TIDMIPEL
RNS Number : 7423U
Impellam Group plc
31 July 2020
Impellam Group plc
("Impellam", the "Group" or the "Company")
INTERIM RESULTS TO 3 JULY 2020
Impellam (AIM: IPEL) announces its unaudited interim results for
the 26 weeks ended 3 July 2020.
H1 impacted by COVID-19, business model remains resilient
Like-for-like(5)
ADJUSTED RESULTS - H1 2020 H1 2019(1) Actual Inc/(Dec) Inc/(Dec)
Revenue (GBP millions) GBP1,024.7 GBP 1,135.9 (9.8)% (10.2)%
Gross profit (GBP millions) GBP115.2 GBP 135.2 (14.8)% (15.4)%
Operating profit (before
amortisation and impairment)
(GBP millions) (2) GBP6.8 GBP14.8 (54.1)% (55.5)%
Operating profit (before
amortisation and impairment)
conversion (%) (3) 5.9% 10.9% (5.0) ppts
Continuing adjusted basic
EPS (4) (2.4)p 16.0p (115.0)%
Net Debt (GBP millions) pre
IFRS 16 (7) GBP15.5 GBP73.5
Like-for-like(5)
STATUTORY RESULTS - H1 2020 H1 2019(1) Actual Inc/(Dec) Inc/(Dec)
Revenue (GBP millions) GBP1,024.7 GBP 1,135.9 (9.8)% (10.2)%
Gross profit (GBP millions) GBP115.2 GBP 135.2 (14.8)% (15.4)%
Operating (loss)/profit (GBP
millions) GBP(21.3) GBP 9.8 (317.3)% (337.0)%
Continuing basic EPS (58.2)p 7.9p (837.1)%
Net Debt (GBP millions) post
IFRS 16 GBP36.0 GBP101.9
(1) 2019 financial statements restated (see note 3)
(2) Operating profit before amortisation of acquired intangible
assets and impairment (see note 2)
(3) Calculated as operating profit before amortisation of
acquired intangible assets and impairment / Gross profit
(4) Continuing Basic EPS before amortisation of acquired
intangible assets and impairment (see note 6)
(5) % change measured at constant exchange rates
(6) Cash conversion defined as operating profit before
amortisation and impairment to net cash generated from
operations
(7) Net debt pre IFRS 16 is used as the basis for banking
covenant calculations
Key operational highlights
-- Group revenue decline of 9.8%, (10.2%(5) ), principally due
to the impact of COVID-19, Q2 decline of 16.3% (5) during period of
lockdowns globally.
-- Gross profit decline of 14.8%, (15.4%(5) ), with the majority
of the decline seen in Q2 - 25.4% (5) , UK operations saw the
greatest impact in the period, down 19.9% (5) whilst North America
and APAC showed more resilience down 3.6% (5) and 8.3% (5)
respectively.
-- Global Managed Services, which represents nearly a third of
the Group's gross profit, held up well, with Gross profit declining
by 5.1% (5) in H1.
-- Temporary recruitment, which represents 90.1% of gross profit
decreased by 11.2%, permanent recruitment down 41.2%.
-- The company took significant steps to further reduce costs
through headcount reductions, salary reductions, furloughing of
staff, support from government schemes and the curtailment of
discretionary spend, resulting in total savings of GBP12.2m
(10.3%).
-- 12% headcount reduction across the year, with further
headcount reductions actioned in June and July.
-- Operating profit(2) of GBP6.8m (2019: GBP14.8m). Recorded
non-cash impairment charges on acquired goodwill and intangibles of
GBP22.2m, reflecting the impact of COVID-19, leading to an
operating loss after the impairment charges of GBP21.3m (2019:
GBP9.7m profit).
-- Successfully administered the UK Government's Job Retention
Scheme on behalf of our clients, paying more than 5,000 furloughed
temporary workers a total of GBP19.5m in H1.
-- Strong cash conversion(6) at 479% (2019: 66.4%) (excluding
the deferral of UK VAT payments totalling GBP36.4m).
-- Net debt was reduced by 64.7% from GBP101.9m at H1 2019 to
GBP36.0m at H1 2020. GBP36.4m of the reduction as a result of the
deferral of UK VAT payments until Q2 2021. Pre IFRS 16 net debt of
GBP15.5m (2019: GBP73.5m) bringing the covenant leverage ratio to
less than 1x (2019: 1.74x).
-- Agreed GBP230m extension of the current GBP240m Revolving
Credit Facility (RCF) in February 2020 until April 2023.
-- Our culture of Virtuosity and an early decision to accelerate
our strategy through Covid-19 ensured we were well-placed to adapt
with speed and agility to volatile and uncertain market conditions
providing us with competitive advantage against peers slower to
react.
