Programmed Maintenance Services might have done a bit better than it forecast in its recent Target statement, but its suitor, Spotless now says it is in a position to call the bid off.
Programmed (PRG) reported a 27% rise in net profit yesterday to $28.4 million in the year to March 31, from the $22.4 million earned in 2007.
The result was a little higher than the profit forecast in the recent target statement because of better returns from New Zealand (due to lower taxes) and higher returns from the Australian property maintenance business in March.
The results included 10 months contribution from the workforce and marine businesses acquired in June 2007 through the merger with Integrated Group.
These acquisitions saw revenue for the full year more than double to $877 million from $333 million.
CEO Chris Sutherland said the company’s April 2008 trading result was in line with projections and Programmed confirmed its current projections for the year ending March 31, 2009, Mr Sutherland said.
He said the company is expecting earnings per share to grow 10.4% to 40.3c in the 2009 fiscal year, revenue to increase 33% to $1.17 billion and earnings before interest, tax and amortisation (EBITA) to rise 29% to $74 million.
Programmed’s shares rose as much as 8c, to $4.84.
But Spotless now reckons that it is in a position to call off its merger because a so-called defeating condition has been breached.
In a statement issued after the PRG release, Spotless said.
"Spotless confirms that, as a result of the Programmed Maintenance Services (“Programmed”) full year audited results for the year ended 31 March 2008 containing consolidated EBIT (before non-recurring items) of approximately $52 million, the defeating condition to Spotless’ bid, which requires that this figure is not less than $56 million, has been triggered.
"Spotless has not yet made any decision as to whether or not it will waive this condition, and continues to reserve its rights in this respect. Spotless is reviewing the audited results, and will make a decision on the waiver or otherwise of this condition in accordance with the timetable provided in the Corporations Act. The next date that Spotless must give notice of the status of the conditions of its offer is Friday 6 June 2008 (unless Spotless’ offer is further extended).
"Spotless is disappointed with Programmed’s FY2008 result. Programmed’s reported consolidated EBIT of $54.4 million (which is after non-recurring items) is approximately 9% below the median of broker forecasts of $59.6 million prior to the announcement of Spotless’ Offer.
"In particular, Programmed’s core business, the Property Maintenance Services division has significantly underperformed, reporting FY2008 earnings before interest, tax and amortisation (“EBITA”) of $30.3 million, a fall of 10% from FY2007.
"Spotless believes that Programmed on its own will remain as a niche single-service focused player, with a strategically challenged business model and will continue to come under pressure, which has been exhibited in the FY2008 result in Programmed’s Property Maintenance Services business.
"Spotless continues to believe that Programmed has a strong strategic fit with Spotless and the combination of the businesses will create value for shareholders of both companies.
"Spotless has entered into pre-bid acceptance agreements with three of Programmed’s largest shareholders indicating their support for the combination of the businesses."
Spotless shares fell 25c or more than 7% to $2.95 before recovering to end down 16c at $3.04.
