Impellam Making Progress
Revenue decreased by 0.4% to £1,206.2 million (2012: £1,210.8 million)
Core staffing revenues increased by 0.8% to £1,137.0 million (2012: £1,127.9 million)
Gross profit decreased by 0.5% to £173.3 million (2012: £174.1 million)
Core staffing gross profit increased by 2.6% to £168.8 million (2012: £164.6 million)
Permanent placement mix 11.5% (2012: 11.3%)
Adjusted operating profit* decreased by £5.0 million to £28.6 million (2012: £33.6 million)
Core staffing operating profit was £37.9 million (2012: £38.6 million)
Exceptional contract loss provisions and other items £23.2 million
Operating profit of £0.4 million
Conversion of gross margin to adjusted operating profit* 16.5% (2012: 19.3%)
Basic loss per share 2.3 pence (2012: earnings 22.2 pence)
Adjusted* basic earnings per share 62.0 pence (2012: 59.0 pence)
Net cash of £8.0 million at 27 December 2013 (28 December 2012: £16.8 million)
US receivable finance agreement with CIT renewed for three more years
Final dividend of 7 pence per share, amounting to £3.1 million in total, proposed to be approved at the AGM to be convened for June payable on 25 July 2014 to all shareholders on the register at 4 July 2014. This makes a total dividend of 12p for 2013.
* Adjusted operating profit before pretax non-recurring expense items, goodwill impairment and share based payments (note 3)
Julia Robertson, Chief Executive Officer, commented: "I am pleased to report that our staffing businesses in the United Kingdom and North America have made consistent quarter on quarter progress in gradually improving markets and, as a consequence, we have increased the Group's market share, particularly in the managed services arena.
Economic conditions in both the United Kingdom and North America during 2013 favoured the growth and development of our managed services operations, whilst from late Q3, our specialist staffing businesses, in particular those with a permanent placement orientation, began to accelerate. The improving economy also helped our branch based businesses, which, in Q4, delivered the highest total gross profit since 2008. Although changes to buying behaviour in the NHS provided challenging conditions for our Medacs healthcare business in the first half, investments made in compliance, managed service sales and delivery capability and into expanding our nursing business resulted in Medacs delivering accelerating quarter on quarter growth in the second half of the year and the Board expects this growth to continue into 2014.
Notwithstanding the considerable progress made in our core staffing operations which account for 94% of our revenue, as previously announced, we have had to deal with two operationally complex, contracts in our Carlisle Support Services ("CSS" or "Carlisle") business. Following a change of management at the half year, and a careful review of all our options, we have already exited one of these contracts and are in discussions with the other customer regarding remediation. These two contracts have had a serious impact on our overall financial performance in 2013 and a provision of £23.0 million has been taken as an exceptional item. In addition, as a consequence of the reduced profitability and smaller scale of the remaining CSS business, an impairment to the goodwill amounting to £5.0 million has also been taken.
Group strategic review
Since becoming Group CEO in April 2013, my focus has been to conduct a full strategic and operational review of each division and each brand within the Group.
We now have a clear plan to build a better business. We will:
•Focus on managed services to give us long term visibility of recurring revenues with higher group conversions
•Strengthen our portfolio of distinctive, premium priced specialist staffing businesses to improve margins
•Refine our portfolio through highly selective M&A activity
•Continue our organic growth by tuning into customers and seeing the world through their eyes
•Provide fulfilment and a sense of purpose to our people
•Continue cost control and well thought through investment, to give sustainable cash generation and reliable shareholder returns
As we emerge from a long period of global recession into a changed world, we believe the time is right for our plan. The explosion of digital, web and cloud based services means that we must continue to re-evaluate the way we do business and our individual service propositions and we must learn lessons from other service sectors about building a better business - a business that is ethical, compliant, purposeful and trusted to deliver on its promises."
The Group's revenue in the year was broadly unchanged at £1.2 billion compared to 2012. Revenue increases in the core UK and US staffing businesses were offset by reductions in Medacs and Carlisle, the former due in part to a change in the process by which certain locum doctors are now paid resulting in revenue recognition on an agency basis. Similarly, Group gross profit was also broadly flat, again with gains in the staffing businesses offset by a reduction in Carlisle. Gross profit margin % has therefore remained flat with some evidence that pricing pressures are easing and also an increase in permanent recruitment activity, particularly in the second half. The Board expects the continued focus on the quality of the revenue base should position the Group favourably as markets recover and we enter a period of economic growth and reducing unemployment in our principle markets.
Business segment operating profit was £33.9 million against £39.0 million in 2012. Again, our UK and US staffing businesses increased operating profits whilst Medacs and Carlisle saw operating profit contraction. The Carlisle business saw a material reduction in operating profit driven by restructuring costs and further contractions in the retail market place and pressure on pricing for contract renewals and wins. Corporate costs were marginally lower at £5.3 million (2012: £5.4 million).
Group operating profit, before non recurring items was £28.6 million, representing a £5.0 million reduction on the prior year (2012: £33.6 million). The conversion rate of gross profit into adjusted operating profit was 16.5% (2012: 19.3%). The Group businesses continue to focus on service delivery efficiencies to drive this key performance indicator and the target is to achieve conversion of in excess of 20%.
Non-recurring items of £23.2 million in the current period comprised provisions for onerous contracts in the Carlisle business and the impairment of consequently impacted fixed assets directly associated with these contracts as previously highlighted.
Adjusted basic earnings per share were 62.0 pence for the year, compared to 59.0 pence in the comparable period in 2012.
As announced in December 2012, a one off special dividend of 35 pence per share, in total £15.4 million, was paid on 10 April 2013. This payment broadly equated to the cash flow in 2012 over and above that required for funding day to day operations, taxation and interest payments. During the year, a final dividend of 5 pence per ordinary share in respect of 2012 was declared and paid on 10 July 2013. Further, an interim dividend of 5 pence per ordinary share was declared and paid on 2 September 2013. The final and interim dividends equated to an aggregate distribution to shareholders of £4.4 million.
Subject to shareholder approval, the Board is proposing a final dividend in respect of 2013 of 7p per share, amounting to £3.1 million, to be paid on 25 July following the Annual General Meeting.
Total dividends in respect of 2013 are more than four times covered against adjusted earnings per share.
Business segment results
&minus Impellam United Kingdom: Turnover increased 1.4% to £772.5 million whilst gross profit increased by 1.8% to £104.4 million. Operating profit increased by £1.3 million, to £27.8 million.
&minus Impellam North America: Turnover increased 6.6%* to £192.4 million and gross profit increased by 7.4%* to £39.1 million. Operating profit increased by £1.2 million to £5.0 million.
&minus Medacs Healthcare Group: Turnover decreased 8.3% to £172.1 million while gross profit decreased by 2.7% to £25.3 million. Operating profit decreased to £5.1 million.
&minus Carlisle Support Services: Turnover decreased 10.7% to £74.0 million and gross profit decreased 52.6% to £4.5 million. Operating profit decreased to a loss of £4.0 million.
* Impellam North America percentage changes are measured in local currency
Cash flow, debt and net assets
The Group generated £18.3 million of cash from operating activities in the year (2012: £26.7 million). Days sales outstanding for the Group was 37.2 at 27 December 2013 compared to 38.4 at 28 December 2012.
Net cash decreased by £8.8 million to a net cash position of £8.0 million as at 27 December 2013 (28 December 2012: £16.8 million). In addition, the Group has outstanding letters of credit drawn against its US borrowing facilities amounting to £4.2 million (28 December 2012: £3.8 million).
At 27 December 2013, the Group had net assets of £112.1 million (28 December 2012: £133.5 million).