Julia Robertson, Chief Executive Officer, commented:
"2020 began with positive year over year profit growth with
strong trading in Global Managed Services and the benefits of
adjustments made to our cost base in Q4 2019 despite the now
delayed introduction of IR35 and softer trading confidence in the
UK post Brexit. During March 2020, as the world began to respond to
the global pandemic through lockdown measures, we, like most
organisations, began to experience the impacts on trading, felt
most severely in Q2.
Although no organisation could have planned for the extent and
impact of a global pandemic, the acceleration of our strategy to
create an integrated, collaborative business underpinned by our
culture of Virtuosity made sure we adapted swiftly and with
agility.
Our primary concern was to make sure our people were safe and
well and I am proud of the way we have come together as a business.
We have swiftly established new ways of working, effectively
hibernated jobs, adopted government support where we can whilst
continuing to serve our customers and candidates with minimal to no
service disruption. Notably, we also implemented and went live with
significant new managed services accounts whilst in lockdown and
continued to win new customers despite the turmoil in our key
markets.
Through June and July, we have started to open our offices in a
measured way ensuring we protect the health and safety of our
people. We have learnt that we can successfully work remotely, and
we will continue to explore how we maximise the balance of remote
and office working so that we can drive growth by finding good work
for people and people for good work.
With the inevitable reduction in customer demand, particularly
in the manufacturing, hospitality, catering and education sectors,
we took action to manage our cost base, our Board and senior
leadership teams took pay reductions and we placed staff on
furlough whilst curtailing our discretionary spend.
The reductions in customer demand have also affected our
candidates. We supported many of them through the administration of
the UK Job Retention Scheme and at the peak made payments to over
5,000 temporary workers.
As we entered lockdowns across all our territories our initial
focus was ensuring service and business continuity and the
wellbeing of our people, followed swiftly by cost management. We
achieved this quickly and then turned our attention to the future
shape of our business to ensure we emerged fighting fit. During
July we set out how we will further accelerate delivery of our
strategy to build an integrated, collaborative business, with a
major focus on Global Managed Services to drive resilience whilst
investing in attractive growth Specialist Staffing markets and our
digital platform businesses.
Next, we further maximise collaboration across Global Managed
Services and Specialist Staffing with a regional focus in our major
territories (UK and Europe, North America and APAC). This will
improve customer experience, retention and expansion, accelerate
cross sell and reduce SG&A costs. We will continue to free up
our Virtuosos to be closer to our customers and will give them
greater spans of control by de-layering the organisation.
.
Global Managed Services - UK, Europe, US and Australasia
The Global Managed Services segment which represents 30.7% of
our gross profit has shown resilience through the pandemic. Gross
profit declined by 3.5% (5.1% (5) ) to GBP35.4m (2019: GBP36.7m).
Whilst there were declines in demand across some of our client
base, we benefited from customer wins implemented through 2019 and
in the first half of 2020, with one go live in April, at the height
of the pandemic. Cost savings were achieved across the period which
offset the decline in gross profit and produced segment operating
profit of GBP5.6m consistent with last year.
Global Specialist Staffing - UK, Europe and US
Global Specialist Staffing, which covers longer term temporary
assignments and permanent recruitment in the IT and Life Science
sectors, saw gross profit decline by 14.6% (15.7% (5) ) to GBP23.4m
(2019: GBP27.4m) with a mixed performance between our US and UK
based businesses. In the US, SCOM and SRG demonstrated year on year
gross profit growth, however Lorien was impacted by the now delayed
IR35 legislation and latterly by COVID-19. Whilst temporary gross
profit has remained stable in SRG UK, deferrals of permanent hires
have been experienced resulting in an overall gross profit decline.
Reductions in the cost base have mitigated some of the lost gross
profit, however segment operating profit decreased 29.5%(5) to
GBP5.4m.
Regional Specialist Staffing - UK and US
Regional Specialist Staffing which covers a wide range of
sectors predominately with temporary workers on shorter term
assignments and permanent placements saw gross profit decrease by
24.8% (25.4% (5) ) to GBP35.4m (2019: GBP47.1m). End markets in
manufacturing, hospitality, catering and education felt the impact
of COVID-19, particularly in the UK, resulting in a sharp downturn
in demand for temporary workers as well as a reduction in permanent
placements. Although the cost base was reduced by GBP7.1m, segment
operating profit decreased by GBP4.6m resulting in a loss of
GBP1.7m (2019: profit: GBP2.9m).
Healthcare - UK, Europe and Australasia
Our Healthcare business experienced unprecedented levels of
demand, driven by Covid-19 across all our territories, however a
shortage of candidates, partly resulting from our doctors', nurses'
and care workers' need to self-isolate and their illness together
with reduced demand for elective surgery resulted in a revenue
increase of 0.4% (1.3%(5) ) but a gross profit decline of 12.5%
(11.6% (5) ) to GBP21.0m (2019: GBP24.0m). Given the importance of
our role in the healthcare supply chain we maintained headcount and
cost and as a result segment operating profit decreased by GBP1.2m
to a small loss of GBP0.7m (2019: profit: GBP0.5m). As the number
of cases reduces and lockdown eases the demand has started to
increase to meet delayed elective surgeries.
