Revenues up 3% in H1 2019 for Parity Group
Parity Group plc has released its half year results for the six months ended 30th June 2019.
Group revenues were up by 3% or £1.3m year on year to £44.514m. Lower margin recruitment revenues were up by 7% or £2.8m reflecting higher contractor volumes which averaged 1,021 in H1 2019 (H1 2018: 953 contractors). Whilst there was an increase in the year on year average, the company saw a downward trajectory over H1 with the number of contractors on billing decreasing from 995 to 913 over the six months. The reduction was due in part to the expected run off of contractors under the Scottish Government framework which was announced in March 2019, and also as a result of challenging trading conditions in the UK recruitment market.
Consultancy revenues were down by £1.55m or 30% due to the inclusion of revenues from the significant MoD contract in the comparative period. The MoD contract ran until August 2018 but was not renewed. Consultancy revenues in H1 2019 included £0.2m from new higher margin data consultancy work.
External contribution margin for recruitment was £3.9m at a margin of 9.6% (H1 2018: £3.8m at 10.1%) and for consultancy was £0.8m at a margin of 21% (H1 2018: £1.4m at 27%). Group selling contribution to overheads was £2.4m (H1 2018: £2.8m) down by 14% or £0.4m due to the sales mix between recruitment and consultancy.
The Group reported a loss before tax for the six months of £0.5m (H1 2018: profit of £0.8m) and an adjusted profit before tax (excluding non-recurring items) of £0.2m (H1 2018: £0.8m). Non-recurring items were £0.7m (H1 2018: £nil) and reflect the charge for specific restructuring costs. The restructuring costs primarily related to the headcount reduction, but also included onerous property lease costs in respect of office relocations.
John Conoley, non-executive chairman of Parity Group plc, said, "The period we are reporting on includes the first four months under our new Chief Executive, Matthew Bayfield, who was appointed in February 2019. He and the senior management team have moved quickly to restructure the business, executing the plan set out earlier in the year.
"The Board is confident in reaching a modest level of adjusted profitability for the year, which will be a significant achievement by the management team given the extent of the transformation being undertaken and following the loss of the very large legacy contract with the Scottish Govt in Q1. The precise year end achievement will depend on the timing and mix of contracts closed in the remainder of the year."
Matthew Bayfield, chief executive, said, "Due to changing client demand we are moving Parity's focus from a single line of business dependent upon relatively low margin recruitment revenues into a multi-line business built around consultancy, learning and development and strategic recruitment in the data world.
"The restructuring programme that we embarked upon earlier in the year has gone deeper into the organisation and has had to be more comprehensive than we originally anticipated. This more comprehensive transformation programme has had an expected impact on our short term gross revenue, however we are seeing the first signs that the plan will deliver higher margins and robust profitability in the medium term.
"A new senior team has been recruited which is focussed on higher margin opportunities and new service lines. The second phase of our transformation plan is about taking the new Parity business model to market with a renewed marketing and communications focus.
"Whilst we still have a long way to go, we have a clear vision, a good plan and the support of our clients in what we are setting out to achieve, which is helping us develop a growing pipeline of new revenue opportunities. In the last few months we have signed new contracts with, amongst others, the Department of Education, BAT and The Crown Commercial Service and are delighted to report today a new retainer consultancy relationship with Compass Group."
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