TIDMIPEL
RNS Number : 7537U
Impellam Group plc
08 April 2021
The information contained within this announcement is deemed by
the Company to constitute inside information under the Market Abuse
Regulation (EU) No. 596/2014
8 April 2021
Impellam Group plc
("Impellam" or the "Company")
FINAL RESULTS FOR THE YEARED 1 January 2021
Impellam (AIM: IPEL) announces its audited final results for the
52 weeks ended 1 January 2021.
A ROBUST PERFORMANCE IN THE FACE OF GLOBAL CHALLENGES
Like-for-like(5)
ADJUSTED RESULTS - FY 2020 FY 2019(1) Actual Inc/(Dec) Inc/(Dec)
Revenue (GBP millions) 2,000.9 2,254.8 (11.3)% (11.3)%
Gross Profit (GBP millions) 228.1 274.1 (16.8)% (16.7)%
Adjusted operating profit
(GBP millions) (2) 18.2 31.1 (41.5)% (40.3)%
Adjusted operating profit
conversion (%) (3) 8.0% 11.3% (3.3) ppts
Continuing adjusted basic
EPS (4) 18.2p 39.2p (53.6)%
Net Debt (GBP millions) pre
IFRS 16 (6) 4.1 72.3
Actual Like-for-like(5)
STATUTORY RESULTS - FY 2020(1) FY 2019(1) Inc/(Dec) Inc/(Dec)
Revenue (GBP millions) 2,000.9 2,254.8 (11.3)% (11.3)%
Gross Profit (GBP millions) 228.1 274.1 (16.8)% (16.7)%
Operating (loss)/profit (15.0) 13.9 (207.9)% (218.4)%
Continuing basic EPS (46.2)p 9.8p (571.4)%
Net Debt (GBP millions)
post IFRS 16 26.3 98.8
(1) 2019 financial statements restated due to reallocation of
separately disclosed items within the comparative results (see note
2)
(2) Adjusted operating profit before amortisation of acquired
intangible assets and impairment (see note 2)
(3) Calculated as adjusted 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 5)
(5) % change measured at constant exchange rates
(6) Net debt pre IFRS 16 is used as the basis for banking
covenant calculations
Key operational highlights
A robust performance in the face of substantial global
challenges to the business from the Covid-19 pandemic, with Group
revenue down 11.3% at GBP2.0bn (2019: GBP2.3bn) and adjusted
operating profit(1) reduced to GBP18.2m (2019: GBP31.1m after
including separately disclosed items). Significant progress against
strategy delivered in the period to enable our Virtuosos, transform
our portfolio and improve our resilience, ready for when we emerge
from the pandemic.
OPERATIONAL
-- A swift and decisive response to the global pandemic, keeping
our people safe, moving to home working overnight and ensuring
uninterrupted service for customers and candidates.
-- Accelerating our strategy through Covid-19 and re-organising
our business to ensure we were well-placed to adapt with speed and
agility to volatile and uncertain markets.
-- Administered the UK Government's Job Retention Scheme,
supporting the payment of more than 5,000 furloughed temporary
workers to ensure their continuity of income. In addition, 800
Impellam colleagues were furloughed during the year to protect jobs
for the long term.
FINANCIAL
-- Gross profit decline of 16.8%, primarily in Q2 during
extensive global lockdowns. The UK was hit hardest with gross
profit down 21.5% whilst APAC and North America showed more
resilience, falling by 16.9% and 4.5% respectively (on a constant
exchange rate basis).
-- Global Managed Services, representing nearly a third of the
Group's gross profit, withstood the market challenges better than
other segments, with gross profit declining by 8.6% (on a constant
exchange rate basis).
-- Temporary recruitment, which represents 91.4% of gross
profit, decreased by 13.2%. Lockdowns had a significant impact on
Permanent recruitment, which was also slower to recover when
restrictions eased, leading to a decline of 42.4%.
-- A relentless focus on costs included headcount reductions,
salary reductions, furloughing of staff, support from government
schemes and the curtailment of discretionary spend, resulting in
total savings of GBP33.1m in the year.
-- The benefits of Q4 2019 headcount reductions flowed through
the year, with a further 500 headcount reduction across 2020.
-- A solid result despite adverse and challenging conditions
globally with adjusted operating profit(1) of GBP18.2m (2019:
GBP31.1m).
-- Non-cash impairment charges on acquired goodwill and
intangibles of GBP22.2m, reflecting the impact of Covid-19, leading
to an operating loss of GBP15.0m (2019: GBP13.9m profit).
-- Net debt was reduced by GBP72.5m to GBP26.3m (2019:
GBP98.8m). GBP48.0m of the reduction comprised of deferred UK VAT
payments and US federal tax payments. Pre- IFRS 16 net debt of
GBP4.1m (2019: GBP72.3m) brought the covenant leverage ratio to
less than 1x (2019: 1.74x).
1. Explanations of Alternative Performance Measures are at the end of the report.
2. Group Fill is the value of the Spend Under Management supplied by other areas of the Group.
Financial results for the 52 weeks to 1 January 2021
The table below sets out the results for the Group by segment
for 2020.
Revenue Gross profit Adjusted operating
profit(2)
Like-for-like Like-for-like Like-for-like
change change change
GBP'million 2020 2019 %(1) 2020 2019 %(1) 2020 2019 %(1)
Global Managed
Services 709.7 757.1 (6.2) 70.9 78.0 (8.6) 13.4 13.7 2.3
Gross profit
% 10.0% 10.3%
Global
Specialist
Staffing 523.2 649.1 (19.4) 45.8 55.5 (17.6) 11.2 15.2 (26.2)
Gross profit
% 8.8% 8.6%
Regional
Specialist
Staffing 581.5 650.3 (11.0) 69.6 94.0 (25.8) (0.2) 6.3 (106.0)
Gross profit
% 12.0% 14.5%
Healthcare 231.3 245.8 (5.8) 41.8 46.6 (9.6) (1.1) 0.5 (251.3)
Gross profit
% 18.1% 19.0%
Inter-segment
revenues (44.8) (47.5) - - - -
------- ------- --------------
Total 2,000.9 2,254.8 228.1 274.1 23.3 35.7
-------- -------- ------ ------ ------- ------- --------------
Corporate costs (5.1) (4.6)
------- ------- --------------
Adjusted operating
profit(2) 18.2 31.1
Amortisation of acquired intangible
assets (11.0) (10.2)
Impairments (22.2) (7.0)
Operating (loss)/profit (15.0) 13.9
------- ------- --------------
1. % change measured at constant exchange rates.
2. Before amortisation of acquired intangibles and impairment
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
2,500 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 seventh(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 (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
Chairman's Comments on the Results
We entered 2020 in a strong position following the moves we made
in 2019, however, the world changed very quickly during the first
quarter. The pandemic created uncertain market conditions,
restrictions on our lives and corporate activities, and caused
illness and bereavement amongst our customers, candidates and
colleagues. The response of our people was exemplary, adapting to
work from home almost overnight to deliver an uninterrupted service
to our customers and candidates.
On behalf of the Board, I would like to thank our shareholders
for their continued support and our people for their hard work and
contribution during this challenging time. Julia and her team
reacted decisively to secure the business, control costs and manage
cash and, at the same time, continued to focus on our
transformation to a streamlined, integrated business to ensure we
emerge from the pandemic a stronger, leaner, and more resilient
organisation.
We saw one change to the Impellam Board in 2020. Tim Briant
joined the Group on 1 October 2019 and was appointed to the Board
on 3 February 2020 as Group Chief Financial Officer.
Our investment in people and technology proved an essential
element in our response to new ways of working and collaborating
during the pandemic and we will continue to enhance our IT
infrastructure, systems and digital capabilities to ensure we are
well prepared for the opportunities the year ahead will bring.
Lord Ashcroft KCMG PC
Chairman
Group Chief Executive Officer's Review
OPERATING REVIEW
The impact of the Covid-19 pandemic on our business was
dramatic. It impacted demand for our services - both positively and
negatively - changed the way we communicated with clients,
candidates and colleagues and challenged our thinking and the way
we operate. Against this backdrop, we delivered robust financial
results, restructured our business in line with our strategy and
streamlined our organisation. I am immensely proud of what we have
achieved and the resilience, perseverance, creativity and
commitment of all the Impellam people who made it happen.