Impairment of goodwill and acquired intangibles
Due to the impact COVID-19 has on current trading performance
and strength of future growth, together with increases in the
discount factors applied to future cash flows we have conducted an
impairment review of our acquired intangible assets. As a result, a
non-cash charge of GBP22.2m has been made in H1, details of which
are set out in note 8.
Cash flow, net debt and net assets
The Group generated GBP32.6 million of net cash from operations,
excluding the deferral of UK VAT, in the first twenty-six weeks of
the year (2019: GBP22.3m). Days Sales Outstanding, being total
trade receivables divided by average daily invoiced sales, reduced
by 3.3 days to 36.2 days from 39.4 days at the end of FY2019.
Day-to-day control of cash and tight control of working capital
continues to be a priority for the Group. Net debt reduced by 78.9%
year on year from GBP73.5m in H1 2019 to GBP15.5m in H1 2020
excluding the impact of IFRS 16. The deferral of VAT in UK
represents GBP36.4m of this decrease. This was down 79% from
GBP72.3m at the end of FY2019. Net debt after IFRS 16 adjustments
decreased by GBP65.9m to GBP36.0m (H1 2019: GBP101.9m).
The Group has outstanding letters of credit drawn against its US
borrowing facilities amounting to GBP3.52m (3 January 2020:
GBP3.35m).
At 3 July 2020, the Group had net assets of GBP220.9m (3 January
2020: GBP246.5m), the decrease arising from the GBP22.5m impairment
of goodwill and acquired intangibles.
We continue to model scenarios to ensure the Group has
sufficient liquidity over the period ahead. With our current level
of net debt (pre IFRS 16) of GBP17.0m, our GBP240 million of
available facilities (GBP230 million to April 2023) and strong
relationship with our lenders we do not envisage the need for any
additional financial support within in the scenarios we have
modelled.
Dividend and dividend policy
On 27 April 2020 the Board announced the suspension of the share
buyback programme, though maintained authority to acquire shares on
an ad hoc basis if deemed appropriate by the board. During the
period prior to the announcement 964,878 shares were purchases at a
total value GBP3.2m. Since the 27 April 2020 two ad hoc purchases
were made with a total of 361,500 shares acquired at a total value
of GBP0.83m. On 30 June 2020, the Company announced it would
reinstate the Share Purchase Plan for the period to the release of
this statement and post period end has purchased 77,411 shares at a
cost of GBP0.18m. From the date of this release the Share Purchase
Plan has once again been suspended though the Company retains the
authorities to buy back shares in the future and may consider ad
hoc purchases of shares if deemed appropriate by the Board.
Trading outlook
Our strength in Global Managed Services, our mixed portfolio and
geographical spread together with strong cost and cash management
allowed us to weather the peak of the crisis well. Looking ahead,
these key strengths together with our increasingly integrated and
delayered Virtuoso structure will ensure we are well placed to
benefit from improving market conditions. We anticipate periodic
lockdowns across our geographies over the coming months and we will
use the lessons learned in Q2 to ensure we continue to adapt
quickly to mitigate business interruptions and fluctuations in
supply and demand.
Financial results for the twenty-six weeks to 3 July 2020
The table below sets out the results for the Group by segment
for the first half of 2020.
