ASX Release

1.  Non-­‐trading  items  were  the  final  payment  of  $1.4  million  for  the  acquisition  of  Programmed  Turnpoint  (announced  in  July  2014);  restructuring  costs  of  $2.8  million;  $0.6  million  for  Programmed's  share  of  the  net  loss  by  its  associate  OneShift;  $1.0  million  settling  a  liquidator’s  claim  arising  from  payment  received  for  work  performed  in  2008;  and  a  tax  credit  of  $1.1  million  relating  to  these  non-­‐trading  items.  

47 Burswood Road Burswood WA 6100

T (08) 9216 2100 F (08) 9216 2186

www.programmed.com.au

Programmed Maintenance Services Ltd

ACN 054 742 264

27 May 2015

   

Results  for  FY15    Statutory  NPAT  $25.7  million  

NPAT  before  non-­‐trading  items1.  $30.4  million,  down  4.7%  Revenue  $1.4  billion  in  line  with  FY14  

Final  dividend  up  4.5%  to  11.5  cps,  fully  franked  Net  debt  down  to  $7  million  from  $42  million  

Programmed  (ASX:PRG),  which  provides  staffing,  maintenance  and  facility  management  services,  today  announced  an  after-­‐tax  profit  of  $30.4  million  before  non-­‐trading  items1.  for  the  year  to  31  March  2015  (FY14:  $31.9  million)  down  4.7%  on  FY14.  After  non-­‐trading  items1.,  after-­‐tax  profit  was  $25.7  million  (FY14:  $30.5  million).      

Earnings  before  interest  and  tax  (EBIT)  by  the  Property  &  Infrastructure  division  were  16%  above  FY14,  but  lower  earnings  by  the  Resources  and  Workforce  divisions  resulted  in  a  decline  of  5%  in  group  EBIT  before  non-­‐trading  items1.  to  $50.1  million  (FY14:  $52.8  million).  

Revenue  was  $1,434  million,  similar  to  FY14  ($1,435  million),  with  a  7%  increase  in  the  Property  &  Infrastructure  division  offset  by  lower  revenue  in  the  Resources  division.  

Continued  focus  on  capital  management  and  strong  operational  cash  flow  reduced  net  debt  to  $7.0  million  at  31  March  2015  from  $42.2  million  at  31  March  2014.  As  a  result,  interest  expense  was  down  27%  to  $5.4  million.  

The  board  has  determined  to  increase  the  final  dividend  by  4.5%  to  11.5  cents  per  share  fully  franked,  payable  on  24  July  2015  to  shareholders  on  the  register  at  3  July  2015.  This  will  bring  dividends  for  the  full  year  to  18  cents  per  share  fully  franked  (FY14:  17  cents).  

Chris  Sutherland,  managing  director  of  Programmed,  said:    ‘Our  business  model,  providing  staffing,  maintenance  and  facility  management  services  across  all  industry  sectors,  gives  Programmed  considerable  strength  and  has  enabled  us  to  deliver  a  reasonable  result  for  shareholders  in  markets  that  continue  to  present  new  challenges.  We  are  pleased  to  have  maintained  very  strong  cash  flow,  reduced  debt  and  increased  the  dividend.  

‘We  are  targeting  markets  that  are  forecast  to  grow  and  are  seeking  new  strategic  positions  in  some  emerging  markets.  In  the  past  year,  we  have  secured  new  long-­‐term  work  in  education,  social  housing,  defence,  tourism  and  food/agriculture,  all  industries  forecast  to  grow  over  the  next  ten  years.  As  a  result,  we  

For

per

sona

l use

onl

y

project  that  growth  in  Property  &  Infrastructure  earnings  should  offset  any  potential  fall  in  Resources  earnings  in  FY16.  

‘We  are  on  the  short  lists  for  the  Western  Australian  schools  PPP  (public-­‐private  partnership)  and  the  new  federal  courts  PPP  in  ACT,  and  are  positioned  to  benefit  from  further  PPP  projects.  

‘We  are  also  having  more  success  with  selling  a  greater  range  of  maintenance  services  to  our  property  customers.  

‘We  have  invested  in  two  new  Workforce  opportunities:  OneShift  to  benefit  from  growth  in  the  online  staffing  sector,  and  an  alliance  with  APM  to  become  a  National  Job  Network  provider  to  the  Federal  Government.  

