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SKILLED Group Results for the half year ended 31 December 2011

SKILLED Group Results for the half year ended 31 December 2011

Financial Summary

• Sales revenue1,2 up 3.1% to $935.0 million

• Reported NPAT of $25.6 million up from a loss of $2.3 million

• Underlying NPAT1,4 up 75.4% to $24.9 million

• Underlying EBITDA1,3 up 7.0% to $45.4 million

• Underlying EBIT1,3 up 22.3% to $38.8 million

• Operating cash flow of $41.2 million

• Net debt reduced to $71.7 million from $96.6 million in June 2011

• Gearing at 14% compared to 19% at June 2011

• Interim dividend of 5.0 cps, fully franked, up from a final dividend of 3.0 cps in 2011

SKILLED Group has announced strong growth in profitability for the half year ended 31 December 2011. Net profit after tax was $25.6 million compared to a loss of $2.3 million in the prior corresponding period (pcp). Underlying net profit after tax was $24.9 million compared to $14.2 million in the pcp, up 75%.

SKILLED Group CEO, Mr Mick McMahon, said that despite challenging market conditions, continued growth in the core Workforce Services division was driven primarily by demand from the mining & resources and FMCG5 sectors. This was partly offset by weakness in employment in the manufacturing and logistics sectors.

Other Staffing Services grew by 12.7% with continued growth in Swan Contract Personnel in line with activity in the mining & resources and oil & gas sectors and growth in telecommunications training and workforce management services.

Engineering and Marine Services revenue and profitability was impacted by managed exits from unprofitable vessel contracts but was offset by improved activity levels in OMS International, UK and New Zealand and the OMSA JV (servicing Gorgon), as well as projects and major shutdown services in ATIVO.

Mr McMahon said, “About 50% of the Group’s revenue is generated from providing high skill trades and technical professionals in the mining & resources and oil & gas sectors. Workforce Services, Swan Contract Personnel, Offshore Marine Services and the OMSA JV (servicing Gorgon) have continued to benefit from the growth in these sectors”.

“We continue to make good progress in the implementation of our Core Plus strategy and the benefits are being reflected in improved earnings. The cost reduction programme targeting $12 million annualised savings by FY13 is delivering ahead of plan with further potential to improve back office processing and service levels at lower cost.

“Continued strong operating cash flow including improvements in working capital management has resulted in a further reduction in net debt and interest expense for the first half. Net debt as at 31 December 2011 was at $71.7 million (June 2011: $96.6 million) and underlying net interest has reduced by 66% to $4.3 million compared to the first six months of the last financial year. We have also achieved a 3 day reduction in average debtor days,” he added.

The Company has completed the divestment of its non-core or under-performing businesses. The sale of Excelior (November 2011) generated a post-tax profit on sale of $3.8 million and the sale of the Tradeforce NZ business (January 2012) is expected to generate a post-tax profit on sale of approximately A$1.9 million in 2H12. The sale proceeds have been used to reduce debt.

A “zero harm” philosophy is central to the Core Plus strategy. The implementation of the Safety Golden Rules is well progressed, focusing on high risk activities and industries and meeting client needs by segment. The Group continued to drive improved performance in safety with reduced injury rates in the half.

SKILLED Group Outlook

Activity levels have strengthened since a low point in September/October 2011 and the positive trend has continued into the first two months of the second half:

• Workforce Services exposure to growth sectors should continue to offset decline in other sectors

• Other Staffing Services growth is expected to continue given sector exposure and Swan Contract Personnel strength

• Engineering & Marine Services expect stronger activity levels in second half but with continued impact of OMS vessel exits on revenue

The continued benefits from the implementation of the strategy including controllable factors of costs, cash and other key enablers will support earnings growth.

“Overall we remain well positioned for growth with exposure to high skill trades and technical professional roles and key growth sectors of mining & resources, oil & gas, telecommunications and infrastructure supported by continued benefits flowing from the continuing implementation of the Core Plus strategy,” Mr McMahon said.


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