Unaudited Revenue Gross profit Operating profit(2)
Like-for-like H1 H1 Like-for-like H1 H1 Like-for-like
GBP'million H1 2020 H1 2019 change(1) 2020 2019 change(1) 2020 2019 change(1)
Global Managed
Services 357.1 372.0 (4.4) 35.4 36.7 (5.1) 5.6 5.4 (0.7)
Gross profit
% 9.9% 9.9%
Global
Specialist
Staffing 284.7 336.0 (15.6) 23.4 27.4 (15.7) 5.4 7.6 (29.5)
Gross profit
% 8.2% 8.2%
Regional
Specialist
Staffing 284.4 326.4 (13.7) 35.4 47.1 (25.4) (1.7) 2.9 (164.5)
Gross profit
% 12.4% 14.4%
Healthcare 123.5 123.0 1.3 21.0 24.0 (11.6) (0.7) 0.5 (224.3)
Gross profit
% 17.0% 19.5%
Inter-segment
revenues (25.0) (21.5) - - - -
------- ------- --------------
Total 1,024.7 1,135.9 115.2 135.2 8.6 16.4
-------- -------- ------ ------- ------- ------- --------------
Corporate
costs(3) (1.8) (1.6)
------- ------- --------------
Operating profit before
amortisation
and impairment(2) 6.8 14.8
Amortisation of acquired
intangible
assets (5.9) (5.0)
Impairment (22.2) -
------- ------- --------------
Operating
(loss)/
profit (21.3) 9.8
------- ------- --------------
1. % change measured at constant exchange rates
2. Before amortisation of acquired intangibles and impairment
3. Includes costs in 2019 previously shown as separately disclosed items (see note 2)
Consolidated income statement
For the twenty-six weeks ended 3 July 2020
26 weeks 26 weeks
3 July 5 July
2020 2019
Notes GBPm GBPm
Unaudited Unaudited
(as restated)
Continuing operations
Revenue 2 1,024.7 1,135.9
Cost of sales (909.5) (1,000.7)
--------- --------------
Gross profit 2 115.2 135.2
Administrative expenses (136.5) (125.4)
--------- --------------
Operating (loss)/profit 2 (21.3) 9.8
------------------------------------------- ----- --------- --------------
Operating profit before amortisation and
impairment 6.8 14.8
Amortisation of acquired intangible assets (5.9) (5.0)
Impairment 8 (22.2) -
Operating (loss)/profit (21.3) 9.8
------------------------------------------- ----- --------- --------------
Finance income 0.2 0.2
Finance expense 4 (3.3) (4.8)
--------- --------------
(Loss)/profit before taxation (24.4) 5.2
Taxation 5 (2.7) (1.3)
--------- --------------
(Loss)/profit for the period from continuing
operations (27.1) 3.9
--------- --------------
Profit from discontinued operations, net of
tax - 0.7
--------- --------------
(Loss)/profit for the period attributable to
owners of the parent Company (27.1) 4.6
--------- --------------
Earnings per share for equity holders of
the parent Company
Basic & diluted 6(58.2)p 9.3p
Consolidated statement of comprehensive income
For the twenty-six weeks ended 3 July 2020
26 weeks 26 weeks
3 July 5 July
2020 2019
GBPm GBPm
Unaudited Unaudited
(as restated)
(Loss)/profit for the period (27.1) 4.6
Other comprehensive income:
Currency translation differences (net of tax) 5.6 2.2
-------------------- --------------------
Total comprehensive (loss)/income for the period,
net of tax, attributable to owners of the parent
Company (21.5) 6.8
-------------------- --------------------
Consolidated balance sheet
As at 3 July 2020
3 July 2020 3 January 2020
GBPm GBPm
Notes Unaudited Audited
Non-current assets
Property, plant and equipment 6.2 6.7
Right-of-use assets 21.0 25.4
Goodwill 8 135.1 148.0
Other intangible assets 8 105.9 117.8
Financial assets 1.5 1.5
Deferred tax assets 10.8 13.6
Trade and other receivables 6.3 5.7
----------- --------------
286.8 318.6
----------- --------------
Current assets
Trade and other receivables 537.1 574.7
Tax receivable 3.8 2.5
Cash and cash equivalents 7 135.0 132.3
----------- --------------
675.9 709.5
----------- --------------
Total assets 962.7 1,028.1
----------- --------------
Current liabilities
Short-term borrowings 7 16.1 24.7
Lease liabilities 7 10.1 10.6
Trade and other payables 567.6 550.4
Tax payable 3.1 1.8
Provisions 6.1 3.6
----------- --------------
603.0 591.1
----------- --------------
Net current assets 66.6 118.4
----------- --------------
Non-current liabilities
Long-term borrowings 7 96.0 140.9
Lease liabilities 7 16.8 21.1
Other payables 1.6 1.6
Provisions 4.5 5.4
Deferred tax liabilities 19.9 21.5
----------- --------------
138.8 190.5
----------- --------------
Total liabilities 741.8 781.6
----------- --------------
Net assets 220.9 246.5
----------- --------------
Equity
Issued share capital 0.5 0.5
Share premium account 30.1 30.1
----------- ----------------
30.6 30.6
Other reserves 125.9 120.3
Retained earnings 64.7 95.9
----------- ----------------
Total equity attributable to owners of the
parent Company 221.2 246.8
----------- ----------------
Non-controlling interest (0.3) (0.3)
----------- ----------------
Total equity 220.9 246.5
----------- ----------------
Consolidated statement of changes in equity
For the twenty-six weeks ended 3 July 2020
Total Total equity
share attributable
capital to equity
and share Other Retained owners of Non-controlling Total
premium reserves earnings the parent interest equity
Unaudited GBP m GBP m GBP m GBP m GBP m GBP
m
4 January 2020 30.6 120.3 95.9 246.8 (0.3) 246.5
----------- ---------- ---------- -------------- ---------------- --------
(Loss)/profit for the period - - (27.1) (27.1) - (27.1)
Other comprehensive income - 5.6 - 5.6 - 5.6
----------- ---------- ---------- -------------- ---------------- --------
Total comprehensive (loss)/income
in the period - 5.6 (27.1) (21.5) - (21.5)
Transactions with owners,
recorded directly in equity
