managing director s review · managing director s review ... our management trainee programme again...

12
Managing Director’s Review We adopted a strategy to grow the business through broadening the range of services we offered our existing customers across Australia. We also began to diversify our service offering in New Zealand and entered the United Kingdom painting market, where our maintenance programmes are unique. The result was a stronger business, with a wider customer base and consistent year-on-year growth. Operating cash flow improved substantially and we have been able to increase our dividend payout ratio and fully frank dividends. Today we provide a broad range of outsourced services. Australian Painting, which has doubled its revenue in the past eight years and contributed strongly to the latest result, provided 33 per cent of 2006-7 group revenue. Combining our multi-service model with geographic expansion has the powerful effect of compounding growth. It has reduced business risks and provided access to a larger market. We can now add greater value to larger businesses and government organisations with multiple sites. Systems to manage multi-site contracts helped us coordinate services during the past year across more than 60 Myer stores, where we provide painting, plumbing, refurbishment, electrical and compliance services. Similarly, we provided multiple services for other national groups such as a cinema chain, Telstra, Orica, retail chains, and specialty stores. We also provide the Australian Electoral Commission with maintenance and compliance services. Our capacity to assist multi-site organisations with outsourced service solutions has increased substantially since the end of the financial year with the Integrated Group merger. This is the next step in Programmed Maintenance Services’ strategic evolution and we are excited by the growth opportunities it provides. The group now has a full-service offering covering the spectrum from labour hire, recruitment and managed labour services, through to property maintenance and infrastructure services, giving us scope to contribute greater customer value. I am pleased to report that Programmed Maintenance Services continued its growth momentum in 2006-7 and generated another record result, led by a strong performance from our Australian Property Maintenance businesses. Particularly satisfying was the significant increase in revenue from multi-service, multi-site contracts, validating the strategy we have implemented since ASX listing in October 1999. Investors then were concerned about our ability to expand the business, the company’s operating cash flow, low dividend payout ratio and lack of franking. Max Findlay Managing Director “The merger with Integrated Group more than doubles the company’s annualised revenue and has increased its market capitalisation. It will also further diversify our earnings, improve cash flow, triple our number of employees to more than 9,500 and provide a larger geographic footprint.” Programmed Maintenance Services 6

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Page 1: Managing Director s Review · Managing Director s Review ... Our management trainee programme again enabled ... been particularly successful in Victoria and Queensland,

Managing Director’s Review

Weadoptedastrategytogrowthebusinessthrough

broadeningtherangeofservicesweofferedourexisting

customersacrossAustralia.Wealsobegantodiversify

ourserviceofferinginNewZealandandenteredthe

UnitedKingdompaintingmarket,whereourmaintenance

programmesareunique.Theresultwasastronger

business,withawidercustomerbaseandconsistent

year-on-yeargrowth.Operatingcashflowimproved

substantiallyandwehavebeenabletoincreaseour

dividendpayoutratioandfullyfrankdividends.

Todayweprovideabroadrangeofoutsourcedservices.

AustralianPainting,whichhasdoubleditsrevenueinthe

pasteightyearsandcontributedstronglytothelatest

result,provided33percentof2006-7grouprevenue.

Combiningourmulti-servicemodelwithgeographic

expansionhasthepowerfuleffectofcompoundinggrowth.

Ithasreducedbusinessrisksandprovidedaccesstoa

largermarket.Wecannowaddgreatervaluetolarger

businessesandgovernmentorganisationswith

multiplesites.

Systemstomanagemulti-sitecontractshelpedus

coordinateservicesduringthepastyearacrossmore

than60Myerstores,whereweprovidepainting,plumbing,

refurbishment,electricalandcomplianceservices.

Similarly,weprovidedmultipleservicesforothernational

groupssuchasacinemachain,Telstra,Orica,retail

chains,andspecialtystores.Wealsoprovidethe

AustralianElectoralCommissionwithmaintenanceand

complianceservices.

Ourcapacitytoassistmulti-siteorganisationswith

outsourcedservicesolutionshasincreasedsubstantially

sincetheendofthefinancialyearwiththeIntegrated

Groupmerger.ThisisthenextstepinProgrammed

MaintenanceServices’strategicevolutionandweare

excitedbythegrowthopportunitiesitprovides.Thegroup

nowhasafull-serviceofferingcoveringthespectrumfrom

labourhire,recruitmentandmanagedlabourservices,

throughtopropertymaintenanceandinfrastructure

services,givingusscopetocontributegreater

customervalue.

