Shares in services group Programmed Maintenance Services (PRG) dipped yesterday after the company produced a weak first half profit for the six months to September 30.
Directors also forecast a weak result for year to next March, but despite this recommended a lift in interim dividend of 8.5%, to 6.5c a share.
The shares eased 1.1% to $2.68 in yesterday’s generally weak market as investors ignored the higher dividend and focused on the less than enthusiastic outlook provided by the company.
Programmed yesterday reported an after-tax profit of $12.1 million (before non-trading, or one-off items) for the six months compared with the $12.8 million earned in the first half of last financial year.
After non-trading items, after-tax profit fell a third to $9.8 million, from $12.4 million.
Non-trading items were the final earn-out payment of $1.4 million for the acquisition of Turnpoint (announced in July 2014); restructuring costs of $900,000 (announced in May, 2014); and $300,000 for Programmed’s share of the net loss by its associate OneShift.
Programmed’s first half revenue eased to $716.9 million from the $723.6 million reported for the first half of the previous year as the downturn in the resources sector hit the company, like it has so many other companies in the services sector.
PRG YTD – Programmed profit falls
Programmed said earnings before interest and tax in its Property & Infrastructure and the Resources divisions were in line with the previous year, "but lower earnings by the Workforce division resulted in a decline of 8% in group EBIT before non-trading items to $20.6 million (1H FY14: $22.4 million)”.
Helping offset weaker profit margins and the fall in revenue, the company cut its interest bill by 27% to $3 million due to a reduction in net debt to $24.3 million at September 30. Debt was 42% down on March this year when the company ruled off its books for the full year.
Looking to the coming six months and the full financial year, Programmed said, “The group’s trading EBIT for FY15 is projected to be approximately $50 to $52 million, before non-trading items".
“In addition to the non-trading items totalling $2.6 million before tax in the first half, the company’s accounts for the full year are expected to include non-trading items of approximately $2.0 million in the second half, as explained above in the reports on the Workforce and Property & Infrastructure divisions, and $0.1 million in respect of Programmed’s share of OneShift’s loss in the second half,” the company said.
That will cut trading earnings before interest tax to a range of $45.3 million to $47.3 million, compared with the $51.8 million reported for 2012-13, which was flat compared with the figure for the 2011-12 financial year.
So for all intents and purposes, Programmed is actually looking at no growth in net earnings for at least three years – indeed they could be 10% or so lower compared with 2011-12.
In yesterday’s statement Programmed’s CEO Chris Sutherland said, "We are pleased to have maintained strong cash flow, lowered debt and increased the dividend in challenging market conditions. Importantly, we are also making necessary changes to the business and investing in longer-term growth opportunities, which have reduced reported profit in the short term but will position the company for future growth".
