IPEL.L Regulatory News (IPEL)

INTERIM RESULTS - UNAUDITED

Key financial highlights

Key operational highlights

§ Cultural change programme continues to gather pace across the Group and a new role of Group Transformation Officer has been put in place to accelerate the achievement of our vision of becoming "the world's most trusted staffing company''

§ High retention strategy delivers 96% customer retention

§ The integration of Global Medics and Bartech into the Group has been successful with the Bartech MSP business performing ahead of expectations

§ The newly combined North America business has traded strongly and delivered expected synergy savings. As planned, the increased scale of the group in North America following the Bartech acquisition has been a major factor in the improvement of conversion of gross profit into operating profit, which is now in line with the UK business

§ Managed Services revenue satisfied by Group companies increased by 35.0% to £512.4 million and significant opportunity remains for increasing the group supply into Managed Service Programmes particularly in North America

§ UK Managed Services businesses have performed strongly with Lorien growing significantly year on year

§ An increased focus on Australasia following the acquisition of Global Medics and investment in Comensura provides further geographic diversification to the Group and high growth potential. Comensura has won, and is in the process of implementing, 25 new Managed Service contracts

§ Strong cash performance with cash generated from operations of £22.9 million (2015: £12.8 million outflow) and a reduction in DSO of 4.2 days

Julia Robertson, Chief Executive Officer, commented:

"I am pleased to report that we continue to make good progress against the 2016 strategic priorities outlined in our 2015 Annual Report.

At the end of last year I stated that my major priorities for 2016 were people and cash. That has not changed and I am pleased to report that this focus together with the clarity of purpose around achieving our vision of being "the world's most trusted staffing company'' means that we can be trusted, even in these uncertain times.

Our focus on Managed Services and Specialist Staffing aimed largely at the contingent workforce, where 90% of our gross profit is derived from temporary or contractor placements, puts us in a strong place both with customers seeking to build better businesses and with candidates who are looking for flexibility, a sense of purpose and employers who value their contribution.

In North America, which is now under single leadership following the Bartech acquisition, our businesses are performing well, and the increased scale has helped to drive the conversion of gross profit to operating profit in line with UK levels. Our focus on driving synergy savings mean that there will be further full year benefits next year which will deliver further conversion improvement.

We are pleased with the progress we have made in Australia where we have increased the scale of our healthcare business, Medacs Global Group, and have seen accelerated growth on the back of investment in Comensura which is implementing 25 new Managed Service contracts and has a strong public and private sector pipeline.

Our cultural change programme is now well underway and over 300 Impellam people have now embarked on a 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. We have created a new role of Group Transformation Officer to help drive this cultural change.

The UK education market has been challenging for a number of months and we are anticipating that this will continue during the remainder of 2016. This has impacted the performance of our teaching businesses in the first half of 2016.

The English healthcare market has seen major disruption in the first half of 2016 with junior doctors' strikes and the imposition of rate caps. As expected our doctors business was adversely impacted but our nursing business and the other healthcare businesses grew during the first half. The doctors market in England appears to have normalised following the disruption caused by the rate caps and we remain confident that our focus on Managed Services and Specialist Staffing will deliver a strong performance.

The Group is concentrating on bedding in the 4 acquisitions made over the past two years, tuning into customers and candidates and focussing on cash collection with a view to reducing our net debt so that we are strongly positioned to take advantage of opportunities that might occur later in 2016 and during 2017. We have made good progress so far this year and net debt has reduced by £8.5 million from the year end to £109.7 million which is in line with our expectations.

The combination of the robustness of our Managed Service offering, geographic spread, concentration on the contingent workforce and the Global Medics and Bartech acquisitions has helped us to deliver an overall 35.9% improvement (£8.8 million) in EBITDA in H1 to £33.3 million."

Outlook

Like many of our competitors, we have seen a softening in the permanent recruitment market in the UK since Q4 2015. Given the current social, economic and political uncertainties in the UK we do not expect this outlook to change. However, we expect our businesses to continue to perform well in our key markets and we are confident that our differentiated high retention strategy, our portfolio of market focused contingent worker Specialist Staffing businesses complemented by our high performing Managed Services businesses, will deliver results for the full year in line with management expectations.

Managed Services UK, Europe and Australasia

Gross profit increased by 15.2% to £29.6 million (2015: £25.7 million). Operating profit increased to £9.6 million (2015: £8.5 million) with conversion of gross profit to operating profit of 32.4% compared to 33.1% in the same period last year. Lorien, the acquisition we made in 2014, continues to perform well and has grown its Managed Service gross profit by 24.8% and EBITDA by 35.6% year on year, demonstrating its strategic fit within the Impellam Group.

