Adjusted PBT down over 48% at year-end 2018 for Parity
Parity Group has released its results for the full year ended 31st December 2018.
Revenue grew at 2.7% across the Group increasing to £86.1m for the full year (2017: £83.8m). The Group continues to be cash generative and has maintained strong working capital management with debtor days reduced to 18 days (2017: 20 days), resulting in a further reduction of net debt to £1.1m (2017: £1.6m), underpinning its solid platform for future investment and development of the Group strategy.
Despite this, its strong first-half was followed by a significant delay and subsequent non-renewal of a major project for its consultancy services business. This reversed the trend of growing contribution from this side of the business and prompted us to accelerate a restructuring which it had planned to manage more progressively.
The division's contractor volumes recovered from the impact of IR35 reforms introduced in the public sector in 2017. The trading issues in the consultancy services division led to a weaker revenue mix. Consequently, adjusted profit before tax fell by 48.7% from £1.66m to £0.85m with the Group adjusted PBT margin tightening from 2.0% to 1.0%. Non-recurring items incurred in the year were predominately related to restructuring and totalled £495,000. Profit before tax after deducting non-recurring items was £358,000. Net cash generated from operations was £604,000 enabling it to reduce net debt from £1.6m to £1.1m at the end of 2018, with the net debt/adjusted EBITDA ratio at the end of year 0.8x (2017: 0.7x).
During 2018 the consultancy services business was focused on delivering data and technology solutions to its clients. Whilst trading was in line with its expectations in the first half of the year, the division was impacted by challenges in the second half which resulted in a 72% drop in full year divisional contribution to £0.3m (2017: £1.1m).
Parity Professionals generated revenue growth of 5% at £84.0m (2017: £80.0m), building on a well-established client base in the public sector with 15 framework wins and over 100 new clients in the year. Over 50% of the new client wins were in the private sector including household names such as Primark, not-for profit organisations such as the British Standards Institute and a number of housing associations.
The total margin value on new sales in the period grew by 8% compared to 2017, and this momentum has improved through the year, resulting in a forward order book at year end of £32.7m (2017: £27.5m). Revenue from permanent recruitment was broadly flat at £638,000 (2017: £657,000) partly due to supply side shortages, though average fee rates per placement increased significantly as it targeted more senior roles and niche skills in the digital and cyber security markets.
Matthew Bayfield, chief executive, said, "This has been a year of reflection and change for Parity.
"As client and market needs changed, we experienced real challenges that questioned our approach. We responded with a roadmap for a new operating model that includes new service lines, a clearer emphasis on consistent and integrated relationship management and a stronger brand and communication to the market. Our strengths in financial management have enabled us to reduce debt and continue to generate cash and, together with a positive initial response from clients to our new offer, this gives us confidence for the future."
The company has also appointed Antonio Acuña MBE has been appointed to the new role of head of consulting.
Bayfield added, “As the new chief executive of Parity I am looking to change the way the Company works and to grow our consultancy business. I am absolutely delighted therefore that we have been able to attract someone of Antonio’s calibre to join us. Antonio’s record and reputation in our industry is first class, his arrival will add huge impetus to our consultancy offer. Our clients will benefit from Antonio’s extensive experience in data management and digital transformation projects.”
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