appendix 4d: half year report half year ended 30 sept. 2009...appendix 4d: half year report half...
TRANSCRIPT
Wednesday 25 November 2009
Company Announcements Office ASX Limited Exchange Centre Level 4 20 Bridge Street Sydney NSW 2000
Dear Sir,
Appendix 4D: Half Year Report Half Year ended 30 Sept. 2009
Please find attached the Appendix 4D Half Year Report for the half year to 30 September 2009, which provides the details of the Group’s results for the period. Yours sincerely, PROGRAMMED MAINTENANCE SERVICES LIMITED
Ian H. Jones Company Secretary
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P R O G R A M M E D M A I N T E N A N C E S E R V I C E S L I M I T E D
(ABN 61 054 742 264)
H A L F Y E A R R E P O R T
For the half-year ended 30 September 2009
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APPENDIX 4D – HALF YEAR REPORT
Results for Announcement to the Market
For the half-year ended 30 September 2009 (Previous corresponding period: half-year ended 30 September 2008)
$’000 Revenue from rendering of services down 6.7% to 583,118 (Appendix 4D item 2.1) Profit from ordinary activities after tax attributable to members down 4.7% to 11,969 (Appendix 4D item 2.2) Profit for the period attributable to members down 4.7% to 11,969 (Appendix 4D item 2.3) (Appendix 4D item 2.6) The results for the half-year ended 30 September 2009 shown above are not directly comparable to the previous half-year ended 30 September 2008 due to the differing impacts of the following items which are described in the attached results commentary and financial report: Half-year ended 30 September 2008
- the disposal of the Industrial Services (Barry Bros.) business on 1 July 2008 (3 months’ contribution and classification as “discontinued operations”)
- the purchase of the SWG business on 4 July 2008 (3 months’ contribution) - the costs associated with Programmed’s response to the Spotless takeover offer
Dividends/distributions Amount per
security
Franked amount per
security (Appendix 4D item 2.4) (cents) (cents) Interim dividend declared 3.0 3.0 Previous corresponding period 9.5 9.5 The Dividend Reinvestment Plan (DRP) will apply to the interim 2010 dividend. The shares issued via the DRP will be calculated at a 5.0% discount to the average market price for the period of five trading days commencing on the second trading day after the record date. Record date for determining entitlements to the dividend (payment date of 27 January 2010)
30 September
2009 30 September
2008 (cents) (cents) Net Tangible Assets per Ordinary Share 61.6 40.8
7 January 2010
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H A L F Y E A R F I N A N C I A L R E P O R T
Half-year ended 30 September 2009
T A B L E O F C O N T E N T S PAGE NO.
Results commentary 4 Directors’ report 11 Auditors’ independence declaration 13 Independent auditor’s review report to the members 14 Directors’ declaration 16
Half year financial report
Condensed consolidated income statement 17
Condensed consolidated statement of comprehensive income 18
Condensed consolidated statement of financial position 19
Condensed consolidated statement of changes in equity 20
Condensed consolidated statement of cash flows 21
Notes to the condensed consolidated financial statements 22
This half-year financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 31 March 2009 and any public announcements made by Programmed Maintenance Services Limited during the half-year reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001 and the Australian Stock Exchange.
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R E S U L T S C O M M E N T A R Y
Programmed First Half FY10 Results
KEY POINTS
Revenue of $583 million (1H FY09: $625 million)
EBITA of $27.3 million (1H FY09: $32.7 million before bid defence costs of $3.5 million and earnings from discontinued operations of $1.4 million)
Profit after tax of $12.0 million (1H FY09: $12.6 million)
Net debt/equity ratio was 64% at 30 September 2009 and before new equity raising (Mar 09: 62%)
Bank facility extended to May 2012
Temporary dividend reduction strategy and dividend reinvestment plans remain in place
Interim dividend of 3 cents per share fully franked (FY09 interim: 9.5 cents)
KLM acquisition announced and Bidder’s Statement sent to all KLM shareholders
Entitlement offer expected to raise approximately $65 million
SUMMARY OF 1H FY10 RESULT Programmed Group, the staffing, maintenance and project services group, today announced a net profit after tax of $12.0 million for the half year ended 30 September 2009 (1H FY09: $12.6 million). EBITA was $27.3 million compared to prior corresponding half year EBITA of $32.7 million (before bid defence and discontinued operations). Chris Sutherland, Managing Director of Programmed, said: ”When one considers the weak economic conditions in comparison to the prior corresponding half year period (ended September 2008) which was at the peak of the economic cycle, the small declines of group revenue and profit are a good result. “This result demonstrates the strength of Programmed’s business model and the resilience of its earnings based on the group’s diverse services and industry sectors, broad range of customers and significant volumes of work under long term contracts. “We have completed a successful rights issue with $53.5 million raised from the institutional component to fund the proposed acquisition of KLM and other potential acquisitions that fit our group strategy. Programmed is in a strong position to further expand the services it can offer and the industry sectors it serves.”
