FINAL RESULTS FOR THE YEAR ENDED 30 DECEMBER 2022
28/04/2023 07:00
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RNS Number : 7874X Impellam Group plc 28 April 2023
("Impellam", the "Group" or the "Company")
FINAL RESULTS FOR THE YEAR ENDED 30 DECEMBER 2022 - AUDITED
Impellam Group plc (AIM: IPEL) announces its audited final results for the 52 weeks ended 30 December 2022
RECORD RESULTS IN AN EXCEPTIONAL YEAR
TOTAL GROUP RESULTS ((1)) - FY 2022 FY 2021 Actual Improve / (Decline) Like-for-like((3)) Improve / (Decline)
Revenue (£ millions) 2,528.3 2,262.4 11.8% 10.1%
Gross profit (£ millions) 314.8 267.0 17.9% 14.4%
Operating profit (before amortisation and impairment) (£ millions) ((2)) 41.5 29.3 41.6% 35.8%
Operating profit (£ millions) 34.4 19.5 76.4% 60.9%
55.9p 18.3p 305.5%
Basic EPS
30.3 (15.0)
Net cash/(debt) (£ millions) pre IFRS 16 ((4))
20.4 (31.5)
Net cash/(debt) (£ millions)
CONTINUING GROUP RESULTS - FY 2022 FY 2021 Actual Improve / (Decline) Like-for-like((3)) Improve / (Decline)
Revenue (£ millions) 1,947.4 1,580.3 23.2% 20.5%
Gross profit (£ millions) 204.9 161.0 27.3% 19.8%
Operating profit (before amortisation and impairment) (£ millions) ((2)) 27.8 20.1 38.3% 27.9%
Operating profit (£ millions) 21.0 13.7 53.3% 60.3%
Continuing basic EPS 32.6p 7.3p 446.6%
The audited results above include the following changes to the preliminary
results released on 30 March 2023:
· With no effect on gross profit and operating profit, and
representing a netting of pass-through cost, Total Group and Continuing Group
Revenue has decreased by £10.7m.
· The Total Group and Continuing Group tax charge has been reduced
by £8.4m as a result of removing a deferred tax balance that was not required
to have been recognised. This has increased profit after tax by this amount
as well as improving earnings per share. There is no cash impact of the
adjustment.
(1) Total Group results are presented before the discontinued operations
(2) Operating profit before amortisation of acquired intangible assets and
impairment (see note 2)
(3) % change measured at constant exchange rates
(4) Net cash/(debt) pre IFRS 16 is used as the basis for banking covenant
calculations
Key operational highlights
Impellam delivered strong financial results in 2022 and our strategic progress
has accelerated as a result of the divestment of traditional businesses in our
Regional Specialist Staffing and Healthcare portfolios setting Impellam up for
sustainable growth.
Full-year performance for the total Group led to record highs in revenue of
£2.53bn (2021: £2.26bn) and gross profit of £314.8m (2021: £267.0m).
Adjusted operating profit(1) was up 41.6% to £41.5m (2021: £29.3m).
Special dividends of £50m were declared in 2022 (110.8 pence per share) with
£25m recognised and paid in the year. A further Special dividend of £35m
(77.8 pence per share) was declared in March 2023 following the completion of
the sale of the Healthcare and Regional Specialist Staffing businesses. Going
forward this allows the Group to return to a dividend policy. As previously
announced, it is the Company's intention, subject to the Group's trading
performance, to re-commence the payment of annual dividends, starting in
January 2024 of £25m. This represents a 9% forward yield on closing share
price on 28 March 2023.
All onward financial information, unless otherwise stated, is based on the
Continuing Operations of the Group.
Group revenue was up 23.2% (20.5%*) on the prior year at £1.95bn (2021:
£1.58bn) and gross profit was up 27.3% (19.8%*) to £204.9m (2021: £161.0m).
Adjusted operating profit(1) was up 38.3% (27.9%*) to £27.8m (2021: £20.1m).
STRATEGIC
· To accelerate progress with our long-term strategy to focus on
high-value growth opportunities across our UK & Europe, North America and
APAC regions - in January 2023 we entered into an agreement to sell Healthcare
(Medacs Global Group in the UK, Ireland and APAC) and Regional Specialist
Staffing (Blue Arrow, Chadwick Nott, Career Teachers and Tate in the UK). This
transaction completed on 3 March 2023 for cash consideration of £85m on a
debt-free, cash, normalised working capital basis. This followed the sale in
February 2022 of Corestaff in North America to swipejobs Inc.
· Continuing operations are our digitally-enabled Managed Services
(Guidant Global, Comensura and Flexy in the UK & Europe, North America and
APAC) and our talent-rich STEM businesses (Lorien, SRG, Carbon60 and Bartech
in the UK & Europe and North America).
· We are now a more focused and agile business, well positioned for
growth globally across attractive Managed Services and STEM markets.
· Throughout the year, we continued to make key investments in
people, technology and customer centricity.
FINANCIAL (CONTINUING OPERATIONS)
· Exceptional performance across the Group delivered 38.3% (27.9%*)
increase in adjusted operating profit(1).
· Strong revenue and gross profit growth across all regions with
APAC delivering a record increase of 31.6% (30.8%*) in gross profit, UK &
Europe up 26.2% (25.7%*) and North America up 28.3% (14.6%*).
· Net cash (pre IFRS 16) of £30.3m compared to net debt(1) of
£(15.0)m in 2021 (includes net sale proceeds from Corestaff of £15.4m and
final repayments of Covid-19 related support of £9.1m as well as a £25m
special dividend paid in December 2022).
1. Explanations of Alternative Performance Measures are at the end of
the report
*Calculated by multiplying the prior year functional currency amount by the
current year foreign exchange rate
Financial results for the fifty-two weeks to 30 December 2022 - audited
The table below sets out the results for the continuing operations of the
Group by region for 2022.
Revenue Gross profit Operating profit(2)
£'million 2022 2021 Like-for-like change(1) 2022 2021 Like-for-like change(1) 2022 2021 Like-for-like change(1)
UK & Europe 1,506.2 1,205.8 25.1 112.8 89.4 25.7 20.5 17.4 15.7
Gross profit % 7.5% 7.4%
North America 394.1 358.3 (1.5) 81.7 63.7 14.6 10.6 8.6 3.2
Gross profit % 20.7% 17.8%
Asia Pacific 47.1 16.2 168.8 10.4 7.9 30.8 2.0 1.6 23.1
Gross profit % 22.1% 46.7%
Total 1,947.4 1,580.3 204.9 161.0 33.1 27.6
Corporate costs (5.3) (7.5)
Operating profit(2) 27.8 20.1
Amortisation of acquired intangible assets (6.8) (6.4)
Operating profit 21.0 13.7
1. % change measured at constant exchange rates
2. Before amortisation of acquired intangibles and impairment
Financial results for the fifty-two weeks to 30 December 2022 - audited
The table below sets out the results for the continuing operations of the
Group by segment for 2022.
Revenue Gross profit
£'million 2022 2021 Like-for-like change(1) 2022 2021 Like-for-like change(1)
Global Managed Services 974.4 838.7 13.9 97.1 79.2 16.4
Gross profit % 9.9% 9.4%
STEM 999.7 759.6 28.4 107.8 81.8 26.9
Gross profit % 10.8% 10.8%
Inter-segment revenues(2) (26.7) (18.0) - -
Total 1,947.4 1,580.3 204.9 161.0
1. % change measured at constant exchange rates
2. Elimination of inter-segment sales which are all within the UK
& Europe region
Chairman's Statement on the Results
The Group has delivered record results in an exceptional year. Adjusted
operating profits(1) were up significantly across all segments and in all
regions as we responded to talent scarcity and a buoyant labour market. This
was achieved against a backdrop of political and economic uncertainty, the war
in Ukraine and resulting rising energy costs contributing to a cost-of-living
crisis, particularly in the UK. Our agile response to the global skills
shortage, the 'great resignation' and post pandemic bounce back in the jobs
market resulted in new customer wins and increased levels of customer
retention as we collaborated across our brands.
