Programmed Maintenance Services has flagged a $75 million impairment resulting from poor performance in its marine services division, but expects to lift earnings to over $100 million by FY17 as it benefits from growth in other sectors of the economy.
Programmed Maintenance Services has flagged a $75 million impairment resulting from poor performance in its marine services division, but expects to lift earnings to over $100 million by FY17 as it benefits from growth in other sectors of the economy.
Perth-based Programmed said it expects to report $65 million in earnings before interest, tax and amortisation for the 2016 financial year, but will record a $75 million non-cash goodwill impairment in the second-half of its fiscal year as a result of the fall in demand for marine services following the steep decline in oil and gas prices, coupled with the sale of its Broadsword Marine Contractors business last month.
The impairment is on top of a $28 million writedown Programmed recorded on its marine business in the first half of FY16.
Programmed expects to pay out a 5 cents per share final dividend, fully franked.
Shares in the company tumbled on the announcement, down 35.4 per cent to $1.17 each at the close of trade.
The company said the downturn in marine services had been partly offset by a better performance in other sectors.
“Customers of Programmed in markets that have been weak over the past few years, 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,” the company said in a statement.
“Demand is growing for staff and maintenance services across these sectors which represent more than two-thirds of group revenue going forward.
“Demand for labour in the resources sectors, however, has weakened further due to the completion of major projects, cutbacks in mining companies’ exploration and operating budgets, and a sharp drop in services for the oil and gas industry following the recent further decline in oil and gas prices.”
Managing director Christopher Sutherland said the further reduction in demand from the resources sectors has impacted both the former Programmed and Skilled parts of the business.
“In this environment, the benefits of combining both organisations and realising cost savings are particularly important, while the company delivers its long-term strategy to develop a larger scale, more efficient, leading provider of staffing, maintenance and facility management services servicing all sectors of the economy,” Mr Sutherland said.
Programmed expects to record a $10 million non-cash amortisation expense, derived from the acquisition of Skilled Group last year, while depreciation and interest expenses for FY16 are expected to be about $16 million and $12 million respectively.
The company’s net debt will be between $260 million and $290 million.
However, by the end of FY17 Programmed said it expects to offset the decline in revenue from the resources sectors by growing revenue in its other business divisions and accelerating cost savings.
It has forecast an EBITA in the range of $100 million to $110 million for FY17.
Mr Sutherland said while the oil price had a significant impact on Programmed’s marine division, the group’s diversity across all industry sectors gives it considerable strength and resilience.
“As we reported in November, we are seeing greater demand for our services from most non-resource based sectors of the economy which represent more than two-thirds of group revenue, and our increased scale following our acquisition of Skilled is opening new opportunities,” he said.
“We are taking action to lower costs in those parts of our business exposed to the oil and gas sector and to position the group to secure additional staffing and maintenance contracts from infrastructure, manufacturing, industrial and other non-resource companies.
“We will also continue to develop further cost savings as we integrate the systems of Programmed and Skilled.”
