Half Yearly Report

RNS Number : 5101I

Impellam Group plc

25 July 2012

 



 

Impellam Group plc

INTERIM RESULTS, ANNOUNCEMENT OF MAIDEN DIVIDEND

AND PROPOSED CAPITAL CONSOLIDATION

Impellam Group plc ("Impellam") - London AIM: IPEL; 26 July 2012

Impellam announces its unaudited interim results for the 26 weeks ended 29 June 2012, which follows the planned transformation strategy around market-focussed restructuring, together with details of its maiden dividend payment and a proposed consolidation of its share capital.

Key strategic highlights

-     Revenue of £590.9 million (2011: £549.4 million)

-     EBITDA of £20.8 million (2011: £21.5 million)

-     Adjusted operating profit of £15.8 million (2011: £16.2 million)

-     Operating profit of £12.8 million (2011: £16.2 million)

-     Conversion of gross profit into adjusted operating profit of 18.4% (2011: 17.8%)

-     Adjusted basic earnings per share of 27.6 pence (2011: 25.4 pence)

-     Basic earnings per share of 20.9 pence (2011: 25.4 pence)

-     Interim dividend of 7 pence per share payable to all shareholders on the share register on 3 August 2012

-     Purchased 572,193 of own shares for £2.0 million

(Adjusted data is stated before non-recurring items)

Cheryl Jones, Chairman, commented:

"Our operational resilience, together with our financial strength, has enabled Impellam to continue to align its brands into clear market-facing businesses, through a restructuring of the divisional and group entities, which will be completed by the end of the financial year.

I am pleased to report that Impellam has continued to develop in all its key businesses and markets and that the transformation strategy is successfully progressing as planned.

EBITDA of £20.8 million for the first half of the year achieved the Group's expectations, despite tough trading environments in both the UK and North America and during a period of transformational change for the Group.

Revenue growth of 7.6% exceeded plan, though margins have tightened under difficult current market conditions. However, focus on the quality of the revenue base should position the Group favourably as when markets recover.

We remain focussed on maximising shareholder value and unlocking the value of the Impellam Group of Companies. To that end, following recent shareholder and court approval of a capital reorganisation, Impellam announces its maiden interim dividend of 7 pence per share.

We also announce details of a proposed capital consolidation that will provide the opportunity for those shareholders with small holdings to dispose of their shares free of dealing charges and at the same time reduce related corporate costs.

The transformational strategy of the Group remains focussed on our key markets and our current and prospective clients. Resource allocation is critical and, whilst the economic environment remains a major challenge, the strength and diversity of our portfolio provides a sound operational and financial base for the on-going success of the Group."

 

Brand re-alignment

During the first half of 2012, the Group continued its stated strategy of aligning its key operational brands into clear market-facing businesses, which will be completed by the end of the financial year.

A new segment (Tegrus) has been formed to house the considerable strengths of Medacs Healthcare alongside those of Comensura and Celsian Education to form 'Tegrus - Medical & Government Services'. This exciting new focus will allow synergies to develop across the medical and government service sectors and speed-to-market particularly within current technology platforms. Further, the solution offerings to clients can be leveraged to enhance growth opportunities.

In addition, 'Impellam - Technical Solutions' segment has been created to specifically accelerate and further develop the key expertise needed in the science, engineering and technical market places. This focus will facilitate growth opportunities for these brands around a faster go-to-market solution and also open up cross-brand synergies.

 

Financial strength

The Group's revenue increased by a very creditable 7.6% to £590.9 million, notwithstanding very challenging market conditions. This was mainly driven by a 14% increase in the UK Staffing segment and a 6.1% (measured in local currency) increase in the North American Staffing business.

EDITDA was £20.8 million, a marginal decline of £0.7 million over the comparable period in 2011, in line with expectations. EBIT was £18.6 million (2011: £19.0 million). Corporate costs were held at constant levels.

Conversion of gross profit into adjusted operating profit of 18.4% (2011: 17.8%) continued to show an upward improvement as the businesses continue to focus on client solutions and delivery efficiencies so as to drive this key performance indicator.

Adjusted operating profit (before non-recurring items) for the period was £15.8 million compared with £16.2 million in 2011. Good performances were generally seen across the businesses offset, in part, by declines in the Support Services and the Technical Solutions segments; driven mainly through margin compression. The overall permanent placement market is also less robust than was originally planned.

Operating profit was £12.8 million down from £16.2 million in the comparable period in 2011. Non-recurring items of £3.0 million in the current period comprised restructuring, reorganisation and transformation costs impacting all businesses as planned.