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TABLE 1 Group Results
1 1H 30 Sep 2008 results include 3 months contribution from both Engineering Services (SWG ‐ purchased in July 2008) and Industrial Services (Barry Bros ‐ sold in July 2008)
2 Discontinued operations comprise Industrial Services (Barry Bros)
Group Results 1H Ended 30
Sep 2009
1H Ended 30
Sep 20081
$m $m % Change
Revenue 583.1 625.1 (6.7%)
EBITDA (before Spotless defence costs and
discontinued operations2 )33.9 38.7 (12.4%)
Depreciation (6.6) (6.0) (10.0%)
EBITA (before Spotless defence costs and
discontinued operations)27.3 32.7 (16.5%)
Spotless defence costs 0.0 (3.5) (100.0%)
Discontinued operations2 0.0 1.4 (100.0%)
EBITA 27.3 30.6 (10.8%)
Amortisation (0.8) (1.8) 55.6%
EBIT 26.5 28.8 (8.0%)
Net Interest (8.6) (10.2) 15.7%
Profit Before Tax 17.9 18.6 (3.8%)
Income Tax Expense (5.9) (6.0) 1.7%
Profit After Tax 12.0 12.6 (4.8%)
Profit After Tax (pre amortisation) 12.8 14.4 (11.1%)
Earnings Per Share (pre amortisation) 12.9 15.4 (15.9%)
Weighted Average Shares on Issue (million) 99.2 93.8 5.8%
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TABLE 2 Divisional Revenue
1 1H 30 Sep 2008 results include 3 months contribution from both Engineering Services (SWG ‐ purchased in July 2008) and Industrial Services (Barry Bros ‐ sold in July 2008)
2 Certain contracts previously included in Property Services in 1H Sep 2008 have been reallocated to Facilities Management in 1H Sep 2009. The 1H Sep 2008 comparatives have been restated by an amount of $22.7m accordingly. On a full year basis the amount to be reallocated from Property Services to Facilities Management is $48.8m
TABLE 3 Divisional EBITA
1 1H 30 Sep 2008 results include 3 months contribution from both Engineering Services (SWG ‐ purchased in July 2008) and Industrial Services (Barry Bros ‐ sold in July 2008)
2 Certain contracts previously included in Property Services in 1H Sep 2008 have been reallocated to Facilities Management in 1H Sep 2009. The 1H Sep 2008 comparatives have been restated by an amount of $(0.3)m accordingly. On a full year basis the amount to be reallocated from Property Services to Facilities Management is $0.5m
Divisional Revenue 1H Ended 30
Sep 2009
1H Ended 30
Sep 20081
$m $m % Change
Continuing Operations
Property Services2 114.0 122.4 (6.9%)
Facilities Management2 140.8 114.7 22.8%
Workforce 180.8 224.8 (19.6%)
Marine 106.6 111.7 (4.6%)
Engineering Services 41.0 40.3 1.7%
Total Continuing Operations 583.2 613.9 (5.0%)
Discontinued Operations
Industrial Services (Barry Bros) 0.0 11.2 (100.0%)
Total Consolidated Revenue 583.2 625.1 (6.7%)
Divisional EBITA 1H Ended 30
Sep 2009
1H Ended 30
Sep 20081
$m $m % Change
Continuing Operations
Property Services2 11.8 14.0 (15.7%)
Facilities Management2 2.7 1.5 80.0%
Workforce 4.0 8.3 (51.8%)
Marine 11.4 9.5 20.0%
Engineering Services 0.9 3.5 (74.3%)
Total Continuing Operations 30.8 36.8 (16.3%)
Discontinued Operations
Industrial Services (Barry Bros) 0.0 1.4 (100.0%)
Unallocated (3.5) (4.1) 14.6%
Total Consolidated EBITA 27.3 34.1 (19.9%)
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REVIEW OF OPERATIONS PROPERTY SERVICES The Property Services division provides painting, corporate imaging and grounds services and employs over 2,000 people. Its 6,000‐strong customer base extends across a diverse range of industries including retail, commercial, manufacturing, education and aged care, with services delivered through 60 branches in capital cities and regional centres throughout Australia, New Zealand and the United Kingdom. The division experienced a small revenue decline (7% overall) with the levels of discretionary expenditure impacted by the economic slowdown in all three countries with the largest percentage decline in the UK. The division resisted wholesale branch closures or staff redundancies during this period and thus EBITA margin has fallen. The division continues to focus on developing new customers within the retailing, education, aged care and government sectors in particular. The level of sales quotations is consistent with the prior year, however some clients are currently delaying final spending decisions and thus deferring planned expenditures. FACILITY MANAGEMENT The Facility Management division provides facility management solutions, property maintenance, refurbishments, and minor capital works through more than 50 contracts and related projects across all states of Australia. These services are delivered through a combination of direct employees and accredited suppliers and sub‐contractors. The division also provides strategic facility management advice to government and industry. The division increased both its revenue and earnings significantly, with growth coming from existing contracts and new contracts that commenced last year. Additional work was won in both NSW and WA associated with the Federal Government stimulus package. Some clients have set lower budgets for their own financial year commencing 1 July 2010. Significant investments are being made to improve systems and operational efficiencies. WORKFORCE The Workforce division, trading as Integrated, provides recruitment and labour hire services to more than 2,500 customers in a range of sectors including resources, industrial, government, manufacturing, transportation and logistics. It operates through a national network of over 40 branches in all states and territories of Australia and employs for customers a daily average of more than 5000 skilled and semi‐skilled staff from an active database of more than 60,000 personnel. The division was significantly impacted by the slowdown of the Australian economy with revenue falling 20% against prior half year. Significant costs were taken out of this division which has enabled a reasonable EBITA result albeit a fall of 52% on the prior half year. It is noted that the prior half year was during the height of strong economic conditions in Australia, resulting in record half year earnings for Workforce. Since the beginning of July we have seen the traditional seasonal pickup in demand for casual labour in the run up to Christmas. In 2007 our weekly full time equivalent casual headcount increased 16.1% from the beginning of July to the end of October. For the same period in 2008 the increase was only 4.4% as a sharp downturn hit in September and October 2008. In 2009 the increase over the same period is 15.4%, albeit from a significantly lower base than 2008. We therefore consider the increase to be the normal seasonal increase (i.e. consistent with prior years excluding 2008) and not a broader significant market increase in aggregate casual labour demand. We would expect a broader market
