29 July 2021

Impellam Group plc

("Impellam", the "Group" or the "Company")

INTERIM RESULTS TO 2 JULY 2021

Impellam (AIM: IPEL) announces its unaudited interim results for the 26 weeks ended 2 July 2021.

H1 sees strong recovery across our markets

(1) Operating profit before amortisation of acquired intangible assets and impairment (see note 2)

(2) Calculated as operating profit before amortisation of acquired intangible assets and impairment / gross profit

(3) Basic EPS before amortisation of acquired intangible assets and impairment (see note 5)

(4) % change measured at constant exchange rates

(5) Net debt pre IFRS 16 is used as the basis for banking covenant calculations

Key operational highlights

§ Group revenue increase of 6.3%, (8.2%⁽⁴⁾), as trading recovered in the US, UK and Europe regions after the impact of Covid-19 from Q2 2020.

§ Group gross profit increase of 6.4%, (9.1%⁽⁴⁾), with the US and UK operations seeing the strongest growth over the half year, up 13.3%⁽⁴⁾ and 9.9⁽⁴⁾ respectively whilst APAC is still impacted by Covid-19 and declined 10.6%⁽⁴⁾.

§ Gross profit increases in Global Managed Services of 6.1%⁽⁴⁾; STEM 13.0%⁽⁴⁾ and Regional Specialist Staffing 16.9%⁽⁴⁾. Healthcare gross profit decreased by 1.4% on 2020 due to the state border closures in Australia, which affect our cross-border locum's business.

§ Temporary recruitment gross profit increased by 6.8%⁽⁴⁾ and permanent recruitment up 33.7%⁽⁴⁾ with permanent recruitment now 10.6% of gross profit, up 2.0 ppts on 2020.

§ Gross profit per fee earner up 7.5%⁽⁴⁾ on 2020 and 5.6%⁽⁴⁾ on 2019, gross profit per total FTE increased by 24.1%⁽⁴⁾ on 2020 and 14.3%⁽⁴⁾ on 2019 demonstrating our improved operating leverage driven by our strategic initiative to reduce layers across the organisation.

§ Headcount increase of 136 (5.5%) from the end of December 2020 responding to increasing demand and to support business growth but remains 6.8% lower than H1 2020 and 12.2% lower than the end of 2019 due to transformed business structure. We will actively invest in headcount through H2 to support ongoing demand.  Our total cost base has increased 1.3% (3.4%⁽⁴⁾) from H1 2020 as a result of increased trading and government support in 2020 but remains 8.8% lower than 2019.

§ Operating profit⁽¹⁾ of £12.9m (2020: £6.8m) growing by 105.2%⁽⁴⁾ as a result of increased gross profit and sustainable structural change benefits.

§ Cash remains tightly controlled.  After the repayment of £13.2m of deferred UK VAT, net debt decreased to £25.5m from £36.0m at H1 2020.  Pre IFRS 16 net debt of £7.1m (2020: £15.5m) maintains the covenant leverage ratio at less than 1x. 

§ The continued integration and de-layering of the Group together with investment in core systems and our virtuoso people have driven conversion benefits and efficient scalability as demand has returned at pace in all regions.

Julia Robertson, Chief Executive Officer, commented:

"Our H1 performance has surpassed expectations. We started 2021 with a degree of optimism following the decisive moves we made in 2020 to re-shape our business for the long term by transforming and de-layering our business to free up our virtuosos to do what they do best, finding good work for people and people for good work.

However, almost immediately, the UK was placed back into lockdown and schools were closed meaning that we reverted to the well-trodden home working patterns of 2020 with practised speed and agility.

We remained focused on supporting and enabling our people and keeping them safe, ensuring they were able to respond to the increasing confidence of our customers and candidates which has steadily grown across all our regions over the last six months driving demand for our services and strong gross profit growth which converted to an operating profit⁽¹⁾ growth of 105.2%⁽⁴⁾. 

With a simplified regional business structure and reduced management layers we have reacted quickly to changing end-market conditions and have made significant investments in digitalisation and new virtuoso fee earners whilst retaining the substantial cost base savings from the transformation of our business in 2020.

The launch of our Customer Office towards the end of 2020 has amplified our intrinsic customer focus ensuring a customer never has a reason to leave Impellam and, together with our Centre of Excellence, has supported the renewal of existing strategic relationships and acquisition of new customers. 

Our virtuoso culture continues to underpin everything we do.  Every day we rely on it, be it to deal with the sudden closure of an office due to a Covid outbreak, to respond to unpredictable peaks in demand from our customers who are facing volatile trading environments or to respond to border closures.  It is our competitive advantage and I extend my heartfelt thanks to all Impellam people who have given everything they have to performing as virtuosos during the first half of 2021.

Following a challenging 2020 we are now firmly on a growth trajectory at revenue, gross margin and operating profit level.  We have worked hard to emerge from the pandemic as a fighting fit business and I am confident that we have made the right moves to ensure we deliver on our promises to our people, our customers, and our investors."

UK & Europe

The UK & Europe region recovered strongly from the significant impact of Covid-19 in 2020.  The end markets of manufacturing, aviation, hospitality, catering and education which are primarily in the Regional Specialist Staffing segment have all started to reopen and as a result gross profit increased 9.9%⁽⁴⁾ to £78.3m (2020: £71.4m).  In addition, our UK STEM segment experienced strong gross profit growth of 22.9% which was across all specialisms, IT, life science and engineering.  The Global Managed Services and Healthcare segments were resilient in 2020 despite Covid-19 and continue to perform in line with our plans. The increases in gross profit supported by the impact of our business transformation led to increased adjusted operating profit of 499.1%⁽⁴⁾ to £8.3m (2020: £1.4m). 