IampleasedtoreportthatProgrammedMaintenanceServicescontinueditsgrowthmomentumin2006-7andgeneratedanotherrecordresult,ledbyastrongperformancefromourAustralianPropertyMaintenancebusinesses.

Particularlysatisfyingwasthesignificantincreaseinrevenuefrommulti-service,multi-sitecontracts,validatingthestrategywehaveimplementedsinceASXlistinginOctober1999.Investorsthenwereconcernedaboutourabilitytoexpandthebusiness,thecompany’soperatingcashflow,lowdividendpayoutratioandlackoffranking.

Max FindlayManagingDirector

“ThemergerwithIntegratedGroupmorethandoublesthecompany’sannualisedrevenueandhasincreaseditsmarketcapitalisation.Itwillalsofurtherdiversifyourearnings,improvecashflow,tripleournumberofemployeestomorethan9,500andprovidealargergeographicfootprint.”

ProgrammedMaintenanceServices6

Page 2: Managing Director s Review · Managing Director s Review ... Our management trainee programme again enabled ... been particularly successful in Victoria and Queensland,

ThemergerwithIntegratedGroupmorethandoubles

thecompany’sannualisedrevenueandhasincreased

itsmarketcapitalisation.Itwillalsofurtherdiversifyour

earnings,improvecashflow,tripleournumberof

employeestomorethan9,500andprovidealarger

geographicfootprint.

Combiningthetwobusinesses,however,promisesfar

morethanthat.Itoffersscopetobundlemoreservices

andofferthemtoabroadercustomerbase;expandlabour

hireservicesintoNewZealandandtheUnitedKingdom;

streamexistingProgrammedMaintenanceServices

expertiseintomorelocations,particularlyinWestern

Australia;andexpandbusinessinindustrieswhere

Integratedhasastrongpresence,suchasminingand

marine.Itwillalsocreategreaterlabourflexibilityacross

thegrouptomeettightregionallabourmarketconditions

andseasonaldemands.

Consistency of EBIT margins

2000

40

35

30

25

20

15

10

5

0

Cent

spe

rsha

re

20012002

20032004

20052006

2007

18%

16%

14%

12%

10%

8%

6%

4%

2%

0%

EBIT

/Rev

enue

%

EBIT EBIT/Revenue

7Managing Director’s Review

Page 3: Managing Director s Review · Managing Director s Review ... Our management trainee programme again enabled ... been particularly successful in Victoria and Queensland,

Managing Director’s Review continued

Weareimplementingadetailedintegrationplan,which

willdeliversomecostsavingsandimprovedbusiness

efficiencieswherefunctionsareduplicated.Fromthe

outset,therehasbeentremendouscooperationand

goodwillfrombothPMSandIntegratedstaffandthetwo

groupsareworkingtogetherharmoniouslytocapitalise

onthespecialskillsthateachbusinesscontributes.

PeopleProgrammedMaintenanceServiceshasoutstanding

peoplethroughoutthebusinessandastrongteamspirit

basedonsixcorevaluesofSafety,Team,Responsibility,

Innovation,PrideandRecognition.

Inthecurrentfullemploymentconditions,thecompany

hascontinuedtoattractandretainhighqualitypeople,

including150apprenticesacrosstheGroup.Skills

shortages,however,havecontinuedtoholdusback

insomeareas,particularlyinWesternAustraliaand

NewZealand.

Tohelpovercometheshortageofskilledtradespeople,

wesecondedasmallteamofpaintersfromourUnited

KingdombusinesstoWesternAustraliaduringAustralia’s

peaksummerseason.Wealsoattendedcareersexpos

inWesternAustraliaandQueenslandtoincreaseschool

students’awarenessofourapprenticeshipopportunities.

Ourmanagementtraineeprogrammeagainenabled

frontlinestafftoprogresstokeyroles.Tohelpmaintain

highstandardsofcustomerservice,wedevelopedan

onlineinductionprogrammewhichwillbeimplemented

acrossthegroupin2007-8.Thisprovidesconsistency,

canbecustomisedforeachbusinessandoffersatesting

andannualre-testingcapability.Wealsocreatedan

eRecruitmenthubtocoordinateandstreamlineall

recruitmentprocesses,trackeffectivenessofadvertising,

controlcostsandprovideatalentwarehouse.Thiswas

successfullytrialledintheAustralianPaintingbusiness.

