Parity (AIM:PTY), the technology focussed consultancy and staffing business, today provides the following update on trading in respect of the year ended 31 December 2018.
At the time of the interim results announcement in September, we reported that despite a growth in the Parity Consultancy Services (“PCS”) revenues in the first half, trading in the second half was constrained by a delay in the extension on a large contract in this business. This contract remains delayed and at the point of writing it is anticipated that scope will be reduced if approved. We have consciously invested in the data strategy for the long-term benefit of the PCS business, but have also been impacted by project delays and reduced scope on some of the traditionally higher margin project delivery contracts with fixed costs. It is now apparent that profit for the full year will fall short of expectations, and despite progress in Group revenues, the Board believes that adjusted profit before tax(1) will now be around breakeven for the second half.
Revenues in the Parity Professionals (staffing) business continue to build, supported by our programme of investment which creates a strong platform for both contract and permanent sales.
A number of initiatives are underway as part of a review to ensure the group continues to grow longer-term profits after our return to profitable growth 3 years ago. The senior management team intends to continue its measured investment for the longer-term strategic benefits of the business. There are early signs of success with some initial higher margin data consultancy projects and additional managed project wins in the Professionals business.
In light of the pressures, the Board has initiated the following actions:
- Restructure of the PCS division to focus on new Data consultancy opportunities.
- Increased alignment of the Professionals business in Data using the depth of knowledge to support marketing activities and to deliver ‘best in class’ capability for our clients whilst reducing exposure to significant bench costs whilst we grow.
- A review of project profitability and staff utilisation with cost reduction activities undertaken which will benefit 2019.
- A re-prioritisation of the pipeline and relationship management process to ensure appropriate engagement on fewer but more likely and more profitable projects, developing a greater in-house knowledge that will support future work.
As a result of the initiative we expect to incur non-recurring costs of approximately £300k-400k comprising the costs of restructuring the PCS division, and to a lesser extent, some one-off legal fees incurred.
Working capital and net debt remain consistent with the progress made in the last three years, and it is expected that our net debt position at the year end will have improved from the half-year.
The investments we have made to build capacity in the Professionals business are supporting revenue growth and will enable greater alignment of the Group moving forwards. The actions taken in the short-term to restructure the Consultancy business make us more targeted and relevant to client needs, and give us greater confidence in the long-term prospects for the Group in the Data market. Together, this strengthens our portfolio of services and reduces our exposure to individual client decisions, enabling greater agility, more focussed marketing activities and improved consumer confidence in our capabilities.