North America (NA)

The North America region withstood the impact of Covid-19 in H1 2020 due to its end customer base and in H1 2021 has grown gross profit by a further 13.3%⁽⁴⁾ to £36.1m (2020: £35.1m) and adjusted operating profit by 18.9%⁽⁴⁾ to £6.5m (2020: £6.2m). This growth was primarily driven by Global Managed Services (Guidant Global) and Regional Specialist Staffing (Corestaff).  Growth in the reported results is tempered by the weakening of the US$ against sterling over the period.  North America gross profit is now 9.0%⁽⁴⁾ above the H1 2019 level.

Asia Pacific (APAC)

Global Managed Services (Comensura and Guidant) are performing strongly however the overall performance of the APAC region is being impacted by continued lockdowns and the closure of state borders meaning our healthcare business is depressed because doctors have not been able to travel to fill demand.  Overall gross profit declined by 10.6%⁽⁴⁾ to £8.2m (2020: £8.7m) and adjusted operating profit reduced to £0.3m (2020: £1.0m).

Cash flow, net debt and net assets

The Group generated £9.3 million of net cash from operations, after the repayment of £13.2m of deferred UK VAT in the first twenty-six weeks of the year (2020: £32.6m excluding the deferral of UK VAT).  Days Sales Outstanding, being total trade receivables divided by average daily invoiced sales, reduced by 1.6 days to 35.5 days from 37.1 days at the end of FY2020.  Day-to-day control of cash and tight control of working capital continues to be a priority for the Group. Net debt decreased by 54.2% year on year from £15.5m in H1 2020 to £7.1m in H1 2021 excluding the impact of IFRS 16.  Of the £36.4m VAT deferred in 2020, £13.2m has been repaid in 2021. Net debt after IFRS 16 adjustments decreased by £10.5m to £25.5m (H1 2020: £36.0m).

The Group has outstanding letters of credit drawn against its US borrowing facilities amounting to £2.93m (1 January 2021: £3.23m).

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 £7.1m, our £240 million of available facilities (£220 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

In January 2021 the Board announced a reduced programme whereby it could purchase shares in the Company up to an aggregate market value of £0.5m per month until the AGM in June. Under this programme 466,753 shares were purchased at a total value £1.3m.

It was approved at the AGM to commence an updated programme whereby the Board can purchase up to a maximum of 4,560,363 shares, being 10% of the issued Ordinary Share capital of the company (as at 17 May 2021) until the earliest of the 2022 AGM or 30 June 2022.

Trading outlook

The recovery in the first half of 2021 has been strong, particularly against the sharp decline experienced in Q2 2020 when we saw severe lockdowns across our principal trading regions. Since Q2 2020 our trading has progressively improved and we anticipate this to continue through the remainder of the year.  We see increasing positivity in our customer demands for our managed service and talent solutions across our markets which we are well placed to meet.  Through this growth cycle we will maintain our Virtuoso agility and adapt to the emerging challenges of supply side shortages and new ways of working as we return to pre-pandemic trading level whilst also benefitting from a streamlined, more efficient cost base.

Financial results for the twenty-six weeks to 2 July 2021

The table below sets out the results for the Group by region for the first half of 2021.

1.     % change measured at constant exchange rates

2.     Before amortisation of acquired intangibles and impairment

Financial results for the twenty-six weeks to 2 July 2021

The table below sets out the results for the Group by segment for the first half of 2021.

1.     % change measured at constant exchange rates

2.     Elimination of inter-segment sales which are all within the UK & Europe region

Consolidated income statement

For the twenty-six weeks ended 2 July 2021

Consolidated statement of comprehensive income

For the twenty-six weeks ended 2 July 2021

Consolidated balance sheet

As at 2 July 2021

Consolidated statement of changes in equity

For the twenty-six weeks ended 2 July 2021

Consolidated cash flow statement

For the twenty-six weeks ended 2 July 2021

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 that are expected to be applicable to the consolidated financial statements for the period ending 31 December 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 2 July 2021 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 1 January 2021 were reported on by the auditors without qualification.

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 £240m (£220m from April 2023) 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 reduce 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 downside 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. 

Over 2020 and the first half of 2021, our business model has been tested and proved to be resilient.  We have performed ahead of our base case scenario's, both from a gross profit and cost perspective as well as a net debt basis.  Accordingly, the Group and the Company continues to adopt the going concern basis in preparing its Financial Statements.

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 1 January 2021.

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

In line with internal reporting the primary segment is presented by region, this represents a change from previously reported primary segment of Global Managed Services, Global Specialist Staffing, Regional Specialist Staffing and Healthcare.  In addition, as a secondary segment we presented our revised business segments of Global Managed Services, STEM, Regional Specialist Services and Healthcare within this report.

Twenty-six weeks ended 2 July 2021 - unaudited

Twenty-six weeks ended 3 July 2020 - unaudited

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.

3     Finance expense - unaudited

4     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 56.7% (2020: (11.2%)).   The increase in the effective tax rate is largely driven by the recognition of more deferred tax liabilities following the increase in the enacted UK corporation tax rate from 19% to 25% from April 2023. 

5      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 2 July 2021 or 3 July 2020.

Excluding the 19,841 shares owned by The Corporate Services Group Ltd Employee Share Trust, the weighted average number of shares in 2021 is 45,705,906 (2020: 46,511,510).

6     Additional cash flow information - unaudited

The overdraft is included in trade and other payables on the balance sheet, and the lease debtor is included in trade and other receivables.

Enquiries:  For further information please contact:

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 2,500 Impellam people, bringing a wealth of expertise through our 14 market-leading brands across 76 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 seventh¹ 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 (2019 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

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