Managing Director’s Review

Our 2012 financial year was a milestone year for the group. It was the year when all employees from all parts of the business joined together to become one team under one refreshed brand, and when we produced a record profit, greater than our pre-GFC high.

Health, safety and environment (HSE)

We started the year with a clear plan to improve our HSE performance. The plan consisted of a number of key elements including:

• implementation of a common HSE reporting and administration system across all operations;

• rolling out critical HSE leadership training to over 100 key line managers;

• development of activities and measures that drive proactive HSE behaviours; and

• development of critical risk standards.

Some elements of the plan will continue into this year, but already there has been a significant improvement, with both our Total Recordable Injury Frequency Rate and our Lost Time Injury Frequency Rate falling more than 20% compared to FY2011.

What is most pleasing is the positive response of our employees and customers to the range of new initiatives we have introduced. However, we can never rest easily as we continue the journey towards our goal of Zero Harm.

Strategy

As a listed public company with over 5,000 shareholders, we recognise our primary purpose is to deliver increasing returns to our shareholders over the long term.

To achieve our purpose, we have built a business that today has over 10,000 employees, operating in three divisions, with a vision to become a leading provider of staffing, maintenance and project services, without injury.

Our business is built around the provision of people.

Customers contract our staffing service, a task-based service

or a complete management or maintenance solution, often

under a long-term contract.

The services we provide are central to a number of the major

energy, resources and infrastructure projects, support the

operations of some of the largest companies and also touch

the lives of many people in Australia and New Zealand. As

examples, we are providing marine manning, catering and

logistical support for the laying of the major offshore pipeline

for Chevron’s Gorgon development, and we have recruited

numerous plant operators for key roles at Fortescue’s iron

ore operations. We are repairing and maintaining the water

pipe networks in the western suburbs of Melbourne for

City West Water and in the Perth metropolitan area for WA

Water Corporation. We are providing long term painting

maintenance services to hundreds of schools across

Australia and New Zealand and are looking after the parks

and gardens of Monash University in Victoria and Murdoch

University in Western Australia. We are providing a range of

building maintenance and refurbishment services to Coles

across Australia and supplying forklift and warehouse staff

for Coca-Cola Amatil. We are installing a modern data and

communication network in Queensland’s newest children’s

hospital and we have repaired and repainted a major hospital

in Whangarei, New Zealand.

Each client has its own reasons for outsourcing this work.

Some do not have the technical or management know-how;

others value our HR or industrial relations experience; some

do not want to take the risk of doing the work; some do not

want to take the risk of employing additional staff or can’t find

the necessary people.

The services we provide are central to a number of the major energy, resources and infrastructure projects, support the operations of some of the largest companies and also touch the lives of many people in Australia and New Zealand.

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We are positioning our services to benefit from the challenges our customers are facing today, which are very different from those they faced only five or ten years ago. Workplace laws have changed and have greater complexity; and businesses must restructure as a result of the high Australian dollar, the trend towards online sales and the impacts of a carbon tax.

Our core business strategy is based around selling more staffing, maintenance and project services to existing customers across Australia and New Zealand, expanding the range of services we can offer and increasing our penetration of the resources sector.

To deliver our strategy, we have implemented during the year six key plans that will have the greatest impact on achieving our primary purpose and vision.

• Improve our HSE Performance – Our ability to demonstrate best practice HSE performance, as mentioned above, is important for all our employees and their families; it will also enable us to secure long-term customer relationships, differentiating our business from the many smaller competitors where HSE performance is often less satisfactory.

• Improve the general management skills of our managers across the business – With many managers who have come into the group with different backgrounds and through a number of acquisitions, it was felt important that we bring them together for training, to give them the knowledge necessary to be a better manager. More than 100 managers went through this program, which also enabled managers from all business units in each state to become familiar with each other personally and realise the additional customer opportunities by working closer together.

▲ An advertisement featuring AFL legend Kevin Sheedy drove traffic to the Programmed website.

u Programmed’s refreshed brand was rolled out across more than 100 Programmed offices and 1000 company vehicles.

Refreshing the Programmed BrandIn 2011, “Project Refresh” brought a fresh new look to Programmed.

The reasons behind the rebrand were simple.;u Greater leveraging of customer

relationshipsu More efficient marketing investmentu A way to unite staff towards a single vision.

A new suite of company logos was designed and we worked towards creating “brand value”.

Project Refresh kicked off in earnest at the end of August at a Fremantle vs Collingwood AFL match in Perth.

The Brand Refresh advertising campaign then went into full swing with the launch of the rebranded Programmed website and use of search engine marketing to funnel as many new enquiries as possible to the various Programmed businesses.

Advertisements appeared on television on prime time in all capital cities, on all major radio stations, in weekday and weekend newspapers in Australia and New Zealand, in national magazines and on billboards at over 40 sites across Australia.

As a result, visits to the Programmed website went up 5‑fold compared to the previous year.