The health and wellbeing of our colleagues and the talented
people we find work for across the world has been front of mind
throughout the year. Sadly, eight of our clinicians lost their
lives to Covid-19 during 2020. A stark reminder of the importance
of the work we do supporting the national efforts of the
communities we serve across the world. The impact of Covid-19 was
felt across all our regions and markets but particularly in the UK,
our largest region by revenue and gross margin, where catering,
hospitality, education and aviation markets were all hard hit. Our
healthcare businesses in the UK, Republic of Ireland and Australia
were incredibly busy but suffered from the cancellation of elective
surgery in all regions and the shortages of doctors and nurses.
Many succumbed to the virus or had to self-isolate and PPE was in
short supply. In Australia, these conditions were exacerbated by
border closures, meaning that our doctors were not able to travel
to undertake the work needed. Our North American businesses showed
more resilience as they were not materially exposed to the most
affected end markets.
Conversely, the pandemic created work for many of our people
across the world. Along with our healthcare professionals who were,
and still are, at the epicentre of the crisis, Impellam people have
been engaged in the national efforts in all three of our main
regions. In the UK, this work has included the construction of the
Nightingale Hospitals, supporting the Ambulance Services, providing
clinical and non-clinical staff for testing and vaccination
programmes. Throughout the year our life sciences business, SRG,
has been centre stage working closely with its pharmaceutical
clients and with the development of mobile testing centres. In
North America, Corestaff provided the call centre operatives needed
to mobilise a crisis management hotline and Bartech played a key
role in enabling clients to produce masks and to deliver mass
temperature checking programmes.
As we accelerated our transformation into a closely integrated
business we benefitted from the collaborative culture we have
nurtured and were able to redeploy colleagues and temporary workers
from hard-hit sectors such as education, catering and hospitality
into growth markets including life sciences and healthcare. Our
Global Managed Services businesses worked closely with our
specialist staffing brands to ensure that Impellam candidates
fulfilled our customers' needs and this contributed GBP12.6m of
Group Fill gross profit (2019: GBP12.6m). We also formed
cross-Group sales and delivery collaborations, winning 11 new
managed service programmes and delivering outstanding results for
customers. This was the key to maintaining 98% of our top 50
customers. 2020 was certainly a year where everything that is
wonderful about the Impellam culture came together to deliver the
exceptional service that our customers and candidates expect.
We moved to a remote working model in the third week of March
2020 and like most organisations, we remained in that formation for
most of the year. I remain thankful and amazed in equal measure
that the transition was so smooth and our investment in IT came
into its own. In Q4 2019 we began a headcount and general cost
reduction programme and took the decision in Q1 2020 to hold
headcount flat, even before the Covid storm clouds gathered. That
decision served us well and protected our performance in Q1 2020,
giving us a good runway into further cost base management in Q2 and
beyond. We made many difficult decisions during the year which
meant that 800 colleagues were on full or part furlough at some
point during the year, a large number, including the Board and the
senior leadership teams, took pay reductions, others agreed to
short time working arrangements but sadly we said goodbye to 500
colleagues. Everyone played their part in doing what they could to
mitigate the decline in gross profit in Q2 and Q3 2020 and I am
very grateful to them for their good humour and commitment to
Impellam.
FINANCIAL PERFORMANCE
I am extremely proud of our financial results in this
extraordinary year. From a significant decline in sales during Q2,
revenue recovered throughout the rest of the year to GBP2.0bn,
ending 11.3% down on 2019 with gross profit at GBP228.1m, down by
16.7%, each on a constant exchange rate basis. Despite cost
mitigation of some GBP33.1m, adjusted operating profit(1) at
GBP18.2m fell 40.3% (on a constant exchange rate basis) compared to
2019, an improvement from H1 2020 which showed a decline of 54.1%.
There were no separately disclosed items in 2020 and the 2019 items
of GBP4.9m have been included within the 2019 adjusted operating
profit(1) .
Our closing headcount on 31 December was 2,491, 16.8% lower than
the previous year. During Q2 2020, the Board and senior leaders
across the Group took a 20% pay reduction and many colleagues
reduced their working hours. In addition, 800 colleagues were
furloughed for varying periods of time according to market
dynamics. The combination of all these management actions led to a
year-on-year reduction of salary and related costs of GBP21.9m.
Other areas of discretionary spend reduced significantly. These
included travel, entertainment, accommodation and candidate
attraction. We do not anticipate these returning to pre-Covid
levels as virtual working becomes part of our new better way of
being. Our cash and net debt performance were outstanding and my
heartfelt thanks must go to our tireless finance community, credit
controllers and sales ledger staff across all our operations for
the phenomenal job they did to make sure we collected our cash when
all around were attempting to preserve it. We are also grateful for
the support received from governments across our regions, which
included the Job Retention Scheme, rates relief, retail grants and
tax credits that benefitted adjusted operating profit(1) by GBP7.4m
and a cash benefit of GBP48.0m.
STRATEGIC REVIEW
Our strategic focus since 2018 has been the creation of a
collaborative, high value, integrated business, where global
managed services work in synchrony with our key talent verticals to
create the future of good work. The global pandemic shone a clear
light on where we need to focus so we took the bold decision in
April 2020 to accelerate the delivery of our strategy.
We simplified our business structure, reduced our management
layers, and gave our Virtuosos a louder voice and greater span of
control, all with the single purpose of creating a fighting fit
Impellam ready for when we emerge from this crisis. During 2020, we
integrated our Managed Services businesses under single leadership
whilst retaining our brand specialisms, Guidant Global and
Comensura. This integration has delivered increased collaboration
in the development of new services, technology, marketing, people
services and best practice. In 2021 we will launch our newly formed
Customer Office to formalise the coordination of key strategic
accounts to encourage innovation, expand our service offering and
drive Group Fill(2) , ensuring our customers never have a reason to
leave Impellam.
We also created a regional focus and appointed CEO s in our
major territories (UK, North America and Asia Pacific) to bring us
closer to our customers by reducing management hierarchies,
speeding up decision-making and encouraging regional innovation.
Our regional CEOs have specific responsibility for optimising and
growing our specialist staffing businesses, working closely with
Global Managed Services to increase Group Fill and developing
regional shared services functions to create efficient and
effective back office services, freeing up our Virtuosos to spend
more time with customers and candidates.
1. ENABLING OUR VIRTUOSOS
2020 was an extraordinary year and the year when our Virtuoso
strategy came into its own. Quite simply, we could not have
achieved what we achieved without the Virtuoso behaviours of
Impellam colleagues who not only delivered 'business as usual' from
their homes, but also created innovative solutions for our
customers and candidates and worked tirelessly on the
transformation of our business.
2. TRANSFORMING OUR PORTFOLIO
2020 was a year of transformation. By early April, we had
settled into the new rhythm of working from home with new meeting
and communication cadences and ways of working. We had early sight
of the impact of the pandemic on our customers and, where this
caused reductions in work, we assessed the support available to our
Impellam colleagues and our temporary workers and put it in place.
In addition, we administered and supported 5,000 temporary workers
with the Job Retention Scheme made available by the UK Government
and absorbed the costs and administrative burden, taking the view
it was the right thing to do.
We then had a critical decision to make. Should we focus our
efforts on riding out the storm, or should we push on with our
transformation and accelerate the delivery of our strategy?
We chose to look forward and with a clear goal of transforming
to a fighting fit virtuoso organisation, we set about re-organising
our business into a regional structure where decisions are made
quickly and closer to the customer. In addition, we integrated our
Global Managed Services businesses under single leadership. With
this new structure, investment decisions were clearer and more
transparent.
We continued to carefully invest in our high growth regions -
North America and Asia Pacific - and in our chosen markets - global
managed services and high value talent verticals.
Specifically, we shone a light onto our STEM businesses,
investing in UK leadership to create a compelling STEM offering,
enabling cross-sell and collaboration and sharing best practice. We
brought our portfolio of technology businesses together under a
single brand, Lorien, both to give our customers access to scalable
technology solutions and to provide more opportunity to colleagues
and candidates.
We strengthened our capability in North America, Asia Pacific
and the Republic of Ireland by investing in talented regional
leadership teams and scalable regional shared services. One early
outcome of this regional investment and flattening of structures is
that we launched Flexy in Australia. Flexy is our digital
employment platform which provides just-in-time staffing solutions
to our customers, transforming candidate experience in the
temporary staffing market.
To enhance our Managed Services offering we created a Managed
Services Centre of Excellence to deliver best-in-class Managed
Services Programme ('MSP') capabilities including technology to
both specialist and full MSP customers. This is a dedicated
function operating as an extension to our brands to reduce
duplication, drive efficiency and increase service and innovation
to customers.
