PTY.L Regulatory News (PTY)

4 Nov 2008 07:00



4 November 2008

Parity Group plc

Interim Management Statement

Parity Group PLC, the UK IT services group, today issues its Interim Management Statement covering the period from 1 July 2008 to 3 November 2008.

Since the announcement of our interim results on 29 August, we have seen market conditions deteriorate with buying cycles continuing to lengthen and overall client spending tightening. We expect this difficult trading environment to continue well into 2009. 

We expect H2 revenues to be flat compared to H1. However, margins in each business unit have been improving through the year, due to both higher selling margins and the cost reductions we have made, and will continue to make, as we adapt the Group to operate in the current environment. As a result we continue to anticipate progress in H2, although we now expect profit before taxation and exceptional items to be lower than the current expectations in the market.

Profitability in our Resources business has been increasing strongly, albeit recently at a slightly slower rate than expected due to the effect of the weak recruitment market. We continue to take a cautious view on selling costs, whilst maintaining our focus on gross margin improvement and strengthening our focus on areas of higher demand in a generally depressed market.

Our Solutions business continues to be affected by delayed buying decisions on projects. We have therefore reduced the size of some elements of our delivery team whilst still growing our Microsoft Sharepoint team to meet the demand from sales successes in this part of our business. In addition we have made some changes in our management and reduced some overhead costs. We are evolving our offerings to ensure that they are relevant to organisations during a difficult economic period, and are re-directing our sales focus accordingly.

Training's revenue was negatively impacted by the aborted sale of this operation during the summer. Since then we have seen a general tightening of pricing in the market as demand falls and, in the last few weeks, we have suffered a significant drop in bookings from a major banking client as a consequence of the banking crisis.  However, together with some cost reductions, we are investing modestly in our offerings to ensure that they remain competitive and in marketing to attract more of the available demand.

In response to these downwards pressures we are reducing overhead costs across the business, in part enabled by implementation of more effective IT systems and improved business processes. We have already gained some benefit from these cost reductions; the full impact of around £1M annualised savings will be seen by the end of H1 2009. We will take an exceptional charge in 2008 for this programme, which we expect to have a payback period of less than one year. There will be a further exceptional charge related to costs incurred during the aborted sale of our Training business.

Following the good progress made in the first half in improving working capital and improving debtor days, we remain focused on sustaining this improvement in our cash position.  Most of our debt is secured by receivables in our Resources business and we have consistently remained well within our available facility.

Our goal remains to deliver improved margins and a stronger, more focused business in the medium term.

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About Parity Group plc

Parity Group PLC is a UK-focused IT services company, operating via three core business units - Parity Resources, Parity Solutions and Parity Training.

Parity Resources is a leading IT recruitment specialist, with over 30 years experience in providing permanent and contract technology staff, temporary staff and managed recruitment services across all markets.

Parity Solutions specialises in providing IT, Projects and Consulting, using leading edge technologies and drawing upon the depth of experience of its consultants in Programme and Project Management.

Parity Training is one of the UK's leading Management and IT training providers. In addition to a comprehensive schedule of public courses, Parity delivers tailored learning solutions and customised programmes for major clients.

Parity is listed on the London Stock Exchange, with a ticker of PTY.LN.