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increase to occur next year and are well positioned to benefit from the recovery in casual labour demand across the country. MARINE SERVICES The Marine division, trading as Total Marine Services, is a specialist provider of manning, catering, vessel management and logistics services to the offshore oil and gas industries in Australia, New Zealand and Asia. Headquartered in Fremantle, Western Australia with offices in Singapore and New Plymouth, New Zealand, the division provides crews and services for rigs, drill ships, offshore support vessels, specialist construction vessels, dredges, offshore platforms and floating production vessels. It also provides a variety of trades, supervisors and management to support offshore construction and maintenance activities. The division continues to benefit from buoyant market conditions, with sustained exploration and production activity in the oil and gas sector. It has good visibility of work for the next few years. ENGINEERING SERVICES The Engineering Services division, trading as SWG, is a construction and maintenance group servicing the resources and energy sectors in Australia, New Zealand and Asia. Headquartered in Perth, Western Australia with an office in Singapore, the division undertakes works in both the offshore oil and gas sector and the onshore resources sector. Prior to the commencement of this first half period, some contracted works were suspended and there was a reduction in immediate opportunities as a number of projects were deferred or cancelled. In response, overhead costs were reduced to ensure the business remained profitable in the short term. During the first half the business saw work return more quickly than expected resulting in revenues of $41 million. Previously suspended works were reinstated. Margins were lower than prior year as some initial work was taken to maintain base levels of activity. The business is likely to see better margins in the second half of FY10. The strategy for SWG to expand Programmed’s footprint into the resources industry remains unchanged. The division continues to identify opportunities for new work in both the offshore oil and gas sector and the onshore resources sector, particularly where it can provide complementary services to other Programmed divisions.
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CASH FLOW AND BALANCE SHEET Gross Operating Cashflow was impacted by timing differences with significant weekly wages ($7 million) paid on 30 September (being the start of a new pay week in our cycle) and expansion of our work in progress (part of inventories) on a number of major contracts. Major movements on the balance sheet compared to the end of March 2009 position were Cash down $18 million (after reduction of borrowings of $7 million), Trade Receivables up $6 million or 4% with a small increase in average debtor days, Inventories up $12 million or 27% as noted above and Trade Payables down $5 million or 4% mainly due to the wage payment noted above. Net Debt to Equity ratio was steady at 64% compared to 62% at end of March 2009. TABLE 4 Group Cashflow
1 1H 30 Sep 2008 results include 3 months contribution from both Engineering Services (SWG ‐ purchased in July 2008) and Industrial Services (Barry Bros ‐ sold in July 2008)
Group Cash Flow 1H Ended 30
Sep 2009
1H Ended 30
Sep 20081
$m $m % Change
Gross Operating Cash Flow 15.3 43.9
Interest paid (13.2) (7.5)
Income tax paid (8.4) (9.4)
Net Operating Cash Flow (6.3) 27.0 (123.3%)
Net purchases of plant & equipment 0.1 (5.7)
Payment for businesses (2.0) (0.5)
Proceeds from sales of businesses 0.0 14.2
Other investing cash flows 0.2 1.5
Net Investing Cash Flow (1.7) 9.5 (117.9%)
Net borrowings / (repayments) (11.5) 1.8
Dividends paid (3.5) (10.3)
Net Financing Cash Flow (15.0) (8.5) 76.5%
Net Increase / (Decrease) in Cash (23.0) 28.0 (182.1%)
Cash at beginning of half year 36.4 0.5
Cash at End of Half Year 13.4 28.5 (53.0%)
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TABLE 5 Group Balance Sheet
INTERIM DIVIDEND The directors have declared an interim dividend of 3 cents per share fully franked, payable on 27 January 2010 to shareholders on the register at 7 January 2010. The dividend reinvestment plan (DRP) will apply with a discount of 5% and the DRP will not be underwritten. This represents an approximate 30% payout of profit after tax for the anticipated number of shares at the record date following the completion of the current entitlement offer. Programmed’s current dividend policy, as announced on 27 May 2009, is to maintain a dividend payout ratio of 30% in order to achieve a target debt to equity ratio of 40% by 31 March 2011. The current entitlement offer will increase Programmed’s equity base and, as a result, Programmed expects to achieve its target debt to equity ratio sooner than previously indicated. Once the debt to equity ratio reaches the 40% target, Programmed will review the current dividend policy.
