PROGRAMMED Maintenance Services has reduced its earnings expectations for the 2015-2016 financial year by about 10 per cent to about $65 million on the back of the slump in oil and gas prices.
Programmed also flagged a $75 million non-cash impairment to the goodwill of its marine services business, both in view of reduced demand and its sale of vessels operated by Broadsword Marine in January.
“The eventual charge will depend on final discount rates and forecasts following completion of the company’s 2015-2016 results,” the group said in an announcement.
In a business update released in early February, Programmed said the earnings before interest, tax and amortisation of its marine division, which included the marine businesses of the recently-acquired Skilled Group, was forecast to be about $16 million.
“Following completion of the major offshore construction projects that the marine business has serviced in the past few years, significant working capital will be recovered by 31 March 2016,” Programmed said – noting the date which signifies the end of its financial year.
“The business is being downsized to suit expected less activity during the next 12 months arising from the steep decline in oil and gas prices.”
Programmed’s staffing division, which combines the workforce arms of both Programmed and Skilled, had generated revenue in line with the previous year, with the exception of Swan Personnel, which provides engineering and technical personnel to the resources industry.
Announcing a reduction in revenue from $175 million to about $90 million in 2015-2016, Programmed said Swan had been repositioned as the WA arm of the Programmed Professionals business, extending its focus further into industries such as retail, tourism and infrastructure.
Programmed managing director Chris Sutherland said the acquisition of Skilled Group was bringing new opportunities to the company.
“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-resources companies,” he said.
The news preceded reports of a series of redundancies at the group, some of which were reportedly due to duplication of roles following the merger.
Forecast cost savings from the merger of about $30 million were expected to be realised for the financial year, with Mr Sutherland saying divisional management teams were operating successfully.
“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 serving all sectors of the economy,” he said.