This Centre of Excellence supported the rapid start-up and
roll-out of a nationwide Managed Service to support the Department
of Health's testing and vaccination programme and would not have
been possible without our business transformation.
Finally, and at the core of our strategy, we launched our
Customer Office. The Customer Office is a C-suite strategic
function and will lead the enhancement and innovation of our
customer experiences in collaboration with our brands. It will
drive customer-led decisions and will support our Virtuosos with a
best practice toolkit to enhance customer delight and retention and
make sure that there is never a reason for a customer to leave
Impellam.
3. IMPROVING RESILIENCE
Whilst our transformation programme was strategically focused on
deliberate moves to build a fighting fit Impellam in the Virtuoso
operating model, robust management of our property portfolio was
equally important to improve our resilience.
With an overnight shift to virtual working in March, we realised
a significant reduction in our property footprint in anticipation
that these more flexible working arrangements would continue in the
future, albeit in a hybrid way. We completed 39 property exits out
of a total property portfolio of 177, delivering annualised savings
of GBP1.92m, 14% of our total property costs. We have a three-year
programme of property rationalisation driven by our integrated
business model and in anticipation of a long-term shift to virtual
and hub working.
We continued to invest in technology to increase efficiency and
productivity and to drive collaboration and communication. Our
earlier investment in Workplace by Facebook really paid back as it
became our key internal communication and engagement platform. We
became super users of Teams, Skype, Zoom and Google and encouraged
our people to keep their cameras on and smile at each other all
year long! We also invested in Condeco, an office management
platform to manage office capacity and the health and safety of our
colleagues. When we return to our offices once again, we will do so
with a system which will simultaneously optimise our property usage
and collaboration and give us the comfort of automated track and
trace capability to mitigate against the spread of Covid-19.
At the end of 2020 we committed to investment in our core
technology systems. This investment will centre on moving our
systems to the cloud and will further digitise the way we work
using AI, automation and mobile solutions. The focus will be the
development of a 'digital core', improving integrity and
integration between our transactions with customers and candidates.
There will be a common global financial system to support our work
in back office transformation, regional middle office bill and pay
replacements and upgrades to help us digitise and automate our
regional operations. Finally, new, digital front office systems
will enable our people to deliver an enhanced experience for
customers and candidates and will increase collaboration across the
Group.
SEGMENTS
Global Talent Acquisition and Managed Services Workforce
Solutions
Our Global Talent Acquisition and Managed Services Workforce
Solutions (Global Managed Services) businesses were amongst the
most resilient in the Group, notwithstanding the impact of Covid-19
on several of our core markets, including aviation and aerospace,
travel, hospitality, oil & gas and manufacturing. Against this
backdrop, and supported by positive hiring trends in healthcare,
government, life sciences and online retail, revenue was down by
just 6.2%, whilst gross profit declined by 8.6% both on a constant
exchange rate basis.
During 2020, Impellam unified its managed services brands under
single leadership whilst retaining the distinct brand personalities
and value propositions of Guidant Global and Comensura. This
strategic move maximises collaboration, reduces duplication and
contributed to the 10.6% reduction in administration expenses
compared to 2019.
Continued investment in and adoption of technology together with
a Virtuoso approach to business transformation and agility meant
that several new business wins were secured whilst existing
relationships were renewed at a record level. Following
particularly strong performances from Comensura in the UK and
Guidant Global in the US, our Managed Services businesses are very
well placed for a strong recovery in 2021.
Global Specialist Staffing
Our Global Specialist Staffing brands in the UK and US faced two
major challenges in 2020, Covid-19 and IR35, and consequently,
revenue decreased by 19.4% and gross profit by 17.6% on a constant
exchange rate basis. The UK Government's decision to pause IR35
came too late to reverse the policies that many of our enterprise
customers had made, leading to a significant reduction in the UK of
the use of IT contractors during H1 2020. This coincided with the
start of the pandemic which had an immediate impact on permanent
hiring in both the UK and US. The hiring of IT contractors returned
quickly following the end of the initial lockdown phases in both
territories and by Q4, business volumes were starting to recover
towards pre-pandemic levels.
The UK life sciences business, SRG, was undoubtedly one of the
most Covid-19 resilient parts of the Impellam portfolio. SRG
delivered growth year-on-year due to the increased demand in
Covid-19 related projects, with over 50% of scientific placements
made in H2 2020 linked to pandemic related projects, from R&D
through to Covid testing projects across both the private and
public sector.
We continued to selectively invest in our Global Specialist
businesses during 2020 whilst keeping tight control of
discretionary spend, reducing administration expenses by 14.1%
compared to 2019.
In Q4, recognising the vital role our technology and life
sciences businesses play in the future world of work, brought into
sharp focus by the impact of the pandemic, we reorganised our STEM
business in the UK into one portfolio to ensure continued focus and
investment.
In addition, during 2020 we consolidated our technology staffing
businesses across the world and rebranded as Lorien. The move to a
single global business enables us to provide our customers with the
scale, agility and expertise to meet all their technology and
telecoms needs anywhere in the world.
Our STEM businesses are well positioned for future growth as we
see a consistent increase in demand for developers and software
engineers as businesses accelerate their digital transformation
programmes coupled with an unprecedented recognition and demand for
the work of our scientists.
Regional Specialist Staffing
Our Regional Specialist Staffing brands in the UK and US were
amongst those hit hardest by Covid-19 in 2020. Whilst across the
globe our white-collar workforces pivoted to working remotely, our
light industrial and manufacturing workers were unable to do so and
the well-documented decline of the travel, catering and hospitality
sectors added to the challenge. This had a significant impact on
gross profit, which declined by 25.8% compared with 2019 whereas
the business mix and recovery throughout the year meant revenue
ended the year only 11.0% down on last year (all on a constant
exchange rate basis).
In response to these changing market conditions, as well as
providing thousands of people to support vital Covid-19 work,
decisive action was taken to reduce the cost base, cutting
administration costs by 20.4%. This was achieved through thoughtful
strategic management actions to share resources, reduce duplication
and increase collaboration as well as headcount reduction and use
of the UK Government Job Retention Scheme. The focus on reducing
our working capital and overdue debts also improved our cash
flow.
In the UK, the uncertainties caused by the pandemic, combined
with the potential impact of Brexit, meant that our customers
approached future hiring plans with some caution.
In the US, restrictions were lifted more quickly, and businesses
reopened and adapted to the new pandemic landscape by mid-year,
meaning that our brands returned to pre-pandemic worker numbers by
Q4.
During 2020 our Regional Staffing businesses continued to
transform, embracing more flexible ways of working. Our teams
became accustomed to working virtually and across geographic
boundaries enabled by the investment made in technology between
2017 and 2019. This gave us the confidence and operating model to
make substantial inroads into reducing our property estate for this
portfolio.
Healthcare
The impact of the Covid-19 pandemic was felt most profoundly by
our Healthcare business, MGG.
Not only were our colleagues and healthcare professionals caught
up in the very epicentre of the battle, but we also had to deal
with the significant impact on the financial performance of the
business as waves of the virus drove up mortality rates and
regional healthcare authorities took action to conserve and
preserve mission critical resource. This resulted in the
cancellation of elective surgery and non-urgent clinical activity,
the closure of international and domestic borders and gave rise to
resource planning challenges as our health professionals succumbed
to the virus or were forced to isolate. Within a turbulent overall
healthcare market, our nursing business saw unprecedented demand
and was able to respond heroically, achieving 25% growth over
2019.
Against this backdrop, MGG revenue fell by 5.8% on a constant
exchange rate basis and gross profit fell by 9.6%. Much of the
decline reflected the closure of borders and the impact on
international migration of healthcare professionals whilst the UK
business had a strong year.
During 2020, MGG became an integral part of Impellam's
integrated business model and from this strategic move came
collaboration at its best. The sharing of sales pipelines and
collaborative bids has resulted in new wins for multiple brands
including MGG. Additionally, recruiters from areas of the business
hard hit by the pandemic, were transferred to MGG to support the
NHS in managing the impact of Covid-19.
OUTLOOK
Whilst the global fight against the Covid-19 pandemic is still
underway across our major regions causing restricted visibility, we
are cautiously optimistic about a reasonable recovery in 2021.
Whilst we do not anticipate a return to 2019 performance levels
on a full year basis, we are seeing the benefit of the assertive
cost management and strategic transformation actions we took in
2020 in our Q1 results to date. We are making selective investments
in headcount in our attractive growing markets, particularly STEM
and Managed Services and we are also investing in a customer office
and a digital core systems upgrade. Costs continue to be well
managed and temp gross profits are recovering.