Balance Sheet 30 Sep 09 31 Mar 09
$m $m % Change
Cash 20.4 38.2 (46.6%)
Trade and other receivables 164.1 157.5 4.2%
Contract Recoverables 185.6 187.9 (1.2%)
Inventories 55.8 43.8 27.4%
Property, plant & equipment 30.2 34.8 (13.2%)
Goodwill & other intangible assets 232.9 233.7 (0.3%)
Other assets 41.1 40.7 1.0%
Total Assets 730.1 736.6 (0.9%)
Trade and other payables 125.6 130.3 (3.6%)
Borrowings 208.2 215.5 (3.4%)
Provisions and other liabilities 102.0 106.5 (4.2%)
Total Liabilities 435.8 452.3 (3.6%)
Total Equity 294.3 284.3 3.5%
Net Debt 187.8 177.3 5.9%
Net Debt / Equity 63.8% 62.3% 2.4%
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D I R E C T O R S ’ R E P O R T
The directors of Programmed Maintenance Services Limited submit herewith the financial report of Programmed Maintenance Services Limited and its subsidiaries (the Group) for the half-year ended 30 September 2009. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows: The names of the directors of the company during or since the end of the half-year are: Geoffrey Allan Tomlinson Christopher Glen Sutherland Susan Mary Oliver Brian John Pollock Jonathan Gladstone Whittle The above named directors held office during and since the end of the half-year. REVIEW OF OPERATIONS
Consolidated revenue for the half-year ended 30 September 2009 was $583,118 thousand, which is 6.7% lower than the corresponding period last year. For the half-year ended 30 September 2009, the consolidated profit before tax amounted to $17,883 thousand, and after tax $11,969 thousand, which are respectively 3.4% and 4.7% below the results for the half-year ended 30 September 2008. In the corresponding period last year, the profit after tax included the expenses related to the Company’s response to the Spotless takeover offer amounting to, on an after-tax basis, $2,452 thousand. Excluding the impact of these items resulted in a profit after tax of $15,013 thousand for the half-year ended 30 September 2008. CHANGES IN STATE OF AFFAIRS
Proposed Acquisition of KLM Group On 29 October 2009, the Company announced that it had signed a Takeover Bid Implementation Agreement with KLM Group Limited (“KLM”) under which Programmed will make an off-market takeover bid to acquire all of the issued shares in KLM for a total consideration of $28.1 million cash. Under the takeover offer, each KLM shareholder will receive $0.47 per KLM share payable in cash. KLM is listed on the ASX (code: KLM) and specialises in the design, installation and maintenance of integrated electrical and communications systems. The KLM Board has confirmed that it intends to unanimously recommend that KLM shareholders accept Programmed’s takeover offer in the absence of a superior proposal. In addition, each KLM director has confirmed that they intend to accept Programmed’s offer in respect of all KLM shares that they own or control, in the absence of a superior proposal. Programmed’s takeover offer is subject to various conditions. More information about the takeover offer is provided in the Bidder’s Statement issued by Programmed on 20 November 2009. Equity Raising The Company also announced on 29 October 2009 that it would undertake a 4 for 19 non-renounceable pro rata entitlement offer (“Entitlement Offer”) to fund the acquisition of KLM and to fund other potential acquisitions. Each new share issued under the Entitlement Offer will rank equally with existing Programmed shares from allotment. The equity raising was structured as follows:
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DIRECTORS’ REPORT (CONTINUED) CHANGES IN STATE OF AFFAIRS (CONTINUED) An underwritten institutional component that raised $53.5 million via the issue of 14.1 million shares, with
settlement completed on 13 November 2009; and A non-underwritten retail component which is expected to raise approximately $12 million; the details of the
completion of this component are expected to be announced on Friday 27 November 2009. Apart from the above, there has not been any matter or circumstance that has arisen since the end of the previous financial year that has significantly affected, or may significantly affect, the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years. AUDITORS’ INDEPENDENCE DECLARATION The auditors’ independence declaration is included on page 13 of the half-year financial report. ROUNDING OFF OF AMOUNTS
The company is of a kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance with that Class Order amounts in the directors’ report and the half-year financial report have been rounded off to the nearest thousand dollars, unless otherwise indicated.
Signed in accordance with a resolution of directors made pursuant to s.306(3) of the Corporations Act 2001. On behalf of the directors
C G SUTHERLAND DIRECTOR
MELBOURNE, VICTORIA 25 NOVEMBER 2009
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D I R E C T O R S ’ D E C L A R A T I O N
The directors declare that: (a) in the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and
when they become due and payable; and (b) in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations
Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the consolidated entity.
Signed in accordance with a resolution of the directors made pursuant to s.303(5) of the Corporations Act 2001.
