Impellam announces its unaudited interim results for the 26 weeks ended 29 June 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."
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.
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).
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.
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 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.