In April 2022, I informed the Board that I wanted to explore opportunities to
dispose of my shareholding in the Group and have worked constructively with
the Company to ensure the interests of all shareholders were properly
considered. The sale of Corestaff in North America in February 2022, followed
by the disposal of our Regional Specialist Staffing (RSS) and Healthcare
brands in Q1 2023 will enable the Group to focus on the fast-growing Managed
Services and Science, Technology and Engineering markets (STEM) where our
specialist expertise and track record positions us for high growth in these
attractive market sectors. This is a bold step for Impellam, and I know the
Executive team have the experience and drive to ensure its success and to use
it as a springboard to accelerate the Group's long-term strategy.
There have been no changes to the Board during the year, providing a stable
foundation to support the Group during this period of transformation and I
thank the Board for their contributions through the year.
I am pleased that we announced two special dividends in 2022, which will
return £50m to our shareholders. The Group announced a further special
dividend of £35m following the disposal of the RSS and Healthcare brands in
early 2023. Going forward this allows the Group to return to a dividend
policy.
It's been a fast-paced year and our people have risen to the challenges and
opportunities, building close working relationships with their colleagues and
customers. I would like to thank each and every one of them for their hard
work, commitment, and ability to respond positively to a changing environment.
Lord Ashcroft KCMG PC
Chairman
1. Explanations of Alternative Performance Measures are at the end of
the report
CEO Review
OVERVIEW
2022 was a defining year for Impellam. Not only did we deliver strong and
consistent operational performance and financial growth but we also responded
to our majority shareholder's intent to explore options around his
shareholding. We entered into negotiations that were substantially concluded
in December 2022 and saw the Group complete the disposal of its Regional
Specialist Staffing and Healthcare businesses on 3 March 2023. This followed
the sale of Corestaff, our North America Specialist Staffing business, to
swipejobs Inc in February 2022.
This bold strategic move enhances the investment case for Impellam's connected
and collaborative, digitally-enabled businesses. Our continuing operations are
now focused on the key growth markets of multidisciplinary workforce solutions
in the UK & Europe, North America and Asia Pacific and the specialist
talent verticals of Science, Technology and Engineering.
The year began with optimism and confidence delivering gross profit growth
across all our regions when compared to 2021. This growth was achieved despite
a backdrop of political and economic upheaval caused by the combined factors
of the global pandemic, the war in Ukraine, the impact of Brexit and the
fast-emerging cost-of-living crisis, particularly in the UK. Despite these
headwinds, the labour market remained tight driven by global skills and talent
shortages, the 'great resignation', the early retirement of over 50s, high
attrition and a booming post Covid-19 job market creating a positive trading
environment for all our businesses.
As a result, our continuing operations delivered gross profit of £204.9m and
operating profit growth of 53.3% (60.3%*). Including discontinued operations
we generated £69.1m of cash and were able to announce dividends of £50m to
shareholders.
IMPACT OF INVESTMENT
We capitalised on the increased demand for our services by continuing to
invest in people, technology and customer centricity.
We developed our service offerings to respond quickly and decisively to meet
our customers' evolving needs, with our key investments in 2022 underpinning
our core principle that Virtuosity is our strategic advantage.
PEOPLE AND VIRTUOSITY
Our customers consistently tell us that they love what we do, but even more
importantly they love how we do it. That's Virtuosity. Our people are really
close to our customers and that means we take the utmost care of them. We
hire, develop and nurture our people to become Virtuosos, so that in turn they
support our customers to build better businesses.
During 2022 more than 268 colleagues joined our Group as customer demand
increased. We expanded our teams in key growth markets with a 20.3% increase
in headcount in our UK and North America STEM businesses and an 8.3% increase
in our GMS businesses across the world, supporting exciting new customer wins.
Alongside this expansion in headcount, we also increased our productivity with
gross profit per FTE rising from £100.2k in 2021 to £112.3k in 2022.
We supported our people's performance and wellbeing, enabling them to work
flexibly between our offices, their homes and customer sites. We worked hard
to get the balance right between providing collaboration technology and
ensuring they received maximum benefit from in-person teamwork. Understanding
that managers make the difference to engagement, we also focused on reigniting
the beautiful basics of thoughtful people management. We made it a priority
that all our people enjoyed quality time with their manager to explore how the
things that mattered most to them personally aligned to the goals and
ambitions of our business.
We have a diverse and talented global workforce who are connected and who
collaborate more than ever before to make sure there is never a reason for a
customer to leave Impellam. We are keen to make sure that our people enjoy a
fulfilling career with us and as we grow, our goal is to create compelling
opportunities across our global business. In 2022, more than 50 colleagues
embarked on exciting new careers in a different part of the Group.
At Impellam, we listen to our people. Our Virtuoso Alliance continued to
influence our strategy. Across two cohorts, 22 Virtuosos made a significant
contribution to our performance and development strategy, our refreshed
Impellam brand and proposition, our EVP, our blended working strategy and our
response to shifting candidate market dynamics.
Similarly, our people shout loudly about the things that matter to them and I
am proud of the great strides we took in 2022 in equity, diversity and
inclusion (ED&I). We launched our Unity council globally and we had highly
active Business Resource Groups helping us understand and celebrate our
differences as we came together for particularly memorable events for
International Women's Day, Pride, Mental Fitness Month and Disability
Awareness.
As we say goodbye to almost 1,300 colleagues leaving the Group for their new
home following the divestment of our Regional Specialist Staffing and
Healthcare businesses, I would like to thank all Impellam colleagues for the
wonderful part they have played in making our Company special and delivering
such impressive operational and financial results in 2022.
CUSTOMER CENTRICITY
Our Virtuoso strategy means that our people are close to their customers and
their voice is heard directly by the Executive team. We have a
non-hierarchical organisation structure with few layers between our customers
and me, ensuring that decisions are always made with customers front of mind.
Our customers have trusted us to find their contingent and permanent talent in
a candidate short market. Following the combined effect of the profound
disruption in our markets across the world outlined in my introduction, there
has been a huge increase in demand across all our vertical market specialisms
and within our 271 managed service and RPO customers.
In particular rapid global digitisation led to a buoyant market for those with
tech, digital and analytical skills and we also saw increased demand for
engineers, scientists and clinicians, as organisations began to invest again,
all coming together to create the future through the power of work.
In 2021, we established our Customer Office (CO) with the intention that there
should never be a reason for a customer to leave Impellam. The CO celebrated
its first anniversary in July 2022 with an impressive 100% account retention
and an increase in the lifetime value(2) of our CO customers of 5.6%. Our
customer focused Centre of Excellence (CoE) brought new capabilities to our
clients and important efficiencies to our business. The CoE managed 55
discrete projects to launch, enhance or expand customer relationships. The CoE
Analytics team developed new intelligence dashboards for use across the
customer portfolio while the Talent Marketing team's highly successful
campaigns resulted in up to 2,000 hires per individual customer. Our VMS team
collaborated closely with our technology channel partners and was subsequently
recognised through our Guidant Global brand as SAP Fieldglass MSP partner of
the year. We automated many key business processes, eliminating thousands of
hours of manual work annually.
As a Company, we came together in 2022 to secure and share 2,450 new client
wins across our regions.
We also expanded our work within existing customers through strong
collaboration and service diversification leading to a significant increase in
customer spend, alongside deepening those relationships leading to a 9.2% rise
in customer retention compared to 2021.
We trained and led our people to price confidently reflecting our premium
position in a buoyant market and were delighted that our customers continued
to value our people so highly.
We ended the year by launching our refreshed Impellam branding. We are
building a consistent and cohesive customer narrative and proposition,
confident of our belief in the power of work and our combined and connected
ability to deliver market-leading workforce and specialist recruitment
solutions in the UK & Europe, APAC and North America.
TECHNOLOGY AND DIGITAL
Our investments in digital technology are focused on our strategic objective
to free up our Virtuosos to do their best work whilst enabling collaborative
teamwork across our diverse global workforce, wherever they are based. In 2022
we enhanced our overall digital experience, achieving our target to be 65%
digital(3) by the end of the year.
During the year, we completed the implementation of Bullhorn CRM and RSM in
our UK STEM businesses. We now operate on a common platform across the front
and back office leading to an enhanced customer and candidate experience,
increased collaboration and improved productivity and efficiency. Going
forward, we will invest in selected additional digital technology to enhance
operational productivity and increase the profit-per-consultant.
In our Managed Services businesses, our investment in digitising service
delivery has been a key contributor to increasing our productivity. Our
investment in an Integration Platform as a Service (IPaaS) has enabled us to
bring together the core functionality and benefits of multiple applications,
both proprietary and third party, improving customer and user experience while
removing manual data entry and workflows.