On behalf of the directors
C G SUTHERLAND DIRECTOR MELBOURNE, VICTORIA 25 NOVEMBER 2009
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C O N D E N S E D C O N S O L I D A T E D I N C O M E S T A T E M E N T
FOR THE HALF-YEAR ENDED 30 SEPTEMBER 2009
Consolidated Half-year ended
Note
30 Sep 2009 $’000
30 Sep 2008 $’000
Continuing operations
Revenue 583,118 613,855
Other income 4,422 2,770 Changes in inventories of finished goods 1,462 (8,324) Raw materials and consumables used (27,385) (40,443) Employee benefits expense (353,644) (384,334) Sub-contractor expenses (149,115) (105,917) Depreciation and amortisation expense 3 (7,410) (7,837) Finance costs 3 (8,985) (10,487) Equipment and motor vehicle costs (7,817) (18,515) Information technology and telecommunication costs (3,655) (3,792) Defence and restructuring costs - (4,258) Other expenses (13,108) (15,316)
Profit before income tax 17,883 17,402 Income tax expense (5,914) (6,008) Profit for the period from continuing operations 11,969 11,394
Discontinued operations
Profit from discontinued operations 7 - 1,167 Profit attributable to members of Programmed Maintenance Services Limited 11,969 12,561
Cents Cents
Earnings per share From continuing and discontinued operations: Basic earnings per share 12.1 13.4 Diluted earnings per share 11.8 13.3 From continuing operations: Basic earnings per share 12.1 12.2 Diluted earnings per share 11.8 12.0 Notes to the condensed consolidated financial statements are included on pages 22 to 30
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C O N D E N S E D C O N S O L I D A T E D S T A T E M E N T O F
C O M P R E H E N S I V E I N C O M E
FOR THE HALF-YEAR ENDED 30 SEPTEMBER 2009
Consolidated Half-year ended
30 Sep 2009 $’000
30 Sep 2008 $’000
Profit for the period 11,969 12,561 Other comprehensive income Exchange differences arising on translation of foreign operations (2,071) (2,920) Gain/(loss) on cash flow hedges taken to equity net of tax 2,971 (2,224) Other comprehensive income for the period (net of tax) 900 (5,144) Total comprehensive income for the period attributable to owners of the parent entity 12,869 7,417
Notes to the condensed consolidated financial statements are included on pages 22 to 30
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C O N D E N S E D C O N S O L I D A T E D S T A T E M E N T O F
F I N A N C I A L P O S I T I O N
AS AT 30 SEPTEMBER 2009
Consolidated Note 30 Sep 2009
$’000 31 Mar 2009
$’000
CURRENT ASSETS Cash and cash equivalents 20,438 38,229 Trade and other receivables 237,558 231,729 Inventories 48,846 35,846 Current tax assets 8,700 3,881 Other 14,793 16,931 Total current assets 330,335 326,616 NON-CURRENT ASSETS
Trade and other receivables 112,159 113,667 Inventories 6,992 7,907 Property, plant and equipment 30,185 34,826 Deferred tax assets 17,521 19,892 Goodwill 220,906 221,076 Other intangible assets 11,981 12,625 Total non-current assets 399,744 409,993 TOTAL ASSETS 730,079 736,609 CURRENT LIABILITIES
Trade and other payables 125,623 130,251 Borrowings 28,716 37,303 Current tax payables 1,302 1,751 Provisions 21,935 22,790 Total current liabilities 177,576 192,095 NON-CURRENT LIABILITIES Borrowings 179,528 178,170 Other financial liabilities 3,818 8,062 Deferred tax liabilities 66,716 65,800 Provisions 8,246 8,095 Total non-current liabilities 258,308 260,127 TOTAL LIABILITIES 435,884 452,222 NET ASSETS
294,195 284,387
EQUITY Contributed equity 6 167,430 165,862 Reserves (2,092) (3,312) Retained earnings 128,857 121,837 TOTAL EQUITY
294,195 284,387
Notes to the condensed consolidated financial statements are included on pages 22 to 30
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C O N D E N S E D C O N S O L I D A T E D S T A T E M E N T O F
C H A N G E S I N E Q U I T Y
FOR THE HALF-YEAR ENDED 30 SEPTEMBER 2009
Consolidated
Issued
capital
$’000
Non
share
equity
$’000
Foreign
currency
translation
reserve
$’000
Capital
profits
reserve
$’000
Equity
settled
employee
benefits
reserve
$’000
Hedging
reserve
$’000
Retained
earnings
$’000
Total
$’000
Balance at 1 April 2008 136,057 - (798) 5,535 703 - 113,338 254,835 Profit for the period - - - - - - 12,561 12,561 Exchange differences arising on translation of foreign operations -
- (2,920) - - - - (2,920)
Loss on cash flow hedges - - - - - (2,224) - (2,224) Total comprehensive income for the period -
- (2,920) - - (2,224) - (5,144)
Issue of shares (note 7) 26,816 - - - - - - 26,816 Non-share equity (note 7) - 5,985 - - - - - 5,985 Recognition of share-based payments -
- - - 551 - - 551
Payment of dividends (note 5) - - - - - - (10,270) (10,270) Balance at 30 September 2008 162,873 5,985 (3,718) 5,535 1,254 (2,224) 115,629 285,334
Balance at 1 April 2009 165,862 - (4,846) 5,535 1,643 (5,644) 121,837 284,387 Profit for the period - - - - - - 11,969 11,969 Exchange differences arising on translation of foreign operations -
- (2,071) - - - - (2,071)
Gain on cash flow hedges - - - - - 2,971 - 2,971 Total comprehensive income for the period -
- (2,071) - - 2,971 - 900
Issue of shares (note 6) 1,468 - - - - - - 1,468 Recognition of share-based payments -
- - - 420 - - 420
Transfer from equity-settled employee benefits reserve (note 6) 100
- - - (100) - - - Payment of dividends (note 5) - - - - - (4,949) (4,949) Balance at 30 September 2009 167,430 - (6,917) 5,535 1,963 (2,673) 128,857 294,195
Notes to the condensed consolidated financial statements are included on pages 22 to 30
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C O N D E N S E D C O N S O L I D A T E D S T A T E M E N T O F
C A S H F L O W S
FOR THE HALF-YEAR ENDED 30 SEPTEMBER 2009
Consolidated Half-year ended
Note
30 Sep 2009 $’000
30 Sep 2008 $’000
