Labour hire and maintenance group Programmed has swung to a full-year profit, helped by cost cuts and higher revenue as it overcame problems with the integration of The Skilled Group amid the resources downturn.
Superficially, the company did well to report a profit, but the reality is that the company is still on cost cutting mode – losing 60 jobs and $10 million in costs this year so far, and slashing final dividend by 30% to conserve capital.
Many of those cuts happened in April, the first month of the new financial year, when the company would have had a good idea of the result for 2016-17.
Dividend for the full year has been cut by nearly 35% and in a further sign of the company’s need for fresh capital (and to limit cash outflow), the dividend reinvestment program has been restarted with shares offered at a 2.5% discount.
This is after the pressures from that downturn, especially in oil and offshore marine operations has forced the company to sell assets and joint venture with a global player.
Programmed reported a profit of $12.3 million for the year to March 31, against the $98 million loss last year thanks to asset write-downs and impairment losses.
The profit was struck on a 21% jump in revenue for the year to March 31, to $2.69 billion, some of its key markets batted to recover from the downturn. “In difficult trading conditions, with continuing weakness in some of our markets, we are pleased to have completed the integration of Skilled, generated strong cash flow, paid down debt, and set the foundations for future growth,’ managing director Chris Sutherland said in a statement yesterday with the results.
Overall results were dragged down by poor performance in the maintenance division, as a significant decline in the marine business — from lower energy prices and project completions — offset any gains from its non-marine business.
Programmed has now agreed to sell its entire international marine activities business and 50% of the Australian and New Zealand marine business to Atlas Professionals, a global provider of staffing services to the oil and gas industry.
It says it will also form a 50:50 joint venture with Atlas to help tide it over the downturn in the marine services business.
The company said demand for blue collar workers from its staffing division tightened during the second half of the year as customers, particularly in Western Australia, reduced labour requirement.
While revenue for the business was maintained during the period, margins were lower, it said.
“Our recent trading suggests that many businesses in the sectors we serve are still seeking to reduce costs,” Mr Sutherland said in the statement.
In view of the current uncertainties, the company has cut 60 jobs since April 1, reducing $10 million in annual costs, in an effort to improve the return on capital for the 2018 financial year.
‘While some economic indicators point to business confidence improving and the economy strengthening in the next 12 months, our recent trading suggests that many businesses in the sectors we serve are still seeking to reduce costs. Governments at all levels are also tightening expenditure,“ Mr Sutherland explained.
To that end final dividend has been slashed 30% to 3.5 cents a share, from 5.0 cents a year ago.
The final is unchanged from the interim, making a total for the year of 7 cents, down from the 2015-16’s 11.5 cents a share paid despite the impairment driven loss. That’s a near 35% slice off 2015-16’s full year payout to shareholders.
The shares bounced more than 5% yesterday to $1.87 at one stage before easing to end up 3.7% at $1.84, despite the lower dividend and the cost cutting since the end of the financial year in March. year to date the shares are down 7 cents from the $1.92 the were at the start of January.