Specialist Staffing UK, Europe and Australasia

Gross profit increased by 9.5% to £72.5 million (2015: £66.2 million). Operating profit was £12.6 million (2015: £14.8 million) with conversion of gross profit to operating profit of 17.4%, compared to 22.4% in the same period last year, primarily due to lower permanent recruitment fees, the removal of travel and subsistence advantages and continued investment in headcount to drive future performance. Our UK Specialist business was complemented by the acquisition of Global Medics in 2015, a healthcare business specialising in locum doctors serving clients across the UK, Ireland and Australasia. We are pleased with the performance of the Global Medics business which is in line with our expectations.

US Managed Services

Gross profit increased by £13.9 million to £22.2 million (2015: £8.3 million) an increase of 155.9% after adjusting for currency movements. Operating profit increased to £5.7 million (2015: £0.6 million). Conversion of gross profit to operating profit improved substantially from 7.2% in 2015 to 25.7% in 2016. The increases were driven by the acquisition in late 2015 of Bartech. On a standalone like-for-like basis, adjusting for constant currency, Bartech Managed Services business has grown its gross profit by 14.5%.

US Specialist Staffing

Gross profit increased by £6.1 million to £14.7 million (2015: £8.6 million), an increase of 61.5% after adjusting for currency movements. Operating profit increased by £4.0 million to £3.5 million (2015: £0.5 million loss). Conversion of gross profit to operating profit improved to 23.8% from (5.8%). The Bartech acquisition was the driver for the growth in this segment.

Cash flow, net debt and net assets:

The Group generated £22.9 million of cash from operations in the first twenty-six weeks of the year (2015: £12.8 million outflow), a principle factor being the increased focus on cash collections in the period. One of our main measure of working capital management, days sales outstanding (DSO), was 36.3 days at 1 July 2016 compared to 40.5 days at 1 July 2015. Day to day control of cash and tight control of working capital continues to be a priority for the Group.

In November 2015 the Group replaced its receivable financing agreements and term loans in the UK and US with a four year £250 million global Revolving Credit Facility (RCF). The facility is provided by a syndicate of six banks led by Barclays, with an option to extend to November 2020 and with an accordion element of an additional £50 million. The new RCF provides the Group with the flexibility to fund its working capital as well as future M&A activity and significantly reduces the operational complexity associated with the invoice discounting facility that it replaced. As at 1 July 2016 net debt was £109.7 million. In the first half of 2016 the Group used £4.1 million of cash on capital expenditure (2015: £3.2 million). £3.5 million has been paid in interest (2015: £1.1 million). With continuing profitability the Group paid £5.1 million in corporation tax in the period (2015: £3.5 million).

In addition, the Group has outstanding letters of credit drawn against its US borrowing facilities amounting to $4.6 million (1 January 2016: $6.7 million).  

At 1 July 2016, the Group had net assets of £214.3 million (1 January 2016: £192.3 million).

Dividend and dividend policy:

The interim dividend is maintained at 7.0 pence per share (2015: 7.0 pence per share). This is a prudent approach given the current uncertain economic environment. The Board will review this at the year end in light of our stated policy of maintaining dividend cover between 4-5 times adjusted earnings per share

Directorate Change

Darren Mee, Group Finance Director, will be stepping down as director with immediate effect and will leave the Company at the end of July 2016 in order to pursue other interests. Darren has been Group Finance Director since January 2015. In that time Darren has been an active member of the Board, has significantly improved the capability of the finance function, has played a key role in the acquisitions made by the Group and the funding available to the Group under its revolving credit facility.

Alison Wilford, Group Financial Controller, joins the Board with immediate effect and will take over as Group Finance Director. Darren will support Alison over the remainder of 2016 in her new role.

Alison, aged 51, is currently a director of Leeward Property Management Limited. She was also previously a director of the following companies during the past five years:

· Aviva Global Services (Management Services) Private Limited; and

· Waveney Asset Management Limited.

Alison has a beneficial interest in 2,714 ordinary shares in the Company.

Save as disclosed above, there are no other matters which are required to be disclosed in accordance with Rule 17 and paragraph (g) of Schedule Two of the AIM Rules for Companies.

Financial results for the twenty-six weeks to 1 July 2016

The table below sets out the results for the Group by segment for the first half of 2016.

1. Spend Under Management is the total value of client funds managed including where we operate as an agent

2. Group Supply includes amounts within Managed Services Spend Under Management fulfilled either by a fellow Group brand or through a direct contract with the worker supplied

3. % change measured at constant currency rates (2015 results restated at 2016 rates)

4. 2015 restated to incorporate Carlisle Support Services into the Managed Services UK, Europe and Australasia segment and other minor reallocations between segments to align to the regular management reporting of the Group

Consolidated income statement

For the twenty-six weeks ended 1 July 2016

Consolidated statement of comprehensive income

For the twenty-six weeks ended 1 July 2016

Consolidated balance sheet

As at 1 July 2016

Consolidated cash flow statement

For the twenty-six weeks ended 1 July 2016

Notes to the interim financial statements

1 Basis of preparation

I. Statement of compliance

The interim financial statements presented in this financial report have been prepared in accordance with International Financial Reporting Standards (IFRS) and the IFRS Interpretations Committee (IFRIC) interpretations as endorsed by the European Union that are expected to be applicable to the consolidated financial statements for the 52 weeks ending 30 December 2016. As permitted, this interim report has been prepared in accordance with the AIM Rules for Companies and does not seek to comply with IAS 34 "Interim Financial Reporting".

