The past 12 months continued to be a time of challenge for all those in the Oil & Gas sector, including those companies providing services to the sector. Prosource took early action in 2014 and 2015 to position itself for these challenging times and sought to cement its relationships with its customers by demonstrating value for money, innovation and excellent quality, even during times of high pressure and challenge.
As we entered the last fiscal year, we forecast a slight revenue contraction as a result of reductions in discretional spend by our customers. On a constant currency basis we managed to limit group contraction to sub 5% and with the benefit of the relative devaluation of the Pound against the Dollar, this was limited to 3.2%. On a brighter note, we managed to achieve modest year on year growth in our home market in the UK as we continued to add extra services and new customers to offset the reduced spend over a number of our O&G customers.
The cost management activities undertaken early in the downturn cycle continued to underpin the Group profitability which allowed us to maintain Group pre-tax profits at just over 10%.
In times like these, it is more important than ever to get the basics right and to ensure the safety of our staff and the people we come into contact with and we thank our staff for another year of high compliance. Remaining focussed on Health, Safety & Compliance is the foundation of all our activity.
A further highlight of our year is our ongoing relationship with the Gathimba Edwards Foundation and we are proud to remain the principal sponsor of this fantastic charity which supports some of the neediest children in Africa. For more information, see www.prosource.it/gathimbaedwardsfoundation
Brexit is not expected to have a material impact on the company. Prosource has a history of providing services to locations in Europe and the devaluation of the Pound against the Euro in the months ahead will provide competitive advantage. Similarly, the continuing devaluation of the Pound against the US Dollar will result in higher Group revenues and profits when the US contribution is converted to Pounds.
Financial risk management objectives and policies
The financial risk management objectives of the group are to mitigate the risks facing the group as much as possible.
The main financial risks facing the group are credit risk, cashflow risk and foreign exchange risk. The group makes use of invoice discounting facilities to mitigate its cash flow risk. Foreign exchange risk has previously been managed by invoicing in the base currency of the companies.
As we look towards 2017, there is no immediate likelihood of any material increase in the Oil Price and thus we are not forecasting any material increase in discretional spend across the O&G sector. However, a combination of newly won projects with long term customers and some exciting opportunities with new non O&G customers does provide us with a degree of qualified optimism that the year ahead could witness further modest Group level growth.