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Impellam Group (LSE:IPEL), an AIM-listed staffing and outsourced support services provider in the UK and North America, with smaller operations in Australia, Ireland, New Zealand and mainland Europe is a big success from my time at t1ps – Steve Moore and I tipped it at 40p in September 2009. I published a note saying that the stock was still a buy at 315p in December of last year. After results for the company’s year ended 28th December 2012, released last week, the shares now trade at 425p. You see, Steve and I do get the odd tip right and we will be serving up another hot prospect on our new Nifty Fifty website later this week.
You can read that December update here
But what now?
Last week’s results showed an adjusted pre-tax profit of £32.1 million, down from a prior year £34.8 million, despite revenue more than 7% higher at £1.211 billion. However, a reduced tax charge and share buy-back programme helped attributable earnings per share 1.7% higher to 59.04p. Other than in the Carlisle Support Services business (which has been particularly impacted by reductions in demand from the retail sector), revenue was increased across the company but continuing difficult economic and trading conditions saw margin compression result in decreased operating profit across the group.
After tax, £5.7 million in group restructuring and capital reorganisation costs, £3.1 million paid out in dividends and £2.8 million on the buy-back and cancellation of shares, net cash increased by £15 million over the year to end at £16.8 million. Net current assets were £13.8 million higher, at £40.2 million, and non-current liabilities reduced by £2.1 million to £15.6 million. The cash performance and balance sheet position has seen a 5p per share final dividend for the year and 35p per share special dividend proposed – the latter payable on 10th April to shareholders on the register on 2nd April. Together these dividends equate to a current yield of 9.4%.
The noted margin compression of what are thin margins is a concern but “the board believes that the restructured operating model provides a degree of resilience to the group’s earnings and a platform for sustainable cash generation” and the rating – 7.2x the earnings just reported – discounts the risks somewhat.
My view now is that on the company continuing to deliver on expectations the current rating still provides scope for further decent share price appreciation – but there must be a material macro-economic threat. Ultimately you cannot complain about what has, with dividends, been a ten bagger for Steve and I. Let’s play it safe and take profits.
Between its establishment in 2000 and October 2012 t1ps.com was edited and written by Tom Winnifrith and Steve Moore. An average gain of 42.7% per tip over 241 tips is THEIR record. Steve and Tom now have nothing to do with t1ps and instead run the Nifty Fifty website where a new investment idea will appear later this week. For more details click HERE