In addition, the deployment of Robotic Process Automation (RPA) tools has
enabled the automation of a significant number of repetitive tasks allowing
our Virtuosos to focus on higher value activities while increasing our access
to large volumes of meaningful data. Using sophisticated reporting tools, we
can now benchmark our recruiters against market data showing clear evidence
that our productivity metrics are ahead of the programmes run by our
competitors and in-house teams.
We also made significant investments in technology platforms to drive customer
and candidate relationship management and applicant tracking. Our priority is
to drive initiatives that free up time for our Virtuosos so they can focus on
building trust and delivering on their promises to clients and candidates.
We continued to invest in customer-facing digital solutions and during 2022 we
launched our first fully integrated platform solution, leveraging our
proprietary technologies EVO and Flexy as well as our newly launched payroll
app. We are proud of this solution and intend to introduce it to more of our
managed service customers in 2023, and to support new services such as Direct
Sourcing.
The divestment of our RSS and Healthcare businesses means that we will now
move away from legacy systems and will operate entirely in the Cloud using
either software-as-a-service applications, or Microsoft Azure facilities. This
transaction removes complexity from the overall Group technology estate by
removing multiple overlapping legacy applications; simplifying physical
infrastructure and reducing manpower costs to support diverse systems.
OUTLOOK
Our strategic realignment following the disposal of our RSS and Healthcare
businesses in March 2023 enables us to focus our investments and the efforts
of our Virtuosos on high growth and attractive markets where we have greater
visibility of future revenue with improved conversion of gross profit to
adjusted operating profit(1).
The disposal also enables us to streamline operations whilst increasing
collaboration and removes significant complexity from our technology, property
estate and our back-office processes.
Trading in 2023 began above our expectations, albeit we have noted some
hesitancy during Q1 on permanent hiring, particularly amongst professional and
financial services clients. Pipelines remain strong but we will continue to
remain vigilant, given the political and economic headwinds of inflationary
pressure and interest rate rises, continuing events in Ukraine and ongoing
talent shortages across all our regions.
We are confident that the strategic moves we have made will continue to
enhance the investment case for Impellam and will return significant value to
shareholders.
Julia Robertson
Group Chief Executive Officer
1. Explanations of Alternative Performance Measures are at the end of
the report
2. Life Time Value (LTV) is defined as average margin per client x
average length of contract.
3. Digital - Data and Digital Technology, supported by monetisable
data, automated process, cloud-based systems and flexible, mobile channels.
*Calculated by multiplying the prior year functional currency amount by the
current year foreign exchange rate
Group Chief Financial Officer's Review
INTRODUCTION
Revenue from continuing operations for the year was up 23.2% (20.5%*) and
gross profit increased by 27.3% (19.8%*), reflecting the buoyant labour market
across our regions and high demand for temporary and permanent staff.
To support this growth, we invested in customer-facing staff adding 268 to our
headcount during the year. Our staff productivity (gross profit divided by FTE
heads) was higher than in previous years and this, together with tightly
controlled costs meant that adjusted operating profit(1) from continuing
operations increased by 38.3% to £27.8m (2021: £20.1m). Operating profit
after the amortisation of acquired intangibles was £21.0m (2021: £13.7m).
The difference between adjusted operating profit(1) and operating profit is
reconciled in note 2 and relates to the amortisation of acquired intangibles.
DISCONTINUED OPERATIONS
We completed the sale of Corestaff in the US to swipejobs Inc. in February
2022 and in January 2023 we announced the sale of our UK Regional Specialist
Staffing businesses (Blue Arrow, Tate, Chadwick Nott and Career Teachers) and
the UK, Ireland and APAC Healthcare business (MGG) to Twenty20 Capital for a
cash consideration of £85.0m on a debt-free, cash-free normalised working
capital basis. This sale completed on 3 March 2023. All financials, unless
otherwise stated, are based on the continuing operations of the Group.
GOVERNMENT SUPPORT
Following support received in 2020 for Covid-19 the Group repaid £3.3m of
deferred VAT payments and US$8m (£5.8m) of federal tax deferred under the
CARES initiative. There are no further payments due under these schemes.
FOREIGN EXCHANGE
Currency movements against Sterling positively impacted our reported
performance, largely due to the strengthening of US Dollar against Sterling.
Over the course of the year to December 2022, the total impact of exchange
movements on gross profit and adjusted operating profit(1) were £8.2m
favourable and £1.1m favourable, 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 £0.6m per annum and adjusted operating profit(1) by
£0.1m per annum. The exchange rate between the US Dollar and Sterling over
the year ended 30 December 2022 averaged US$1.2372 (2021: US$1.3757) and
closed at US$1.2077 (2021: US$ 1.3536). As the Group expands further in
overseas territories the impact of changes in exchange rates will increase.
CAPITAL INVESTMENT
Capital expenditure on tangible and intangible fixed assets in the period was
£11.3m (2021: £5.8m), as we continued our investment in our core systems to
further digitalise the business with roll outs of new front office systems,
new bill and pay systems and new finance systems. The deployment will continue
in 2023, though revisions will take into account the disposed businesses and
associated separation plans. As well as some general IT equipment refreshes,
we also continued investment in our proprietary vendor management systems
(VMS) and the development of our digital platform, Flexy. The net repayment
of finance leases amounted to £5.5m (2021: £7.2m).
INTEREST AND DEBT
Net cash generated from operations (including discontinued operations) during
the period was £69.1m (2021: £10.2m). During the year final deferred tax
payments of £9.1m (2021: £38.9m) were made. Excluding the impact of these
tax deferrals, cash generated from operations was £78.2m (2021: £49.1m).
Excluding deferred taxes, the conversion of adjusted operating profit(1) to
net cash generated is 248.7% (2021: 167.6%). Cash generation from operations
was enhanced by an improvement in Days Sales Outstanding (DSO) which stood at
34.8 days (2021: 35.4 days) at the end of 2022.
In addition to the strong operating cash flows, £15.4m of cash proceeds (net
of disposal expenses) were received following the disposal of Corestaff in
February 2022.
Finance expenses for the Group, including discontinued operations, were higher
than the prior year at £5.2m (2021: £4.3m). Lease interest was lower at
£0.4m (2021: £0.6m) and interest cost on financing facilities increased to
£4.5m (2021: £3.5m) as a result of interest rates rises. At the balance
sheet date net cash(1), excluding the adjustments for IFRS 16, was £30.3m
compared to £(15.0)m net debt in 2021, an increase of £45.2m.
The net cash flow from operations was primarily utilised as follows:
• Special dividend £25m
• Investment in fixed assets and software development: £11.3m
• Net lease repayment: £5.5m
• Share buybacks: £1.2m
• Net interest paid on borrowings and leases: £4.9m.
The Group's operations are financed by retained earnings and bank borrowings.
The Group manages working capital requirements through a £182.5m global
revolving credit facility (RCF) approved in December 2021. This £182.5m RCF
has an accordion element of an additional £40m which is available for three
years with options to extend for a further two years. Rates of interest for
the RCF are based on SOFRA/SONIA plus a margin calculated on the net debt(1)
to adjusted EBITDA(1) leverage. The RCF also includes a letter of credit
facility which amounted to £2.7m (2021: £3.0m) at the end of 2022.
The Group takes advantage of a number of nonrecourse supplier finance
arrangements organised by clients of the Group to allow for the acceleration
of payment of the Group's receivables. At the end of 2022, we did not utilise
these arrangements (2021: £8.2m).
These agreements accrue interest at between 0.65% and 1.75% over SONIA applied
to the number of days the drawdown takes place before the due date. During
2022, the Group paid less than £0.1m in other interest (2021: less than
£0.1m).
Following the completion of the sale of the RSS and Healthcare businesses in
March 2023 the RCF was reduced to £132.5m and the accordion reduced to £30m.
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(1) 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.
Exposure to currency risk at a transactional level is generally minimal, with
most transactions being carried out in local currency.
TAXATION
The tax charge (including discontinued operations) in the period of £1.4m
(2021: £7.1m) represents an effective tax rate of 14.5% (2021: 45.8%) and
arises on the Group's activities in the UK and overseas. The lower effective
tax rate is driven by prior year adjustments to deferred tax on overseas
intangibles to calculate the opening deferred tax position at the local rate.
Excluding adjustments in respect of previous periods, the effective tax rate
is 23.8%.