Fully aligned to the transformation programme and to further adapt to the economic environment, a certain level of reorganisation costs will be incurred in the second half of the year, as the businesses reposition their brands to the market-facing structures. On an annualised basis, we expect non-recurring items will be earnings accretive, starting in the second half of the current financial year.

Adjusted basic earnings per share were 27.6 pence for the period, compared to 25.4 pence in the comparable period in 2011.

The Group utilised £7.5 million of cash from operations in the period (2011: generated cash of £7.7 million). Working capital movements, alongside strong revenue growth, were the primary source of the cash utilisation. Days' sales outstanding for the Group was 38.5 at 29 June 2012 compared to 35.6 at 1 July 2011. This was partly offset by positive cash movements through trade and other payables. These are normal trading movements for the business and are principally timing in nature. Monitoring and management of overall working capital remains a key focus.

Taking opportunity of market conditions, during the six months ended 29 June 2012, Impellam purchased 572,193 of its own shares at a cost of £2.0 million. In aggregate, since following this strategy, Impellam has purchased a total of 932,693 shares. On an annualised basis, cancellation of these shares provided shareholders with an approximate 2% increase in value, as measured through earnings per share.

Net movements in short-term borrowings amounted to £12.4 million all of which were utilised in funding the above movements, along with capital expenditures and non-recurring items.

At 29 June 2012, net debt amounted to £12.9 million (December 2011: net cash of £1.8 million). In addition, the Group has outstanding letters of credit drawn against its US borrowing facilities amounting to £3.8 million (December 2011: £3.6 million).

At 29 June 2012, the Group had net assets of £136.5 million (December 2011: £129.3 million).

 

Dividend

The Board is focussed on maximising shareholder value. Following the recent shareholder and court approval for a capital reorganisation, and in light of the Group's financial and operational strengths, Impellam announces the payment of its first cash dividend to shareholders. An interim dividend of 7 pence per ordinary share will be paid on 13 September 2012 to those shareholders on the register (record date) on 3 August 2012 with an ex-dividend date of 1 August 2012. The interim dividend equates to an aggregate distribution to shareholders of approximately £3.1 million.

 

Operational resilience

Impellam Group is a leading provider of human capital services, including innovative solutions for the workforce, business process outsourcing (BPO); expertise in technical, professional and medical talent and flexible workforce consulting, staffing and recruitment.

Impellam - UK Staffing

Impellam's UK staffing segment now includes the key market-facing brands of Blue Arrow, Tate, CMS, Austin Benn, Chadwick Nott, and Hewitson Walker.

Revenue increased 14% to £258.8 million and gross profit declined by 8% to £32.4 million. Operating profit of the segment remained constant at £5.1 million.

The UK business out-performed the market and its targets in terms of revenue generation in the period. Economic conditions have both compressed margins and adversely affected the permanent placement market, and this is reflected in the reported results for the period. Planned efficiency initiatives have enabled the cost-base to, in part, mitigate the impact on margins. As the business focuses on up-selling higher-value solution offerings to its clients, cost rationalisation remains a key area of focus in the second half of the year so as to further drive efficiency and contribution.

Impellam - Technical Solutions

The newly-created Technical Solutions segment comprises the market-facing brands of S.Com, SRG and ABC.

Revenue increased just under 1% to £96.6 million and gross profit declined by 6.2% to £12.1 million. Operating profit of the segment declined to £4.4 million.

The demand for certain services in the period, as anticipated, declined, but there are recent signs that the business initiatives put in place are starting to leverage the brands. The markets are likely to remain tough though, as the division continually seeks to re-evaluate the changing market requirements so as to drive service delivery efficiencies. Whilst some increasing demand in the market is now seen, following first-half shrinkage, the demand for permanent placements remains depressed and overall margins will remain challenging.

Impellam - North America Staffing

Impellam's North American staffing segment includes the major brands of Corestaff and Guidant.

Revenue increased 6.1%* to £87.6 million and gross profit increased by 1.0%* to £17.6 million. Operating profit of the segment increased to £2.0 million.

The business has recorded a good performance in the period. Focus on new business initiatives along with a lower cost of service delivery, leveraging the efficiency programmes put in place during 2011, has enabled the division to return above-market performance, despite tough economic challenges across North America. The higher-value solution offerings to clients have shown a strong take-up and the division is positioned well for the second half of the year.

Tegrus - Medical & Government Services

The newly-formed Medical & Government Services segment comprises the key market-facing brands of Medacs Healthcare, Comensura and Celsian Education.

Revenue increased 2.1% to £107.4 million and gross profit declined by 3.5% to £19.2 million. Operating profit of the segment increased to £7.0 million.

