Impellam Group reveals gross profit increase of 11.9%
Ø Exceptional items reduced significantly to £2.7 million (2013: £23.2 million)
Ø Operating profit £34.0 million (2013: £0.4 million)
Ø Conversion of gross margin to adjusted operating profit* 18.9% (2013: 16.5%)
Ø Basic earnings per share 59.6 pence (2013: loss 2.3 pence)
Ø Adjusted* basic earnings per share 68.1 pence (2013: 62.0 pence)
Ø Net debt of £14.8 million at 2 January 2015 (27 December 2013: cash £8.0 million)
Ø 2 acquisitions completed in the period (Lorien & Career Teachers)
Ø UK receivable finance agreement with Barclays increased to £120 million and renewed for three more years to November 2017 and term loan, originally of £15 million, taken out in connection with Lorien acquisition
Ø Final dividend of 7.75 pence per share, amounting to £3.8 million in total, proposed to be approved at the AGM to be convened for 30 June payable on 31 July 2015 to all shareholders on the register at 10 July 2015. This makes a total dividend of 14p for 2014 an increase of 16.7% on 2013.
* Adjusted operating profit before pre- tax non-recurring expense items (note 3)
Julia Robertson, chief executive officer, commented, "I am pleased to report that the Group has delivered a strong financial performance this year in its staffing businesses and has made two excellent acquisitions in Lorien Resourcing & Career Teachers, both of which are performing in line with expectations and will be accretive in their first full year. In addition, we have completed the exit of onerous contracts in Carlisle Support Services and is on track for return to profitability."
Highlights and financial summary
Financial results for the fifty-three weeks ended 2 January 2015 - unaudited
The table below sets out the financial results for the Group by segment for the fifty-three weeks ended 2 January 2015
Operating profit / (loss)
Spend under management - UK
Spend under management - North America **
Group Supply - UK
Group Supply - North America **
Managed Services - United Kingdom
Gross profit %
Specialist Staffing - United Kingdom
Gross profit %
Managed Services - North America **
Gross profit %
Specialist Staffing - North America **
Gross profit %
Carlisle Support Services
Operating profit before non-recurring items
Add back: depreciation and amortisation
** % change measured at constant currencyrates (2013 results restated at 2014 rates)
The above table shows the revised segmental reporting identified in the Group Chief Executives Strategic review last year. These segments are now the basis of regular monthly management reporting and have, therefore, been incorporated into these consolidated Group accounts.
"It has been a good year for Impellam. We have traded in line with expectations and have progressed well in delivering our strategic objectives which were set out by our CEO, Julia Robertson, in early 2014. Subject to shareholder approval, the Board are proposing a final dividend of 7.75 pence per share, amounting to £3.8m to be paid on 31 July 2015 following the Annual General Meeting on Tuesday 30 June 2015. During the year, Finance Director Andrew Burchall and Non-executive Directors Lincoln Jopp and Eileen Kelliher left the Board. I would like to thank them for their significant contribution and wish them well for the future. The year also saw us welcome Michael Laurie, Sir Paul Stephenson and Derek O'Neill to our Board as Non-executive Directors and most recently, Darren Mee as our Group Finance Director. All bring varied and significant experience to the Group.
It was, however, with great sadness we reported the passing of Impellam's former Chairman, Andrew Wilson. He became Chairman in November 2012 having served as a Non-executive Director of the Group since May 2008. Andrew had been part of the business for more than ten years and made an enormous contribution to the success, leading us to become the Group we are today. I joined the Impellam Board in December 2014 and I look forward to working with Julia to deliver further shareholder value. Finally, I would like to acknowledge the contribution and support of the Board and all our employees during 2014 as the Group continues on its strategic journey."
Lord Ashcroft KCMG PC
Chief Executive Officer's Report
2014 has been an important year for Impellam. We have worked hard to embed the Group strategy I set out in 2014 and we have made significant progress which I will detail later in my review. During the year, we saw improved economic conditions which favoured the growth and development of the Group. Improved client and candidate sentiment continues to give us clear organic growth opportunities in many market segments. We made two acquisitions during the year: Career Teachers in March and Lorien Resourcing in November. Both businesses are now thriving in the Impellam family and growth synergies are already being recognised.
The Group's revenue in the year has increased to £1.32 billion, compared to £1.21 billion for 2013. On a like for like basis, excluding the impact of the acquisitions in the period and the foreign currency translation impact of US$ revenues, revenue increased by 4.7%. Revenue increased in both the UK and US Managed Services Businesses and the UK Specialist Staffing businesses but were offset by a reduction in the US Specialist Staffing business. As expected, the revenue in Carlisle, our Support Services business, also reduced with the exit of onerous contracts at the end of 2013 and through 2014.