The Group's contribution to the UK Treasury in the period amounted to £347.4m
(2021: £331.9m) 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 totalling £46.9m (2021: £37.7m)
was a cost to the business.
EARNINGS PER SHARE
Continuing basic earnings per share increased to 32.6p (2021: 7.3p) as
underlying profit after tax from continuing operations increased by £11.4m.
Total group (including discontinued operations) basic earnings per share
increased to 55.9p (2021: 18.3p) with underlying profit after tax increasing
by £19.9m.
The weighted average number of shares in 2022 was 45.1m, 0.4m lower than 2021
due to the ongoing share buyback programme. Continuing adjusted earnings per
share increased to 44.3p (2021: 18.2p) 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 extended
payment terms require senior finance approval. 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. The amount of borrowing required to fund the
Group's activities is determined based on these projections, together with
expected returns to shareholders and planned capital expenditure. This is then
compared to the bank lending facilities currently committed and expected to be
available to the Group.
Following the sale of the RSS and Healthcare business in 2023 the continuing
requirements of the Group has been assessed in line with revised profit and
cash flow plans and bank lending facilities.
Also considered is the projection of compliance with the financial covenants
implied by these plans. In addition, these figures are tested for sensitivity
to possible changes to the economic environments in which the Group operates.
The Group has no operations in Ukraine or surrounding regions and therefore
there is no direct impact on the Group's trading. However, any indirect
impact, such as a worsening in economic conditions, would represent such a
sensitivity.
The impact on Group liquidity and covenants of each of these sensitivities is
then evaluated together with the likelihood of each of these occurring either
individually or in combination.
On a regular basis, and at least quarterly, the Board reviews updated
projections of future borrowing requirements, facility usage and resulting
headroom, together with projected covenant compliance; these are based upon
the latest actual results and borrowing position supplemented by regularly
updated profit forecasts. Based on the above, the Directors consider it
appropriate to continue to adopt the going concern basis in preparing the
financial statements.
DIVIDENDS AND SHARE BUYBACK
Approval was gained at the 2021 AGM to commence an updated programme
authorising the Board to purchase up to a maximum of 4,560,363 shares,
representing 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. Under this
programme a total of 188,255 shares were purchased at a value £0.8m in 2022.
An updated programme was approved at the 2022 AGM authorising the purchase of
a maximum of £0.5m of Ordinary Shares (by market value) per calendar month
until the 2023 AGM. Under this programme a total of 65,360 shares were
purchased at a value £0.4m in 2022. A further 106,597 shares have been
purchased up to 30 March 2023 at a value of £0.7m.
On the 8 November 2022 the Board announced a special dividend of 55.4p per
share, amounting to £25m, which was paid on 9 December 2022. On 22 December
2022 the Board announced a second special dividend of 55.4p per share,
amounting to £25m, which was paid on the 27 January 2023.
On 3 March 2023 the Board announced a further special dividend in connection
with the sale of the RSS and Healthcare businesses of 77.8p per share,
amounting to £35m to be paid on the 6 April 2023.
See note 11 Post Balance Sheet Events - Important Information.
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.
OUTLOOK
We experienced positive trading conditions in 2022 supported by the
investments made in revenue generating headcount in 2021 and through 2022
whilst maintaining our focus on cost management. Operational cash flow was
strong with further improvements in DSO which enabled an underlying reduction
in borrowings and facility levels. This positive cash flow also facilitated
returns to shareholders with special dividends totalling £50m paid or
proposed during the year. The strategic disposal of the RSS and Healthcare
businesses in March 2022 and the cash received, net of a further distribution
of shareholders of £35m, will further bolster this position.
Tim Briant
Group Chief Financial Officer
1. Explanations of Alternative Performance Measures are at the end of
the report
*Calculated by multiplying the prior year functional currency amount by the
current year foreign exchange rate
2.
INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF
IMPELLAM GROUP PLC ON THE PRELIMINARY 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
preliminary statement of annual results for the period ended 30/12/2022 which
includes key operational highlights, Chairman's statement, narrative
disclosures and the financial results.
Use of our report
This report and our auditor's report on the company's financial statements are
made solely to the company's members, as a body, in accordance with Chapter 3
of part 16 of the Companies Act 2006 and the terms of our engagement. Our work
on the preliminary 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 preliminary statement of
annual results, for this report, or for the opinions we have formed.
Responsibilities of directors and auditor
The directors of the company are responsible for the preparation, presentation
and publication of the preliminary statement of annual results. We are
responsible for agreeing to the publication of the preliminary 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 27 April 2023. 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.
Overview
Coverage 1 (#_ftn1) 77% (2021: 88%) of Net fee income
69% (2021: 73%) of Group absolute* adjusted operating profit
72% (2021: 70%) of Group absolute* profit before tax
82% (2021: 79%) of Group revenue
85% (2021: 82%) of Group gross assets
* Absolute refers to the cumulative value of figures regardless of whether it
is a positive or negative value
Key audit matter 2022 2021
Key audit matters Risk of fraud or cut-off error in revenue recognition on temporary contractor P P
revenue and complex accounting on managed service contracts
Compliance with employment laws and regulations P P
Materiality
Group financial statements as a whole
£3.8m (2021: £1.45m) based on 1.2% of net fee income (Gross profit) (2021:
5.0% of the average of adjusted operating profit).
Materiality
Group financial statements as a whole
£3.8m (2021: £1.45m) based on 1.2% of net fee income (Gross profit) (2021:
5.0% of the average of adjusted operating profit).
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its
environment, including the Group's system of internal control, and assessing
the risks of material misstatement in the financial statements. We also
addressed the risk of management override of internal controls, including
assessing whether there was evidence of bias by the Directors that may have
represented a risk of material misstatement.
We designed an audit strategy to obtain the required audit assurance for each
component for the purposes of our Group audit opinion (ISA 600 (UK)).
Components were scoped in to address aggregation risk and to ensure sufficient
coverage was obtained of Group balances on which to base our audit opinion.
The percentage coverage of key financial statement areas by our audit
procedures is summarised graphically below and then detailed in the following
table.
Significant components • We identified eight significant components, which were subject to full
scope audit procedures.
• Three of the full scope audits of significant components were performed
by component auditors, under the direction and supervision of the Senior
Statutory Auditor; who issued detailed instructions, reviewed component audit
files and attended local audit close meetings. All significant components
were audited by BDO LLP utilising the Group audit team and UK component
auditors, other than one component, which was audited by a BDO member firm in
the US.
Specified audit procedures • Specified audit procedures were performed to address the risk of
material misstatement arising from key balances in non-significant components,
with testing performed on all material balances within these components.
• All testing was performed by BDO LLP, other than for the components in
Australia, which were performed by a BDO member firm in Australia. All
testing was under the direction and supervision of the Senior Statutory
Auditor via detailed instructions and via review of selected working papers on
significant risk areas.
• This specific scope testing was performed on components that contribute
14% (2021: 8%) of Net fee income, 24% (2021: 21%) of the Group Absolute
Adjusted Operating Profit, 21% (2021: 25%) of the Group Absolute Profit before
Tax, 10% (2021: 16%) of the Group revenue and 11% (2021: 15%) of Group Gross
Assets.
Remaining components • All other components, not included in the above, were scoped in for
analytical review procedures to confirm our conclusion that there were no
significant risks of material misstatement of the aggregated financial
information.
Parent Company and consolidation • The Parent Company is located in the UK and was audited by the Group
audit team. The Parent Company is treated as a significant component for the
Group.
• The Group audit team have performed testing of the consolidation and
related consolidation adjustments posted in preparation of the Group financial
statements.
Our involvement with component auditors
For the work performed by component auditors, we determined the level of
involvement needed in order to be able to conclude whether sufficient
appropriate audit evidence has been obtained as a basis for our opinion on the
Group financial statements as a whole. Our involvement with component auditors
included the following:
We assessed the competence and independence of the component auditors.
Direction and supervision over their work performed was also provided by the
Group audit team through group audit instructions. We attended the component
auditors' planning and completion meetings. The Group audit team reviewed the
work of the component auditors in order to gain comfort over the audit of the
significant components, specified audit procedures on specific scope entities,
and reviews over the remaining insignificant components.