Afirmcommitmenttoemphasisingsafetythroughout

theorganisationsignificantlyreducedtherateofinjury

andillness.Ourapproachistodevelopacultureof

safety,ratherthanrelyonsupervisedsafety,andthe

lost-timeinjuryratecontinuedtofallduringtheyear.

AcentralisedCorporateAssurancefunctionwas

establishedtodeliverconsistentprocessesacrossthe

group.Tostreamlineadministration,wenowhaveasingle

managementsystemthatintegratesoccupationalhealth

andsafety,qualityandenvironmentalrequirements.

Wealsorolledoutnewdatacommunicationsto

55locationsinAustraliaandNewZealand,andimproved

ourabilitytohandleahighervolumeofhelpdeskenquiries.

8 Programmed Maintenance Services

LukeDickinsonworkingatTheVillageGlenisoneofthemanyProgrammedMaintenanceServices’groundspeopleprovidinggroundsandgardensservicesthroughoutAustralia.Sitesvaryfromsportingovalsanduniversitygroundstoretirementvillages,petrolstationsandcivicparks.

Managing Director’s Review 9

Page 4: Managing Director s Review · Managing Director s Review ... Our management trainee programme again enabled ... been particularly successful in Victoria and Queensland,

LukeDickinsonworkingatTheVillageGlenisoneofthemanyProgrammedMaintenanceServices’groundspeopleprovidinggroundsandgardensservicesthroughoutAustralia.Sitesvaryfromsportingovalsanduniversitygroundstoretirementvillages,petrolstationsandcivicparks.

Managing Director’s Review 9

Page 5: Managing Director s Review · Managing Director s Review ... Our management trainee programme again enabled ... been particularly successful in Victoria and Queensland,

ThemergerwithIntegratedGroupmorethandoubles

thecompany’sannualisedrevenueandhasincreased

itsmarketcapitalisation.Itwillalsofurtherdiversifyour

earnings,improvecashflow,tripleournumberof

employeestomorethan9,500andprovidealarger

geographicfootprint.

Combiningthetwobusinesses,however,promisesfar

morethanthat.Itoffersscopetobundlemoreservices

andofferthemtoabroadercustomerbase;expandlabour

hireservicesintoNewZealandandtheUnitedKingdom;

streamexistingProgrammedMaintenanceServices

expertiseintomorelocations,particularlyinWestern

Australia;andexpandbusinessinindustrieswhere

Integratedhasastrongpresence,suchasminingand

marine.Itwillalsocreategreaterlabourflexibilityacross

thegrouptomeettightregionallabourmarketconditions

andseasonaldemands.

Consistency of EBIT margins

2000

40

35

30

25

20

15

10

5

0

Cent

spe

rsha

re

20012002

20032004

20052006

2007

18%

16%

14%

12%

10%

8%

6%

4%

2%

0%

EBIT

/Rev

enue

%

EBIT EBIT/Revenue

7Managing Director’s Review

Managing Director’s Review continued

Australian Property MaintenanceTheAustralianPropertyMaintenancebusinesseshada

verysuccessfulyear.Tightercontrolsoverjobmanagement

ledtoastrongupliftinmargins,particularlyinAustralian

Painting,withearningsbeforeinterestandtaxincreasing

by31.9percent,comparedwitha19percentincrease

inrevenue.

TheAustralianPaintingbusinessperformedstrongly,

especiallyinVictoria,NewSouthWalesandQueensland.

Improvedestimating,performancemeasurementand

reportingsystemscontributedtogreateraccountability

andcorrespondinglyimprovedoutcomes.Revenue

fromlong-termmaintenanceprogrammesincreased

andseveralsignificantprogrammeswererenewed,

includingmaintenanceofsomeiconicracecoursesand

prominentschools.Majorprojectsrangedfromdetailed

decorationofSydney’sGreatSynagoguetopainting

communicationspiresontopofMelbourne’s60storey

101CollinsStreettower.

Multi-siteprojectscompletedduringtheyearincludeda

trafficmanagementprogrammetoimprovetrafficflow

andsafetyinsome700supermarkets,andinterior

refurbishmentofstoresthroughoutAustraliaforamajor

retailchain.