Purchase of Treasury shares - - (4.1) (4.1) - (4.1)
----------- ---------- ---------- -------------- ---------------- --------
3 July 2020 30.6 125.9 64.7 221.2 (0.3) 220.9
----------- ---------- ---------- -------------- ---------------- --------
Consolidated cash flow statement
For the twenty-six weeks ended 3 July 2020
26 weeks 26 weeks
3 July 5 July
2020 2019
GBPm GBPm
Unaudited Unaudited
(as restated)
Cash flows from operating activities
Profit before taxation (24.4) 5.2
Adjustments for:
Depreciation and amortisation 15.0 14.2
Impairments 22.2 -
Net interest charge 3.1 4.6
Discontinued operations - (0.7)
---------------------- ----------------------
15.9 23.3
Decrease / (Increase) in trade and other receivables 51.8 (39.2)
(Decrease) / Increase in trade and other payables 1.2 39.1
Increase in provisions 1.4 0.7
---------------------- ----------------------
Cash generated by operations 70.3 23.9
Taxation paid (1.3) (1.6)
---------------------- ----------------------
Net cash generated by operating activities 69.0 22.3
---------------------- ----------------------
Cash flows from investing activities
Purchase of property, plant and equipment (0.9) (1.7)
Purchase of intangible assets (1.9) (4.0)
Finance interest received 0.3 0.2
Net movement in other financial assets - (0.1)
---------------------- ----------------------
Net cash utilised on investing activities (2.5) (5.6)
---------------------- ----------------------
Cash flows from financing activities
(Decrease) / Increase in short-term borrowings (53.4) 14.0
(Decrease) in overdraft (0.6) (0.5)
Purchase and cancellation of own shares (4.1) (5.7)
Finance expense paid (3.4) (4.8)
Repayment of lease liabilities (5.4) (5.7)
Receipt from lease debtors 1.2 1.4
Cash outflow on discontinued operations - (2.5)
---------------------- ----------------------
Net cash (outflow) from financing activities (65.7) (3.8)
---------------------- ----------------------
Net (decrease) / increase in cash and equivalents 0.8 12.9
Opening cash and cash equivalents 132.3 117.1
Foreign exchange gain / (loss) on cash and cash
equivalents 1.9 (1.4)
---------------------- ----------------------
Closing cash and cash equivalents 135.0 128.6
---------------------- ----------------------
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 period ending 1 January 2021. 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 26 weeks to 3 July 2020 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 period ended 3 January 2020 were reported on by the
auditors without qualification but did contain a paragraph in
relation to a "material uncertainty with regards to going concern"
related to the inherent uncertainties caused by COVID-19.
The Directors continue to consider the Group's profit and cash
flow plans for the coming period and continue to run forecasts and
downside "stress test" scenarios. The projections assess our
potential debt requirements against the Group's GBP240m of
committed facilities and against the key covenant ratios' over this
period. The Group has cyclical working capital requirements which
increase during periods of higher trading levels and therefore as
we have experienced a significant short term decline in trading the
working capital requirements and therefore net debt has initially
reduced providing a natural hedge against the sharp downturn. In
our projections, as business activity increases our working capital
requirements and net debt levels would rise, but to levels within
our facility. In these projections the Group's key covenant ratio
of net debt being less than 2.5x the last twelve months EBITDA is
not breached at the quarterly testing points. The scenario's
include additional cost mitigation actions, such as reduced
performance bonus, travel and entertainment, marketing activity,
reduced capital expenditure and postponement in share buybacks,
and, furloughing of certain staff. In the event that there is a
more significant downturn than in these scenarios there are further
mitigating actions which could include but are not limited to,
further reductions in capital expenditure, further reductions in
non-business critical expenditure as well as the potential to
reduce working hours and further headcount reductions.
Over Q2, during the period of global lockdowns, our business
model has been tested and proved to be resilient. We have performed
ahead of our downside scenario's, both from a gross profit and cost
perspective. However, although we now have experience of managing
through the first wave of this crisis it still remains hard to
predict what the continuing and future impact that CVOID-19 may
have on our business. We continue to run stress test scenario's and
under these scenarios the Group could withstand a material and
prolonged decline in revenue and continue to operate within the
available banking facilities. Accordingly, the Group and the
Company continues to adopt the going concern basis in preparing its
Financial Statements. However, if the impacts of COVID-19 are worse
or more prolonged than the Directors' expectations, and further
mitigating actions are not sufficient, the Group may need to seek
additional support.
The financial statements do not include any adjustments should
the going concern basis of preparation be inappropriate.
The published annual report and accounts 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
The accounting policies used in this report are with those
applied at 3 January 2020.