Cash Flows from Operating Activities Receipts from customers 630,646 687,908 Payments to suppliers and employees (615,352) (644,034) Interest and other cost of finance paid (13,195) (7,475) Income tax paid (8,443) (9,407) Net cash (used in)/provided by operating activities (6,344) 26,992
Cash flows from investing activities Interest received 287 485 Payment for property, plant and equipment (2,398) (5,920) Proceeds from sale of property, plant and equipment 3,016 512 Payment for development software (560) (314) Payment for contracts acquired - (408) Payment for businesses (1,988) (534) Cash received on acquisition of business 7 - 177 Proceeds from sale of businesses 7 - 14,246 Other cash flows from investing activities - 1,250 Net cash (used in)/provided by investing activities (1,643) 9,494
Cash flows from financing activities Proceeds from borrowings 6,682 12,208 Repayment of borrowings (18,213) (10,449) Dividends paid (3,481) (10,270) Net cash used in financing activities (15,012) (8,511)
Net (decrease)/increase in cash and cash equivalents (22,999) 27,975 Cash and cash equivalents at the beginning of the period 36,184 598 Effects of exchange rate changes on the balance of cash held in foreign currencies 229 (33) Cash and cash equivalents at the end of the period 13,414 28,540
Reconciliation of cash Cash and cash equivalents per balance sheet 20,438 32,431 Bank overdrafts (7,024) (3,891) Cash and cash equivalents per cash flow statement 13,414 28,540 Notes to the condensed consolidated financial statements are included on pages 22 to 30
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
30 September 2009
Page 22
1. Significant accounting policies
Statement of compliance The half-year financial report is a general purpose financial report prepared in accordance with the Corporations Act 2001 and AASB 134 Interim Financial Reporting. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34 Interim Financial Reporting. The half-year financial report does not include notes of the type normally included in an annual financial report and shall be read in conjunction with the most recent annual financial report.
Basis of preparation The condensed financial statements have been prepared on the basis of historical cost, except for the revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted.
The company is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance with that Class Order amounts in the directors' report and the half-year financial report are rounded off to the nearest thousand dollars, unless otherwise indicated.
The accounting policies and methods of computation adopted in the preparation of the half-year financial report are consistent with those adopted and disclosed in the company’s 2009 annual financial report for the financial year ended 31 March 2009 except as noted below. 2. Segment Information The Group has adopted AASB 8 Operating Segments and AASB 2009-5 Further Amendments to Australian Accounting Standards Arising from the Annual Improvements Project (the amendments relating to AASB 8 Operating Segments), with effect from 1 April 2009. AASB 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision makers in order to allocate resources to the segments and to assess its performance. In contrast, the predecessor Standard (AASB 114 Segment Reporting) required an entity to identify two sets of segments (business and geographical), using a risk and rewards approach, with the entity’s “system of internal financial reporting to key management personnel” serving only as the starting point for the identification of such segments. The Group’s segments as identified under AASB 114 Segment Reporting and as disclosed in the annual financial report for the financial year ended 31 March 2009 are not different to the reportable operating segments identified under AASB 8 Operating Segments as disclosed in this report.
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
30 September 2009
Page 23
2. Segment Information (continued)
The following is an analysis of the revenue and results for the period, analysed by reportable operating segment for the periods under review.
Workforce Property Services Marine Facilities
Management
Engineering
Services
Total continuing
operations
Discontinued
operations
Industrial Services
Consolidated
2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Segment revenue 1 180,770 224,802 113,980 122,3793 106,632 111,729 140,786 114,6633 40,950 40,282 583,118 613,855 - 11,204 583,118 625,059 Segment result Earnings before interest, tax, amortisation and unallocated costs 4,010 8,262 11,808 13,9423 11,404 9,498 2,682 1,5013 918 3,525 30,822 36,728
- 828 30,822 37,556 Amortisation of contract intangibles
(811)
(1,830)
-
-
(811)
(1,830)
Takeover defence costs
-
(3,503)
-
-
-
(3,503)
Restructuring costs - (755) - - - (755) Other unallocated costs
(3,495)
(3,278)
-
5762
(3,495)
(2,702)
Earnings before interest and tax
26,516
27,362
-
1,404
26,516
28,766
Net finance costs (8,633) (9,960) - (289) (8,633) (10,249) Profit before tax 17,883 17,402 - 1,115 17,883 18,517 Income tax (expense)/benefit
(5,914) (6,008)
- 52 (5,914) (5,956)
Profit for the period 11,969 11,394 - 1,167 11,969 12,561 1 Segment revenue represents revenue from rendering of services to external customers. 2 Profit on disposal of business of $576 thousand net of fair value adjustments. 3 Certain contracts previously included in Property Services in the half year ended 30 September 2008 have been reallocated to Facilities Management in the half year ended 30 September 2009. As a result,
the 30 September 2008 comparative segment revenue amounts have been restated by $22,671 thousand and the segment EBITA amounts have been restated by ($254 thousand).
