot;As we explained in our results presentation in February, we continue to see short term softness in a number of areas. & quot;The large supermarket chains have delayed the start of work for some major projects across Australia, while other scheduled project programs have also been delayed, particularly in the Middle East. & quot;A strengthening Australian dollar since the first half results has also impacted the translation of our Middle & #160;East and UK earnings. & quot;Working capital continues to trend above our expected target range (1.5% to 2.5% of annualised sales). & quot;We expect this position to revert to the target range in the medium term. & quot; & quot;Along with the rest of the sector, we are confident we will see a return to growth at the EBIT level (earnings before interest and tax) in the 2011 financial year of at least 10%, with further growth opportunities in FY12 and beyond. & quot;We are now seeing tender activity in Australia and the Middle East at the highest level it has been for some time. & quot;In Australia, projects that were mothballed or delayed because of the global financial crisis are now moving again, demand is growing in the commercial sector and the spending on infrastructure by State and Federal governments is underpinning this revival. & quot;In the Middle East, we continue to win work with preferred builders and developers, particularly in those markets like Abu Dhabi and Qatar where the oil and gas sector remains strong. & quot;It appears that confidence has increased in these markets in recent months and we & #160;are seeing increased investment in infrastructure and commercial buildings, & quot; Mr Harris said. & #160;  

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