No other 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 3 July 2020 - unaudited
Segment
Adjusted
operating
Revenue Gross profit profit
GBP m GBP m GBP m
Global Managed Services 357.1 35.4 5.6
Global Specialist Staffing 284.7 23.4 5.4
Regional Specialist Staffing 284.4 35.4 (1.7)
Healthcare 123.5 21.0 (0.7)
Inter-segment revenues (25.0) - -
-------- ------------- -----------
Operating segments 1,024.7 115.2 8.6
-------- ------------- -----------
Twenty-six weeks ended 5 July 2019 - unaudited (as restated)
Segment
Adjusted
operating
Revenue Gross profit profit
GBP m GBP m GBP m
Global Managed Services 372.0 36.7 5.4
Global Specialist Staffing 336.0 27.4 7.6
Regional Specialist Staffing 326.4 47.1 3.0
Healthcare 123.0 24.0 0.4
Inter-segment revenues (21.5) - -
-------- ------------- -----------
Operating segments 1,135.9 135.2 16.4
-------- ------------- -----------
Unaudited 26 weeks
26 weeks 5 July
3 July 2019
2020 GBP m
GBP m (as restated)
Segment adjusted operating profit 8.6 16.4
Corporate costs (1.8) (1.0)
Corporate costs (previously in separately disclosed
items) - (0.6)
--------- ---------------
Operating profit before amortisation and impairment 6.8 14.8
Amortisation of acquired intangibles (5.9) (5.0)
Impairment (22.2) -
Operating (loss)/profit (21.3) 9.8
Finance income 0.2 0.2
Finance expense (3.3) (3.9)
Finance expense (previously in separately disclosed
items) - (0.9)
Taxation income/(charge) (2.7) (1.3)
--------- ---------------
(Loss)/profit for the period from continuing
operations (27.1) 3.9
--------- ---------------
The above table reconciles the adjusted operating profit to the
standard profit measure under International Financial Reporting
Standards (Operating Profit). This is the Alternative Profit
Measure used when discussing the performance of the Group. The
Directors believe that adjusted operating profit is the most
appropriate approach for ascertaining the underlying trading
performance and trends as it reflects the measures used internally
by senior management for all discussions of performance, including
Directors' remuneration. All discussions within the Group on
segmental and individual brand performance refer to adjusted
operating profit. Corporate costs represent costs associated with
being a listed company with a wide portfolio of brands and
therefore are not allocated to the segments.
Adjusted operating profit is not defined by IFRS and therefore
may not be directly comparable with other companies' alternative
profit measures. It is not intended to be a substitute, or superior
to, IFRS measurements of profit.
In 2019 several items were reported as separately disclosed
items, however due to ongoing review these have been restated as
follows:
-- Corporate costs - GBP0.6m
The Group de-merged Carlisle Support Services Group in 2019,
incurring costs of GBP0.8m.
Acquisition costs relate to contingent consideration in respect
of Global Medics in 2019, credit of GBP0.4m.
Legal costs of GBP0.2m for ongoing litigation.
-- Finance expense - GBP0.9m
In 2019 the Group negotiated an amend and extend to its
Revolving credit facilities ("RCF") arrangement before the 2020
expiry date, the outstanding fees for the original RCF have been
taken as a cost in 2019.
3 Comparative restatement
The amounts in the prior year interim statement has been
restated due to changes to separately disclosed items discussed
above and adjustments required as a result of adopting new
standards in the period, the most significant of which were IFRS 9
'Financial Instruments', IFRS 15 'Revenue from Contracts with
Customers' and IFRS 16 'Leases', as well as some misstatements
identified during the preparation of the annual financial
statements.
The misclassification of some revenue streams led to an increase
in revenue for the Group of GBP0.9m with a corresponding increase
in cost of sales and, under IFRS 15, an additional GBP0.3m in cost
of sales was required due to amortisation of implementation costs
recognised as part of the comparative statements disclosed in the
financial statements for the period ended 3 January 2020.
Under IFRS 16 several adjustments were required which have had a
net decrease in operating profit of GBP0.2m and a decrease in the
net interest expenses of GBP0.1m.
As a result of these adjustments the tax charge was reduced by
GBP0.1m.
The cash flow for the prior period has been restated in relation
to the above as well as for some reclassifications on the balance
sheet which occurred between the prior interim statement and the
annual financial statements.
These are summarised below:
-- The cash outflow on the discontinued operations is now being
disclosed as a financing activity rather than an investing
activity
-- Bank overdrafts are no longer offset against cash balances
leading to an increase in opening cash for the prior period of
GBP39.9m with a GBP0.5m outflow included in investing
activities.
-- GBP0.8m previously disclosed as a payment of deferred
consideration have been reclassified as a movement in
creditors.
-- An arrangement fee relating to the revolving credit facility
taken out during the first half of the prior year has been
reallocated against movements in the credit facility leading to a
GBP1.5m inflow relating to movements in creditors and a similar
outflow on the movements in short term borrowing.