Inthepresentstrongbusinessclimate,morecompanies

aredifferentiatingthemselvesthroughre-imaging,resulting

inincreasedrevenueandprofitforourAustralianCorporate

Imagingbusiness.Projectsincludedthe235-storerollout

ofTyrepower’svibrantnewbranding,andcreatingan

excitingnewlookforluxurycarshowroomsinSydney

andMelbourne.

OurBuildingServicesbusinessimprovedstronglyin

thesecondhalf,aidedbyexcellentperformancein

SouthAustraliaandconsiderableprogressinVictoria

andNewSouthWales.Thebusinesscontinuedtodiversify

itsrevenueandskillsbaseandaddedtothenumberof

itsmulti-site,multi-servicenationalcustomers.Thisis

expectedtoleadtofurtherrevenueandearningsgrowth

in2007-8.

Programmed Maintenance Services10

Page 6: Managing Director s Review · Managing Director s Review ... Our management trainee programme again enabled ... been particularly successful in Victoria and Queensland,

Managing Director’s Review

Weadoptedastrategytogrowthebusinessthrough

broadeningtherangeofservicesweofferedourexisting

customersacrossAustralia.Wealsobegantodiversify

ourserviceofferinginNewZealandandenteredthe

UnitedKingdompaintingmarket,whereourmaintenance

programmesareunique.Theresultwasastronger

business,withawidercustomerbaseandconsistent

year-on-yeargrowth.Operatingcashflowimproved

substantiallyandwehavebeenabletoincreaseour

dividendpayoutratioandfullyfrankdividends.

Todayweprovideabroadrangeofoutsourcedservices.

AustralianPainting,whichhasdoubleditsrevenueinthe

pasteightyearsandcontributedstronglytothelatest

result,provided33percentof2006-7grouprevenue.

Combiningourmulti-servicemodelwithgeographic

expansionhasthepowerfuleffectofcompoundinggrowth.

Ithasreducedbusinessrisksandprovidedaccesstoa

largermarket.Wecannowaddgreatervaluetolarger

businessesandgovernmentorganisationswith

multiplesites.

Systemstomanagemulti-sitecontractshelpedus

coordinateservicesduringthepastyearacrossmore

than60Myerstores,whereweprovidepainting,plumbing,

refurbishment,electricalandcomplianceservices.

Similarly,weprovidedmultipleservicesforothernational

groupssuchasacinemachain,Telstra,Orica,retail

chains,andspecialtystores.Wealsoprovidethe

AustralianElectoralCommissionwithmaintenanceand

complianceservices.

Ourcapacitytoassistmulti-siteorganisationswith

outsourcedservicesolutionshasincreasedsubstantially

sincetheendofthefinancialyearwiththeIntegrated

Groupmerger.ThisisthenextstepinProgrammed

MaintenanceServices’strategicevolutionandweare

excitedbythegrowthopportunitiesitprovides.Thegroup

nowhasafull-serviceofferingcoveringthespectrumfrom

labourhire,recruitmentandmanagedlabourservices,

throughtopropertymaintenanceandinfrastructure

services,givingusscopetocontributegreater

customervalue.

IampleasedtoreportthatProgrammedMaintenanceServicescontinueditsgrowthmomentumin2006-7andgeneratedanotherrecordresult,ledbyastrongperformancefromourAustralianPropertyMaintenancebusinesses.

Particularlysatisfyingwasthesignificantincreaseinrevenuefrommulti-service,multi-sitecontracts,validatingthestrategywehaveimplementedsinceASXlistinginOctober1999.Investorsthenwereconcernedaboutourabilitytoexpandthebusiness,thecompany’soperatingcashflow,lowdividendpayoutratioandlackoffranking.

Max FindlayManagingDirector

“ThemergerwithIntegratedGroupmorethandoublesthecompany’sannualisedrevenueandhasincreaseditsmarketcapitalisation.Itwillalsofurtherdiversifyourearnings,improvecashflow,tripleournumberofemployeestomorethan9,500andprovidealargergeographicfootprint.”

ProgrammedMaintenanceServices6

RhysWight,left,andPeterSmith,atopthe101CollinsStreettowerinMelbourne,arepartofProgrammedMaintenanceServicesabseilcrew,whichspecialisesindifficult-to-reachmaintenanceprojects.

