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Programmed Profits Slip Amid Soft Demand

Programmed Profits Slip Amid Soft Demand
May 27, 2015 By Imran Valibhoy

Full-year profits for labour force company Programmed Maintenance Services (ASX:PRG) were down, according to a report released on Wednesday. For the full-year period ending on 31 March 2015, earnings before interest, tax, depreciation and amortisation (EBITDA) came to $61.4m. EBITDA was down 4.10 per cent compared to the previous corresponding period. Profit after tax on a statutory basis came to $25.7m, down 15.7 per cent. Revenue for the period came to $1,434.2m, almost exactly the same as the previous period.

On Monday, it was announced that Programmed and rival Skilled Group (ASX:SKE) resumed merger discussions. Skilled had rejected a previous merger proposition from its rival, saying it did not want to risk its market position. Executives at Programmed noted that a merger between the two companies would create a more competitive overall venture with better market position. The company cited reduced offshore construction work and vessel management demand as two factors for stagnant revenue and lower earnings. In the face of slowing demand, the company was able to cut costs through its upgraded business system to centralise recruitment functions in each state and reduce the number of branches.

Earnings per share (EPS) on a statutory basis fell 15.9 per cent to 21.7c per share. Net operating cash flow rose 18 per cent to $65.7m. Another factor for the profit slowdown was attributed to the headwinds facing the resource sector. "We always knew that the resources sector would peak," said managing director Chris Sutherland. Speculation has arisen that Programmed is attempting to sign new deals with major players in the mining and gas industries. However, Mr. Sutherland was hesitant to comment on the new deals. "We're not going to be specific. They are the major players,” he said.  Shares of PRG are up 8c, or 3.14 per cent, at $2.63 per share near the end of trading on Wednesday.

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Imran Valibhoy Author: Imran Valibhoy May 27, 2015

Since Joining the firm in 2006, Imran has worked on a range of M&A and Capital Market transactions in the natural resources, mining as well as projects in the renewable energy sector. Prior to joining Wise-owl, Imran worked at Euroz Securities in Perth, aiding in the advisory and valuation of companies in the mining and industrial sectors in Australia. Imran has a Masters in Banking & Finance from City University's Class Business School in London and a Bacheloor degree in Commerce from UWA.

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