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UK – Impellam suffering due to onerous contract

21 February 2014

UK recruitment firm Impellam (IPEL: LSE) announced in a trading update yesterday that it expects to lose up to £9.8 million over the next four years stemming from the company’s non-core business, Carlisle Support Services.

In December 2013, Impellam reported that Carlisle Support Services had two long term contracts, which had proven to be operationally complex, badly priced, and financially onerous. The company announced that they completed the exit of one of those contracts on the terms expected.

However, the company continues to experience substantial operational challenges with the second contract. Planned re-engineering and restructuring of the service due to be completed at the end of the first quarter of 2014 are proving difficult to finalise. As a consequence, additional operating losses of up to £9.8 million are estimated over the remaining four year contract life, in addition to those losses announced in December.

Negotiations in respect of the range of options, including an exit from the contract, are ongoing.  

Despite the announcement, the company’s share price remained unmoved yesterday at £3.75, an increase of +15.2% compared with a year ago. Based on its current share price, the company has a market value of £164.7 million. 

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