Photographerwasfellowpainter,RobbieSchimmelpfenning,whowasworkingontheadjacentcommunicationantenna.

11Managing Director’s Review

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Managing Director’s Review continued

TheGroundsManagementbusinessalsohadavery

strongyear,especiallyinVictoria,SouthAustraliaand

Queensland.Itsnationalpresenceenabledittosecure

amajorcontractforWoolworths’petrolstations,and

thebusinesswasappointedbySpotlesstomaintainthe

groundsatDepartmentofDefencebasesinsouth-east

Queensland.Newmulti-sitecontractshaverecently

commencedwithMacquarieGoodmanandNewSouth

WalesPolice.

Ournationallandscapingserviceattracteddiverse

customers,rangingfromtertiaryinstitutionstothe

VictorianArtsCentre.Italsoexpandeditsshareofthe

newhomedevelopmentmarketwiththecompletionof

majorlandscapingworksandstrengtheneditsposition

intheeducationsector.

Ourinfrastructureandfacilitiesmanagementbusiness,

Tungsten,wasrestructuredtoincorporateInfraserv,and

considerablenewbusinesswasgenerated.Tungsten

providesawiderangeofhighlevelmanagementskills,

includingengineers,fitters,plumbers,groundsandother

services,toprovidelargeindustrialandminingsiteswith

solutionsfromsecurityatthefrontgatetoemergency

fireandaccidentresponseteams.

TungstensecuredanewcontractcoveringBHPBilliton

sitesinWesternAustraliauntil2011,whileitscontract

forBHPBilliton’ssitesinVictoriaandSouthAustraliawas

extendeduntil2011.Italsogainedsignificantlong-term

contractsfromPortofMelbourneCorporation,theWater

CorporationofWesternAustralia,YarraValleyWaterand

ASSAAbloy.Reflectingitscommunityprofile,Tungsten

wontheToyotaCommunityArtsAwardforFrankston

CityCouncilinVictoriaandwasnominatedforthe

nationalaward.

Industrial ServicesTheBarryBros.industrialservicesbusinesscontinuedto

increaseitsrevenuefollowinginvestmentinnewequipment

andopeningbranchesatGosford,NewSouthWales,and

theGoldCoast.Earnings,however,wereconstrainedby

drought,whichcausedunder-utilisationofequipment,so

whilerevenueincreasedby19percentovertheprevious

year,earningsbeforeinterestandtaxdeclinedmarginally.

12 ProgrammedMaintenanceServices

Page 8: Managing Director s Review · Managing Director s Review ... Our management trainee programme again enabled ... been particularly successful in Victoria and Queensland,

StanwellPowerStation,pictured,isoneofTungsten’scurrentQueenslandcustomers.Tungstenhasextensiveexperienceintheassetmanagementandmaintenanceofwaterutilities,powergenerationsites,educationalfacilities,correctionalfacilities,localgovernmentinfrastructure,publichousingandindustrialmanufacturingsites.

13Managing Director’s Review

Page 9: Managing Director s Review · Managing Director s Review ... Our management trainee programme again enabled ... been particularly successful in Victoria and Queensland,

Profitablegrowthofnon-paintingserviceshasenabled

ustocontinuefullfrankingofdividends,whichincreased

from17cto18.5casharefortheyear.Increasedfranking

andour60percentpayoutpolicyhavecontributedtoa

re-ratingofthecompany’sshares:duringthethreeyears

toMarch2007,shareholdernumbersroseby60percent

to4,700andtheshares’historicalprice-to-earningsratio

grewfrom11timestomorethan18times.

AmajorbenefitofProgrammedMaintenanceServices’

strategicprogressionhasbeenthestronggrowthingross

operatingcashflow,whichincreasedby71percentto

over$31.3million.Thiswasachieveddespitecontract

recoverablesrisingby7percent.

Thedebt-to-equityratioincreasedto67percentfrom

59percentat31March2006,with$16.1millionofplant

andequipmentpurchasedduringtheyear.Netinterest

payments,whichwerehigherduetothenewequipment

andtheacquisitionofTungsten,werecovered6.2times.

