As it forecast last week, labour hire group Programmed Maintenance Services (PRG) dropped into the red in the six months to September 30, thanks to big impairments which generated the $18.7 million loss.
The result for the half year to September 30 was largely driven by the previously announced $28 million goodwill write-down linked to a significant deterioration in the market for marine services in recent months (that’s related to the downturn in oil and gas exploration and spending).
Excluding significant items including the write-down and $5.2 million worth of costs from the group’s $700 million acquisition of Skilled Group, Programmed’s underlying net profit edged up to $12.8 million from $12.1 million in the previous corresponding period.
The board maintained interim dividend at 6.5 cents a share fully franked, a sign directors remain confident about the second half of the year to next March.
Despite that confidence the shares drifted and ended the day down 5% at $2.84. That sliced the year’s gains from 12.8% to 7.8%. Obviously investors don’t see much of a lasting contribution from the Skilled takeover, or if there are, they will be fleeting. The wider market was up 2.1% in the second 2% plus trading rise this week.
PRG 1Y – Programmed plunges to $18.7m loss
Directors said the $28 million of non‐trading items included transaction costs from the Skilled takeover, restructuring and other costs totalling $5.2 million; non‐cash impairment of goodwill associated with the Resources segment of $27.8 million (as announced on 13 November 2015) and $0.1 million for Programmed’s share of the net loss by its associate OneShift.
The acquisition of Skilled Group Limited was completed on October 16, so its results are not reflected in Programmed’s first half financial report.
Group revenue was down a touch at $710 million from the previous corresponding period”s $717 million. That was after a 5% increase in the Property & Infrastructure division’s revenue which was offset by lower revenue by the Resources division. The Workforce division’s revenue increased after three years of decline, providing a positive sign of non‐resources sector growth, according to directors in yesterday’s commentary.
Earnings before interest and tax (EBIT) by the Property & Infrastructure and Workforce divisions were significantly up, with increases of 68% and 30% respectively, while the Resources division’s EBIT plunged 66%. That left group EBIT before non‐trading items at $20.1 million was down from the $20.6 million.
Interest paid was down 37% to $1.9 million and net debt was $18 million at 30 September 2015.
CEO Chris Sutherland said in yesterday’s statement, "Our strategy to provide staffing, maintenance and facility management services across all industry sectors has been particularly important during this six month period. The significant growth in our Property & Infrastructure division’s earnings, offsetting the sharp fall in revenue and earnings by our Resources division, was very pleasing.
‘We are at the coalface of the Australian economy and our results suggest this was the six month period when the baton was passed from the resources sector to the infrastructure and household services sectors of the economy.
"Importantly, our Workforce division has seen increased demand for the first time in three years. Customers in markets that have been weak over the past few years, such as retailing, tourism, transport, industrial and manufacturing, are hiring people and spending on their assets again, supported by the lower Australian dollar. Additionally, education and health / aged care opportunities continue to grow.
"We have moved quickly to integrate Skilled’s business, capture efficiencies and seek new revenue opportunities from across the combined group. From Monday 19 October 2015, we have had a new combined management team marching forward as one team with a clear vision and a simple four point plan built upon safety, people and culture, systems and growth. After just five weeks we are well ahead of our integration schedule and will deliver more than $20 million annualised of cost synergies by 31 December 2015. We have communicated with our more than 25,000 employees who are working with us each day, along with over 20,000 customers,” he said.
