FINANCIALS: Large contract delay knocks Parity Group profit expectations

Technology staffing business Parity Group says it expects profits to be short of expectations as it predicts it will break even in the second half of this year.

In a trading update, the group revealed H2 2018 trading had been constrained by a delay on a large contract expected by its Parity Consultancy Services (PCS), with the group expecting the scope of this contract to be reduced if approved.

However, the group added revenues for its Parity Professionals staffing business continue to grow, and it is working on a number of initiatives as part of a review to grow profits.

The group added its senior management team plans to continue its measured investment for the longer-term strategic benefits of the business, while there are early signs of success with some initial higher margin data consultancy projects and additional managed project wins by the group’s professionals business.

Additionally, the group is acting to:

  • Restructure its PCS division to focus on new data consultancy opportunities
  • Increase alignment of the professionals business in data 
  • Conduct a review of project profitability and staff utilisation with cost reduction activities undertaken 
  • Re-prioritise 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 these initiatives, the group expects to incur non-recurring costs of roughly £300k-400k made up of the costs of restructuring the PCS division, and to a lesser extent, some one-off legal fees incurred.

The group added its working capital and net debt remain consistent with progress made in the last three years, while it expects net debt position at the year-end will have improved from the half-year.

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