Key audit matter Description How we addressed the key audit matter in the audit
Risk of fraud or cut-off error in revenue recognition on temporary contractor Temporary contractor revenue
revenue and complex accounting on managed service contracts
· The risk of fraudulent revenue recognition arises from revenue in · To address the risk around cut-off of revenue, on a sample basis,
relation to temporary contractors and permanent placements. Management applies revenue around the period end was tested against underlying supporting
judgements and estimates concerning the completeness, accuracy and cut-off of documentation, such as engagement letters, timecards, payments to temporary
revenue around the period end, therefore a risk of material misstatement workers and monies received from the clients to check revenue was recognised
exists either through error or in order to meet financial targets or in the correct period.
. performance related bonuses.
· We recalculated late timecard accrued revenue and cost based on
timecards submitted after period end that relate to services provided in the
period with historical trends
· The risk of erroneous revenue recognition arises from complex
accounting on rebates related to managed service contracts. Accounting and · The completeness of revenue was tested by sampling timecards around
potential understatement of these rebate agreements could result in a material period end and tracing them to the revenue and accrued income and checking
error within the revenue stated for the period. they have been recognised in the correct period.
· A sample of credit notes raised after the period end that relate to the
FY22 period were reviewed in order to assess the validity of the sales
· This results in the cut-off of temporary revenue and complex accounting invoices raised in the financial period.
on Managed Service Contracts being assessed as a significant risk of material
misstatement and a key audit matter.
Complex accounting on Managed Service Contracts
· Revenue recognition on a sample of Managed Services Contracts was
assessed for compliance with IFRS 15 Revenue from Contracts with Customers
recognition requirements, with a specific focus on the principal v agent
treatment of the whole arrangement or specific service elements therein.
· The period end rebate liability was further analysed against the prior
period's rebate liability in order to understand key movements in rebates and
form an expectation on the liability position at the period end.
· A sample of rebates were recalculated using the terms of the supplier
contracts and/or correspondences and volume of placements obtained from the
information held on the audited entity's system.
Key observations:
From the work performed, we did not identify any evidence that temporary or
managed service revenue has not been recognised in the correct period or at
the correct value.
The judgements and estimates applied were consistent with our expectations.
Key audit matter
Description How we addressed the key audit matter in the audit
Compliance with employment laws and regulations · The Group is subject to both local and international legal and · We held meetings with the Group's legal counsel to understand areas of
regulatory requirements that vary between the different industries and non-compliance with laws or regulation and the progress of any significant
jurisdictions that the Group operates. The Group has an in-house legal team ongoing legal areas.
who assist management in the determination of its financial obligations.
· We obtained confirmation from external counsel concerning any potential
claims or areas of non-compliance.
· The Group has recorded a number of balances in relation to its ongoing · The outcome of prior period claims has been evaluated against the
obligations to comply with the regulatory and legal environment - varying current period provisions settlements to gain assurance over the historical
levels of judgement are required to estimate the impact of these on the reliability and completeness of the liability.
financial statements.
· We assessed 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 payout by
· The key areas of compliance relate to workers' rights, such as PAYE sampling contractors and employees to underlying contracts and system
underpayment, national minimum wage,Fair Labour Standards Act (USA) and generated reports.
holiday pay.
· We assessed the Group's control environment around national minimum
wage compliance and made enquires to assess areas of potential exposure,
inspecting and assessing correspondence and management's expert assessment of
· Provisions have been made for the expected cost of settling these exposure.
matters, these are inherently judgemental.
· We assessed the appropriateness of the disclosures covering provisions,
estimates and judgements within the financial statements from our work
performed.
· Any non-compliance may result in fines, unrecorded liabilities and
reputational damage to the Group.
Key observations:
· The compliance with employment laws and regulations has been assessed
as a significant risk of material misstatements and related disclosures and a
key audit matter. We did not identify, either from external or internal sources, any material
compliance issues not already included in the provisions.
Based on the work performed, we did not identify any inappropriate judgements
or estimates made by management, all provisions fell within our range of
potential outcomes.
We did not identify any disclosure deficiencies that describes the degree of
inherent uncertainty in the assumptions and estimates used in assessing the
value of associated non-compliance provisions.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit,
and in evaluating the effect of misstatements. We consider materiality to be
the magnitude by which misstatements, including omissions, could influence the
economic decisions of reasonable users that are taken on the basis of the
financial statements.
In order to reduce to an appropriately low level the probability that any
misstatements exceed materiality, we use a lower materiality level,
performance materiality, to determine the extent of testing needed.
Importantly, misstatements below these levels will not necessarily be
evaluated as immaterial as we also take account of the nature of identified
misstatements, and the particular circumstances of their occurrence, when
evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the
financial statements as a whole and performance materiality as follows:
Group Materiality
2022 2021
Materiality £3.8m £1.45m
Basis 1.2% of Net Fee Income (Gross profit) 5.0% of Adjusted Operating Profit 2 (#_ftn2)
Rationale During the period, we have reconsidered the most appropriate benchmark on
which to set materiality and this has resulted in a change to the benchmark.
We consider Net Fee Income (Gross profit) to be the most appropriate benchmark
as it is less volatile than Adjusted Operating Profit, in a low margin / high
volume business such as the Group, and it is also a key measure of trading
activities for stakeholders. In setting our materiality percentage of Net Fee
Income, we have benchmarked against recruitment company peers, using a variety
of income statement metrics, to derive an appropriate materiality metric and
value.
Performance Materiality £2,660k £1,015k
Measure 70% of Materiality 70% of Materiality
Application
Based on history of adjustments and an assessment of the aggregated risk.
Parent Company Materiality
2022 2021
Materiality £2.09m £1.38m
Basis 95% Group materiality
Rationale Calculated as a percentage of the Group materiality given the assessment of
the aggregation risk.
Performance Materiality £1,460k £964k
Measure 70% of Materiality 70% of Materiality
Application
Based on history of adjustments and an assessment of the aggregated risk.
Component materiality
We set materiality for each component of the Group based on a percentage of
between 10% (2021: 12%) and 95% (2021: 95%) of Group materiality dependent on
the size and our assessment of the risk of material misstatement of that
component. Significant component materiality ranged from £377k (2021:
£170k) to £1.19m (2021: £1.38m). In the audit of each significant
component, we further applied performance materiality levels of 70% (2021:
70%) of the component materiality to our testing to ensure that the risk of
errors exceeding component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual
audit differences in excess of £190k (2021:£58k). We also agreed to report
differences below this threshold that, in our view, warranted reporting on
qualitative grounds.
Procedures performed to agree to the preliminary statement of annual results
In order to agree to the publication of the preliminary statement of annual
results of the company we:
· checked the accuracy of extraction of the financial information in
the preliminary 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.