Group gross profit increased to 14.7% from 14.4% in 2013 with a small gain in the UK driven by Specialist Staffing and improved gross profit in Carlisle. This was offset by a reduction in the US margins. Excluding the impact of acquisitions in the period, gross margin stayed at 14.7%. The Board expects improved margins going forward in all segments and particularly in the US where action was taken mid-way through 2014 to address under performance. Group operating profit, before non-recurring items, was £36.7 million, representing an £8.1 million improvement on the prior year (2013: £28.6 million). The conversion rate of gross profit into adjusted operating profit was 18.9% (2013: 16.5%). The Group's businesses continue to focus on service delivery and cost efficiencies to drive this key performance indicator, and the new segmentation has highlighted opportunity to address non assigned costs, with a target to improve Group conversion to in excess of 20% in the near term.
At £3.0 million, non-recurring items (including £0.3 million finance non-recurring) are substantially reduced year on year. The charge in the period represents the costs associated with our acquisitions, both successful and unsuccessful, plus costs connected with senior management departures. This compares to £23.2 million in 2013 which largely comprised provisions for onerous contracts in Carlisle together with associated asset write-offs.
Adjusted basic earnings per share were 68.1 pence for the year, compared to 51.5 pence in the comparable period in 2013.
Dividends and share capital
During the year, a final 2013 dividend of 7 pence per ordinary share was declared and paid on 25 July 2014. Furthermore, a 2014 interim dividend of 6.25 pence per ordinary share was declared and paid on 5 September 2014. Subject to shareholder approval, the Board is proposing a final dividend in respect of 2014 of 7.75p per share, amounting to £3.8 million, to be paid on 31 July following the Annual General Meeting. Total dividends paid and unpaid of 14 pence in respect of 2014 are more than four times covered against adjusted earnings per share.
In connection with the acquisition of Lorien Resourcing in November 2014, 1.6 million shares were issued to the vendors, whilst a further 3.3 million shares were placed with new and existing shareholders to raise approximately £15 million - the proceeds of which were used to part fund the initial cash consideration.
Our strategic themes
A focused business
During 2014, we completed the reorganisation of the Group's staffing businesses into two distinct segments: Managed Services and Specialist Staffing. Our Managed Service businesses manage the supply of temporary, permanent and contract staff - all forms of partial and complete outsourcing - in large organisations. They operate internationally and locally in the private, public and not-for-profit sectors. Multi-disciplinary Managed Service programmes are delivered through Guidant and Comensura while single discipline programmes are delivered though our larger specialist brands, Medacs, Blue Arrow and Lorien Resourcing.
Our Group strength, capability and focus in this area has enabled us to rapidly reach a market-leading position in the Healthcare Managed Services market within our Medacs business. It has also enabled Lorien Resourcing, our newly acquired IT specialist business, to expand its service offering. We have added 14 new clients to our portfolio compared to 12 last year and have a 95% retention ratio of existing customers.
These multi-disciplinary recruitment and supply management services help our customers build better businesses by simplifying specific recruitment processes. By providing our customers with real-time information and control of large-scale workforces we give them transparency. They can see exactly how many staff they are employing, in what functions and at what cost and terms. Our tailored processes and reporting systems allow them to better manage that resource helping them save time and achieve cost savings, while still ensuring compliance.
Our multi-branded Specialist Staffing businesses provide bespoke, expert-to-expert recruitment services in clearly defined talent pools for permanent, temporary, contract and fixed price work.
By tuning in and understanding our customers' and candidates' challenges and aspirations, we make sure our services exactly match their needs. Our Specialist Staffing brands yield higher margins than our Managed Service programmes but are more dependent on economic growth.
The combination of Specialist Staffing and Managed Services businesses working in harmony, with shared goals, deliver robust and stable earnings for Impellam Group. This also gives us a balanced business portfolio with long term visibility of earnings through our Managed Services programmes and higher margins in our Specialist Staffing businesses.
The reorganisation will allow us to release the full potential of each business, through improved focus, greater efficiencies, higher productivity, cost savings and improved conversions. As the new structure becomes further embedded, alongside the cultural changes we are leading, we expect to create increased shareholder value by reducing costs, increasing margins, winning new customers and retaining a higher percentage of existing customers.
Take the 'high road'
We help our customers build better businesses by providing them with productive people with a sense of purpose. A Gallup study looking at data from 23,000 businesses demonstrated that those businesses with the highest people engagement scores (top 25%) averaged 18% higher productivity than those with the lowest engagement scores (bottom 25%).
The way we and our customers treat our people has a significant impact on the bottom line. If people enjoy working for an organisation and feel they can make a difference, that organisation is far easier to recruit for. People stay longer at companies that look after them and they are more productive because they are more fulfilled. Better performing staff mean our customers are delighted with our services and that reduces customer losses. Loyal customers are easier and less costly to service and offer better margins.
We work with clients who have this high road approach, but we help develop high road practices with all our customers - it is good for their business and that is good for our business.
Candidates are at the heart of our business model
We will make it easy and fulfilling for candidates to find work through us. Through an impeccable blend of expert recruiters and well aligned processes we will make sure that candidates are placed in the right job for them and are treated with dignity and respect.
Our people tune in to both customers and candidates to craft the perfect match so that business and life ambitions can be achieved. By matching the right candidate to a client, we help them to build a better, more sustainable business.
