The latest results from staffing group Impellam (IPEL) included it emphasising “we are well placed to take advantage of a return to growth”. We have longer-term macroeconomic concerns, added to by the response to Covid-19, but do accept there is strong upcoming macroeconomic recovery potential. Many stocks in the recruitment sector have already responded, doubling and much more but here a current 294p to buy compares to a low of 220p and we see recovery potential back to 375p+. That makes the shares a recovery buy.
Impellam Group describes itself as “the seventh largest Global Talent Acquisition and Managed Workforce Solutions provider in the world”, delivering managed services and specialist staffing in the UK, North America, Australasia, the Middle East and Europe. Revenue last year was 73% from the UK (prior year: 75%), 20% North America (v. 18%), 4% Europe (v. 3%) and 3% Australasia (v. 3%). Responsible for the group’s UK operations between 2008 and 2013, CEO Julia Robertson was appointed to the role in 2013. Last year’s remuneration was £612,000 with 153,910 shares held. A Chartered Accountant with over ten years’ experience working within the recruitment sector, CFO Tim Briant joined the group in October 2019 and was appointed to the board in February 2020. Last year’s remuneration was £381,000. Tory peer and well known businessman Lord Ashcroft is Non-Executive Chairman and has a majority interest in the shares.
8th April-announced results for the group’s year ended 1st January 2021 noted “the impact of the Covid-19 pandemic on our business was dramatic” and showed revenue down 11% on the prior year to £2 billion, gross profit down 17% to £228.1 million, adjusted pre-tax profit down 44% to £12.8 million and adjusted earnings per share down 54% to 18.2p. Net current assets reduced by £8.7 million to £109.6 million, but non-current liabilities were reduced by £34.9 million to £157.7 million and adjusted net debt to just £4.1 million. That was with the group emphasising it “reacted decisively… 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”. In addition to the usual risks, the group admits “the speed and extent of the economic recovery in our global markets remains uncertain” and that it has seen some business benefits, for example, in healthcare and life sciences areas. However, overall trading conditions have been improving and there are the more “streamlined, integrated business” benefits to hopefully flow through (e.g. “virtual working becomes part of our new better way of being”). We have longer-term macroeconomic concerns, added to by the response to Covid-19, but do accept there is strong upcoming macroeconomic recovery potential.
At a current 294p to buy, the previously noted financials compare to a market cap here of circa £134 million. The results stated the group “cautiously optimistic about a reasonable recovery in 2021” but we see macro cause currently to more optimistic and the group “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” also suggests further confidence. It did “not anticipate a return to 2019 performance levels on a full year basis” (adjusted pre-tax profit £22.9 million, earnings c39p) but also noted “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 look for that together with trading recovery to result in financials better than the market currently expects. By next year earnings should be heading back towards the levels the year before last and in anticipation of that we would expect to see the shares at 375p or more. Therefore, at up to 300p, a Recovery Buy.
This article first appeared on the N50 website which Tom Winnifrith runs with Steve Moore & Lucian Miers. To access the website for a new share tip from Tom & Steve JUST OUT THIS AFTERNOON and for a new shorting piece this week click HERE
Filed under: Impellam, Tern, Red Rock Resources, Headlam, Bluebird Merchant Ventures, N50 website
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