Impellam's strategy paying dividends

The staffing firm Impellam escaped from under a debt mountain in 2011 and is now proposing a capital reorganisation so it can start paying dividends if it wishes to. Revenue in 2011 edged up 1.6% to £1,131m from £1,114m the year before, while profit before tax climbed to £32.9m from £26.8m the year before.The group saw earnings before interest, tax, depreciation and amortisation (EBITDA) grow 13.9% to £47.5m in 2011.The group's Chief Executive, Cheryl Jones, mentions in the update that the "highly leveraged historic debt position had to be addressed".Her remedy for the debt problem has been converting margins to actual profits and then getting those profits in the bank in the form of cash.That strategy has worked with conversion of gross margin to operating profit up from 16.8% in 2010 to 19.1% in 2011. This improvement has allowed Impellam to pay off its near £20m debt and enter 2012 with £1.8m in cash, even after it bought back 360,500 of its own shares in 2011 at a cost of £1.2m.The financial performance has been acknowledged by the market, with shares in Impellam jumping 7.9% to 307.5p in the morning trading session.Impellam will shortly be seeking shareholder and court approval for a capital reorganisation, and if it receives the approvals, it will then have sufficient distributable reserves to be in a position to pay a cash dividend starting with the 2012 interims. The capital reorganisation will also provide for other forms of capital transactions capable of delivering value to the shareholders, the company statement said.BS