Mark Cardiff (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
27 April 2023
Consolidated income statement
For the fifty-two weeks to 30 December 2022
Audited 52 weeks Re-presented 52 weeks
30 December 31 December
2022 2021
Notes £m £m
Revenue 2 1,947.4 1,580.3
Cost of sales (1,742.5) (1,419.3)
Gross profit 2 204.9 161.0
Administrative expenses (183.9) (147.3)
Operating profit 2 21.0 13.7
Operating profit before impairments, amortisation of brand value and customer 27.8 20.1
relationships
Amortisation of brand value and customer relationships (6.8) (6.4)
Operating profit 21.0 13.7
Finance income 0.1 0.2
Finance expense 3 (5.0) (4.1)
Profit before taxation 16.1 9.8
Taxation 4 (1.4) (6.5)
Profit from continuing operations 14.7 3.3
Profit from discontinued operations, net of 10.5 5.0
tax
6
Profit for the period 25.2 8.3
Earnings per share for equity holders of the parent Company
Basic 5 55.9p 18.3p
Continuing basic 5 32.6p 7.3p
Consolidated statement of comprehensive income
For the fifty-two weeks to 30 December 2022
Audited 52 weeks Restated 52 weeks
30 December 31 December
2022 2021
£m £m
Profit for the period 25.2 8.3
Other comprehensive income:
Foreign currency translation differences - foreign operations 14.0 (1.4)
Reduction in non-controlling interests - (0.3)
Total comprehensive income for the period, net of tax 39.2 6.6
Total comprehensive income for the period attributable to: 39.0
Equity holders of the Parent Company 6.6
Non-controlling interest 0.2 -
39.2 6.6
Consolidated balance sheet
As at 30 December 2022
Audited 30 December 2022 Audited 31 December 2021
Notes £m £m
Non-current assets
Property, plant and equipment 3.4 4.2
Right-of-use assets 9.1 15.9
Goodwill 109.5 128.9
Other intangible assets 49.8 85.3
Financial assets 1.0 1.7
Deferred tax assets 3.2 8.3
Trade and other receivables 0.7 0.9
176.7 245.2
Current assets
Trade and other receivables 636.8 605.5
Tax receivable 4.0 0.9
Assets held for sale 6 171.2 -
Cash and cash equivalents 7 112.4 90.9
924.4 697.3
Total assets 1,101.1 942.5
Current liabilities
Short-term borrowings 7 - 0.1
Lease liabilities 7 3.0 5.1
Trade and other payables 677.7 568.7
Tax payable 0.4 0.7
Liabilities held for sale 6 87.1 -
Provisions 2.0 8.3
770.2 582.9
Net current assets 154.2 114.4
Non-current liabilities
Long-term borrowings 7 77.8 101.9
Lease liabilities 7 6.9 11.4
Provisions 1.7 3.8
Deferred tax liabilities 7.7 18.7
94.1 135.8
Total liabilities 864.3 718.7
Net assets 236.8 223.8
Equity
Issued share capital 0.5 0.5
Share premium account 30.1 30.1
30.6 30.6
Other reserves 130.9 116.9
Retained earnings 75.0 76.2
Total equity attributable to owners of the parent Company 236.5 223.7
Non-controlling interest 0.3 0.1
Total equity 236.8 223.8
Consolidated statement of changes in equity
For the fifty-two weeks to 30 December 2022
Total share capital and share premium Other reserves Retained earnings Total equity attributable to equity owners of the parent Non-controlling interest Total equity
£ m £ m £ m £ m £ m £ m
Audited 1 January 2022 30.6 116.9 76.2 223.7 0.1 223.8
Profit for the period - - 25.0 25.0 0.2 25.2
Other comprehensive income - 14.0 - 14.0 - 14.0
Total comprehensive (loss)/income in the period - 14.0 25.0 39.0 0.2 39.2
Transactions with owners, recorded directly in equity
Dividends (25.0) (25.0) - (25.0)
Purchase and cancellation of own shares - - (1.2) (1.2) - (1.2)
Audited 30 December 2022 30.6 130.9 75.0 236.5 0.3 236.8
Consolidated cash flow statement
For the fifty-two weeks to 30 December 2022
Audited Re-presented Audited 52 weeks
52 weeks 31 December
30 December 2021
2022
£m £m
Cash flows from operating activities
Profit before taxation - continuing operations 16.1 9.8
Profit before taxation - discontinued operations 13.2 5.6
Adjustments for:
Depreciation and amortisation 2.6 2.4
Amortisation of right-of-use assets 5.5 7.0
Amortisation of other intangible assets 14.9 15.1
Impairment of asset held for sale 1.9 -
Loss / (profit) on disposal of property, plant and equipment 0.2 (0.2)
Gain on disposal of discontinued operations (4.6) -
Finance income (0.1) (0.2)
Finance expense 5.2 4.3
54.9 43.8
(Increase) in trade and other receivables (111.7) (46.0)
Increase in trade and other payables 136.3 12.1
(Decrease) / Increase in provisions (3.0) 2.0
Cash generated by operations 76.5 11.9
Taxation paid (7.4) (1.7)
Net cash generated by operating activities 69.1 10.2
Cash flows from investing activities
Cash flow from disposal of operations, net of cash 15.4 -
Purchase of property, plant and equipment (3.3) (1.5)
Purchase of intangible assets (8.0) (4.3)
Receipt from lease debtors - 1.7
Decrease in other financial assets 0.7 -
Finance interest received 0.1 0.2
Net cash inflow / (utilised) on investing activities 4.9 (3.9)
Cash flows from financing activities
Drawdown of short-term borrowings 151.2 292.0
Repayment of short-term borrowings (175.3) (308.7)
Increase in overdraft 0.4 1.0
Dividends paid (25.0) -
Purchase and cancellation of own shares (1.2) (1.9)
Interest paid on lease liabilities (0.4) (0.6)
Interest paid on borrowings (4.5) (3.5)
Repayment of lease liabilities (5.5) (8.9)
Net cash (outflow) from financing activities (60.3) (30.6)
Net increase / (decrease) in cash and equivalents 13.7 (24.3)
Opening cash and cash equivalents 90.9 117.9
Foreign exchange gain / (loss) on cash and cash equivalents 7.8 (2.7)
Closing cash and cash equivalents 112.4 90.9
Notes to the interim financial statements
1 Basis of preparation
I. Non-statutory information
The financial information for the 52 weeks to 30 December 2022 does not
constitute the statutory accounts of the Group for the relevant period within
the meaning of section 435 of the Companies Act 2006.
The annual report and accounts for the 52 week period ended 30 December 2022
have been audited and the audit report was unqualified and did not contain any
statement under section 498 of the Companies Act 2006.
The consolidated financial statements have been prepared on a going concern
basis in accordance with UK adopted international accounting standards. In
coming to their conclusion the Directors have considered the Group's profit
and cash flow plans for the coming period, together with outline projections
for 2024 and 2025. At the end of the year the Group had a net cash position of
£31.0m (excluding IFRS 16 lease liabilities) and has a further £105.0m
available to drawdown on the Group's revolving credit facility. Following the
sale of the Regional Specialist Staffing and Healthcare businesses in March
2023 the Group's revolving credit facility was reduced by £50m to £132.5m in
line with the revised projections of the Group's activities. The amount of
borrowing required to fund the Group's activities is determined based on these
projections, together with expected returns to shareholders and planned
capital expenditure. Also considered is the projection of compliance with the
financial covenants implied by these plans. In addition, these figures are
tested for sensitivity to possible changes to the economic environments in
which the Group operates. The Group has no operations in Ukraine or
surrounding regions and therefore there is no direct impact on the Group's
trading, however, any indirect impact such as a worsening in economic
conditions, would represent such a sensitivity. The impact on Group liquidity
and covenants of each of these sensitivities is then considered together with
the likelihood of each of these occurring either individually or in
combination. Given this analysis, the Directors have determined that there are
no likely downside scenarios which would cause the Group a concern.
II. Accounting policies
The accounting policies used in this report are those which applied at 30
December 2022.
No 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.
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. The disposals during the year and after the year-end
comprised the entirety of the Regional Specialist Staffing and Healthcare
segments but these have been retained in this note to reflect what was
reviewed by the CODM throughout the period.
Fifty-two weeks to 30 December 2022 - audited
Revenue Gross profit Adjusted operating profit
£ m £ m £ m
UK & Europe 1,506.2 112.8 20.5
North America 394.1 81.7 10.6
Asia Pacific 47.1 10.4 2.0
Operating regions 1,947.4 204.9 33.1
Fifty-two weeks to 31 December 2021 - restated
Revenue Gross profit Adjusted operating profit
£ m £ m £ m
UK & Europe 1,205.8 89.4 17.4
North America 358.3 63.7 8.6
Asia Pacific 16.2 7.9 1.6
Operating segments 1,580.3 161.0 27.6
Audited Restated
52 weeks 52 weeks
30 December 2022
31 December
2021
£ m
£ m
Segment adjusted operating profit 33.1 27.6
Corporate costs (5.3) (7.5)
Operating profit before amortisation and impairment 27.8 20.1
Amortisation of acquired intangibles (6.8) (6.4)
Operating profit 21.0 13.7
Finance income 0.1 0.2
Finance expense (5.0) (4.1)
Taxation charge (1.4) (6.5)
Profit for the period 14.7 3.3
Where the Group places workers between operational segments, the relevant
segments each record the gross revenue for placing the worker on an
arm's-length basis. An adjustment has been made to remove the impact of
inter-segment revenues from the Group results.
The Group has adopted adjusted operating profit as its Alternative Performance
Measure, to include depreciation and amortisation of assets but excluding
amortisation of acquired intangibles.
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
Finance expense Audited Audited
52 weeks 52 weeks
30 December
2022 31 December
£m
2021
£m
Revolving credit facilities 4.6 3.4
Interest on lease liabilities 0.4 0.6
Unwind discount on provisions 0.1 0.2
Other interest expense 0.1 0.1
Total finance expense 5.2 4.3
Continuing operations 5.0 4.1
Discontinuing operations 0.2 0.2
Total 5.2 4.3
4 Taxation
Tax charge in the income statement
Audited Audited
52 weeks 52 weeks
30 December 2022 31 December 2021
£m £m
Current income tax
UK corporation tax on results for the period 3.1 2.8
Adjustments in respect of previous periods (0.6) (0.5)
2.5 2.3
Foreign tax in the period 2.3 1.6
Total current income tax 4.8 3.9
Deferred tax charge (0.7) 3.2
Total taxation charge in the income statement 4.1 7.1
Continuing operations 1.4 6.5
Discontinuing operations 2.7 0.6
Total 4.1 7.1
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.
