And although the 3% rise in full year earnings by Programmed Maintenance Services (PRG) was modest, it still was a rise, which is what a lot of its competitors in the services sector will struggle to report for the 2012-13 financial year.
But the profit increase didn’t come from higher margins – a tax benefit and lower interest bill played the major part and without that PRG would have struggled to match the 2011-12 result.
The company yesterday reported a net profit of $32.1 million for the year to March. That will look good compared with those from the rest of the sector.
Mining services companies such as Cardno, Coffey International, UGL, WorleyParsons and Transfield have all downgraded their earnings outlooks this month as the mining and resources investment booms slow and move into a phase of lower spending and cost-cutting.
Like Aristocrat, PMS shares had a gain yesterday – up more than 5%, or 13c, to $2.28.
PRG YTD – Shares up after higher profit, dividend
Helping drive the share price higher was a higher final dividend for the year and a higher total payout for shareholders.
PMS will pay a fully franked final dividend of 10c per share, up 25% from the final for the 2011-12 year, taking the total for the year to 15c per share fully franked, up 2c a share.
The company said the 3% rise in net profit for the 2012-13 year was struck on a 9% rise in revenue to $1.52 billion, indicating PMS came under margin compression pressures, especially in the second half (as the rest of the sector did).
But helping lift profit was a sharp fall in interest costs (like at Aristocrat). Interest expense fell by 21% to $9.9 million "due to strong cash flow, lower debt and lower rates on new bank facilities negotiated in October 2011". Income tax expense was lower at $9.9 million down from $13 million due partly to a $2.7 million benefit from tax losses carried forward from previous years.
Net debt at 31 March 2013 was $67.1 million, down 24% from 31 March 2012 ($87.8 million).
While the lower debt and interest bill should continue into this year, the tax benefit might not, so earnings could come under pressure from the undoubted slowdown in activity in the resources sector. But the work in the LNG industry could be the buffer and help offset the impact on margins from elsewhere.
Programmed managing director Chris Sutherland says despite suggestions the commodities boom has peaked and demand is strong for onshore and offshore mining maintenance and construction work by the company.
"From an operations and maintenance vantage point, there never was a boom and we don’t see a bust," Mr Sutherland said on Wednesday. While revenue in the resources division was flat, earnings rose by 10% as margins increased for onshore work.
Offshore oil and gas projects on the North West Shelf in Western Australia contributed to 85% of the resource division’s revenue thanks to work on Chevron’s huge Gorgon liquefied natural gas project (LNG).
Programmed said it expects to carry out work on the other major Chevron LNG project called Wheatstone project, also in Western Australia, in the next financial year and is hoping to get work with Japanese energy firm Inpex in 2014-15.
Programmed’s integrated workforce division suffered a 5% earnings decline as the high Australian dollar deterred small and medium-sized businesses from hiring.