‘We  are  investing  heavily  in  technology  to  give  the  business  a  more  efficient  and  lower  cost  base,  along  with  significantly  greater  field  capability  to  service  our  customers.  

‘Our  balance  sheet  is  strong,  with  just  $7  million  of  net  debt  at  the  end  of  March  2015,  enabling  us  to  take  advantage  of  further  growth  opportunities,  and  we  continue  to  evaluate  potential  acquisitions  to  increase  our  scale,  and  ways  in  which  we  can  expand  in  our  existing  markets.  

'As  announced  on  Monday,  we  look  forward  to  progressing  discussions  with  Skilled  Group  on  the  possibility  of  combining  our  businesses.  While  there  is  no  certainty  that  a  transaction  will  eventuate,  we  believe  the  strategic  rationale  for  combining  the  businesses  is  strong.  It  would  create  a  stronger,  more  efficient  and  more  competitive  workforce  solution  provider  covering  staffing,  maintenance  and  facility  management  operations,  diversified  across  all  sectors  of  the  economy  and  better  positioned  to  take  advantage  of  growth  opportunities,'  said  Chris  Sutherland.  

Group  Results   FY15  31  Mar  2015  

$m  

FY14  31  Mar  2014  

$m  

%  change  

Revenue   1,434.2   1,434.9   (0.0%)  Results  before  non-­‐trading  Items        EBITDA   61.4   64.0   (4.1%)  Depreciation  and  amortisation   (11.3)   (11.2)   0.9%  EBIT   50.1   52.8   (5.1%)  Interest   (5.4)   (7.4)   (27.0%)  Profit  before  tax   44.7   45.4   (1.5%)  Income  tax  expense   (14.3)   (13.5)   5.9%  Profit  after  tax  (before  non-­‐trading  items)   30.4   31.9   (4.7%)  Non-­‐trading  items        Restructuring  and  other  costs   (3.8)   (1.0)    Incentive  payment  (Turnpoint  acquisition)   (1.4)      Share  of  net  loss  of  associate  (OneShift)   (0.6)   (0.7)    Tax  on  non-­‐trading  items   1.1   0.3    Profit  after  tax  (statutory  basis)   25.7   30.5   (15.7%)  Earnings  per  share  (cents;  before  non-­‐trading  items)   25.7   26.9   (4.5%)  Earnings  per  share  (cents;  statutory  basis)   21.7   25.8   (15.9%)  Weighted  average  shares  on  issue  (million)   118.5   118.2    

For

per

sona

l use

onl

y

Divisional  Results  

Property  &  Infrastructure     FY15  31  Mar  2015  

$m  

FY14  31  Mar  2014  

$m  

%  change  

Revenue   807.6   751.9   7%  EBIT  (before  non-­‐trading  items)   32.4   28.0   16%  

The  Property  &  Infrastructure  division  provides  a  range  of  maintenance,  building  and  operational  services,  including  painting,  electrical,  communications,  grounds,  specialist  turf,  signage,  general  building  repairs  and  facility  management.  Growth  in  revenue  arose  from  new  long-­‐term  facility  management  contracts  and  the  higher  margin  was  the  result  of  improved  operational  control  across  many  areas  of  the  business.  

Painting  volumes  were  similar  to  the  prior  year,  but  on  reduced  invested  capital  due  to  a  greater  mix  of  sundry  work.  Invested  capital  in  long-­‐term  painting  maintenance  programs  was  $97.2  million  at  31  March  2015  compared  with  $110.2  million  a  year  earlier.  Painting  margins  were  higher  due  to  lower  overheads  and  improved  job  management,  offset  partially  by  lower  indexation  revenue  from  existing  contracts.  

The  division’s  grounds  maintenance  operations  performed  well,  with  improved  margins  and  a  number  of  new  outsourcing  contracts.  A  significant  milestone  was  a  contract  to  finance,  build  and  maintain  for  five  years  the  new,  elite-­‐standard  training  ground  for  the  Fremantle  Football  Club.  This  work  will  commence  later  in  2015.  A  new  grounds  FBM  (finance-­‐build-­‐maintain)  program  is  now  being  marketed  to  sporting  clubs,  schools  and  local  councils  around  Australia  and  New  Zealand.  

