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UK – Mixed trading update from Impellam knocks £5 million off operating profit

16 December 2013

In a trading statement released today, UK recruitment firm Impellam Group PLC (IPEL: LSE) announced that trading during the second half of the year has reflected the improving economic conditions in the Group’s key markets.

According to the company’s statement: “Our staffing businesses are all expected to see year-over-year growth in net fees in the second half of the year with both our UK Staffing and US Staffing business seeing full year-on-year growth.”

“Whilst we anticipate year on year growth in operating profits in both our UK and US Staffing businesses, the costs associated with both enhanced compliance requirements and the sourcing of medical professionals is still depressing net fee conversion in our Medacs (Healthcare Group) business.  Accordingly, Medacs will report year on year operating profit contraction in the second half, albeit at a slower rate than we saw in the first half.”

“Trading in our Carlisle Support Services business (people-based outsourced solutions supplier) has shown some early signs of improvement.  Changes to the management structure announced at the half year are starting to deliver the benefits we anticipated in the mobilisation of high volume labour solutions to the retail, transport and logistics sectors.  Whilst second half trading will not show any material improvement due to restructure costs, the outlook is more favourable.” 

“However, the business has two long term contracts, one a substantial first generation out-sourcing agreement, which have proven to be operationally complex, badly priced, and financially onerous.  In accordance with accounting standards, full provision will be made for the costs of the exiting of one and the future ongoing losses of the other.  The total provision, amounting to some £13 million, will be taken as an exceptional item.  Having carefully reviewed the contracts portfolio, we are satisfied that no other similar contracts exist in the Group.”

As a result of the mixed conditions, Impellam Group predicts that the company’s adjusted operating profit will be £5 million lower than the comparative period last year. In its H2 2012 trading statement, the company had expected operating profits, before share option charges and before restructuring charges to be around £5.5 million.

In early trading today, the company’s share price fell by -6.8% to £3.45, an increase of +21% compared with a year ago. Based on its current share price, the company has a market value of £162.5 million. 

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