We anticipate further recovery when key markets such as
hospitality, catering and aviation re-open at the end of lockdowns,
but this will be off-set to some degree by reducing levels of
Covid-related revenue.
Julia Robertson
Group Chief Executive Officer
1. Explanations of Alternative Performance Measures are at the end of the report.
2. Group Fill is the value of the Spend Under Management supplied by other areas of the Group.
Group Chief Financial Officer's Review
INTRODUCTION
Revenue for the year was down 11.3% (11.3% at constant exchange
rates) and gross profit decreased by 16.8% (16.7% at constant
exchange rates) reflecting the impact of the Covid-19 pandemic on
demand for temporary and permanent staff across our businesses. Q1
2020 started well with trading in line with prior year until the
first lockdowns across our regions.
Trading reductions were most severe in the second quarter when
restrictions were at their highest level and improved steadily
through the second half of the year as these were lifted and
businesses adapted to new ways of working. The decline in gross
profit was mitigated by a GBP33.1m (13.6%) reduction in costs
through savings from voluntary pay cuts, reduced bonus and
commission payments, headcount reductions, property closures and
reduced travel and facilities costs. In addition, we received
GBP7.4m of government support through the Job Retention Scheme,
Rates deferrals and Retail grants. These savings were offset by
restructuring costs of GBP2m and a GBP3.6m increase in provisions
for bad debt.
Adjusted operating profit(1) reduced by 41.5% to GBP18.2m due to
the impact of Covid-19, with the UK experiencing the most
significant declines.
In response to the challenges faced in the year the Group also
impaired former acquisition intangibles by GBP22.2m (2019 GBP7.0m).
This non-cash charge was recognised in the first half of the year.
GBP14.3m was recognised against the Information Technology Cash
Generating Unit ('CGU') in the GSS reporting segment. Just under
GBP2.1m was recognised against the Engineering CGU, just under
GBP0.3m against the Online platform CGU and GBP5.6m on the
Education brand value, all of which are in the RSS reporting
segment.
As a result of the impact of Covid-19 and the impairment
charges, the Group recorded an operating loss in the year of
GBP15.0m (2019: profit GBP13.9m).
The difference between adjusted operating profit(1) and
operating profit is reconciled in note 2 and is principally due to
the impairment of intangibles previously discussed, and the
amortisation of acquired intangibles.
GOVERNMENT SUPPORT
In the UK, the Group received GBP5m under the Job Retention
Scheme ('JRS') where almost 800 staff were furloughed between April
and November. In addition, the Group received rates relief of
GBP1.7m and retail grant income of GBP0.7m. From a cash flow
perspective, the Group was able to defer VAT payments of GBP36.4m
which will be repaid over 11 months from March 2021. In the US,
$16m (GBP11.6m) of Federal Tax was deferred under the CARES
initiative and will be repaid in two equal instalments in December
2021 and December 2022 We have also administered the JRS for the
temporary staff we provide clients. The net effect of these
programmes on our gross profit and cost of sales was not material
as these programmes were used to compensate the temporary staff
affected. It allowed us to maintain these temporary colleagues on
our payroll without charging these to clients and preventing ending
of their contracts.
FOREIGN EXCHANGE
Currency movements versus Sterling adversely impacted our
reported performance. Over the course of the year to December 2020,
the total impact of exchange movements on gross profit and adjusted
operating profit(1) were GBP0.7m adverse and GBP0.5m adverse,
respectively. Fluctuations in the rates of the Group's key
operating currencies versus Sterling continue to represent a
sensitivity for the reported performance of our business. By way of
illustration, each 1 cent movement in annual exchange rates of the
US Dollar impacts gross profit by GBP0.5m per annum and adjusted
operating profit(1) by GBP0.1m per annum. The rate of exchange
between the US Dollar and Sterling over the year ended 1 January
2021 averaged US$1.2840 and closed at US$1.3494.
As the Group expands further in overseas territories the impact
of changes in exchange rates will be greater. Whilst the
year-on-year average strength of the US Dollar against Sterling
positively affected trading results, the strength of Sterling at
the balance sheet date (2020: US$1.3494; 2019: US$1.3093) led to a
lower re-translation of cash balances denominated in foreign
currencies and resulted in a GBP1.3m year-on-year increase in net
debt.
CAPITAL INVESTMENT
Capital expenditure on tangible and intangible fixed assets in
the period was GBP3.5m (2019: GBP10.4m), as we restricted our
spending in response to the impact of Covid-19. The net repayment
of finance leases amounted to GBP8.3m (2019: GBP9.2m).
INTEREST AND DEBT
Net cash generated from operations during the period was
GBP94.5m, GBP46.5m after adjusting for the deferral of UK VAT and
US Federal Taxes (2019: GBP49.5m). Strong underlying cash
performance was the result of the continued focus on cash
collections, overdue debt reduction and working capital management
activities. Excluding the deferral of tax payments, the conversion
of adjusted operating profit(1) to net cash generated is 256%
(2019: 138%). At the end of 2020, Days Sales Outstanding ('DSO')
stood at 37.1 days (2019: 39.4 days).
Finance expenses were lower than the prior year at GBP5.7m
(2019: GBP9.0m). Lease interest was lower at GBP0.8m (2019:
GBP1.3m) and interest cost on facilities reduced to GBP4.6m (2019:
GBP6.5m) as a result of reduced borrowings.
At the balance sheet date net debt was GBP26.3m. Excluding the
adjustments for IFRS 16, net debt was GBP4.1m compared to GBP72.3m
in 2019, a decrease of GBP68.2m. The net cash flow from operations
was primarily utilised as follows:
-- Investment in fixed assets and software development:
GBP3.5m
-- Net lease repayment: GBP8.3m
-- Share buybacks: GBP4.3m
-- Net interest paid on borrowings and leases: GBP5.4m
GBP3.0m of the share buyback was prior to the suspension of the
programme due to Covid-19.
The Group's operations are financed by retained earnings and
bank borrowings. The Group has in place a GBP240m global revolving
credit facility ('RCF') with an accordion element of an additional
GBP50m which is available to 1 April 2021 and in March 2020 the
Group exercised the option to extend GBP220m of the facility by one
year to 1 April 2023. This provides the Group with the flexibility
to fund its working capital as well as future potential
acquisitions. Rates of interest for the RCF are based on LIBOR plus
a margin calculated on the net debt to adjusted EBITDA(1) leverage.
The RC F also includes a letter of credit facility which amounted
to GBP3.23m (2019: GBP3.35m) at the end of 2020.
The Group takes advantage of a number of non-recourse financing
agreements organised by clients of the Group to allow for the
acceleration of payment of the Group's receivables. At the end of
2020, these amounted to GBP6.3m (2019: GBP12.6m). These agreements
accrue interest at between 0.65% and 1.75% over LIBOR. A
significant priority for the Group remains the focus on the
conversion of operating profit into sustained positive cash flow by
controlling working capital. The Group measures three covenants as
required by the facility - interest cover, adjusted leverage ratio
(defined as net debt less loan notes and restricted cash to
adjusted EBITDA(1) ) and debtor cover. All covenants were met
during the year.
Borrowing levels are controlled by the Group Finance department,
which manages treasury risk in accordance with policies set by the
Board.
The Group's financial liabilities are denominated primarily in
Sterling. At December 2020, US$20m of the RCF was drawn in US
Dollars to provide a natural hedge against the US operations'
profit streams and net assets which, when reported at a Group
level, are affected by movements in exchange rates. Exposure to
currency risk at a transactional level is generally minimal, with
most transactions being carried out in local currency.
TAXATION
The tax charge in the period of GBP1.0m (2019: GBP0.9m)
represents an effective tax rate of -4.9% (2019: 15.8%). The tax
charge is comprised of corporate tax charges arising on the Group's
activities in the UK and overseas. The overseas tax charge arises
mainly in the US where the highest federal corporate income tax
rate is 21% and also includes state taxes which range from 2%-9% on
average.
The Group's contribution to the UK Treasury in the period
amounted to GBP212.3m (2019: GBP288.0m) and consisted of VAT,
income tax, national insurance and corporation tax. Of this amount,
employer's national insurance, apprenticeship levy, irrecoverable
VAT and corporation tax of GBP24.5m (2019: GBP50.0m) was a cost to
the business.