There was no dilutive effect in 2022. For 2021 there were 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 2022 is 45,147,337 (2021:
45,538,963) and the fully diluted average number of shares is 45,152,679
(2021: 45,558,804). The calculations of both basic and diluted earnings per
share ('EPS') are based upon the following consolidated income statement data:
Audited Audited
52 weeks 52 weeks
30 December 2022
31 December 2021
£m £m
Continuing profit for the period 14.7 3.3
Discontinued profit for the period 10.5 5.0
Total profit for the period 25.2 8.3
Impairment of asset held for sale (net of tax) - discontinued 1.9 -
Customer relationship and brand amortisation (net of tax) - continuing 5.3 5.0
Customer relationship and brand amortisation (net of tax) - discontinued 2.3 2.7
Total adjusted profit for the period 34.7 16.0
Continuing adjusted profit for the period 20.0 8.3
Discontinued adjusted profit for the period 14.7 7.7
Weighted average number of shares 45,147,337 45,538,963
Audited Audited
52 weeks 52 weeks
30 December 2022
31 December 2021
Basic EPS Pence Pence
Continuing unadjusted basic earnings per share 32.6 7.3
Discontinued unadjusted basic earnings per share 23.3 11.0
Total unadjusted basic earnings per share 55.9 18.3
Impairment of asset held for sale (net of tax) - discontinued 4.2 -
Customer relationship and brand amortisation (net of tax) - continuing 11.7 10.9
Customer relationship and brand amortisation (net of tax) - discontinued 5.1 6.1
Total adjusted basic earnings per share 76.9 35.3
Continuing adjusted basic earnings per share 44.3 18.2
Discontinued adjusted basic earnings per share 32.6 17.1
6 Discontinued operations
Profit and loss relating to discontinued operations
Audited Audited
52 weeks 52 weeks
30 December 2022
31 December 2021
£m £m
Turnover 580.9 682.1
Cost of Sale (471.0) (576.1)
Gross Profit 109.9 106.0
Admin expenses (99.2) (100.2)
Impairment of goodwill (1.9) -
Operating profit 8.8 5.8
Interest (0.2) (0.2)
Profit before tax 8.6 5.6
Taxation (1.3) (0.6)
Profit from discontinued operations 7.3 5.0
Post tax gain on disposal 3.2 -
Total profit from discontinued operations 10.5 5.0
Cash flows relating to discontinued operations
52 weeks 52 weeks
30 December 31 December
2022 2021
£m £m
Net cash generated by operating activities 4.7 2.9
Net cash generated on investing activities 12.1 (0.6)
Net cash outflow from financing activities (2.4) (2.9)
Net cash flows for discontinued operations 14.4 (0.6)
Disposal of Corestaff
On 24 January 2022 the Group announced the sale of the business and assets of
Corestaff, the US-based Light Industrial brand, to swipejobs Inc., a US
private digital staffing company, for cash consideration of approximately $19
million (£14.1 million) (the "Disposal"). This consideration was based on an
agreed net working capital of $10 million on the date of disposal with a $ for
$ adjustment to consideration if the net working capital was above or below
this amount. The final working capital position was to be determined between
90 and 120 days post completion date and, on 29 June 2022, a final position of
$12.9 million was agreed. As a result, an additional $2.9 million (£2.2
million) of consideration was received in July 2022 giving a total of $21.9
million (£16.3 million).
Corestaff is not a separate legal entity but is included within the trade of
two US registered legal entities (Corporate Employment Resources Inc and
Corestaff Support Services Inc). Assets, liabilities and trade relating to
Corestaff are identified by way of specific cost centre combinations that are
identified as relating to Corestaff.
Profit from disposal of Corestaff:
£m
Cash consideration received 16.3
Cash disposed of -
Expenses relating to disposal (0.9)
Net cash inflow on disposal of discontinued operation 15.4
Net assets disposed (other than cash):
Right of use asset (0.2)
Trade and other receivables (10.9)
Trade and other payables 0.8
Lease liabilities 0.2
Provisions 0.3
(9.8)
Gain on disposal of discontinued operation before allocated goodwill and tax 5.6
Allocated goodwill (1.0)
Pre-tax gain on disposal of discontinued operation 4.6
Related tax expense (1.4)
Gain on disposal of discontinued operation 3.2
Profit and loss relating to discontinued operations
52 weeks 52 weeks
30 December 31 December
2022 2021
£m £m
Turnover 9.8 98.0
Cost of Sale (8.7) (85.1)
Gross Profit 1.1 12.9
Admin expenses (1.1) (11.4)
Operating profit - 1.5
Interest - -
Profit before tax - 1.5
Taxation - (0.4)
Profit from discontinued operations - 1.1
Post tax gain on disposal 3.2 -
Total profit from discontinued operations 3.2 1.1
Cash flows relating to discontinued operations
52 weeks 52 weeks
30 December 31 December
2022 2021
£m £m
Net cash generated by operating activities (0.5) 0.7
Net cash generated on investing activities 13.8 -
Net cash outflow from financing activities - 0.1
Net cash flows for discontinued operations 13.3 0.8
Effect of disposal on the financial position of the Group
At disposal
£m
Allocated goodwill 1.0
Right-of-use 0.2
Trade and other receivables 10.9
Trade and other payables (0.8)
Lease liabilities (0.2)
Provisions (0.3)
Net assets and liabilities 10.8
Disposal of Regional Specialist Staffing and Healthcare Staffing divisions
On 30 January 2023 the Group announced the sale of the business and assets of
its Regional Specialist Staffing businesses in the UK (Tate, Blue Arrow Group,
Chadwick Nott, Career Teachers) and its Healthcare Staffing business in the
UK, Ireland and APAC (Medacs Global Group) to Twenty20 Capital, for cash
consideration of £85m on a debt-free, cash-free, normalised working capital
basis (the "Transaction"). This consideration was based on an agreed nil
cash position and net working capital of £46.3 million on the date of
disposal with a £ for £ adjustment to consideration if the final positions
were above or below this amount. The final working capital position is to be
determined 60 days post completion date. The deal had been deemed to be
highly probable on 30 December 2022 and at that time was treated as a
discontinued operation and as an asset and liability held for sale. The
transaction was completed on 3 March 2023.
Profit and loss relating to discontinued operations
52 weeks 52 weeks
30 December 31 December
2022 2021
Turnover 571.1 584.1
Cost of Sale (462.3) (491.0)
Gross Profit 108.8 93.1
Admin expenses (98.1) (88.8)
Impairment of goodwill (1.9) -
Operating profit 8.8 4.3
Interest (0.2) (0.2)
Profit before tax 8.6 4.1
Taxation (1.3) (0.2)
Profit from discontinued operations 7.3 3.9
Post tax gain on disposal - -
Total profit from discontinued operations 7.3 3.9
Cash flows relating to discontinued operations
52 weeks 52 weeks
30 December 31 December
2022 2021
£m £m
Net cash generated by operating activities 5.2 2.2
Net cash generated on investing activities (1.7) (0.6)
Net cash outflow from financing activities (2.4) (3.0)
Net cash flows for discontinued operations 1.1 (1.4)
Effect of disposal on the financial position of the Group
30 December
2022
£m
Property, plant and equipment 1.5
Right-of-use 3.4
Goodwill 25.2
Other intangible assets 30.4
Financial assets 0.1
Deferred tax assets 1.7
Trade and other receivables 107.8
Lease receivable 1.1
Total assets held for sale 171.2
Lease liabilities (4.4)
Trade and other payables (68.8)
Tax payable (0.5)
Provisions (6.6)
Deferred tax payable (6.8)
Total liabilities held for sale (87.1)
Net assets and liabilities 84.1
7 Additional cash flow information
Audited Audited Transfer to liabilities held for sale Cash flow Interest charged Interest paid Drawdown Foreign exchange Audited
1 January 2022 30 December 2022
£ m £ m £ m £ m £ m £ m £ m £ m
Cash and short-term deposits 90.9 - 13.7 (2.4) 2.4 - 7.8 112.4
Bank overdraft (3.9) - (0.4) - - - - (4.3)
Revolving credit (101.9) - 24.0 (2.0) 2.0 - 0.1 (77.8)
Hire purchase (0.1) - 0.1 - - - - -
Lease liabilities (16.5) 3.3 5.4 (0.4) 0.4 (1.8) (0.3) (9.9)
Lease debtor - - - - - - - -
Net cash/(debt) (31.5) 3.3 42.8 (4.8) 4.8 (1.8) 7.6 20.4
The overdraft is included in trade and other payables on the balance sheet,
and the lease debtor is included in trade and other receivables.