The business displayed some positive characteristics in the first half of 2012, countering overall market-conditions and the downward trend seen in 2011. Contract margins have declined, but a focus on overheads and a return of the investment made in 2011 in the development of an expanded contact centre have resulted in a creditable contribution and overall performance. Some early signs of upward movements in the market cycle have been seen.

Carlisle Support Services

Carlisle Support Services and its related brands were realigned during 2011.

Revenue remained flat at £40.5 million and gross profit declined by 23% to £4.7 million. Operating profit of the segment declined to £0.1 million.

The key markets in which the division operates have generally, save in part for Cleaning, shown a downward trend in the first half of 2012, aligned to economic conditions and a realignment of the market place, along with the non-renewal of some higher margin contracts, have contributed to its financial performance. Initiatives have been put in place to address the cost base and new business platforms are being actively pursued, but margin pressure on new and renewing business has been factored into the plan.

Business segment analysis

	Revenue			Gross profit			Operating profit
£ million	2012	2011	% change	2012	2011	% change	2012	2011
Impellam - UK Staffing	258.8	227.0	14.0	32.4	35.2	(8.0)	5.1	5.1
Impellam - Technical Solutions	96.6	96.2	0.4	12.1	12.9	(6.2)	4.4	5.4
Impellam - North America Staffing	87.6	80.5	6.1*	17.6	17.0	1.0*	2.0	1.4
Tegrus - Medical & Government Services	107.4	105.2	2.1	19.2	19.9	(3.5)	7.0	6.0
Carlisle Support Services	40.5	40.5	-	4.7	6.1	(23.0)	0.1	1.1
	590.9	549.4		86.0	91.1		18.6	19.0
Corporate costs							(2.8)	(2.8)
Operating profit before non-recurring items							15.8	16.2
Non-recurring items							(3.0)	-
Operating profit							12.8	16.2

* % change measured in local currency 

Following implementation of the Group's transformational plans, the business segments have been realigned to the current divisional and group structures. Prior period data has been appropriately reclassified.

Proposed capital consolidation

The Board today announces a proposed reorganisation of the share capital of Impellam. The company has approximately 3,500 shareholders, of whom over 73% hold fewer than 100 ordinary shares. The Board is aware that it can be difficult for shareholders to sell very small shareholdings and that dealing charges might make selling small shareholdings uneconomic. Maintaining a large share register of very small shareholdings is also very expensive for the company and considered by the Board to be not in the best interests of shareholders as a whole.

The Board therefore proposes a reorganisation of the company's share capital, which will result in those shareholders holding fewer than 100 ordinary shares receiving a cash payment equal to the then market value of the shares held. The shareholdings of those shareholders holding 100 or more ordinary shares will not be materially affected and they will receive a cash payment for that part of their shareholding which is not divisible by 100.

All shareholders who are entitled to receive the interim dividend announced herein will continue to be so entitled following the proposed capital consolidation.

A circular explaining these proposals in further detail will be dispatched shortly to the company's shareholders and at the same time will provide notice of a General Meeting at which these proposals will be presented.

Consolidated income statement

For the twenty-six weeks ended 29 June 2012

		2012	2011
	Notes	£m	£m
Revenue	2	590.9	549.4
Cost of sales		(504.9)	(458.3)
		__________	__________
Gross profit		86.0	91.1
Administrative expenses		(73.2)	(74.9)
		__________	__________
Operating profit	2	12.8	16.2
Finance expense - net		(0.7)	(1.1)
		__________	__________
Profit before taxation		12.1	15.1
Taxation	3	(2.8)	(3.5)
		__________	__________
Profit for the period		9.3	11.6
		__________	__________
Attributable to:
Owners of the parent Company		9.3	11.5
Non-controlling interests		-	0.1
		__________	__________
		9.3	11.6
		__________	__________

Earnings per share for equity holders of the parent Company
Basic and Diluted (pence)	4	20.9p	25.4p
		__________	__________

Consolidated statement of comprehensive income

For the twenty-six weeks ended 29 June 2012

			2012		2011
			£m		£m
Profit for the period			9.3		11.6
Other comprehensive income:
Currency translation differences (net of tax)			(0.1)		(0.2)
			__________		__________
Total comprehensive income for the period			9.2		11.4
			__________		__________
Attributable to:
Owners of the parent Company				9.2	11.5
Non-controlling interests				-	(0.1)
				__________	__________
				9.2	11.4
				__________	__________

