Impel: third year of high cost implementation of new labour legislation

In 2017, Impel Group, Poland's largest group of companies providing services for business, generated sales revenues of PLN 2.21 billion, an increase by over PLN 187 million (9.3%) comparing to 2016. Operational profit of the group amounted to PLN 36.6 million.

In 2017, services of the group were divided into three business areas (Facility Management, Industrial Services and Digital Services & BPO) and new strategy was implemented to provide both more standardised and more specialist services. Internal processes has also been improved by constantly refined management of the group which results in greater clients' satisfaction.

Taking into account increased labour costs in 2017 due to legally imposed hourly rate for contractors and upward pressure on salaries on the market, our consolidated operational result EBIT of PLN 36.6 million seems perfectly fine, even though the result in 2016 was higher by PLN 5 million. We are particularly happy about improved financial liquidity, reduced debt and improved covenants.

- The minimal hourly rate for all sorts of civil-law contracts of PLN 13.00 per hour, legally imposed as of 1 January 2017, was the main cause of reduced operational result. The minimal rate increased labour costs for civil law contracts and forced us to terminate some contracts with contractors who did not accept new financial terms resulting from amended legislation. Our portfolio of contracts was significantly changed due to terminated and newly won contracts which negatively impacted the result in short term. Valorisation challenges resulted from similar legislative change in labour costs in 2016, when social security charges were legally imposed up to minimal salary for civil-law contracts. To face those changes, we launched the process of optimizing organisational structures and improving internal processes and service delivery. We both cut costs and implement innovative components and automation processes. Our priority for the new strategy is to deliver new specialist services with higher profitability and productivity. Taking into account additional costs of financing new receivables related to increased labour costs, we focused on improving economic indicators of financial liquidity. We optimized collection process, we shortened payment time limits, and hence we reduced debt, highlights Grzegorz Dzik, President of Impel S.A.

[FM] Facility Management

In 2017, the largest business area Facility Management (FM) grew its revenues while with reduced margin.

Renegotiation of contracts due to new labour legislation was the most intense in Facility Management (FM) which gathers workers working on the lowest rates on the market. Revenues in FM increased by PLN 149 million (10.4%), reaching over PLN 1.58 billion. Its operational result decreased by PLN 9.8 million, as this segment is the most sensitive to changed labour costs, its margin was lost in part due to termination of some contracts for which prices could not be accepted by both parties.

In 2017, Impel Group strengthened its position in the segment of store chains, by providing services for Carrefour Polska, LPP, Jeronimo Martins Polska and Wroclavia. In the segment of National Defense, FM provided security services for more Polish military units (up to 30%) on the market of 450 million yearly. Moreover, guards are systematically replaced by technical (electronic) solutions. Such investments in the reported period increased by over 100%. In early 2018, further growth and well established tendency to optimize security systems are observed.

- The scale of projects is enormous. We established the Office for Security Technology with sales engineers which are to deliver the state-of-art solutions to upgrade security systems. By introducing innovative components and automation processes, we lower labour costs of security services. This solution is crucial for clients, providing high quality and stable less labour cost dependent prices, highlights Wojciech Rembikowski, Vice-President of Impel S.A.

Industrial Services [IS]

Industrial Services, established in January 2017, providing highly specialist services, such as industrial cleaning, integrated real estate services, production and installation of facility marking elements (rebranding), grew its revenues by PLN 23 million (10.1%), systematically increasing profitability of margin and increasing operational result by PLN 4.5 million comparing to 2016. Establishment of Industrial Service within Impel Group acted as a catalyst for changes in management and allowed us to focus on strategic goals in industrial segment. Industrial Services increased cooperation with Logico (integrated real estate services). Currently, Impel takes care of 21 logistic parks with a surface of more than 1,200,000 m². Other clients of Impel Group include Aero Gearbox Ropczyce - Rolls Royce, Grupa MLP, Hamilton Sundstrand Rzeszów and PZL Świdnik. The total value of contracts amounted to over 42 million.

- We provide more and more services related to reconstruction, development and modernisation of facilities for public institutions, developers and industrial companies. We modernised many facilities, such as: nursing homes, hospitals, theatres and hotels. As a subcontractor, we carried out specialist installation works. The total value of contracts amounted to PLN 24 million. We win contracts for integrated services, we combine management with maintenance, cleaning, security and technical services. Climbex providing specialist services related to automatic cleaning and repairing of oil containers, have clients throughout Poland: PERN SA, Lotos, PGNIG, Orlen, as well as abroad: Bazan Group - Oil Refineries in Israel, VAOS Limited A/S in Libya or A/S Dansk Shell in Denmark, notes Wojciech Rembikowski.

Digital Services & BPO

Digital Services & BPO grew its revenues by PLN 15 million (4.3%), reaching PLN 374,7 million and reaching operational result of PLN 2.6 million. This area is innovative, by launching new products in HR and accounting services, offering optimisation solutions both product-wise (adding management accounting to accounting services) and organisation-wise (Lean Management and robotisation). Thanks to technology offered by UiPath, some works which were carried out by employees were automatized.

- We successfully provide our clients with our products which are based on SAP technology, facilitating growing accounting and reporting obligations imposed by law: SI-ZSMOPL for pharmaceutical sector, SI-SENT for transport and SI-NIP. We also started three innovative projects for Sun Garden: automatization of documentation flow, i.e. implementation of SI-Flow, implementation of Hybris e-commerce, an on-line shop with spare parts for retail clients and implementation of Hybris Cloud for Sales, a CRM system for sellers to business clients. The system will register activity of sellers, visits and contacts with clients and selling opportunities. The projects will be launched in May-June 2018. This is the first step in development of those functionalities in Sun Garden, including customer service and portal for business clients where they will be able to track the status of their order from placement to delivery and payment. We also develop our competences for Hybris which we implemented for the largest mobile operator in Europe, adds Grzegorz Dzik.