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Impellam H1 2015 gross profit up 19.6%

 

Key financial highlights

 

H1 2015

H1 2014

% Inc/(Dec)

Revenue

 &pound831.6m

 &pound612.3m

35.8%

 

 

Managed Services spend under

&pound961.6m

&pound737.1m

30.5%

management

 

 

 

 

Group supply

&pound405.0m

&pound224.9m

80.1%

 

 

Gross Profit

 &pound108.8m

 &pound91.0m

19.6%

 

 

Managed Services and Specialist Staffing operating profit

 &pound24.3m

 &pound18.2m

33.5%

 

 

Profit conversion*

20.0%

16.6%

3.4 ppts

 

 

Profit before tax*

 &pound20.1m

 &pound14.3m

40.6%

 

 

Adjusted EPS*

33.0p

28.4p

16.2%

 

 

Interim dividend

7.0p

6.25p

12.0%

 

 

Net debt

&pound39.4m

&pound25.0m

57.6%

 

 

DSO

40.5 days

41.0 days

(0.5 days)

* before separately disclosed items and amortisation

 

Key operational highlights

Cultural change programme underway across the Group which is a key catalyst in achieving our vision of becoming the most trusted staffing company in the world

Career Teachers and Lorien acquisitions made in 2014 are fully integrated and performing ahead of expectations

Managed Services revenue satisfied by Group companies increased from 30.5% to 42.1%

UK Managed Services and Specialist Staffing businesses have performed strongly and also improved their conversion of gross profit into operating profit from 24.2% to 26.9%

Segmentation into Specialist Staffing and Managed Services has helped drive a reduction in the US cost base and underpinned the improvement in conversion of gross profit into operating profit

Increasing focus on Australasia in a number of our businesses

Acquisition of Global Group, a global healthcare business specialising in locum doctors with operations in Ireland, Australia, New Zealand, Canada and UK announced today which is expected to be earnings enhancing in its first full year of ownership

Julia Robertson, chief executive officer, commented, "I am pleased to report that we continue to make good progress against the 2015 strategic priorities outlined in our 2014 Annual Report.

"Our focus on Managed Services and Specialist Staffing as two distinct segments is reaping rewards, enabling us to increase both market share and quality of earnings by focusing on "fulfilling flexibility" whilst improving efficiency in both operations.

"In North America, our Guidant business, which is now under single global leadership, is performing well, and in addition, our new segmentation has allowed us to review our cost base.  As a consequence we have implemented a restructure in the first half of the year, which will significantly reduce the shared North America cost base in the second half of the year and on a full year basis next year.

"We have made good progress in Australia with our neutral vend managed service business Comensura, and have achieved organic growth in Medacs, where our position in the Healthcare market will be complemented by our acquisition announced today of Global Group.

"Our cultural change programme is now well underway and our top 50 leaders have all embarked on a leadership development programme based on effective promise management which is designed both to hasten our progress towards our vision of becoming "The world's most trusted staffing company" and to ensure we operate at optimal levels through increased agility.

"Our technology programme continues with significant investment in infrastructure the implementation of new CRM systems in Specialist Staffing and our proprietary VMS systems, evolution and c.net, together with projects in the feasibility stage which will enhance our digital performance.  The IT investment plan will be spread over several years and benefits are anticipated to be realised through higher productivity and improved margin conversion.

"The two acquisitions we completed last year, Lorien and Career Teachers, continue to deliver strong operating performance and have performed well in the Impellam portfolio, with Lorien already being the biggest supplier to Guidant on IT roles in the UK.  Both businesses grew strongly on a year on year basis, demonstrating the value of our portfolio approach.

"We have a well-developed and targeted pipeline of M&A opportunities and we have today announced the acquisition of Global Group, a specialist doctors locum business operating in Ireland, Australasia, Canada and the UK, which is highly complementary to the Medacs business and propels the healthcare business forward significantly outside the UK.  Both businesses operate largely on frameworks and are establishing themselves as key partners in the rapidly emerging Healthcare Managed Services markets across UK, Ireland and Australasia enabling them to deliver significant savings to the healthcare sector. 

"The combination of the robustness of our Managed Service offering, the higher margin Specialist Staffing businesses and the Career Teachers and Lorien acquisitions has helped us to deliver an overall 40.8% improvement (&pound7.1m) in EBITDA in H1 to &pound24.5m."