Consolidated balance sheet

	Notes	29 June 2012	30 December 2011
		£m	£m
Non-current assets
Property, plant and equipment		5.5	5.8
Goodwill		60.1	60.1
Other intangible assets		47.5	48.1
Deferred tax assets		3.6	4.2
Financial assets		2.3	2.4
		_________	_________
		119.0	120.6
		_________	_________
Current assets
Trade and other receivables		232.5	194.3
Cash and short-term deposits		20.0	22.3
		_________	_________
		252.5	216.6
		_________	_________
Total assets		371.5	337.2
		_________	_________
Current liabilities
Trade and other payables		177.7	161.9
Taxation liabilities		4.1	4.0
Short-term borrowings		32.9	20.5
Provisions		4.1	3.8
		_________	_________
		218.8	190.2
		_________	_________
Net current assets		33.7	26.4
		_________	_________
Non-current liabilities
Other payables		-	0.9
Provisions		5.5	5.6
Deferred tax liabilities		10.7	11.2
		_________	_________
		16.2	17.7
		_________	_________
Total liabilities		235.0	207.9
		_________	_________
Net assets		136.5	129.3
		_________	_________

Consolidated balance sheet (continued)

	Notes	29 June 2012	30 December 2011
		£m	£m
Equity
Issued share capital	7	0.4	0.4
Share premium account		15.5	15.5
		_________	_________
		15.9	15.9
Reserves		120.6	113.4
		_________	_________
Total equity attributable to equity holders of the parent Company		136.5	129.3
		_________	_________

Consolidated cash flow statement

For the twenty-six weeks ended 29 June 2012

		2012	2011
	Notes	£m	£m
Cash flows from operating activities
Cash (utilised by) generated from operations	5	(7.5)	7.7
Taxation paid		(2.5)	(2.4)
		________	________
Net cash (utilised by) generated from operating activities		(10.0)	5.3
		________	________
Cash flows from investing activities
Non-controlling interest acquired		-	(0.2)
Purchase of property, plant and equipment		(0.8)	(1.3)
Purchase of other intangible assets		(1.2)	(0.7)
Net movement in other financial assets		0.1	0.1
		________	________
Net cash utilised by investing activities		(1.9)	(2.1)
		________	________
Cash flows from financing activities
Net movement in short-term borrowings		12.4	(2.0)
Purchase and cancellation of own shares		(2.0)	-
Finance expense paid		(0.6)	(1.3)
		________	________
Net cash generated from (utilised by) financing activities		9.8	(3.3)
		________	________
Net decrease in cash and equivalents		(2.1)	(0.1)
Opening cash and cash equivalents		22.3	13.9
Foreign exchange on cash and cash equivalents		(0.2)	(0.2)
		________	________
Closing cash and cash equivalents		20.0	13.6
		________	________

Notes to the interim financial statements

1.   Basis of preparation

(a)  Statement of compliance

The unaudited interim financial statements presented in this financial report have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and taking into account the International Financial Reporting Interpretations Committee (IFRIC) interpretations that are expected to be applicable to the consolidated financial statements for the 52 weeks ending 28 December 2012. As permitted, this interim report has been prepared in accordance with the AIM Rules for Companies and does not seek to comply with IAS 34 "Interim Financial Reporting".

(b)  Statutory information

The financial information, which is unaudited, for the twenty-six weeks ended 29 June 2012 does not constitute the statutory accounts of the Group for the relevant period within the meaning of section 434 of the Companies Act 2006.

The published annual report and financial statements of Impellam Group plc for the 52 weeks ended 30 December 2011 were reported on by the auditors without qualification, did not contain an emphasis of matter paragraph, did not contain any statement under section 498 of the Companies Act 2006, and have been delivered to the Registrar of Companies.

(c)  Accounting policies, new IFRS and interpretations

The accounting policies used in this report are consistent with those applied at 30 December 2011.

No new and/or revised IFRS and IFRIC publications that came into force in the period have any impact on the accounting policies, performance or financial position of the Group.

2.   Segmental information

Twenty-six weeks ended 29 June 2012

	Impellam - UK Staffing	Impellam -   Technical Solutions	Impellam -  North America Staffing	Tegrus -  Medical & Government Services	Carlisle Support Services	Group Total
	£m	£m	£m	£m	£m	£m
Revenue	258.8	96.6	87.6	107.4	40.5	590.9
	________	________	________	________	________	________
EBITDA Depreciation & amortisation	6.1 (1.0)	4.5 (0.1)	2.4 (0.4)	7.5 (0.5)	0.3 (0.2)	20.8 (2.2)
	________	________	________	________	________	________
EBIT	5.1	4.4	2.0	7.0	0.1	18.6
	________	________	________	________	________
Corporate costs						(2.8)
						________
Operating profit before non-recurring items						15.8
Non-recurring items						(3.0)
						________
Operating profit						12.8
Finance expense -net						(0.7)
						________
Profit before taxation						12.1
Taxation						(2.8)
						________
Profit for the period						9.3
						________

Following implementation of the Group's transformational plans, the business segments have been realigned to the current divisional and group structures. Prior period data has been appropriately reclassified.