Exposure  to  electrical  works  in  new  commercial  buildings  is  being  reduced  and  there  is  increasing  focus  on  fit-­‐out,  maintenance  and  upgrades  of  electrical,  data  and  communications  systems  in  existing  buildings  and  infrastructure.  This  opens  up  greater  opportunities  to  work  with  the  division’s  other  customers.  FY2016  has  begun  with  a  strong  backlog  of  electrical  maintenance  and  upgrade  work.  

The  division's  facility  management  and  maintenance  activities  continue  to  grow  and  nine  significant  long-­‐term  contracts  have  been  secured  or  renewed  since  March  2014,  including:  

• A  new  five  year  contract  to  maintain  social  housing  in  New  Zealand,  which  commenced  on  1  July  2014;  • Renewal  of  the  Western  Australian  social  housing  maintenance  contract  for  the  South  West  region,  and  

the  addition  of  two  new  regions,  which  commenced  on  2  November  2014  for  an  initial  five  years;  • Renewal  of  the  facility  management  contract  on  Rottnest  Island  for  a  further  five  years,  with  the  scope  

expanded  to  include  all  accommodation  housekeeping,  which  commenced  on  1  August  2014;  • A  new  three  year  contract  to  maintain  Fonterra’s  logistics  distribution  centres  in  New  Zealand,  which  

commenced  on  1  September  2014;  • A  new  14  year  contract  for  maintenance  and  lifecycle  refurbishment  of  the  South  Queensland  

Correctional  Centre,  which  commenced  on  1  July  2014;  • A  new  contract  with  Coles  to  maintain  its  support  office  and  state  office  facilities,  which  commenced  in  

September  2014;  

For

per

sona

l use

onl

y

• Renewal  of  the  estate  services  contract  with  Energy  Australia  at  Yallourn  Power  Station  for  a  further  four  years;  

• A  second  PPP  contract  in  New  Zealand  to  maintain  four  schools  for  25  years;  and  • A  39  year  PPP  contract  to  maintain  student  accommodation  at  Wollongong  University.  

Existing  public  assets  are  getting  older  and  require  upgrades  and  greater  levels  of  maintenance  to  maintain  service.  The  growing  population  is  requiring  new  assets  to  be  built,  thus  creating  further  opportunities,  and  increasingly  governments  at  all  levels  are  looking  for  privately  funded  and  managed  solutions.  

Resources   FY15  31  Mar  2015  

$m  

FY14  31  Mar  2014  

$m  

%  change  

Revenue   247.5   306.9   (19%)  EBIT  (before  non-­‐trading  items)   20.1   24.4   (18%)  

The  Resources  division  provides  a  range  of  workforce,  maintenance,  construction  support  and  operational  services  to  both  the  offshore  oil  and  gas  and  onshore  mining  sectors.  Revenue  was  affected  by  the  conclusion  of  a  major  offshore  project  and  the  lower  oil  price  which  caused  some  operators  to  defer  seismic  exploration  work  in  the  second  half  of  Programmed’s  fiscal  year.  

Demand  for  vessel  management,  manning,  catering  and  logistical  services  has  fallen  in  recent  months  by  approximately  25%,  compared  to  the  prior  corresponding  period,  as  a  number  of  oil  and  gas  operators  have  elected  to  defer  greenfield  exploration  expenditure  and  as  offshore  construction  activity  associated  with  the  Gorgon  /  Wheatstone  developments  comes  off  its  peak.  Work  is  projected  to  remain  at  about  the  current  level  as  offshore  construction  work  continues  on  the  Ichthys  and  then  the  Prelude  developments,  and  due  to  ongoing  field  extension  drilling  and  increased  production  and  operations  support.  

While  negotiations  for  a  new  Australian  marine  EBA  continue,  there  remains  some  risk  of  industrial  action,  with  associated  short-­‐term  revenue  and  cost  impacts  during  the  negotiations.  

Minimal  work  was  undertaken  for  onshore  mining  companies  in  FY15,  but  outsourcing  opportunities  are  been  sought  in  FY16.  

Workforce   FY15  31  Mar  2015  

$m  

FY14  31  Mar  2014  

$m  

%  change  

Revenue   376.8   372.8   1%  EBIT  (before  non-­‐trading  items)   7.5   10.5   (29%)  

The  Workforce  division  provides  a  range  of  staffing  services  across  all  industry  sectors.  While  revenue  was  similar  to  FY14,  margins  were  lower  due  to  ongoing  weakness  in  the  blue  collar  economy  and  the  impact  of  structural  changes  across  the  staffing  industry.  

