Impellam Will Invest Judiciously
Impellam Will Invest Judiciously
Impellam announces its unaudited interim results for the 26 weeks ended 28 June 2013.
§ Revenue £591.7 million (2012: £590.9 million)
§ Gross profit £83.8 million (2012: £86.0 million)
§ Segment EBITDA from continuing operations of £17.3 million (2012: £21.3 million)
§ Operating profit £11.8 million (2012: £12.8 million)
§ Conversion of gross profit into operating profit of 14.1% (2012: 14.9%)
§ Earnings per share of 20.1p (2012: 20.9p)
§ Interim dividend of 5.0 pence per share (2012: 7.0 pence per share) payable to all shareholders on the register on 2 August 2013.
Andrew Wilson, Chairman, commented: "The outlook in our core Staffing markets in the United Kingdom and North America is positive with both divisions showing growth in their Managed Services and Specialist Staffing operations. We will invest judiciously in the opportunities that we see in these markets.
Performance in both our Medacs Healthcare and Carlisle Support Services divisions was disappointing. However, the longer term growth outlook for both of them remains positive. I am confident that the correct actions are being taken to address the weaknesses that have emerged in these businesses in the first half of this year.
The contrasting fortunes of our four operating divisions means that in comparison with the first half of 2012, performance has been flat at the EPS level. Challenges remain and will need to be addressed in the second half of the year. Our expectation is that we will see a continuance of the strong performance in the core UK and US businesses in the second half of the year but that the corrective changes we will implement in Medacs and Carlisle will continue, for the short term, to hold back growth in EPS.
Underlying profitability and resilient cash generation remains a very strong feature of the business. Therefore, in line with stated intentions, I am happy to report that the Group is proposing a 5.0 pence per ordinary share interim dividend which is 4.0 times covered. The dividend will be paid on 2 September 2013 to all shareholders on the share register on 2 August with an ex-dividend date of 31 July 2013.
Julia Robertson, Chief Executive, commented:"I am very encouraged by the consistent and reliable trading performances of our Staffing businesses in the United Kingdom and North America, both of which are delivering improved margins and profits whilst positioning themselves to take advantage of the accelerating opportunities in both geographies for managed services and specialist staffing.
Our Healthcare business, Medacs, is developing and adapting to challenging market conditions in Doctor recruitment in the UK. It continues to invest in new geographies, service offerings and markets whilst benefiting from the Group's deep understanding of Managed Services provision to ensure delivery of consistent future earnings.
Carlisle Support Services has experienced a challenging and disappointing first half due to a combination of internal and external factors and we are responding accordingly, in particular looking at ways to leverage Group capability and resource to improve market position, process and profitability."
Impellam United Kingdom
Revenue increased 1.5% to £372.1 million and gross profit increased by 0.8% to £50.7 million with the business returning to year on year net fee income growth in Q2 of 2013. Market indicators suggest a continued improvement in the outlook for the UK economy and our portfolio of specialist staffing businesses are poised to capitalise on this trend in the second half of the year, complementing our Managed Services businesses which continue to take market share. In addition, we are seeing pleasing growth in perm placement fees which now represent 17.2% (2012: 16.3%) of net fee income.
Operating profit in the segment improved to £12.3 million from £11.7 million in the prior year as a result of both net fee income growth and further improvements in efficiency. Operating profit conversion improved to 24.3% in the period.
Impellam North America
Revenue increased 7.7%* to £95.2 million and gross profit increased by 6.8%* to £18.9 million. Our North American business has now seen five quarters of year on year growth primarily due to the take up of high value, innovative client solutions in our Managed Services business.
In order to deliver top line growth and increased efficiency, we have invested in new front and back office platforms. Therefore, although we are seeing year on year growth in EBITDA, increased amortisation charges have impacted operating profits which are flat. As the US economy continues to recover, we remain confident that these investments will pay off in terms of improved year on year EBIT in the second half.
Medacs Healthcare Group
Revenue decreased 8.7% to £87.7 million and gross profit declined by 9.0% to £12.2 million. The business is experiencing challenging market conditions with margins under pressure and growth in demand in specific clinical areas being subject to short supply. Buying patterns in the NHS are also changing with shorter lead times and multiple buying frameworks for medical professionals alongside increased penetration of new entrants, particularly those offering solutions aimed at enabling the NHS to reduce VAT related costs.
We are also bearing increased costs associated with both enhanced compliance requirements and in the sourcing of the required medical professionals for the demand available. Accordingly, operating profit of the segment fell to £2.1 million.
We continue to invest in attractive markets and in June made a strategically important and earnings enhancing acquisition of a business placing Nurses and Doctors into permanent positions in Singapore. In addition we have invested in the development of our Managed Services offering where we are able to leverage our market leading experience elsewhere in the Group into the emerging Healthcare managed services market.
Carlisle Support Services
Revenue decreased 9.4% to £36.7 million and gross profit declined by 57.4% to £2.0 million. Whilst some underlying progress is being made in our cleaning and security business, the costs associated with the mobilisation and re-engineering of recent contract wins is substantially depressing gross margin percentages compared to prior periods. In addition, and in-line with prevailing market conditions, the business is continuing to see little or no recovery in demand in the retail market as customers continue to defer shop refurbishment as they assess their brick and mortar strategy versus their investment in on-line channels. Accordingly, the business reported an operating loss of £2.0 million in the first half.
Recognising the evolving market, changes to the management structure have recently been made to enable us to leverage our overall Group experience and capability in the mobilisation of high volume labour solutions to the retail, transport and logistics sectors. In the medium term, this will enable us to deliver a differentiated value proposition in the support services sector whilst creating operational improvement and cost synergies.
The short term outlook for this business continues to be mixed. The expected benefits from the new management structure and the conversion of contract wins into profitable long term income streams will take time to achieve and further losses are expected in the second half of the year.
Cash flow, net debt and net assets:
The Group used £20.2 million of cash in operations in the first twenty-six weeks of the year (2012: £7.5 million), a principle factor being the timing of quarter end VAT payments. Our main measure of working capital management, days sales outstanding (DSO), continue to be well controlled. DSO for the Group was 39.8 at 28 June 2013 compared to 38.4 at 28 December 2012 and 38.5 days at 29 June 2012.
Net debt increased by £41.1 million to £24.3 million as at 28 June 2013 (28 December 2012: net cash £16.8 million, 29 June 2012: net debt £12.9 million). During the first half of 2013, the Group paid £15.4 million in dividends (2012: nil), utilised £2.7 million on capital expenditure (2012: £2.0 million), spent £1.0 million on a small in-fill acquisition in Singapore to extend the Medacs geographical coverage, and paid interest of £0.6 million (2012: £0.6 million). With continuing profitability and the utilisation of historic tax losses, the Group paid £1.9 million in Corporation tax in the period (2012: £2.5 million).
In addition, the Group has outstanding letters of credit drawn against its US borrowing facilities amounting to $6.1 million (28 December 2012: $6.1 million).
At 28 June 2013, the Group had net assets of £127.7 million (28 December 2012: £133.5 million).