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
30 September 2009
Page 24
3. Expenses Consolidated Half-year ended
30 Sep 2009 $’000
Half-year ended 30 Sep 2008
$’000
Profit before income tax has been arrived at after charging the following specific expenses: Finance Costs: Total interest costs 7,491 10,334 Other finance costs 1,494 452 8,985 10,786 Attributable to: Continuing operations 8,985 10,487 Discontinued operations - 299 8,985 10,786 Depreciation and amortisation of non-current assets - Plant and equipment 6,345 6,894 - Identifiable intangibles 942 1,830 - Other non-current assets 123 211 7,410 8,935 Attributable to: Continuing operations 7,410 7,837 Discontinued operations - 1,098 7,410 8,935 4. Contracts and work in progress at recoverable value Consolidated Half-year ended
30 Sep 2009 $’000
Year ended 31 March 2009
$’000
Half-year ended 30 Sep 2008
$’000
Contracts in progress Balance at the beginning of period 187,926 172,895 172,895 (Decrease)/increase in amounts recoverable (113) 18,118 5,548 Effect of foreign currency movements (2,205) (3,087) (1,818) Balance at end of period 185,608 187,926 176,625 Categorised as: Current 73,641 74,401 77,387 Non-current 111,967 113,525 99,238 185,608 187,926 176,625
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30 September 2009
Page 25
4. Contracts and work in progress at recoverable value (continued) Consolidated Half-year ended
30 Sep 2009 $’000
Year ended 31 March 2009
$’000
Half-year ended 30 Sep 2008
$’000 Work in progress
Balance at the beginning of period 24,026 25,234 25,234 Increase/(decrease) in amounts recoverable 3,130 (1,142) 6,807 Effect of foreign currency movements (518) (66) (1,655) Balance at end of period 26,638 24,026 30,386 Categorised as: Current 19,646 16,119 20,028 Non-current 6,992 7,907 10,358 26,638 24,026 30,386 Total contracts and work in progress Categorised as: Current 93,287 90,520 97,416 Non-current 118,959 121,432 109,595 212,246 211,952 207,011 5. Dividends During the period, Programmed Maintenance Services Limited made the following dividend payments: Half-year ended
30 Sep 2009 Half-year ended
30 Sep 2008 Cents
per share
Total
$’000
Cents per
share
Total
$’000
Fully paid ordinary shares Final dividend 5.0 4,949 10.5 10,270 On 25 November 2009, the directors declared a fully franked interim dividend of 3.0 cents per share (2008: 9.5 cents) to the holders of fully paid ordinary shares in respect of the half-year ended 30 September 2009, to be paid to shareholders on 27 January 2010. This dividend has not been included as a liability in these financial statements. The total estimated dividend to be paid is $3,516 thousand (2008: $9,292 thousand).
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30 September 2009
Page 26
6. Contributed equity and issuance of equity securities
30 Sep 2009 $’000
30 Sep 2008 $’000
99,582,071 fully paid ordinary shares (2008: 97,808,946) 167,430 162,873 3,000 performance shares (2008: Nil) - - Non share equity (note 7) - 5,985 167,430 168,858
Ordinary shares Half-year ended 30 Sep 2009
Half-year ended 30 Sep 2008
No.’000 $’000 No.’000 $’000
Balance at the beginning of the half-year 98,981 165,862 90,013 136,057 Issue of shares as consideration for acquisition of business (note 7) - - 7,796 26,816 Non share equity (note 7) - - - 5,985 Issue of shares under the Dividend Reinvestment Plan 571 1,468 - - Issue of shares under the Long Term Incentive Plan 30 100 - - Balance at the end of the half-year 99,582 167,430 97,809 168,858
Performance shares During the half-year reporting period, the Company issued 3,000 performance shares following shareholder approval at the 2009 Annual General Meeting. The performance shares have limited rights, and do not carry dividend or voting rights, are not listed, and can be transferred only in very limited circumstances. They will, however, convert into fully paid ordinary shares in the capital of the Company depending upon the financial performance of the SWG Group, and comprise part of the deferred consideration for the purchase of this business (refer note 7 ). Apart from those noted above, there were no other movements in the ordinary share capital or other issued share capital of the company in the current or prior half-year reporting period.
Performance rights and options The following reconciles the outstanding Performance rights and options under the Long Term Incentive Plan at the beginning and end of the half-year:
Performance rights Performance options Half-year
ended
30 Sep
2009
No.
Half-year
ended
30 Sep
2008
No.
Half-year
ended
30 Sep
2009
No.
Half-year
ended
30 Sep
2008
No. Balance at the beginning of the half-year 1,029,304 939,304 3,360,000 2,900,000 Granted during the half-year - - - - Exercised during the half-year (30,000) - - - Lapsed during the half-year (35,000) - (125,000) - Balance at the end of the half-year 964,304 939,304 3,235,000 2,900,000
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
30 September 2009
Page 27
7. Acquisition and disposal of subsidiaries
Discontinued operation in the half year ended 30 September 2008
(a) On 1 July 2008, the Group disposed of Barry Bros Specialised Services Pty Limited which represented the Group’s Industrial Services business segment.
