Programmed profit lower as merger talks continue

Programmed Maintenance Services managing director Christopher Sutherland says it’s too early to speculate on what price will be put on its proposed merger with Skilled Group, after announcing a 16 per cent slide in net profit to $25.7 million.

Mr Sutherland said it’s only been in recent days that Programmed and Skilled have reengaged to discuss a new merger proposal, but did not confirm that the new deal would be a merger of equals.

“We’ve indicated that we’ve got some flexibility around the terms and how we best combine the business for both groups of shareholders and they’ve taken that on board and agreed to have discussions with us about that,” he said.

“We’re more focused on infrastructure and they’re more focused in heavy industry, mining and manufacturing, so we get more diversity.

“We think the larger balance sheet of the combined group will allow us to compete more effectively for some of those larger opportunities that are emerging in the market.”

He also said the combined marine business would be better positioned to manage a lower oil price environment, while the combined workforce business would provide resilience to ongoing customer margin pressure and the ability to leverage technology investments which can be very expensive, and offer customers improved risk management.

When the discussions were announced to the market on Monday, Skilled said in a statement that it was prepared to enhance the terms upon which the companies may be combined, and that Programmed had agreed that there was merit in pursuing those discussions further.

Meanwhile, Programmed’s net profit result for the year to March was on the back of a slight decrease in revenue to $1.43 billion, while earnings before interest, tax, depreciation and amortisation fell 4.1 per cent to $61.4 million.

But excluding restructuring costs and other one-off items, profit was down 4.7 per cent to $30.4 million, which was $600,000 ahead of analysts' expectations.

Programmed dramatically reduced its net debt to $7 million, down from $42.2 million it reported in the previous corresponding period.

It also declared a 4.5 per cent increase in its final dividend to 11.5 cents a share.

“We maintained very strong cashflow, reduced debt and increased our dividend in a challenging market,” Mr Sutherland said.

Programmed launched a merger of equals proposal to Skilled just before Christmas, but it was rejected by Skilled in January because it felt it undervalued the company.

Programmed shares were 2.7 per cent higher to $2.62 per share at 10:15am.