Impellam (IPEL)

A maturing recruiter

Impellam are a company I first looked at last year. Since then, bar a small dip, they’ve pretty much hung around 350p – a price which puts them on a low single-digit multiple of their (admittedly quite recent) strong earnings.  Their short history comes about from how they were created – the merger in 2007 of two recruiting firms, The Corporate Services Group and Carlisle Group Limited. Since then it’s been rapid growth in both revenue and profits, though in the last two years (and looking at the recently released interims this year) things have begun to slow down. Hence the ‘maturing’!

While there aren’t any forecasts for this full year on Digital Look, it looks likely the results will be slightly weaker than last year; while revenue was up 7.6% in the group’s half yearly report, operating profit was down 21% as margins were heavily squeezed. The company makes the usual case about the continuing top line growth putting them in a strong position when the general market recovers – this is something that sounds logically appealing but I take with a pinch of salt. The half yearly report also reported a slight deterioration in the working capital position (though probably well within the boundaries of noise), though over the last few years the large receivables balance has remained stable.

Things are slowing down on that front, then, but they’re also launching their maiden dividend – at 7p – as well as continuing some share buybacks, all after they reorganised their capital to allow them to do so. Let’s face it – recruiting is hardly ever a capital intensive business anyway – but it all indicates Impellam are moving out of that growth phase and into the spot where many of the other recruiters sit (again I’ll link to Philip O’Sullivan’s post on Harvey Nash), with slim balance sheets and decent dividend payouts.

I still feel a little hesitant about the industry in general, though. I don’t know – something about the lack of tangibility and the apparent difficulty of actually differentiating your offering. Still, I bought Morson, and they were a recruiter, though a little more niche. I’m not sure if that’s a good thing or bad – Morson certainly suffered because their niche ( the technical side; engineering etc.) was hit hard during the downturn with infrastructure investment and the like. On the other hand, does a specialised company offer a better service to clients? Does it even matter, when Impellam is split into so many divisions anyway? Modern corporate structure could easily see these divisions basically functioning as stand alone companies, anyway.

Lots of questions, but I’ll finish up with the final point of interest – the shareholder register. Impellam’s website lists ‘Lombard Trust’ as owning 57.6% of the shares – some googling turns up these as being transferred from Lord Ashcroft, businessman and Conservative Peer, in 2010. That’s a hefty shareholder, then, though I don’t know how much influence he actually exerts over the company. Not sure what I think on final balance, but it’s probably fair to say it’s quite cheap.

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