The profit/(loss) for the half-year from the discontinued operation is analysed as follows:
Half-year ended 30 Sep 2009
$’000
Half-year ended 30 Sep 2008
$’000 Loss of the company for the half-year - (144) Gain on disposal of the company - 1,311 - - 1,167 The following were the results of the company for the half-year: Revenue - 11,185 Operating expenses - (10,347) Finance costs - (299) Operating profit before tax - 539 Fair value adjustments on sale - (735) Loss before income tax - (196) Income tax benefit - 52 Loss after tax - (144) The net assets of Barry Bros Specialised Services Pty Limited at the date of disposal were as follows:
1 July 2008 $’000
Net assets disposed of 8,755 Attributable goodwill - 8,755 Gain on disposal 1,311 Total consideration 10,066 Net cash inflow on disposal Cash and cash equivalents consideration 10,066 Add bank overdraft balance disposed of 180 10,246 (b) An amount of $4,000 thousand, which was receivable at 31 March 2008 following the sale of a subsidiary, was received in the half-year ended 30 September 2008.
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30 September 2009
Page 28
7. Acquisition and disposal of subsidiaries (continued) Acquisition of subsidiaries in the half year ended 30 September 2008
On 4 July 2008, the Group acquired 100% of the issued share capital of SWG Holdings (2005) Pty Ltd and its subsidiaries (“SWG group”), with the share consideration being the issue of Programmed Maintenance Services Limited shares. 7,795,552 ordinary shares were issued at a price of $3.44 per share providing consideration of $26,816 thousand. A further $1,136 thousand of consideration, including acquisition costs, had been paid in cash by 31 March 2009 ($444 thousand by 30 September 2008). The initial accounting for the acquisition of the SWG group had been provisionally determined at 30 September 2008 and was finalised at 31 March 2009. The deferred consideration payable for the acquisition of SWG will comprise further ordinary shares in the Company, with the number issued to be entirely dependent upon the financial performance of the SWG group over the three financial years to 30 June 2011. To facilitate the issue of further ordinary shares, the Company issued the SWG sellers (or their nominees) with a new type of share in the Company, called a “Performance share”. Following shareholder approval at the 2009 Annual General Meeting, the Company issued 3,000 Performance shares. The Performance shares have limited rights and convert into fully paid ordinary shares in the capital of the Company depending upon the financial performance of the SWG Group. The terms of the Performance shares and the required levels of EBIT (earnings before interest and tax) were described in the ASX Appendix 3b issued on 13 August 2009. At 30 September 2009, the business was not expected to perform at the average EBIT level over the three year period that would result in the conversion of the Performance Shares into any more than a nominal number of fully paid ordinary shares. No value has therefore been assigned to the deferred consideration at reporting date.
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30 September 2009
Page 29
7. Acquisition and disposal of subsidiaries (continued) Details of the net assets acquired in the business combination and the goodwill arising, as at 31 March 2009, were as follows: Book
value
$’000
Fair value adjustments
$’000
Fair value on
acquisition $’000
Net assets acquired: Current assets Cash and cash equivalents 177 - 177 Trade and other receivables 13,427 (111) 13,316 Inventories 1,527 (193) 1,334 Other current assets 800 - 800 Non-current assets Property, plant and equipment 3,139 (29) 3,110 Deferred tax assets 302 33 335 Current liabilities Trade and other payables (8,686) - (8,686) Borrowings (2,021) - (2,021) Current tax payable (1,255) - (1,255) Provisions - (527) (527) Non-current liabilities Deferred tax liabilities (485) 58 (427) 6,925 (769) 6,156 Goodwill arising on acquisition 21,796 Total consideration 27,952 Net cash flow on acquisition: $’000
Total purchase consideration 27,952 Less non cash consideration: issue of equity securities (note 6) (26,816) Consideration and acquisition costs paid in cash 1,136 Less cash and cash equivalent (177) 959 8. Subsequent events Proposed Acquisition of KLM Group On 29 October 2009, the Company announced that it had signed a Takeover Bid Implementation Agreement with KLM Group Limited (“KLM”) under which Programmed will make an off-market takeover bid to acquire all of the issued shares in KLM for a total consideration of $28.1 million cash. Under the takeover offer, each KLM shareholder will receive $0.47 per KLM share payable in cash.
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30 September 2009
Page 30
8. Subsequent events (continued) KLM is listed on the ASX (code: KLM) and specialises in the design, installation and maintenance of integrated electrical and communications systems. The KLM Board has confirmed that it intends to unanimously recommend that KLM shareholders accept Programmed’s takeover offer in the absence of a superior proposal. In addition, each KLM director has confirmed that they intend to accept Programmed’s offer in respect of all KLM shares that they own or control, in the absence of a superior proposal. Programmed’s takeover offer is subject to various conditions. More information about the takeover offer is provided in the Bidder’s Statement issued by Programmed on 20 November 2009. Equity Raising The Company also announced on 29 October 2009 that it would undertake a 4 for 19 non-renounceable pro rata entitlement offer (“Entitlement Offer”) to fund the acquisition of KLM and to fund other potential acquisitions. Each new share issued under the Entitlement Offer will rank equally with existing Programmed shares from allotment. The equity raising was structured as follows:
An underwritten institutional component that raised $53.5 million via the issue of 14.1 million shares, with settlement completed on 13 November 2009; and
A non-underwritten retail component which is expected to raise approximately $12 million; the details of the completion of this component are expected to be announced on Friday 27 November 2009.
Apart from the above, there has been no other matter or circumstance that has arisen since the end of the half year, that has significantly affected, or may significantly affect, the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years.
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