8 Dividends
Audited Audited
52 weeks 52 weeks
30 December 2022
31 December 2021
£m £m
Special dividend paid 9 December 2022 25.0 -
Paid in period 25.0 -
On 22 December 2022 the company announced a further special dividend of 55.4p
per share totalling £25.0m to be paid on 27 January 2023 which has not been
recognised in these accounts.
On 6 March 2023 the company announced a further special dividend of 77.8p per
share totalling £35.0m to be paid on 6 April 2023 which has not been
recognised in these accounts.
See note 11 Post Balance Sheet Events - Important Information
9 POST BALANCE SHEET EVENTS - SHARE PURCHASE AND CANCELLATION
Between the end of the year and 30 March 2023, a further 106,597 Ordinary
shares of 1p each have been repurchased in the market for total consideration
of £0.7m.
See note 11 Post Balance Sheet Events - Important Information
10 POST BALANCE SHEET EVENTS - DISPOSAL OF SUBSIDIARIES
On 30 January 2023 the Group announced the sale of the business and assets of
its Regional Specialist Staffing businesses in the UK (Tate, Blue Arrow Group,
Chadwick Nott, Career Teachers) and its Healthcare Staffing business in the
UK, Ireland and APAC (Medacs Global Group) to Twenty20 Capital, for cash
consideration of £85m on a debt-free, cash-free, normalised working capital
basis. This consideration was based on an agreed nil cash position and
target net working capital of £30.8 million on the date of disposal with a £
for £ adjustment to consideration if the final positions were above or below
this amount. The final working capital position is to be determined 60 days
post completion date. The deal had been deemed to be highly probable on 16
December 2022 and at that time was treated as a discontinued operation and as
an asset and liability held for sale. The transaction was completed on 3 March
2023.
11 POST BALANCE SHEET EVENTS - IMPORTANT INFORMATION
The Board has become aware of an administrative oversight concerning technical
compliance with the Companies Act 2006 ("CA 2006") in respect of the special
dividend paid on 27 January 2023 (the "Dividend") and share buybacks effected
by the company following this date (the "Post January 2023 Share buybacks").
The amount of the Dividend was £25m and the total amount of the Post January
2023 Share buybacks was approximately £0.6m representing 94,822 shares. The
Group's historic reported trading results and financial condition, and ability
to pay future dividends are entirely unaffected by this matter. The CA 2006
requires the amount of any dividend distribution and share repurchases to be
justified by reference to relevant accounts which show the requisite level of
distributable reserves. If a company's last annual accounts do not show the
necessary reserves, then the company must prepare interim accounts and, in the
case of a public company, file those interim accounts with the Registrar of
Companies prior to the payment of the relevant dividend or share repurchase.
The Company's last annual accounts did not show the necessary reserves,
interim accounts should have been prepared and filed with the Registrar of
Companies prior to the payment of the Dividend and the Post January 2023 Share
buybacks, but were not. This therefore has the consequent effect on the
Dividend and the Post January 2023 Share buybacks.
Due to this administrative oversight the Company has been advised that, as a
consequence of the Dividend having been paid otherwise than in accordance with
the 2006 Act, the Dividend is technically unlawful and that the Company may
have claims against past and present shareholders who were recipients of the
Dividend and against persons who were directors of the Company at the time of
the payment of the Dividend. In addition, the Company has been advised that
the purported purchase and cancellation of the Post January 2023 Share
buybacks is void. The ordinary shares of the Company purportedly subject to
the Post January 2023 Share buybacks remain technically in issue but the
voting rights which attach to them are not capable of being exercised by any
person. The Company intends to take action to resolve this matter as soon as
practicable.
The Board notes, however, that the Company has no intention of bringing any
such claims or to seek the return of funds and that the Group's historic
reported trading results and financial condition and ability to pay future
dividends and continue its previously announced buyback programme are entirely
unaffected by this matter.
The Company will shortly post to shareholders an explanatory circular (the
"Circular") in due course and convene a general meeting, at which resolutions
authorising various rectifying actions will be proposed which will, if passed
and once such actions are completed, put all potentially affected parties, so
far as possible, in the position in which they were always intended to be.
Alternative Performance Measures
Certain discussions and analyses set out in this Preliminary Announcement
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:
Audited Restated
2022 2021
£m £m
Segment adjusted operating profit 33.1 27.6
Corporate Costs (5.3) (7.5)
Adjusted operating profit 27.8 20.1
Amortisation of brand value and customer relationships (6.8) (6.4)
Operating profit 21.0 13.7
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.
Adjusted EBITDA
Definition: The Group calculates adjusted EBITDA as operating profit before
interest, tax, depreciation and amortisation and excludes IFRS 16 adjustments.
Closest equivalent IFRS measure: Operating profit.
Rationale for adjustment: The Group continues to measure EBITDA which is used
for banking covenants and internal performance measures. It is also used
externally for valuation purposes.
Reconciliation of adjusted EBITDA to operating profit:
Audited Restated
2022 2021
£m £m
Adjusted EBITDA 34.2 26.2
Amortisation of software (4.8) (4.7)
Depreciation (1.6) (1.4)
Adjusted operating profit 27.8 20.1
Amortisation of brand value and customer relationships (6.8) (6.4)
Operating profit 21.0 13.7
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:
Audited Audited
52 weeks 52 weeks
30 December 2022 31 January 2021
£m £m
Continuing profit for the period 14.7 3.3
Acquired intangibles amortisation (net of tax) 5.3 5.0
Continuing adjusted profit 20.0 8.3
Weighted average number of shares 45,147,337 45,538,963
Continuing basic earnings per share 32.6 7.3
Continuing adjusted earnings per share 44.3 18.2
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:
Audited Audited
2022 2021
£m £m
Cash and short-term deposits 112.4 90.9
Bank overdraft (4.3) (3.9)
Revolving credit (77.8) (101.9)
Hire purchase - (0.1)
Net cash / (debt) excluding IFRS 16 30.3 (15.0)
Lease liabilities (9.9) (16.5)
Lease debtors - -
Net cash / (debt) 20.4 (31.5)
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 Tel: 020 7523 8150
Emma Gabriel
Thomas Diehl
Prior to publication the information communicated in this announcement was
deemed by the Company to constitute inside information for the purposes of
article 7 of the Market Abuse Regulations (EU) No 596/2014 as amended by
regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations No
2019/310 ('MAR'). With the publication of this announcement, this information
is now considered to be in the public domain.
Note to Editors:
Impellam is a connected group providing global workforce and specialist
recruitment solutions. Our 2000 people and market leading brands work across a
broad spectrum of industries and job categories throughout North America, the
UK and Europe and Asia Pac.
Our award-winning Global Managed Services provide a diverse range of digitally
enabled, multi-disciplinary workforce solutions to organisations around the
world. We are upper quadrant industry leaders in Managed Service Provision and
Services Procurement, and the seventh largest Managed Service Provider in the
world with over £4bn SUM(1) (Spend under Management).
Our STEM businesses are specialists in recruiting and engaging talent in the
key growth markets of technology, digital, data analytics, science, clinical
and engineering and work with clients across all sectors and sizes delivering
services that span Managed Services (MSP) Recruitment Process Outsourcing
(RPO), Statement of Work (SOW) and specialist recruitment.
Led by our Virtuosos, our capabilities are underpinned by proprietary digital
technology and unique partnerships with market-leading software providers,
enabling us to transform and future-proof our services.
We believe in the power of work. Through the power of work, we build better
businesses and help people lead more fulfilling lives.
For more information about Impellam Group please visit: www.impellam.com
(http://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 (2021 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
-END-
1 (#_ftnref1) These are areas which have been subject to a full scope audit.
(#_ftnref2)
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