WewelcomeIntegrated’schairman,NeilHamilton,

andnon-executivedirector,JonathanWhittle,tothe

ProgrammedMaintenanceServicesboard,andIthank

myfellowdirectorsfortheircontributionduringtheyear.

Inparticular,IwouldliketothankourManagingDirector,

themanagementteamandallouremployeesforanother

recordresult,andshareholdersfortheircontinuingsupport.

Changing mix of revenue 1989–2007

1999RevenueRevenue

A$85 million

IndustrialServices13%

GroundsServices4%

BuildingServices1%

NewZealand15%

AustralianPainting67%

AustralianPainting100% 1989

RevenueA$46 million

2006-07Revenue

A$333 million

UnitedKingdom9%NewZealand12%

GroundsServices10%

BuildingServices12%

Tungsten16%

IndustrialServices8%

AustralianPainting33%

Chairman’s Report 3

Growth in dividends and franking

20022003

20042005

20062007

20

18

16

14

12

10

8

6

4

2

0

Cent

spe

rsha

re

Franked

Unfranked

Managing Director’s Review continued

DemandisincreasingforBarryBros.’Envirovac

infrastructuresweeping,non-destructivediggingand

concretedemolitionservices.Theseserviceshave

beenparticularlysuccessfulinVictoriaandQueensland,

andarereducingthebusiness’dependenceondrain

cleaning.DemonstratingtheroleBarryBros.canplayin

emergencies,ourteamsworkedcloselywithauthoritiesto

cleanupaftertheLismoretrainderailmentinsouth-west

VictoriaandtheBurnleyTunnelaccidentinMelbourne.

Whilethedroughtcontinuestohaveanimpactonthe

business,plansareinplacetoensuretheadditional

equipmentpurchasedin2006-7isbetterutilisedin

2007-8.

New ZealandTheperformanceoftheNewZealandproperty

maintenancebusinesswasaffectedbypoorweather

interruptingprojectsandbytherelativestrengthofthe

Australiandollar.InNewZealanddollars,revenue

increasedby16.9percentandearningsbeforeinterest

andtaxgrewby0.8percent,butaftertranslationinto

Australiandollarsearningswere5.9percentweaker.

Indicatingtheunderlyingstrengthofourpainting

programmesinNewZealand,contractrecoverables

rose17percenttoNZ$65million.

Newbrancheswereopenedonthenorthshoreof

AucklandandinGisborne,bringingthetotalto15.

Thebuildingservicesbusinesscontinuedtogrowstrongly

fromalowbase,completinganumberofprojectsand

makingapositivecontribution.

Trainingprogrammesandnewprocessesarebeing

introducedtoimproveprojectplanning,operational

performance,customersatisfactionandsafety,aswell

astoattractandretainskilledtradespeople,whoremain

inshortsupply.

Severallongtermcontractswererenewed,anda

significantrefurbishmentprojectwascompleted

successfullyafterfinancialyear-end.

United KingdomWhittlePaintingGroup,ourUnitedKingdombusiness,

continuedtoincreaseitsrevenueandearnings,although

marginswereaffectedbyabaddebtinthefirsthalfand

underperformancebytwobranches.

Weexpandedourmarketfootprintthroughtheacquisition

ofasmallpaintingbusinessinLeeds,bringingthenumber

ofbranchestonine,coveringthenorth-west,north-east,

midlands,south-westandeastofEngland,aswellasthe

ThamesValley.

Ourlongtermmaintenanceprogrammesremainunique

inthemarketandtheyaregainingincreasingrecognition,

particularlyintheeducationsector.Werenewedour

partnershipswithLancasterandDerbyHomes,completed

projectsatseveralprisonsandgainedaprogramme

fromtheQueen’sestateatSandringham.The70new

programmessignedduringtheyearbringthetotaltoover

420,withacombinedvalueof£14.8million(A$36million).

Programmed Maintenance Services14

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Chairman’s Report

Duringthepastyearwetookourmostsignificantstepso

farwiththemerger,throughaschemeofarrangement,

withIntegratedGroupLimited.Themergerofthetwo

companieswillbroadenourrangeofservicesfurther,

addinglabourhire,recruitmentandmanagedlabour,and

alsoincreaseourmarketfootprint.Thecombinedgroup

willhaveannualisedrevenueexceeding$800millionand

themergerisprojectedtobeearningspersharepositive

beforesynergiesin2007-8.

