corporatefile...open briefing..read

Date of lodgement: 28-06-2007
Title: Open Briefing®. SKILLED. CEO on FY07 Trading
Record of interview:
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SKILLED Group Ltd’s earnings guidance given at your interim results
presentation was for a stronger FY07 second half and full year EBITDA of $66 to
$69 million and NPAT of $29 to $32 million. Do you expect to meet this
guidance? What are the major drivers of current earnings growth?
CEO Greg Hargrave
We’re experiencing strong growth from our businesses exposed to mining and
resources and there has also been a stronger trend in our businesses in
metropolitan Melbourne and Sydney. Our call centre business, Excelior, has also
performed well and we’re positioning ourselves as one of the premier call centre
providers in the country.
We’ve maintained a very positive overall trend despite economic conditions in
some parts of regional Australia being tough. The drought has impacted demand
in some areas. We’ve also been temporarily affected by the postponement of a
number of government infrastructure projects, which we had expected to
commence in the second half of FY07.
Notwithstanding these challenges, we expect to come in at the top end of our $66
to $69 million EBITDA guidance and at the bottom end of our NPAT guidance of
$29 to $32 million. In FY06 we reported $47.5 million EBITDA and $24.7
million NPAT. We’ll exceed both of those very comfortably. Our strategy to
provide a diversified range of staffing services to key sectors in a range of
geographic locations is enabling us to sustain growth at strong levels.
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Drought conditions also adversely affected SKILLED Group’s first half earnings.
How significant was the impact in the second half?
CEO Greg Hargrave
The impact of drought on regional employment in the second half was again
severe and much greater than we expected, particularly in NSW, South Australia
and Victoria. We didn’t anticipate the extent of the flow-on of poor crops on
secondary industries, such as the canning and food processing industries, the wine
bottling industry and the packaging and distribution industries that underpin the
regional areas.
We’ve held up relatively well by comparison with many of our clients who were
quite adversely affected. SKILLED Group’s regional revenues declined only
slightly year on year, but didn’t deliver the growth we expected. This has been
balanced by a stronger performance by our metropolitan areas.
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Are there any signs of recovery from the drought yet?
CEO Greg Hargrave
After two or three years of the compounding effects of drought, regional areas are
seeing the best rains in ten years. Bumper harvests are expected across most areas
which will reinvigorate the regional sectors and SKILLED Group is well
positioned to enjoy the upside of economic strength next year.
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You’ve indicated that several government infrastructure projects were delayed.
What were these projects and what is their status?
CEO Greg Hargrave
They were largely interstate regional rail projects across the eastern seaboard, and
they did not come through in the second half as we had hoped. They are still
delayed. As such we’re not factoring them into our budget until we get positive
indications of when they’ll begin.
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State and Federal Governments have recently made multi-billion dollar
commitments to infrastructure spending, particularly across Queensland, Victoria
and NSW. What impact do you anticipate this expenditure will have on the labour
market generally and demand for SKILLED labour services specifically?
CEO Greg Hargrave
These programs will be a real positive for us. The key will be for governments to
translate these commitments into actions. Obviously, if the projects proceed, they
will have a further tightening effect on the labour market in general and generate
strong demand for our services in particular.
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We’re well positioned to benefit from the upsurge in committed infrastructure
investment and we’re ready and waiting for the recently announced investments to
materialise.
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Earlier this year you announced that your call centre business, Excelior, had been
selected to take over AAPT’s operations in Bendigo and Robina. Has this deal
been finalised and how will Excelior benefit?
CEO Greg Hargrave
The contract has been finalised and implementation has begun. The benefits are
accruing with extra profit derived in this half from the AAPT contract. We
anticipate the benefits of this contract to flow for at least the next 12 to18 months
and importantly, it builds on our position as Australia’s fastest growing contact
centre business.
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The Pacific Relines and Swan Contract Personnel acquisitions further expanded
your presence in the resources sector. How are these businesses performing and
do you expect to make further acquisitions within this sector?
CEO Greg Hargrave
Pacific Relines added a further specialist capability, the relining of grinding mills
and crushers at hard rock mining sites, to our resource projects and maintenance
support services. This business is performing very well. Swan Contract Personnel
added to our strength in the engineering, drafting and technical market in mining,
oil and gas. The business is also performing well and in line with our
expectations.
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Overall, can you comment on the outlook for FY08?
CEO Greg Hargrave
We’re very positive about next year. The general outlook is for another strong
year in FY08, building on FY07. We’ll give more specific guidance later in the
year when we report our Full Year Results on 21 August.
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Thank you Greg.
For more information about SKILLED, visit www.skilled.com.au or call Susan
Frost on (03) 9924 2386 or 0414 921010.
For previous Open Briefings with SKILLED Group Limited, or to receive future
Open Briefings by e-mail, please visit www.corporatefile.com.au.
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