EARNINGS PER SHARE
Continuing basic earnings per share decreased to (46.2)p (2019:
9.8p) as underlying profit after tax from continuing operations
reduced by GBP26.2m. This decrease was driven by the impact of
Covid-19 and the increase in impairment of acquired intangible
assets. The weighted average number of shares in 2020 was 46.2m,
2.3m lower than 2019 due to the ongoing share buyback
programme.
Continuing adjusted earnings per share decreased to 18.2p (2019:
39.2p) and reflects the underlying performance of the business,
excluding impairment and amortisation of acquired intangibles and
their respective taxation impact.
CAPITAL MANAGEMENT
The Group's capital base is primarily used to finance its
working capital requirement, the key component of which is trade
receivables. Trade receivables in the staffing and support services
sectors are managed according to a range of DSO targets. Terms of
trade are monitored, and the approval of extended payment terms
requires senior finance involvement. In some of the Group's Managed
Services businesses, the amounts payable to third party suppliers
are not due until shortly after the receipt of the client
receivable. As noted above, the Group has committed facilities that
ensure there is sufficient liquidity to meet ongoing business
requirements.
The primary objectives of the Group's capital management are to
ensure that it maintains a good credit rating in order to support
its business, maximise shareholder value and to safeguard the
Group's ability to continue as a going concern.
GOING CONCERN
After making appropriate enquiries, the Directors have a
reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable
future. In coming to their conclusion, the Directors have
considered the Group's profit and cash flow plans for the coming
period, and in the light of the continued uncertainties related to
the global pandemic, Covid-19, have run downside scenarios
representing the potential impact on the trading performance and
cash flows of the Group.
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 so if there is any short-term decline in trading,
the working capital requirements and net debt would initially
reduce, providing a natural hedge against any sudden downturn. In
the projections, as business activity increases, working capital
requirements and net debt levels would rise, but to levels well
within our facility. There would be an initial increase in the
Group's operating leverage but manageable against covenant
requirements. These scenarios include cost mitigation actions that
the Group can implement, such as reduced performance bonus, travel
and entertainment, marketing activity, reduced capital expenditure
and reductions in share buybacks, and, if required, a short period
of reduced working hours.
The scenarios do not include headcount reductions. 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 and share
buyback, further reductions in non-business critical expenditure as
well as the potential to reduce working hours and headcount
reductions. Based on the above, the Directors consider it
appropriate to continue to adopt the going concern basis in
preparing the financial statements.
DIVIDS AND SHARE BUYBACK
Following the outbreak of Covid-19, the Board suspended the
share buyback programme whilst retaining the authorities to buy
back shares on an ad hoc basis if deemed appropriate by the Board.
In 2020 a total of 1,397,789, GBP4.3m of shares, were purchased and
cancelled by the Company, of which GBP3m was purchased prior to the
suspension of the programme. In January 2021 the Board announced a
reduced share buyback programme, where it will purchase ordinary
shares in the Company up to an aggregate market value of GBP0.5m
per calendar month until the next AGM to be held in June 2021.
INSURANCE
The Group maintains a comprehensive insurance programme with
several reputable third-party underwriters. Insurance is brokered
at a Group level. The Group's insurance policies are reviewed and
updated annually to ensure that there is adequate cover for
insurable risks and that the terms of those policies are
optimised.
BREXIT
On 31 January 2020 the UK left the European Union, and the
transition period ended on 31 December 2020. There is continued
uncertainty as to the future trading relationship that will exist
between the UK and the European Union and to some extent the rest
of the UK's global trading partners. The continued uncertainty
could have a detrimental impact on candidate confidence to move
jobs, or business confidence to invest and take on new staff. The
impact on this could be reduced volumes of placements in our UK
business leading to reduced fees. Forward visibility remains
limited and the outlook uncertain, but as ever we will monitor
activity levels closely.
OUTLOOK
Through 2020 our focus on cost and cash management were key in
delivering a robust financial performance against the backdrop of
the global pandemic. Although the speed and extent of the economic
recovery in our global markets remains uncertain, trading
conditions have been improving. With the actions we took in 2020
underpinned by our strategies across our balanced portfolio we are
well placed to take advantage of a return to growth.
Tim Briant
Group Chief Financial Officer
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF IMPELLAM GROUP PLC
ON THE FINAL RESULTS ANNOUNCEMENT OF ANNUAL RESULTS
As the independent auditor of Impellam Group Plc ('the company')
we have been asked by the directors to agree to the publication of
the company's final results statement of annual results for the
period 4 January 2020 to 1 January 2021 which includes key
operating highlights, Chairman's statement, Chief executive's
statement, Chief Financial Officer's statement, narrative
disclosures and the financial results.
Responsibilities of directors and auditor
The directors of the company are responsible for the
preparation, presentation and publication of the final results
statement of annual results. We are responsible for agreeing to the
publication of the final results statement of annual results,
having regard to the Financial Reporting Council's Bulletin "The
Auditor's Association with Preliminary Announcements made in
accordance with the requirements of UK Listing Rules".
Status of our audit of the financial statements
Our audit of the annual financial statements of the Company is
complete and we signed our auditor's report on 7 April 2021. Our
auditor's report is not modified and contains no emphasis of matter
paragraph.
Our auditor's report on the full financial statements contained
the following information regarding key audit matters and how they
were addressed by us in the audit, our application of materiality
and the scope of our audit
Risk name Description How we addressed the key
audit matter in the audit
Fraud in revenue The Group processes a large On a sample basis focussed
recognition - incomplete volume of data in relation around the year end, we
temporary contractor to contractor revenue involving agreed the revenue recognised
revenue a number of systems that was in agreement with
operate independently from underlying supporting
each other. evidence (such as customer-approved
The risk in relation to temporary timecards, evidence of
contractors is that the judgements payment to the contractor
and estimates applied by and evidence of receipt
management concerning the of cash from the end customer).
completeness and accuracy Where there were judgements
of revenue cut off are materially involved in the estimate
misstated, in order to meet of revenue for timesheets
financial targets or commissions relating to the period
in relation to candidate but not received, these
placements. have been corroborated
to evidence supporting
these judgements.
We considered the appropriateness
of the cut-off adjustments
made by management by
agreeing a sample of temporary
placements to timesheets
with reference to the
period worked.
We inspected a sample
of credit notes raised
subsequent to the year-end
in order to assess the
validity of the sales
invoices raised in the
financial period.
Key observations communicated
to the audit committee
We identified no matters
to report concerning the
completeness and accuracy
of temporary contractor
revenue. The judgements
and estimates applied
were consistent with our
expectations.
======================================= ======================================
Revenue recognition Certain entities within the We audited a sample of
- complex contract Group provide managed services contract terms covering
accounting on global to their clients, which can the significant revenue
managed service be complex. The applicable streams in the business.
contracts contracts usually span several We understood the types
financial periods, and have of costs included in implementation
costs incurred prior to the costs with reference to
contract revenue being recognised. timecards and the job
These contracts also contain roles of the individuals.
associated rebate agreements. We ensured that these
The risk relates to the accounting met the IFRS 15 criteria
and potential understatement to be recognised as implementation
of these rebate agreements costs and the appropriateness
that could result in a material of the release period.
error within the revenue
stated for the period. We considered the completeness
There is also management of the rebate liability
judgement involved in appropriately by, on a sample basis,
recognising implementation vouching estimates to
costs in relation to the key contracts and/or correspondence.
upfront implementation costs Our analysis of the customers
and subsequent release over compared against the rebates
the contract life. payable in the current
The audit risk includes all and prior year allowed
aspects noted above. us to form an expectation
as to the liability position
at period end.
We re-calculated the rebate
liability with reference
to the terms of the supplier
contracts/correspondence
and volume of placements
obtained from the information
held on the audited entity's
system.
Key observations communicated
to the audit committee
We found no matters to
report concerning the
judgemental areas surrounding
the implementation costs
and the rebates noted
within the global managed
service contracts.