Themergerwascompletedon7Juneandisalogicalstep

inProgrammedMaintenanceServices’growthasaleading

providerofoutsourcedservices.Itfollowsourpurchaseof

infrastructureservicescontractsfromSercoin2004and

oftheTungsteninfrastructureandfacilitiesmanagement

businessin2005.

Throughdiversifyingourservicesandincreasingour

coverageofthethreecountrieswhereweoperate,

wehavebroadenedourearningsandrevenuebase.

Wenowmaintainandprotectlandmarkbuildings,retail

outlets,industrialsites,educationalfacilities,sporting

groundsandinfrastructure,andincreasinglyweare

providingmultipleservicestocustomerswithmultiplesites.

Ouractivitiesextendtooperatingwaterrecyclingplants,

carryingoutcomplianceassessmentsforlargeinstitutions,

andmanagingcatering,IThelpdesksandemergency

responseteams.

Reflectingthisdiversification,60percentofAustralian

revenuein2006-7camefromservicesotherthanpainting,

comparedwith50percentthepreviousyear.While

marginsonthesenewerservicestendtobelowerthan

onourtraditionalmaintenancepaintingprogrammes,our

averageEBITmarginof11.6percentwasinlinewithplan

andremainswellaheadofotherlistedservicesgroups.

In2006-7,ProgrammedMaintenanceServicesachieveditsninthconsecutiveyearofdoubledigitprofitgrowth.Thisconsistentperformancehasbeentheresultofourlong-termstrategytodiversifytheservicesweofferandexpandourgeographicalcoverage.

Geoff TomlinsonChairman

“Therehasbeenanencouragingstartto2007-8,withstrongorderbooksacrossourbusinesses,andthecompanyiswellpositionedtoaccelerateitsrateofgrowth.”

ProgrammedMaintenanceServices2

RichardGoodwinpolishesaTyrepowermonolithsignbeforefinalinstallationononeofthecompany’s235storesites.

OurAustralianCorporateImagingbusinessisaspecialistinhelpingcompaniestostandoutfromthecrowdbyapplyingstrong,consistentbrandingacrosstheirretailnetworks.

15Managing Director’s Review

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Managing Director’s Review continued

Businessdevelopmentwasstrengthenedandtwo

experiencedsalespeopleweretransferredfromAustralia

andNewZealandtofurthersupportthegrowthofour

programmebusiness.WhittleachievedISO9001

accreditationforitsservices,andasurveyreflecteda

highlevelofcustomersatisfaction.

WeexpecttoseesolidgrowthintheUnitedKingdomas

wecontinuetoincreaseourmarketpresence.

The FutureProgrammedMaintenanceServiceshaschanged

substantiallysincethecompanylistedontheASXnearly

eightyearsago.ThenwewerelargelyanAustralianand

NewZealandpaintingbusiness,withotherservices

contributingonly18percentofrevenue.Todayweare

adiversifiedoutsourcinggroupprovidingawiderange

ofservicestoseveralthousandcustomersandwith

branchesthroughoutAustralia,NewZealandandthe

UnitedKingdom.

Thecompany’srecordofconsistentdoubledigitincreasesin

earningsledtoourinclusioninForbesAsia’s2006listofthe

region’sbest200companieswithsalesunder$US1billion,

basedontheirrecordsofsustainedgrowthandprofitability.

Butthisisonlythebeginning.ThemergerwithIntegrated

Groupwillleadtoasignificantlymorerobustcompany,with

expandedrevenueopportunitiesandastronggrowthprofile.

IwelcomeallIntegratedGroupemployeeswhojoinedusin

June.Ialsothankourcustomersfortheircontinuingsupport

andeachmemberofthegrowingProgrammedMaintenance

Servicesteamforcontributingtothevitalityofthecompany

andtoitsstrongmarketposition.Together,theyhaveenabled

ustocontinueourmomentumandgivenustheconfidenceto

planforfurthergrowth.

Max FindlayManagingDirector

15June2007

ProgrammedMaintenanceServices16 ProgrammedMaintenanceServices16

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PaulGravellofBarryBros.providingdraincleaningservicestotheTelstraDome.

Theseincludeidentifyingundergroundassetsthroughnondestructivediggingtechnology,highpressurewaterjetting,vacuumloading,Envirovacsweepingandwaterrecycling.

17Managing Director’s Review