4 Finance expense - unaudited
26 weeks
26 weeks 5 July
3 July 2019
2020 GBPm
Finance expense GBP m (as restated)
Revolving credit facilities 2.7 3.2
Write off capitalised finance costs - 0.9
Interest on lease liabilities 0.5 0.7
Other interest expense 0.1 -
--------- ---------------
Income statement 3.3 4.8
--------- ---------------
5 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 which has been estimated as (11.2%) (2019:
25%). The increase in the effective tax rate is largely driven by
the goodwill impairment charge and the increase in the deferred tax
liabilities as a result of the deferred reduction of the UK
corporation tax rate.
6 Earnings per share - unaudited
Basic earnings per share amounts are calculated by dividing the
profit or loss 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 no options outstanding at either 3
July 2020 or 5 July 2019.
Excluding the 19,841 shares owned by The Corporate Services
Group Ltd Employee Share Trust, the weighted average number of
shares in 2020 is 46,511,510 (2019: 49,160,900).
26 weeks 26 weeks
3 July 5 July
2020 2019
GBPm GBPm
(as restated)
Continuing (loss)/profit for the period (27.1) 3.9
Discontinued profit for the period - 0.7
---------- --------------
Total (loss)/profit for the period (27.1) 4.6
Impairment of goodwill (net of tax) 16.7 -
Impairment of other intangible assets (net of
tax) 4.5 -
Acquired intangibles amortisation (net of tax) 4.7 4.0
---------- --------------
Total adjusted (loss)/profit (1.2) 8.6
---------- --------------
Continuing adjusted (loss)/profit (1.2) 7.9
Discontinued adjusted profit - 0.7
---------- --------------
Weighted average number of shares 46,511,510 49,160,900
26 weeks 26 weeks
3 July 5 July
2020 2019
Basic and diluted EPS Pence Pence
(as restated)
Continuing unadjusted basic earnings per share (58.2) 7.9
Discontinued unadjusted basic earnings per share - 1.4
-------- --------------
Total unadjusted basic earnings per share (58.2) 9.3
Impairment of goodwill (net of tax) 35.8 -
Impairment of other intangible assets (net of
tax) 9.8 -
Acquired intangible asset amortisation (net
of tax) 10.2 8.1
-------- --------------
Total adjusted basic earnings per share (2.4) 17.4
-------- --------------
Continuing adjusted basic earnings per share (2.4) 16.0
Discontinued unadjusted basic earnings per share - 1.4
-------- --------------
7 Additional cash flow information - unaudited
Change
4 January Cash Interest Interest in short Foreign 3 July
Unaudited 2020 flow charged paid term borrowings exchange 2020
GBP m GBP m GBP m GBP m GBP m GBP m GBP m
Cash and short-term
deposits 132.3 59.0 (0.1) 0.1 (58.2) 1.9 135.0
Bank overdraft (39.0) - - - 0.6 - (38.4)
Revolving credit (165.3) 1.4 (2.7) 2.7 53.4 (1.3) (111.8)
Hire purchase (0.3) - - - - - (0.3)
Lease liabilities (31.7) - (0.6) 0.6 5.4 (0.6) (26.9)
Lease debtor 7.3 - 0.3 (0.3) (1.2) 0.3 6.4
--------- ----- -------- -------- ---------------- --------- -------
Net debt (96.7) 60.4 (3.1) 3.1 - 0.3 (36.0)
--------- ----- -------- -------- ---------------- --------- -------
The overdraft is included in trade and other payables on the
balance sheet, and the lease debtor is included in trade and other
receivables.
8 COVID-19
The global outbreak of COVID-19 has significantly disrupted our
main markets which have seen unprecedented declines in GDP during
the first half of 2020. This has had a significant impact on our
business, most notably in the second quarter as countries entered
lockdown.
We are continuing to monitor and address the impacts of the
COVID-19 outbreak, but it remains uncertain as to the extent of the
impact on our business.
i) Goodwill and other intangible assets
The impairment review methodology for goodwill and acquired
intangibles is unchanged from that described in the Annual Report
and Financial Statements for the period ended 3 January 2020. We
consider the disruptive nature of Covid-19 to our markets to be an
indicator of impairment. The main drivers of the impairments set
out below are a result in a revision to our assumptions on discount
factors, which have increased due to changes in the risk premium,
and future growth assumptions.
Net carrying
Goodwill Cost Impairment value
GBP m GBP m GBP m
Opening balance at 4 January 2020 158.2 (10.2) 148.0
Impairment in the period - (16.6) (16.6)
Foreign exchange and other movements 3.7 - 3.7
Closing balance at 3 July 2020 161.9 (26.8) 135.1
----- ---------- ------------
Foreign exchange and other movements to goodwill arises from the
retranslation of goodwill balances held in foreign currencies
relating to the acquisition of Bartech Holdings Corporation, in the
US Staffing CGU.