Our approach is backed by service promises combined with the specialisms of our recruiters who are highly experienced. This means that they are well placed to support candidates by offering a more meaningful experience during the recruitment process. Our promise-based culture creates an environment where our people make and keep service promises to our candidates: we do what we say we are going to do each step of the way.
This approach leads to more referrals and ultimately will lead some candidates to become our customers. When we put candidates at the heart of our business model, we create competitive advantage for both Impellam and our customers.
Create a promise based culture
Keeping promises is a strong market differentiator that will help us attract and retain, employees, candidates and customers. Promise-based cultures have two distinct advantages. Firstly, when markets move as fast and are as hard to predict as ours, competitive advantage stems less from inflexible strategies and systems and more from the ability of people to adapt quickly to this turbulence. Promise-based businesses continually adapt to a changing situation in order to deliver the outcomes they've committed to, no matter what challenges and opportunities emerge. Secondly, kept promises build trust in a brand.
Today, we are embedding promise-making in every one of our relationships and putting it at the heart of our culture. When all our people make, keep and deliver promises consistently, we will be the world's most trusted staffing company.
Through highly selective M&A activity, we aim to fill the geographic and sector gaps in our portfolio to enable us to take an increased share of the available £1.6 billion of gross spend we handle on behalf of our Managed Services customers. In 2014, we completed two substantial high road acquisitions which have helped make us the second largest recruitment business in the UK. The Career Teachers and Lorien Resourcing transactions have allowed us to fulfil long-term ambitions of developing market-leading positions in both education and technology recruitment. Opportunities for value creation have been identified both in the acquired companies and across the Group. As a result of the Lorien Resourcing transaction we can now take an increased share of the IT staffing spend we manage on behalf of clients, which we previously outsourced.
The Career Teachers transaction has secured our position, alongside Celsian Education, as one of the UK's market leaders in the supply of teaching staff to primary and secondary schools, a high growth specialist market for the Group.
We will continue to refine our portfolio, identifying dynamic businesses which offer the opportunity for earnings enhancement as well as enabling us to offer new disciplines and broaden our geographical reach.
The Impellam Way - our signature practices
A key part of our strategy is celebrating difference. Not only are our Managed Services businesses different from our Specialist Staffing brands but each brand within our portfolio has its own distinct personality and style appropriate to its market. We believe that people prefer dealing with experts and specialists in their field.
Nevertheless, in order to achieve our vision to be the world's most trusted staffing business all businesses in the Group have adopted our 4 signature practices: tuning in to customers, producing stars, keeping promises and high integrity leadership to create a thread that is common to all across the Group. Together they are 'The Impellam Way', they are how we ensure that our people have the skills and support to do their jobs, cross sell, move customers up the value chain and ensure candidate experience is enhanced. They also underpin the way we ensure that Managed Services and Specialist Staffing work well together and provide the best solution for customers and candidates. We believe that when all Impellam people follow our signature practices we will achieve our vision and create shareholder value.
Similarly, we now have a renewed focus on the consistent communication of our strategy, goals and ethos. Last year we launched 'Pella', our Group Intranet site. This reinforces our vision, our strategy and our values and acts as a source of reference for our brand, values, policies and procedure as well as facilitating the sharing of information and news across the company.
Corporate social responsibility
We are aware of our contribution to society and that every business activity we undertake has an impact on the communities in which our businesses operate and the environment. We are committed to conducting our business with integrity in an ethical and responsible manner.
We will work with customers who recognise the value we create and strive to provide good workplaces for our people. By doing so, we make sure that we are all working together, responsibly.
With a network of 234 offices, supporting and working with our local communities is important to us. For example, our brands have volunteering programmes where employees are given one paid working day per year for local fundraising or volunteering activities.
It is not uncommon for staff to leave work early to participate in a fun run or to conduct fundraising initiatives during work hours. This scheme was devised following feedback from employees that they wanted to be free to support local charities of their choice with their time and efforts, rather than just by sponsorship and donations.
I am proud of all our people who have volunteered this year, giving up their time, skills and enthusiasm to support a wide range of charities. These activities have ranged from climbing Mount Snowdon, Skydiving, endurance training, cake sales and many more.
On behalf of the Board and my senior leadership team, I would like to take this opportunity to thank everyone at Impellam for their hard work, commitment and support during 2014. We are on a journey to becoming the 'world's most trusted staffing business' and I believe we are one step nearer to fulfilling our vision. I am very much looking forward to making further progress throughout 2015.
Julia Robertson, group chief Executive officer, said, "Looking forward our priorities for 2015 are:
1. Further refinement of operational structure and cost base supporting Managed Service and Specialist Staffing segments
2. Development of our leaders and our culture to ensure unified achievement of our vision
3. Enhancing performance in North America, Asia Pacific and other non UK geographies to support our customers' growth plans
4. Refining our portfolio through highly targeted M&A
5. Selective organic investment in key growth markets
6. Investment in our technology platforms, in particular our digital reach"