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UK – Impellam’s results hamstrung by onerous contracts

27 February 2014

Impellam (IPEL: LSE) achieved revenue for the 52 weeks ending 27 December 2013 of £1.2 billion, a slight fall of -0.4% from £1.21 billion in the same period last year. The company reported a drop of -0.5% in gross profit from £174.1 million in 2012 to £173.3 million in 2013.

Impellam reported a net loss for the period of £1 million, compared with a net income of £9.8 million in 2012. Earlier this month, the company announced that it expects to lose up to £9.8 million over the next four years stemming from onerous contracts at one of their non-core businesses. 

Julia Robertson, Chief Executive Officer for Impellam, commented: “I am pleased to report that our staffing businesses in the United Kingdom and North America have made consistent quarter-on-quarter progress in gradually improving markets and, as a consequence, we have increased the group’s market share, particularly in the managed services arena. Economic conditions in both the United Kingdom and North America during 2013 favoured the growth and development of our managed services operations, whilst from late Q3, our specialist staffing businesses, in particular those with a permanent placement orientation, began to accelerate.”

“Notwithstanding the considerable progress made in our core staffing operations, which accounts for 94% of our revenue, as previously announced, we have had to deal with two operationally complex, contracts in our Carlisle Support Services business. Following a change of management at the half year, and a careful review of all our options, we have already exited one of these contracts and are in discussions with the other customer regarding remediation.  These two contracts have had a serious impact on our overall financial performance in 2013 and a provision of £23 million has been taken as an exceptional item. In addition, as a consequence of the reduced profitability and smaller scale of the remaining CSS business, an impairment to the goodwill amounting to £5 million has also been taken,” Ms Robertson concluded. 

Revenue derived from Impellam’s home market of the United Kingdom was £772.5 million in 2013, an increase of +1.4% from £762.2 million last year. The UK generated a gross profit of £104.4 million, a rise of +1.8% from £102.6 million in 2012. Operating profit derived from the UK increased by +4.9% to £27.8 million from £26.5 million a year ago.

North American revenue rose by +6.6% during 2013 to £192.4 million from £178 million last year. The region achieved a gross profit of £39.1 million, equating to a year-on-year rise of +7.4% from £36 million in 2012. Operating profit derived from North America increased by +48% to £7.4 million up from £5 million last year. 

Impellam operates primarily in the UK and the USA, with smaller operations in Australia, Ireland, New Zealand, and mainland Europe. According to research from Staffing Industry Analysts, the firm is ranked among the 20 largest staffing companies in the world.

Despite Impellam’s reported net loss, given the onerous contracts had already been highlighted to investors, the company’s share price rose by +4.1% to £4.05, an increase of +27.1% compared with a year ago. Based on its current share price, the company has a market value of £176.8 million. 

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