Due to the challenging trading period as a result of Covid-19 an
impairment of GBP14.3m was recognised against the Information
Technology CGU which is in the Global Specialist Staffing reporting
segment. Just under GBP2.1m was recognised against the Engineering
CGU and just under GBP0.3m against the Online platform CGU, both of
which are in the Regional Specialist Staffing reporting segment. As
noted, these impairments have been driven by COVID-19 and the
subsequent revisions to our assumptions on discount factors, which
have increased due to changes in the risk premium, and future
growth assumptions.
Other intangible assets Client relationships
Software Brand values Total
GBP m GBPm GBPm GBP m
Cost - 4 January 2020 34.7 84.6 54.7 174.0
Additions 1.9 - - 1.9
Disposals (1.1) - - (1.1)
Impairment - (5.6) - (5.6)
Foreign exchange (0.2) 0.8 0.7 1.3
-------- -------------- -------------------- -----
Cost - 3 July 2020 35.3 79.8 55.4 170.5
-------- -------------- -------------------- -----
Accumulated amortisation - 4 January
2020 17.3 6.8 32.1 56.2
Charge for the period 3.4 3.1 2.5 9.0
Disposals (1.0) - - (1.0)
Foreign exchange - 0.2 0.2 0.4
-------- -------------- -------------------- -----
Accumulated amortisation - 3 July
2020 19.7 10.1 34.8 64.6
-------- -------------- -------------------- -----
Net carrying value - 3 July 2020 15.6 69.7 20.6 105.9
-------- -------------- -------------------- -----
Included in software additions for the 26 weeks ended 3 July
2020 are internally generated software development costs of GBP0.9m
which have been capitalised at cost. These costs have been assessed
as having a finite life of between three and five years and are
amortised, from the date the software is available for use, on a
straight-line basis over this period.
Client relationships have resulted from business combinations
and have been assessed as having a finite life of ten years. They
are amortised, from the date of acquisition, on a straight-line
basis over this period.
Brand values have resulted from business combinations and have
been assessed as having a finite life of between 3 and 20 years
depending on the prominence of the brand. They are amortised on a
straight-line basis over this period.
These assets are all reviewed for impairment when there are
changes in events or situations that indicate the carrying value
may not be recoverable. Due to the challenging trading period as a
result of Covid-19 an impairment of GBP5.6m was recognised against
the value of the Education brand values which are within the
Regional Specialist Staffing reporting segment.
ii) Government assistance income
Various local governments announced measures to provide both
financial and non-financial assistance to the disrupted industry
sectors and the affected business organisations. From April, the
Group took advantage of Job Retention scheme launched by the UK
Governments, whereby it was reimbursed for a portion of salaries of
the personnel, who have been furloughed. The compensation was
presented as a deduction in reporting the related staff
expense.
iii) Allowance for expected credit risk
Due to COVID-19 and the impact on some of our customers we
impaired our trade receivables by GBP1.3m during the period. In
addition, we undertook a review of our expected credit loss
provision against trade receivables and given the decreased trade
receivable balance and the additional impairment already made, no
addition to the year-end provision was considered necessary.
Enquiries: For further information please contact:
Impellam Group plc
Julia Robertson, Group Chief Executive Tel: 01582 692658
Tim Briant, Group Chief Financial
Officer
Canaccord Genuity Ltd ( NOMAD and Corporate Broker to Impellam )
Bobbie Hilliam Georgina McCooke Tel: 020 7523 8150
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014
Note to Editors:
Impellam is a leading Global Talent Acquisition and Managed
Workforce Solutions provider supported by talent-focused specialist
staffing brands with deep heritages, vertical sector expertise and
loyal candidate networks.
Clients across the world trust us to deliver Managed Services
and talent-focused Specialist Staffing in the UK, North America,
Australasia, the Middle East and Europe. Working with them are
2,800 Impellam people, bringing a wealth of expertise through our
16 market-leading brands across 106 locations. Every year, we
connect carefully chosen candidates with good work at all levels.
They include technology and digital specialists, scientists,
clinical experts, engineers, nurses, doctors, lawyers, teachers,
receptionists, drivers, chefs, administrators, warehouse and call
centre operatives.
Underpinning everything we do is our Virtuoso strategy which
recognises it is our people who make the difference. Virtuosos make
and deliver on promises and grow with their customers through
sector, service or international expansion which ensures there is
never a need for a customer or candidate to leave Impellam.
Impellam is the sixth(1) largest Global Talent Acquisition and
Managed Workforce Solutions provider in the world.
For more information about Impellam Group please visit:
www.impellam.com
1 By SUM (confirmed by Staffing Industry Analysts). Spend Under
Management (SUM) is the total amount of client expenditure which
our Managed Services brands manage on behalf of their clients. This
equates to revenue earned where Impellam acts as principal plus
gross billings to customers where Impellam acts as agent (2018
published numbers). Management use this measure as it reflects the
total value of the client spend to the Group and not just the
revenue generated
-END-
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR EAKXFDDDEEEA
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July 31, 2020 02:38 ET (06:38 GMT)
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