Non-recurring items comprise restructuring, reorganisation and transformation costs.

Corporate costs include depreciation of £0.7 million (2011: £0.8 million)

Twenty-six weeks ended 1 July 2011

	Impellam - UK Staffing	Impellam -   Technical Solutions	Impellam -  North America Staffing	Tegrus -  Medical & Government Services	Carlisle Support Services	Group Total
	£m	£m	£m	£m	£m	£m
Revenue	227.0	96.2	80.5	105.2	40.5	549.4
	_______	_______	_______	_______	_______	_______
EBITDA Depreciation & amortisation	6.2 (1.1)	5.5 (0.1)	2.0 (0.6)	6.6 (0.6)	1.2 (0.1)	21.5 (2.5)
	_______	_______	_______	_______	_______	________
EBIT	5.1	5.4	1.4	6.0	1.1	19.0
	_______	_______	_______	_______	_______
Corporate costs						(2.8)
						_______
Operating profit						16.2
Finance expense - net						(1.1)
						_______
Profit before taxation						15.1
Taxation						(3.5)
						_______
Profit for the period						11.6
						_______

3.   Taxation

Income tax expense is recognised based on management's best estimate of the effective annual income tax rate expected for the full financial year. 

4.   Earnings per share

Basic earnings per share is calculated by dividing the profit for the period attributable to the equity holders of the Company by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share is calculated on the same basis, but after adjusting the denominator for the effects of dilutive options. The only potentially dilutive shares arise from the share options issued by the Group under its share-based compensation plans. There are 83,165 outstanding options as at 29 June 2012 (2011: 83,165).  This number has no effective impact on the earnings per share figures in either period; hence the diluted and basic figures are the same.

The weighted average number of shares for the 26 weeks ended 29 June 2012 for the basic calculation is 44,496,014 (2011: 45,039,041) excluding the 19,841 shares owned by The Corporate Services Group Employee Share Trust.   

5.   Reconciliation of profit before tax to cash (utilised by) generated from operations

	2012	2011
	£m	£m
Profit before taxation	12.1	15.1
Adjustments for:
Net finance expense	0.7	1.1
Depreciation and amortisation	2.9	3.3
	__________	__________
	15.7	19.5
Net movements in working capital	(23.3)	(10.1)
Net movements in provisions	0.1	(1.7)
	__________	__________
Cash (utilised by) generated from operations	(7.5)	7.7
	__________	__________

6.   Additional cash flow information

	30 December  2011	Cash flow	Foreign exchange	29 June 2012
	£m	£m	£m	£m
Cash and short-term deposits	22.3	(2.1)	(0.2)	20.0
	__________	__________	________	__________
Revolving credit borrowings	(20.5)	(12.4)	-	(32.9)
	__________	__________	________	__________
Net cash (debt)	1.8	(14.5)	(0.2)	(12.9)
	__________	__________	________	__________

        7.             Issued share capital

During the six months ended 29 June 2012, 572,193 ordinary shares of the Company were repurchased in the market for an aggregate cash consideration of £2.0 million and then cancelled. At 29 June 2012, the Company had in issue 44,126,189 ordinary shares of 1 pence each.

Enquiries:  For further information please contact the appropriate individual below.

Impellam Group plc
Cheryl Jones, Chairman	Tel: [phone]
Andrew Burchall, Group Finance Director	Tel: [phone]
Cenkos Securities plc (Nominated Advisor and Broker to Impellam)
Nicholas Wells Adrian Hargrave	Tel: [phone] Tel: [phone]
Threadneedle Communications
John Coles	Tel: [phone]

Notes:

Impellam Group plc conducts business primarily in the UK and North America, with smaller operations in Australia, Ireland, New Zealand and mainland Europe. The Group employs nearly 6,000 people, including 2,200 managers and consultants and more than 3,500 support services workers, across a network of 230 branch and regional offices. The Group operates more than 15 specialty brands across a broad range of staffing sectors which are complemented by businesses in the outsourced support services sector. Impellam Group is ranked 19th on the Staffing Industry Analysts' 2012 Top Global Staffing Companies List.

-ENDS-

 

END

 

 

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