======================================= ======================================
Goodwill, brand Group risk Group risk
intangibles and The Group's consolidated Our work was focused on
Parent Company investment balance sheet includes goodwill the Education, Healthcare
recoverability and brand intangibles, principally and UK General Staffing
arising from historical acquisitions. CGU's due to the sensitivity
The risk is that the goodwill of the discounted cash
and brand values allocated flow model inputs. The
to cash generating units key sensitivities in the
are not recoverable and should model relate to the revenue
be impaired. Management prepare growth rate, profitability
assessments at a Cash Generating assumptions and the discount
Unit (CGU) level and assess rate. We have also focused
whether the present value on the CGU's for which
of cash flows over a terminal impairments were realised
period support the assets during the interim reporting
held. and considered the possibility
Due to the inherent uncertainty of error within the interim
involved in forecasting and calculations.
discounting cash flows, which Due to the impact of Covid-19
are the basis of the assessment on the budgeting process,
of recoverability, this is we compared interim forecasts
a key judgemental area of against the Group's results,
the audit. to gain an understanding
The financial statements of the Group's ability
disclose the sensitivity to produce robust and
estimated by the Group. accurate forecasts.
Company Risk
Related to the goodwill risk We challenged the robustness
noted above, the carrying of key assumptions, including
amount of the investment revenue growth rates,
in subsidiaries held by the profitability assumptions
Parent Company is a significant and the discount rate,
balance that in the current based on our understanding
economic environment may of the CGUs. We also compared
be at greater risk of impairment. the assumptions used with
There is a risk that the other, similar, recruitment
judgements and estimate applied firms. Where appropriate,
to the impairment model may we have sensitised management's
not be congruent with the judgements to consider
underlying data and facts the impact of these not
available to management. being achieved.
We utilised an auditor's
internal valuation expert
to assess management's
key assumption inputs
noted above. This was
done with comparison to
industry standard data
points that are utilised
in such models.
Parent company investment
We compared the investment
value held to the market
capitalisation of the
Group, adjusting for factors
that would affect the
valuation of the shares.
This work was assisted
by the auditor's valuation
expert.
We utilised underlying
discounted cash flow forecasts
to form an expectation
of the recoverable amount,
and in addition considered
the asset position of
the subsidiary entities
and current performance.
Key observations communicated
to the audit committee
We have confirmed the
estimates and judgements
utilised within the models
applied in relation to
the impairment of Goodwill,
brand intangibles and
company investment impairments
are within acceptable
ranges.
======================================= ======================================
Compliance with The Group is subject to both We held meetings with
laws and regulations local and international legal the Group's legal counsel
and regulatory requirements both in the UK and in
that vary between the different the USA to understand
industries that the Group areas of non-compliance
operates. The Group has an with laws or regulation
in-house legal team who assist and the progress of any
management in the determination significant ongoing legal
of its financial obligations. areas.
The Group holds a number
of balances in relation to We circulated legal confirmations
its ongoing obligations to to key external counsel
comply with the regulatory to confirm the existence
and legal environment - varying of any potential claims
levels of judgement is required or areas of non-compliance.
to estimate the impact of
these on the financial statements. We assessed whether the
The key areas of compliance disclosures in relation
relate to workers' rights, to the liabilities and
such as holiday pay, and judgements made within
retention of customer unclaimed the consolidated financial
payments. statements are complete
Any non-compliance may result and accurate in relation
in fines, unrecorded liabilities to the ongoing legal claims
and reputational damage to and compliance matters.
the Group - a combination
of these may affect the Group's We specifically assessed
ability to continue trading. by brand, the Group's
policies and practices
in relation to holiday
pay, in the context of
relevant legal requirements.
We reviewed the basis
and appropriateness of
holiday pay accruals and
level of pay-out by sampling
contractors and employees
to underlying contracts
and system generated reports.
We assessed the Group's
treatment of the provision
for client credits and
unclaimed payments.
Key observations communicated
to the audit committee
We have no matters to
report concerning compliance
with key laws and regulations
applicable to the Group.
======================================= ======================================
New accounting treatments The Group utilised certain We understood the underlying
as a result of Covid-19 government support schemes government support schemes
in the year as a direct result utilised by the Group
of Covid-19. and the terms attached
The utilisation of these to these - the most significant
schemes required the Group scheme to the Group was
to comply with the requirements support for the ongoing
of the scheme. employment of both contractors
Any non-compliance may result working for clients and
in fines, unrecorded liabilities internal staff members.
and reputational damage to For any other material
the Group - a combination schemes utilised by the
of these may affect the Group's Group, we have agreed
ability to continue trading. compliance to the underlying
There is a risk that these rule governing these schemes.
new accounting treatments
are incorrectly accounted Our work ensured that
for. the financial statements
correctly disclosed the
support as required by
the relevant reporting
standards.
On a sample basis, we
agreed the calculation
for individual employee
claims to supporting scheme
documentation and correspondence
to determine compliance
with the underlying rules.
This covered both internal
employees and external
temporary contractors.
Key observations communicated
to the audit committee
We have no matters to
communicate in respect
of the government support
received relating to the
continued employment of
employees and contractors.
======================================= ======================================
Procedures performed to agree to the final results statement of
annual results
In order to agree to the publication of the final results
statement of annual results of the company we:
-- checked the accuracy of extraction of the financial
information in the final results statement from the audited
financial statements of the company;
-- considered whether any "alternative performance measures" and
associated narrative explanations may be misleading; and
-- read the management commentary and considered whether it is
in conflict with the information that we have obtained in the
course of our audit.
Use of our report
This report is made solely to the company's members, as a body,
in accordance with the terms of our engagement. Our work on the
final results statement of annual results has been undertaken so
that we might state to the company's members those matters we have
agreed to state to them and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company's members as a
body, for our work on the final results statement of annual
results, for this report, or for the opinions we have formed.
Mark Cardiff (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London , UK
7 April 2020
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Financial Statements
Consolidated income statement
For the fifty-two weeks ended 1 January 2021
52 weeks 52 weeks
1 January 3 January
2021 2020
Notes GBPm GBPm
Continuing operations
Revenue 2 2,000.9 2,254.8
Cost of sales (1,772.8) (1,980.7)
---------- ----------
Gross profit 2 228.1 274.1
Administrative expenses (239.5) (261.4)
Impairment losses from receivables (3.6) 1.2
---------- ----------
Operating (loss)/profit 2 (15.0) 13.9
-------------------------------------------------- ----- ---------- ----------
Operating profit before impairments, amortisation
of brand value and customer relationships 18.2 31.1
Amortisation of brand value and customer
relationships (11.0) (10.2)
Impairment of goodwill (16.6) (1.6)
Impairment of other intangible items (5.6) (5.4)
Operating (loss)/profit (15.0) 13.9
-------------------------------------------------- ----- ---------- ----------
Finance income 0.3 0.8
Finance expense 3 (5.7) (9.0)
---------- ----------
(Loss)/profit before taxation (20.4) 5.7
Taxation 4 (1.0) (0.9)
---------- ----------
(Loss)/profit for the period from continuing
operations (21.4) 4.8
---------- ----------
Profit from discontinued operations, net of
tax - 0.7
---------- ----------
(Loss)/profit for the period attributable to
owners of the parent Company (21.4) 5.5
---------- ----------
Earnings per share for equity holders of
the parent Company
Basic 5(46.2) p 11.2 p
Diluted 5(46.2) p 11.2 p
-------- ------
Consolidated statement of comprehensive income
For the fifty-two weeks ended 1 January 2021
52 weeks 52 weeks
1 January 3 January
2021 2020
GBPm GBPm
(Loss)/profit for the period (21.4) 5.5
Items that may be subsequently reclassified
into income:
Currency translation differences (net of tax) (2.0) (4.3)
-------------------- --------------------