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• Improve the returns on capital in our painting business – A wide range of operational and capital management improvements were made to the delivery of our core long-term painting maintenance programs to increase this business’ return on capital. This has an important bearing on the group’s overall performance and ability to invest funds in other areas, due to the significant funds currently invested in long-term programs.

• “Mine our customer base” – We had been operating as a group of businesses with separate brands, sales people with limited knowledge of the wider group, customers who only knew us as a small and local supplier of one particular service and systems that could not tell all parts of the business who its customers were. To capitalise on the strengths of the group, we have aligned our different businesses, brands and employees under one refreshed “Programmed” brand to ensure all our customers and employees know more about us and what services we offer. We are part of the way through installing a common customer relationship management system (CRM) across the group, and are training a group of sales people who, whilst working in one of our divisions, have the capacity to sell and refer customers across all services or take ownership of specific industry sales strategies. We have also introduced a new iPad-based sales tool linked to our new CRM system to assist our sales people, and a group-wide customer referral incentive scheme.

• Minimise the impact of weakness in the general (non-resources) economy – The slowing, and in some sectors contraction, of a wide part of the economy, due to a range of factors including a high Australian dollar and a lack of consumer confidence, has put pressure on margins and slowed revenue growth. We are implementing a range of initiatives to improve margins in parts of our operation and / or create new areas

for growth. Some of these initiatives include investing further in our business systems to improve productivity and seeking larger opportunities where we can bundle our services, such as in selected infrastructure Facility Management (FM) opportunities. Two key areas of strategic focus in the next year will be the delivery of energy reduction programs and the development of on-line sales and service support for our customers.

• Expand our exposure to resources opportunities – We have seen first-hand the strength of the resources sector and plan to capture a greater share of this investment. This has involved greater sales effort in the offshore marine sector supporting new oil and gas projects. We have also sought to focus on smaller maintenance and construction support opportunities onshore as we build scale in our onshore resources business. Longer-term, we are seeking to obtain long-term maintenance contracts as new assets are completed and the capital phase of this mining investment cycle slows. In addition, through our Integrated Workforce division we have restructured our operations to have greater focus on the delivery of staffing services for mining operations across Australia, and we are developing a further plan to target some of the property maintenance associated with mining operations where our current presence is small.

People

The ongoing support and development of our staff is a key task to ensure we can effectively deliver our strategy.

During the year, we made a significant increase in our investment in training and development. A significant skills training program was delivered to all our managers across all businesses to ensure common understanding of expectations and behaviours and to improve the sharing of local knowledge of customers and opportunities in each region.

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2012 Annual Report 9

Programmed provided marine manning, catering and logistical support to the Allseas Australia pipeline trenching vessel Calamity Jane for the Gorgon Jansz Pipelay Project off Barrow Island, WA.

▲ Daniel Benwell, from Programmed’s corporate imaging team installs signage at a Hertz office in Melbourne’s CBD.

Our second class of 25 future managers completed our 18 month “momentum” leadership development program, and we have trained many of our tradesmen and supervisors in customer service, contract management and frontline supervision.

We employ more than 400 apprentices and trainees, and during the year many of our former apprentices and trainees were promoted into supervisory and project roles.

With a clear plan to improve our gender diversity, it is pleasing to report that the percentage of women in the top 50 senior management roles across the group increased from 14% last year to 29% at 31 March 2012, with our target of 40% now well within reach.

We joined the Australian Employment Covenant initiative and put in place improved means to attract, recruit and retain indigenous employees.

Group results

Profit after tax for the year ending 31 March 2012 was $31.2 million. This was an increase of 41% over the profit from continuing operations in FY2011 ($22.2 million) and an increase of 200% over the reported profit of $10.4 million in FY2011 which included the discontinued UK operations.

EBIT (earnings before interest and tax) was $56.7 million, up 34% compared with $42.3 million in FY2011.

Revenue from continuing operations was $1,394 million, an increase of 14% over FY2011 ($1,220 million).

The board has determined to pay a fully franked final dividend of 8.0 cents per share (FY2011: 6.0 cents), bringing dividends for the full year to 13.0 cents per share fully franked (FY2011: 9.0 cents). The final dividend will be paid on 27 July 2012 to shareholders on the register at 6 July 2012.

The result demonstrates the strength of our business model, offering staffing, maintenance and project services across all industry sectors. This has enabled us to offset weaker demand in the retail, manufacturing and light industrial sectors with strong growth in the mining, oil and gas sectors.

The standout performance was from our Resources division where we nearly doubled earnings year-on-year.

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▲ More than 300 staff joined Programmed when our contract with WA Water Corporation was activiated.

▼ The Programmed team responsible for painting services at Parliament House, Canberra.

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Whilst margins were weaker in the Property & Infrastructure division, we were successful in continuing to win our share of property maintenance work in a competitive environment, as well as securing long-term contracts in the water and Public Private Partnership sectors.