The  business  has  been  reshaped  in  response  to  these  changes.  A  significant  upgrade  of  the  core  Workforce  business  system  has  been  completed  to  provide  new  capability  that  operates  simply  and  efficiently  across  any  mobile  device.  The  system  also  enables  further  centralisation  of  recruitment  functions  in  each  state  

For

per

sona

l use

onl

y

and  expansion  of  the  mobile  account/sales  network,  reducing  the  need  for  some  branches  and  lowering  overall  overhead  costs.  This  redesign  of  the  way  the  business  functions  was  completed  in  October  2014,  resulting  in  a  reduction  in  the  number  of  branches  and  personnel  and  ongoing  cost  savings  of  more  than  $3  million  per  annum.  Thus,  the  second  half  EBIT  of  $4.5  million,  which  was  $1.5  million  higher  than  the  first  half  EBIT  of  $3  million,  is  the  business’  current  earnings  rate.  

OneShift,  the  start-­‐up  online  recruitment  business  in  which  Programmed  invested  $5  million  for  a  27.5%  equity  stake  in  October  2013,  continues  to  develop  and  grow.  

The  Federal  Government  has  restructured  how  unemployed  people  are  managed  back  to  work  and  recently  tendered  for  new  National  Employment  Services  providers.  The  tender  seeks  service  providers  in  more  than  50  regions  across  Australia,  and  Programmed  has  formed  an  alliance  with  APM  (a  national  provider  of  workforce  and  rehabilitation  services)  which  has  secured  contracts  in  nine  regions,  including  the  metropolitan  areas  of  Sydney  and  Perth  and  the  major  regional  centres  of  Geelong  and  Gold  Coast.  These  contracts  are  due  to  start  on  1  July  2015.  

Unallocated  Costs  

Unallocated  costs,  which  relate  to  corporate  overheads  and  non-­‐trading  income  and  expenses,  were  $9.9  million  (FY14:  $10.1  million).  

Cash  Flow  and  Net  Debt  

Cash  flow  remained  strong,  with  gross  operating  cash  flow  of  $80.9  million,  similar  to  FY14  ($80.6  million).    Net  operating  cash  flow  was  $65.7  million,  18%  higher  than  FY14  ($55.8  million).  

Net  debt  fell  a  further  $35.2  million  to  $7.0  million  at  31  March  2015  from  $42.2  million  at  31  March  2014.    The  company's  net  debt  to  equity  ratio  fell  to  1.7%  from  10.3%  at  31  March  2014.  

For  further  information  contact:  

General  /  Investor  Enquiries  Chris  Sutherland  Managing  Director  Telephone:  +61  8  9216  2123  

Investor  Enquiries  Katina  Nadebaum  Company  Secretary  Telephone:  +61  8  9216  2191  

Media  Enquiries  Ashley  Rambukwella  Financial  &  Corporate  Relations  Telephone:  +61  407  231  282  

About  Programmed  

Programmed  is  a  leading  provider  of  staffing,  maintenance  and  facility  management  services.  The  group  consists  of  three  divisions:  

• Property  &  Infrastructure:  provides  maintenance,  building  and  operational  services  to  the  property  and  infrastructure  sectors.  

• Resources:  provides  maintenance,  construction  and  operational  services  to  the  resources  sector.  

• Workforce:  provides  recruitment  and  labour  hire  services  to  a  range  of  industries  including  mining,  construction,  industrial,  manufacturing,  infrastructure,  transport  and  logistics.  

The  group  employs  approximately  10,000  people  across  a  broad  range  of  government  and  private  sector  businesses.  Its  ability  to  recruit  and  deploy  staff  is  supported  by  an  active  database  of  approx.  60,000  people.  Programmed  provides  services  to  over  7,000  customers,  often  under  long-­‐term  contracts,  and  delivers  these  services  through  a  network  of  over  100  branches  throughout  Australia  and  New  Zealand.  

Programmed's  business  model  is  built  around  its  ability  to  recruit,  retain  and  deploy  a  large  directly-­‐employed  workforce  of  professional,  skilled  and  semi-­‐skilled  staff  with  a  wide  range  of  capabilities.  

For

per

sona

l use

onl

y