A few months has made the world of difference for shareholders in Programmed Maintenance Services (PRG). In February the company revealed a shock profit downgrade as the impact of the slide in oil and gas prices bit hard, and the positive impact of last year’s acquisition of Skilled Group couldn’t make up the difference.
The shares slid more than 35% in a one day, hitting $1.175. Since then the shares have climbed as the company got through the March 31 full year profit report unscathed.
Yesterday they kicked 14% higher yesterday, topping the $2 mark, before ending at $2.03, thanks to no more bad news from yesterday’s AGM.
In fact the mood was upbeat and the meeting was told the company is cutting more costs in its troubled oil and gas business and the integration of Skilled is ahead of schedule.
Investors picked up on the meeting being told that the company is still expecting to make its 2016-17 earnings guidance set amid the bad news and downgrade issued last February.
Chairman Bruce Brook told the meeting: “we are continuing to make progress, taking advantage of the many opportunities presented by our expanded operations.”
"While we are less than four months into our year and much can change between now and next March, we currently maintain the forecast we made in February 2016 of EBITA between $100 million and $110 million, before non‐trading items, for our 2017 year,“ Mr Brook told the meeting. CEO, Peter Sutherland also told the meeting the company has earmarked sectors other than resources (especially oil and gas) for future growth.
"Customers in markets such as retailing, tourism, transport and manufacturing are hiring people and spending on their assets again, and there are growing opportunities in the education, health and aged care sectors. Demand is growing for staff and maintenance services across these sectors which represent more than 2/3 of group revenue going forward,” he said.
"Demand for labour in the resources sectors, however, has weakened due to the completion of major projects, cutbacks in exploration and operating budgets, and a sharp drop in services for the oil and gas industry.
"Following the decline in oil and gas prices and the end of a number of major offshore construction projects, our marine operations now make up a relatively small proportion of the group’s business.
"After a review to further lower overheads in this business and consider how we best seek operations and maintenance work in the offshore oil and gas sector, we have decided to combine the marine business with the existing onshore facility management / industrial maintenance businesses to become a single Operations and Maintenance division that now serves the infrastructure, industrial, mining and offshore oil and gas sectors. We will adjust our segment reporting to match this change in our 2017 financial year.
"The integration of Skilled is ahead of plan, with cost savings of more than $30 million per annum delivered by 31 March 2016. The group and divisional management teams have bonded and are operating successfully, and all businesses have been rebranded under the master Programmed brand. Integration of the core business IT systems will be completed during the next 12 months, with projected one‐off integration and restructuring costs of approximately $10 million.”
"We have created a large national white collar staffing business, Programmed Professionals, operating in a number of markets where growth is occurring, such as health and aged care.
"Operational and maintenance expenditures are forecast to grow across all classes of infrastructure, including health, education, water, justice, public housing, ports and transport, and new assets are being built to meet the demands of a growing and aging population. We have been successful recently in securing major infrastructure contracts and will seek further ways to participate in the staffing, maintenance and facility management of new and existing infrastructure.
"A pipeline of large infrastructure maintenance opportunities continues to be developed and we are well positioned to bid for, and secure, a share of this work over the next 12 months,” Mr Sutherland added.