Total comprehensive income for the period, net
of tax (23.4) 1.2
-------------------- --------------------
Total comprehensive income for the period attributable
to:
Equity holders of the Parent Company (23.4) 1.5
Non-controlling interest - (0.3)
-------------------- --------------------
Total comprehensive income for the period, net
of tax (23.4) 1.2
-------------------- --------------------
Consolidated balance sheet
As at 1 January 2021
(Restated)
1 January 3 January
2021 2020
Notes GBPm GBPm
Non-current assets
Property, plant and equipment 5.1 6.6
Right-of-use assets 21.3 27.6
Goodwill 129.1 148.0
Other intangible assets 96.2 117.8
Financial assets 1.6 1.5
Deferred tax assets 10.3 13.6
Trade and other receivables 3.3 5.7
--------- -----------
266.9 320.8
--------- -----------
Current assets
Trade and other receivables 563.9 574.7
Tax receivable 2.8 2.5
Cash and cash equivalents 117.9 132.3
--------- -----------
684.6 709.5
--------- -----------
Total assets 951.5 1,030.3
--------- -----------
Current liabilities
Short-term borrowings 0.1 24.7
Lease liabilities 9.2 10.7
Trade and other payables 558.0 550.4
Taxation payable 0.5 1.8
Provisions 7.2 3.6
--------- -----------
575.0 591.2
--------- -----------
Net current assets 109.6 118.3
--------- -----------
Non-current liabilities
Long-term borrowings 119.0 140.9
Lease liabilities 17.3 23.1
Other payables - 1.6
Provisions 3.3 5.5
Deferred tax liabilities 18.1 21.5
--------- -----------
157.7 192.6
--------- -----------
Total liabilities 732.7 783.8
--------- -----------
Net assets 218.8 246.5
--------- -----------
Equity
Issued share capital 0.5 0.5
Share premium account 30.1 30.1
--------- -----------
30.6 30.6
Other reserves 118.3 120.3
Retained earnings 70.2 95.9
--------- -----------
Total equity attributable to owners of the parent
Company 219.1 246.8
--------- -----------
Non-controlling interest (0.3) (0.3)
--------- -----------
Total equity 218.8 246.5
--------- -----------
Consolidated statement of changes in equity
For the fifty-two weeks ended 1 January 2021
Total Total equity
share attributable
capital to equity
and share Other Retained owners of Non-controlling Total
premium reserves earnings the parent interest equity
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 for the period - - (21.4) (21.4) - (21.4)
Other comprehensive income - (2.0) - (2.0) - (2.0)
----------- ---------- ---------- -------------- ---------------- --------
Total comprehensive income
in the period - (2.0) (21.4) (23.4) - (23.4)
Transactions with owners,
recorded directly in equity
Purchase and cancellation
of own shares - - (4.3) (4.3) - (4.3)
1 January 2021 30.6 118.3 70.2 219.1 (0.3) 218.8
----------- ---------- ---------- -------------- ---------------- --------
Consolidated cash flow statement
For the fifty-two weeks ended 1 January 2021
(Restated)
52 weeks 52 weeks
1 January 3 January
2021 2020
GBPm GBPm
Cash flows from operating activities
(Loss)/profit before taxation (20.4) 5.7
Adjustments for:
Depreciation and amortisation 2.8 3.2
Amortisation of right-of-use assets 9.5 9.0
Amortisation of other intangible assets 17.6 17.2
Impairment of goodwill 16.6 1.6
Impairment of other intangible assets 5.6 5.4
(Profit)/loss on disposal of property, plant
and equipment (0.2) 0.2
Finance income (0.3) (0.8)
Finance expense 5.7 9.0
Discontinued operations - 0.7
---------------------- ----------------------
36.9 51.2
Decrease/(Increase) in trade and other receivables 8.1 (8.1)
Increase in trade and other payables 50.8 6.0
Increase in provisions 1.4 4.8
---------------------- ----------------------
Cash generated by operations 97.2 53.9
Taxation paid (2.7) (4.4)
---------------------- ----------------------
Net cash generated by operating activities 94.5 49.5
---------------------- ----------------------
Cash flows from investing activities
Acquisition of subsidiary - (2.9)
Purchase of property, plant and equipment (1.2) (3.6)
Purchase of intangible assets (2.3) (6.8)
Receipt from lease debtors 3.2 2.9
Increase in other financial assets (0.1) (0.1)
Interest received 0.3 0.8
---------------------- ----------------------
Net cash from investing activities (0.1) (9.7)
---------------------- ----------------------
Cash flows from financing activities
Drawdown of short-term borrowings 167.1 260.0
Repayment of short-term borrowings (213.4) (243.2)
Decrease in overdraft (36.1) (0.9)
Purchase and cancellation of own shares (4.3) (10.8)
Interest paid on lease liabilities (0.8) (1.3)
Other finance expenses paid (4.6) (6.8)
Repayment of lease liabilities (11.5) (12.1)
Cash outflow on discontinued operations - (2.5)
---------------------- ----------------------
Net cash from financing activities (103.6) (17.6)
---------------------- ----------------------
Net (decrease) / increase in cash and equivalents (9.2) 22.2
Opening cash and cash equivalents 132.3 117.1
Effect of foreign exchange rate movements (5.2) (7.0)
---------------------- ----------------------
Closing cash and cash equivalents 117.9 132.3
---------------------- ----------------------
Notes to the final financial statements
1 Basis of preparation
I. Statement of compliance
The consolidated financial statements have been prepared on a
going concern basis in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union and
those parts of the Companies Act 2006 applicable to companies
reporting under IFRS.
II. Statutory information
The financial information for the 52 weeks to 1 January 2021
does not constitute the statutory accounts of the Group for the
relevant period within the meaning of section 435 of the Companies
Act 2006. Such statutory accounts will be completed in due course
and delivered to the Registrar of Companies.
III. Accounting policies, new IFRS and interpretations
The accounting policies used in this report are consistent with
those applied at 1 January 2021, where we have adopted the
following new IFRS standards, amendments and interpretations.
a) IFRS 16 Leases COVID-19 related rent concessions.
2 Segmental information
Fifty-two weeks ended 1 January 2021
Adjusted
operating
Revenue Gross profit profit
GBP m GBP m GBP m
Global Talent Acquisition and
Managed Workforce Solutions 709.7 70.9 13.4
Global Specialist Staffing 523.2 45.8 11.2
Regional Specialist Staffing 581.5 69.6 (0.2)
Healthcare 231.3 41.8 (1.1)
Inter-segment revenues (44.8) - -
-------- ------------- -----------
Operating segments 2,000.9 228.1 23.3
-------- ------------- -----------
Fifty-two weeks ended 3 January 2020
Adjusted
operating
Revenue Gross profit profit
GBP m GBP m GBP m
Global Talent Acquisition and
Managed Workforce Solutions 757.1 78.0 13.7
Global Specialist Staffing 649.1 55.5 15.2
Regional Specialist Staffing 650.3 94.0 6.3
Healthcare 245.8 46.6 0.5
Inter-segment revenues (47.5) - -
-------- ------------- -----------
Operating segments 2,254.8 274.1 35.7
-------- ------------- -----------
Restated
52 weeks 52 weeks
1 January 3 January
2021 2020
GBP m GBP m
Segment adjusted operating profit 23.3 35.7
Corporate costs (5.1) (4.6)
----------- -----------
Adjusted operating profit 18.2 31.1
Amortisation of acquired intangibles (11.0) (10.2)
Impairment of goodwill (16.6) (1.6)
Impairment of intangible assets (5.6) (5.4)
----------- -----------
Operating (loss)/profit (15.0) 13.9
Finance income 0.3 0.8
Finance expense (5.7) (9.0)
Taxation charge (1.0) (0.9)
----------- -----------
(Loss)/profit for the period from continuing
operations (21.4) 4.8
----------- -----------
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, and also reflects the starting profit
measure used when calculating the Group's banking covenants. 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.
As a result of the adoption of IFRS 16 in the prior financial
year, the Group has moved to adjusted operating profit (from
adjusted EBITDA) as its Alternative Profit Measure, to include
depreciation and amortisation of assets but excluding amortisation
of acquired intangibles. In 2019 a number of items were reported as
separately disclosed items, however due to ongoing review these
have been restated as costs either within the relevant segment or
corporate costs
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
52 weeks 52 weeks
1 January 3 January
2021 2020
Finance expense GBPm GBPm
Revolving credit facilities 4.4 6.5
Write off capitalised finance costs
(note 4) - 0.9
Lease interest payable 0.8 1.3
Unwind discount on provisions 0.3 -
Other interest expense 0.2 0.3
------------ -----------
Total finance expense 5.7 9.0
------------ -----------
4 Taxation
Tax charge in the income statement
52 weeks 52 weeks
1 January 2021 3 January 2020
GBPm GBPm
Current income tax
UK corporation tax on results for the period 0.8 0.8
Adjustments in respect of previous periods (0.9) (0.1)
---------------- ----------------
(0.1) 0.7
Foreign tax in the period 2.1 1.3
Adjustments in respect of previous periods (0.8) -
---------------- ----------------
Total current income tax 1.2 2.0
Deferred tax credit (0.2) (1.1)
---------------- ----------------
Total taxation charge in the income statement 1.0 0.9
---------------- ----------------
Income tax expense is recognised based on management's best
estimate of the effective annual income tax rate expected for the
full financial year.
5 Earnings per share
Basic earnings per share amounts are calculated by dividing the
profit for the period attributable to the owners of the Company by
the weighted average number of Ordinary shares outstanding during
the period. As there were no material changes to current or
comparative results as a result of the initial adoption of the new
accounting standards referenced in note 1, there has been no
adjustment to the results below. The Group has allocated separately
disclosed items into the comparative results, rather than showing
them separately as in the prior year, so the comparatives have been
restated to remove these items.