II. Statutory information

The financial information for the twenty-six weeks to 1 July 2016 does not constitute the statutory accounts of the Group for the relevant period within the meaning of section 434 of the Companies Act 2006.

The published annual report and accounts of Impellam Group plc for the 52 weeks ended 1 January 2016 were reported on by the auditors without qualification, did not contain an emphasis of matter paragraph, did not contain any statement under section 498 of the Companies Act 2006, and have been delivered to the Registrar of Companies.

III. Accounting policies, new IFRS and interpretations

The accounting policies used in this report are consistent with those applied at 1 January 2016.

No new and/or revised IFRS and IFRIC publications that come into force in the period have any material impact on the accounting policies, financial position or performance of the Group.

2 Segmental information

Twenty-six weeks ended 1 July 2016 - unaudited

Twenty-six weeks ended 3 July 2015 - unaudited

* 2015 restated to incorporate Carlisle Support Services into the Managed Services - UK, Europe and Australasia segment and other minor reallocations to align to the regular management reporting of the Group

3 Spend under management and group supply - unaudited

Group Supply includes amounts within Managed Services Spend Under Management fulfilled either by a fellow Group brand or through a direct contract with the worker supplied. 

4 Separately disclosed items - unaudited

In 2016 acquisition costs includes contingent consideration in respect of Lorien Limited, as well as other acquisition related costs. During the year we have restructured both the US business and other interests worldwide which have given rise to costs associated with closing branches.

The separately disclosed items in 2015 result from the closure of the Spanish business of Carlisle following the termination of the only contract there. In the US we have restructured the business. This resulted in redundancy costs and property exit, or partial exit, costs associated with offices in New York and Atlanta. In the UK we also reviewed our management structure in Carbon 60 and Chadwick Nott in order to better position those brands going forward.

5 Finance expense - unaudited

6 Taxation - unaudited

Income tax expense is recognised based on management's best estimate of the effective annual income tax rate expected for the full financial year. 

7 Earnings per share - unaudited

Basic earnings per share amounts are calculated by dividing the profit for the period attributable to the owners of the Company by the weighted average number of Ordinary shares outstanding during the period.

Diluted earnings per share amounts are calculated on the same basis but after adjusting the denominator for the effects of dilutive options. The only potentially dilutive shares arise from the share options issued by the Group under its share-based compensation plans. There were 1,300,000 options outstanding at 1 July 2016.

Excluding the 19,841 shares owned by The Corporate Services Group Ltd Employee Share Trust, the weighted average number of shares in 2016 is 49,951,001 (2015: 49,005,154) and the fully diluted average number of shares is 50,887,148 (2015: 49,005,154).

8 Deferred acquisition costs - unaudited

On 5 April 2016 the Company issued 719,344 ordinary shares of 1p each to the vendors of Lorien at a price of £8.31 per share ("Consideration Shares"). These shares were issued to part satisfy deferred consideration payable of £11.95 million, in accordance with the terms of the earn-out. Subject to satisfactory conclusions of outstanding claims, an additional cash payment of approximately £0.104 million may be payable to the vendors of Lorien. 

9 Additional cash flow information - unaudited

10 Dividends - unaudited

During the period a final dividend in respect of 2015 of 10.0 pence per share (2015: re 2014 7.75 pence per share) was approved at the Annual General Meeting and will be paid on 28 July 2016, amounting to £5.0 million (2015: re 2014 £3.8 million).

The Board also announces the payment of an interim dividend of 7.0 pence per share (2015: 7.0 pence per share), amounting to £3.5 million (2015: £3.4 million) payable on 14 October 2016 to all shareholders on the register on 2 September 2016.

Enquiries: For further information please contact the appropriate individual below:

Note to Editors:

Impellam Group plc, traded on the AIM (Symbol: IPEL) is a leading provider of Managed Services and Specialist Staffing expertise and is primarily based in the UK and North America, with smaller operations in Asia Pacific, Ireland and mainland Europe. Impellam Group plc provides fulfilling jobs at all levels, including doctors, lawyers, accountants, nurses, teachers, scientists, receptionists, drivers, chefs, administrators, engineers, technology specialists, cleaners, security guards, and manufacturing and warehouse operatives. Impellam Group plc is the 2nd largest staffing business in the UK and 6th largest MSP provider worldwide (as measured by Spend Under Management), employing over 3,300 people across 220 worldwide locations.

-END-