The Integrated Workforce division’s earnings were slightly higher in a market where demand was weaker than the prior year.

Property & Infrastructure division

The Property & Infrastructure division provides a range of building and maintenance services, including painting, electrical, communications, grounds, signage, general building repairs and facility management.

Whilst revenue grew, margins were lower in the second half. This was the result of weaker demand for sundry works, tighter margins on a number of projects and reduced productivity due to wet weather in the fourth quarter.

In the Property Services business, weaker demand for painting in the second half lowered earnings compared to the prior year. Capital investment in maintenance programs was $129.8 million at the end of FY2012 compared with $133.8 million a year earlier; by value, 36% of new maintenance programs sold were the less capital intensive type.

The grounds maintenance business was strengthened in April 2012 with the acquisition of Turnpoint Group which provides landscaping, construction and maintenance services for golf courses, horse race courses and major sports stadia across Australia.

In the FM business, margins on some contracts were lower and there was extra expenditure on business development targeting larger opportunities. The strategy to sell complete maintenance solutions to customers using a range of the group’s capabilities succeeded in securing the FM component of New Zealand’s first school Public Private Partnership, as well as a new long-term maintenance contract with WA Water Corporation. In addition, the contract with City West Water in Victoria was renewed for another three years and a new public housing maintenance contract was secured in the South Western Australia region.

Whilst the operational start of our FM contract for the Ararat prison in Victoria has been delayed, the contract with the Aegis Correctional Partnership (ACP) remains in place and we have no direct exposure to the issues connected with the builder of the prison which has a separate contract with ACP.

The KLM electrical and communication business’ margins were lower on increased volumes, particularly in the new commercial building market where competition is strong. Opportunities continue to be developed across the group’s customer base and new energy reduction programs will be launched shortly.

▲ Programmed group’s management team. From left: Glenn Triggs, CEO Resources; Steve Taylor, CEO Property & Infrastructure; Stephen Leach, CFO; Tara Hogan, Group General Manager Risk & Legal; Chris Sutherland, Managing Director; Jim Sherlock, Group General Manager HR; Malcolm Deery, Group General Manager HSE; Brian Styles, CEO Integrated Workforce.

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Resources division

The Resources division provides a range of workforce, maintenance, construction support and operational services to both the offshore oil and gas and onshore mining sectors.

Revenue grew strongly as a result of major expansion of offshore oil and gas developments in the North West of Australia.

Offshore work is serviced by Total Marine Services and demand for vessel management, manning, catering and logistical services reached a high during the fourth quarter as work commenced on the Gorgon pipelay project. During the year, more than 60 offshore vessels, FPSOs, drilling rigs and platforms were serviced. Significant business development in the prior year was rewarded with offshore revenue and earnings growing more than 60%. With some projects concluding in the first half of FY2013, additional work will need to be secured to achieve further growth.

Revenue from onshore work, providing maintenance and construction support to the Western Australian mining sector, grew more than 60%, and profitability was improved as a result of the focus on smaller construction support, managed labour and maintenance opportunities.

Integrated Workforce division

The Integrated Workforce division provides a range of staffing services across all industry sectors.

Overall demand was flat in the first quarter and weakened across the general manufacturing and industrial sectors for the remainder of the year. Margins were maintained through tight control of costs.

The market remains weak, with small and medium size enterprises cautious about hiring people, but the business has a low cost base and will respond strongly to a broad economic (ie non-mining) recovery when general business confidence returns.

Unallocated costs

These relate to corporate overheads and a range of non-trading income and expenses, including foreign exchange movements from UK and NZ payments and amortisation of contract intangibles. The net unallocated costs for the year were $9.7 million (FY2011: $8.7 million before restructuring costs of $5.9 million).

Balance sheet and cash flows

Gross operating cash flow was $72.7 million, 150% higher than FY2011 ($29.1 million). Net operating cash flow was $48.3 million.

With the continued focus on capital management, the group’s net debt reduced to $87.8 million at 31 March 2012, from $118.3 million at 31 March 2011. The net debt-to-equity ratio fell to 23.5% at 31 March 2012 from 33.7% at 31 March 2011.

On 30 September 2011, the group agreed new terms with its banks to provide lending facilities to October 2014 at lower rates, replacing the existing facilities due to expire in October 2012. The bank syndicated facility includes three financing tranches aggregating $250 million. Other arrangements for the group’s asset finance requirements ($20 million) remain in place.

Thank you

The group’s significantly improved performance is the result of a large team effort by all our 10,000 employees. I would like to thank each of them for their continuing commitment to serving our customers in a safe environment.

I also thank our shareholders for continuing to support Programmed during a period of market volatility.

Chris Sutherland Managing Director 30 May 2012

▲ People and Culture trainee Stephen Thorpe is part of Programmed’s Human Resources team. He contributes to the delivery of our employee benefits, leadership program and diversity initiatives and also supports other Indigenous Employment Programmed participants.

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