Diluted earnings per share amounts are calculated on the same
basis but after adjusting the denominator for the effects of
dilutive options. The only dilutive effect relates to 19,841 shares
owned by The Corporate Services Group Ltd Employee Share Trust
which hold the shares remaining after various historic option plans
lapsed. Excluding these shares, the weighted average number of
shares in 2020 is 46,208,380 (2019: 48,543,107) and the fully
diluted average number of shares is 46,228,221 (2019: 48,562,948).
The calculations of both basic and diluted earnings per share
('EPS') are based upon the following consolidated income statement
data:
(Restated)
52 weeks 52 weeks
1 January 3 January
2021 2020
GBPm GBPm
Continuing (loss)/profit for the period (21.4) 4.8
Discontinued profit for the period - 0.7
---------- ----------
Total (loss)/profit for the period (21.4) 5.5
Impairment of goodwill 16.6 1.6
Impairment of other intangible assets (net of
tax) 4.5 4.4
Acquired intangibles amortisation (net of tax) 8.6 8.2
---------- ----------
Total adjusted profit for the period 8.3 19.7
---------- ----------
Continuing adjusted profit 8.3 19.0
Discontinued adjusted profit - 0.7
---------- ----------
Weighted average number of shares 46,208,380 48,543,107
(Restated)
52 weeks 52 weeks
1 January 3 January
2021 2020
Basic EPS Pence Pence
Continuing unadjusted basic earnings per share (46.2) 9.8
Discontinued unadjusted basic earnings per share - 1.4
---------- ----------
Total unadjusted basic earnings per share (46.2) 11.2
Impairment of goodwill 36.0 3.3
Impairment of other intangible assets (net of
tax) 9.8 9.2
Acquired intangibles amortisation (net of tax) 18.6 16.9
---------- ----------
Total adjusted basic earnings per share 18.2 40.6
---------- ----------
Continuing adjusted basic earnings per share 18.2 39.2
Discontinued unadjusted basic earnings per share - 1.4
---------- ----------
Fully diluted weighted average number of shares 46,228,221 48,562,948
(Restated)
52 weeks 52 weeks
1 January 3 January
2021 2020
Diluted EPS Pence Pence
Continuing unadjusted diluted earnings per share (46.2) 9.8
Discontinued unadjusted diluted earnings per
share - 1.4
---------- ----------
Total unadjusted diluted earnings per share (46.2) 11.2
Impairment of goodwill 36.0 3.3
Impairment of other intangible assets (net of
tax) 9.8 9.2
Acquired intangible asset amortisation (net
of tax) 18.6 16.9
---------- ----------
Total adjusted diluted earnings per share 18.2 40.6
---------- ----------
Continuing adjusted diluted earnings per share 18.2 39.2
Discontinued unadjusted diluted earnings per
share - 1.4
---------- ----------
6 Additional cash flow information
(Restated)3
January Cash Interest Interest Foreign 1 January
2020 flow charged paid Drawdown exchange 2021
GBP m GBP m GBP m GBP m GBP m GBP m GBP m
Cash and short-term
deposits 132.3 (9.2) - - - (5.2) 117.9
Bank overdraft (39.0) 36.1 - - - - (2.9)
Revolving credit (165.3) 46.2 (4.4) 4.4 - 0.2 (118.9)
Hire purchase (0.3) 0.1 - - - - (0.2)
Lease liabilities (33.8) 11.5 (0.8) 0.8 (3.9) (0.3) (26.5)
Lease debtors 7.3 (3.2) 0.1 (0.1) - 0.2 4.3
----------- ----- -------- -------- -------- --------- ---------
Net debt (98.8) 81.5 (5.1) 5.1 (3.9) (5.1) (26.3)
----------- ----- -------- -------- -------- --------- ---------
An explanation of the restatement is disclosed in note 9.
7 POST BALANCE SHEET EVENTS - SHARE PURCHASE AND CANCELLATION
Between the end of the year and 30 March 2021, a further 78,916
Ordinary shares of 1p each have been repurchased in the market for
total consideration of GBP0.2m and have been cancelled.
Alternative Performance Measures
Certain discussions and analyses set out in this Annual Report
and Accounts include measures which are not defined by generally
accepted accounting principles such as IFRS. We believe this
information, along with comparable IFRS measurements, is useful to
investors because it provides a basis for measuring our operating
performance on a comparable basis. Our management uses these
financial measures, along with the most directly comparable IFRS
financial measures, in evaluating our operating performance and
value creation. Non-IFRS financial measures should not be
considered in isolation from, or as a substitute for, financial
information presented in compliance with IFRS. Non-IFRS financial
measures as reported by us may not be comparable with similarly
titled amounts reported by other companies.
Adjusted operating profit
Definition: The Group calculates adjusted operating profit as
operating profit before amortisation of acquired intangibles and
impairment.
Closest equivalent IFRS measure: Operating profit.
Rationale for adjustment: 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, and also
reflects the starting profit measure used when calculating the
Group's banking covenants. All discussions within the Group on
segmental and individual brand performance refer to adjusted
operating profit.
Following the adoption of IFRS 16 in 2019 the Group has moved
from adjusted EBITDA to adjusted operating profit as its
Alternative Profit Measure in 2020, to include depreciation and
amortisation of assets but excluding amortisation of acquired
intangibles, and this is included in the table below.
Reconciliation of adjusted operating profit to operating
profit:
2020 2019
GBPm GBPm
------------------------------------------------------- ------ ------
Segment adjusted operating profit 23.3 35.7
Corporate Costs (5.1) (4.6)
------------------------------------------------------- ------ ------
Adjusted operating profit 18.2 31.1
Amortisation of brand value and customer relationships (11.0) (10.2)
Impairment of intangible assets (22.2) (7.0)
Operating (loss)/profit (15.0) 13.9
------------------------------------------------------- ------ ------
In 2019 a number of items were reported as separately disclosed
items, however due to ongoing review these have been restated as
costs either within the relevant segment or corporate costs.
The amortisation of acquired intangibles (brand value and
customer relationships) charge due to its size and nature is
disclosed separately to give a comparable view of the year-on-year
trading financial performance.
The impairment charge due to its size is disclosed separately to
give a more comparable view of the year-on-year underlying
financial performance.
Spend Under Management (SUM)
Definition: Total amount of client expenditure which our Managed
Service brands managed 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.
Closest equivalent IFRS measure: Group Revenue.
Rationale for adjustment: The Group uses this measure as it
reflects the total value of the client spend to the Group, not just
the revenue generated.
Continuing adjusted earnings per share (EPS)
Definition: Continuing adjusted profit divided by the weighted
average number of Ordinary shares outstanding during
Closest equivalent IFRS measure: Continuing basic earnings per
share.
Rationale for adjustment: The Group uses this measure alongside
the basic EPS calculation as it reflects the underlying trading
performance of the business
Reconciliation of Adjusted EPS to Basic EPS:
(Restated)
52 weeks 52 weeks
1 January 3 January
2021 2020
GBPm GBPm
Continuing (loss) / profit for the period (21.4) 4.8
Impairment of goodwill 16.6 1.6
Impairment of other intangible assets 4.5 4.4
Acquired intangibles amortisation (net of tax) 8.6 8.2
---------- ----------
Continuing adjusted profit 8.3 19.0
Weighted average number of shares 46,208,380 48,543,107
Continuing basic earnings per share (46.2) 9.8
Continuing adjusted earnings per share 18.2 39.2
Net debt excluding IFRS 16 'leases'
Definition: The Group calculates net debt as the total of cash
and short-term deposits, revolving credit and hire purchase.
Following the adoption of IFRS 16 the calculation includes lease
liabilities and debtors.
Rationale for adjustment: The Group has used this measure to
maintain alignment to the covenant reporting during 2020.
Reconciliation of net debt excluding IFRS 16 to net debt:
2020 2019
GBPm GBPm
----------------------------- ------- -------
Cash and short-term deposits 117.9 132.3
Bank overdraft (2.9) (39.0)
Revolving credit (118.9) (165.3)
Hire purchase (0.2) (0.3)
----------------------------- ------- -------
Net debt excluding IFRS 16 (4.1) (72.3)
Lease liabilities (26.5) (33.8)
Lease debtors 4.3 7.3
Net debt (26.3) (98.8)
----------------------------- ------- -------
-END-
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