"Global Group was acquired for an initial consideration of &pound17.3m and assumption of debt of &pound7.1m.  In addition there are &pound4.4m worth of guaranteed deferred payments payable over the next 2-3 years and contingent earnout payments of up to &pound8.4m dependent on the performance of the Irish and Australasian businesses over the next 2-3 years. Key members of the management team including shareholders Justyn Randall and Ronan Corrigan will all remain with the business and be responsible for accelerating the growth of the business in Australasia and Ireland. Global Group achieved an adjusted unaudited EBITDA of &pound5.5m for its year ended 31 March 2015.

"The acquisition was financed through an extension of the Company's existing term loan with Barclays Bank plc.  Global Group's invoice discounting facility with ABN Amro Bank plc of &pound11m will remain in place and will continue to fund the Global Group's working capital requirements under Impellam's ownership.

Outlook

"Overall we expect our businesses to continue to perform well in our key markets and we are confident that our differentiated strategy, with our portfolio of market focused specialist staffing businesses complemented by our high performing managed services businesses, will drive shareholder value through more resilient earnings.

UK Managed Services

"Revenue in our UK Managed Services segment increased by 84.6% to &pound461.7 million (2014: &pound250.1 million) or 7.5% on a like-for-like basis, excluding the impact of acquisitions in 2014. Operating profit was &pound11.6 million (2014: &pound7.4 million) with a conversion rate of 39%, up from 37% in FY14.  We are delighted with the performance of Lorien since acquisition in 2014. Lorien has grown its Managed Service revenue by 17.2% and EBITDA by 14.3% on a standalone like-for-like basis and helped to increase the group supply of spend under management from 31% to 42%, demonstrating its strategic fit within the Impellam Group.

UK Specialist Staffing

"Gross profit in our UK Specialist Staffing segment increased by 18.3% to &pound60.2m (2014: &pound50.9m) with margins improving to 21.2% from 19.5%.  Operating profit was &pound12.6 million (2014: &pound9.8 million) with an improved conversion rate of 21%, up from 19% in FY14.  Our UK Specialist Staffing business was complemented by the acquisition of Career Teachers in Marchlast year. Career Teachers grew its standalone revenue by 17.2% and EBITDA by 24.3% on a like-for-like basis. 

US Managed Services

"Revenue in our US Managed Services segment increased by &pound3.8m to &pound44.8 million (2014: &pound41.0 million), although after adjusting for currency movements was broadly flat year on year (reduction of 0.4%).  Gross profit increased by &pound1.0 million to &pound8.3 million (2014: &pound7.3 million) an increase of 13.7% (3.8% after adjusting for currency movements).

US Specialist Staffing

"Revenue in our US Specialist Staffing segment decreased by &pound0.2m to &pound44.8 million (2014: &pound45.0 million), broadly flat although after adjusting for currency movements was a decline of 8.9%.  Gross profit decreased by &pound1.0 million to &pound8.6 million (2014: &pound9.6 million), a decrease of 10.4% and 18.1% after adjusting for currency movements.

"With new leadership in the business since Q4 2014, we are now seeing positive trends in the Specialist Staffing businesses and are confident that coupled with the US restructuring we will see a significant improvement in the results in the second half of 2015.

Carlisle Support Services

"As expected, revenue decreased 44.6% to &pound17.9 million (2014: &pound32.3 million) and gross profit decreased by 36.7% to &pound1.9 million (2014: &pound3.0 million).

"The business reported an operating loss of &pound0.9 million in the first half (2014: &pound0.9 million).   The outlook for this business continues to improve. However, the progress made with existing contracts and the conversion of contract wins into profitable long term income streams will take time to achieve.  We are confident that the business is now in a position to grow.

Cash flow, net debt and net assets:

"The Group used &pound12.8 million of cash in operations in the first twenty-six weeks of the year (2014: &pound7.7 million), a principle factor in the increase being the increase in trade receivables due to increases in turnover. Our main measure of working capital management, days sales outstanding (DSO), has improved to 40.5 at 3 July 2015 compared to 41.7 at 2 January 2015 and 41.0 days at 27 June 2014.

"Net debt increased by &pound24.6 million to &pound39.4 million as at 3 July 2015 (2 January 2015: &pound14.8 million, 27 June 2014: &pound25.0 million).  In the first half of 2015 the Group has used &pound3.2 million of cash on capital expenditure (2014: &pound2.5 million).  &pound1.6 million has been paid in interest (2014: &pound0.5 million). With continuing profitability and the utilisation of historic tax losses, the Group paid &pound3.5 million in Corporation tax in the period (2014: &pound1.3 million).

"In addition, the Group has outstanding letters of credit drawn against its US borrowing facilities amounting to $5.4 million (2 January 2015: $8.0 million).  

"At 3 July 2015, the Group had net assets of &pound172.6 million (2 January 2015: &pound155.8 million).

 

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