TIDMSTAF
RNS Number : 5757D
Staffline Group PLC
27 June 2019
For Immediate Release 27 June 2019
`
STAFFLINE GROUP PLC
('Staffline', 'Company' or 'the Group')
RESULTS FOR THE YEARED 31 DECEMBER 2018
Staffline Group plc, the Recruitment and Training organisation,
today announces its results for the year ended 31 December 2018, a
summary of which is as set out below.
Audited Annual Report
A copy of the audited 2018 Annual Report has been sent to
shareholders.
The Annual Report, together with a presentation of the results,
will be available on our website
https://www.stafflinegroupplc.co.uk/ from 07.00 am on Thursday 27
June 2019.
Financial summary
Statutory Underlying*
2018 2017 Change 2018 2017 Change
GBP'm GBP'm % GBP'm GBP'm %
-------------------------- -------- ------ -------- ------ ----------
Revenue 1,127.5 957.8 +17.7 1,127.5 957.8 +17.7
-------------------------- -------- ------ ---------- -------- ------ ----------
Recruitment 1,020.0 843.3 +21.0 1,020.0 843.3 +21.0
-------------------------- -------- ------ ---------- -------- ------ ----------
PeoplePlus 107.5 114.5 (6.1) 107.5 114.5 (6.1)
-------------------------- -------- ------ ---------- -------- ------ ----------
Profit/(loss) before
tax (9.6) 24.1 (139.8) 36.0 36.3 (0.8)
-------------------------- -------- ------ ---------- -------- ------ ----------
Recruitment (4.1) 11.9 (134.5) 21.0 17.4 +20.7
-------------------------- -------- ------ ---------- -------- ------ ----------
PeoplePlus (5.5) 12.2 (145.1) 15.0 18.9 (20.6)
-------------------------- -------- ------ ---------- -------- ------ ----------
% Profit margin (0.9%) 2.5% 3.2% 3.8%
-------------------------- -------- ------ ---------- -------- ------ ----------
Recruitment (0.4%) 1.4% 2.1% 2.1%
-------------------------- -------- ------ ---------- -------- ------ ----------
PeoplePlus (5.1%) 10.7% 14.0% 16.5%
-------------------------- -------- ------ ---------- -------- ------ ----------
Non-underlying charges 45.6 12.2
-------------------------- -------- ------ ---------- -------- ------ ----------
Pence Pence % Pence Pence %
-------------------------- -------- ------ ---------- -------- ------ ----------
Basic earnings per share (32.5) 71.4 (145.5) 110.1 113.2 (2.7)
-------------------------- -------- ------ ---------- -------- ------ ----------
Diluted earnings per
share ("EPS") (32.5) 71.1 (145.7) 110.1 112.6 (2.2)
-------------------------- -------- ------ ---------- -------- ------ ----------
Final dividend per share - 15.7 (100.0) - 15.7 (100.0)
-------------------------- -------- ------ ---------- -------- ------ ----------
Total dividend per share 11.3 26.7 (57.7) 11.3 26.7 (57.7)
-------------------------- -------- ------ ---------- -------- ------ ----------
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
-------------------------- -------- ------ ---------- -------- ------ ----------
(46.5) (46.5)
Net debt** 63.0 16.5 increase 63.0 16.5 increase
-------------------------- -------- ------ ---------- -------- ------ ----------
* Underlying excludes amortisation of intangible assets arising
on business combinations, business acquisition costs, exceptional
reorganisation costs, exceptional NMW remediation and financial
penalties, revised audit scope and increased audit fees and the
non-cash charge/credit for share-based payment costs.
** Net debt including unamortised transaction costs
Delay in publication of results and National Minimum Wage
issues
The Group had planned to release its unaudited results for the
year ended 31 December 2018 on 30 January 2019. On the evening of
29 January 2019, the Group auditors received an anonymous email
which made various allegations in relation to payroll and invoicing
practices and associated VAT liabilities and accruals/provisions. A
detailed explanation is included in the Chief Executive Officer's
Statement. The Directors sincerely apologise for the delay in the
publication of the 2018 results. Since the allegations were
received, the Group has carried out an exhaustive investigation and
review.
This has been extremely time consuming but reflects the
Directors determination to be thorough and transparent. Where
issues have been identified, they have been rectified with the
benefit of expert independent advice. The Group will now move
forward with renewed determination and ambition to grow our market
leading businesses, further enhance our valuable existing
partnerships and regain the confidence of our customers and
shareholders.
Exceptional costs of GBP15.1m have been recorded in relation to
the historical non-compliance with the National Minimum Wage
('NMW') regulations.
Recognising this difficult period in the Group's circumstances,
the Executive Directors have voluntarily waived all bonus
entitlements in relation to 2018.
Financial highlights
-- Group revenues increased 17.7% to GBP1,127.5m (2017:
GBP957.8m). Growth of GBP166.8m from seven acquisitions during 2018
and full year benefit of the two acquisitions made in 2017.
-- Organic revenue growth of +0.3%, with Recruitment +1.9% but
PeoplePlus -11.8% due to the wind down of the Work Programme
(non-Work Programme revenues grew by +31%: organic growth of
+20%).
-- Underlying profit before tax down 0.8% to GBP36.0m (2017:
GBP36.3m) - Recruitment growth of GBP3.6m, PeoplePlus GBP3.9m
lower. Reported loss before tax of GBP9.6m was GBP33.7m lower than
last year's profit before tax of GBP24.1m due to a GBP33.4m
increase in non-underlying charges in 2018. Non-underlying charges
include a provision for National Minimum Wage remediation costs and
financial penalties; and the reorganisation of the PeoplePlus
division.
-- Underlying diluted earnings per share down 2.2% to 110.1p (2017: 112.6p).
-- Final dividend per share cancelled (2017: 15.7p).
-- Net debt GBP63.0m, an increase of GBP46.5m in the year
(December 2017: GBP16.5m) primarily driven by GBP49.6m spent on
acquisitions. In addition, non-underlying reorganisation costs and
an increase in working capital, primarily due to the timing of
collections and payments contributed to the increase. Net debt at
30 June 2019 expected to be in the range GBP89m to GBP94m.
-- Refinancing of GBP150m of bank borrowings during 2018 which
are subject to amendment as more fully described in the Proposed
Placing announcement released by the Company today.
Operational highlights
Recruitment division
-- Acquired and integrated six businesses during the year, which
has provided an expanded footprint in the core blue collar
vertical. These acquisitions contributed to the overall Recruitment
division revenue growth of 21% and collectively performed better
than expected during the year.
-- Significant investment in the Group's proprietary digital
platforms which is both increasing candidate attraction and
retention capability, whilst providing unrivalled insights that
enable us to improve worker and customer experience. Our worker
engagement strategy is providing strong service differentiation and
driving worker and customer loyalty.
-- Strong performance in the Logistics vertical where the Group
continues to expand, both through new and existing clients,
offsetting macro-economic headwinds in the retail and automotive
sectors.
-- New business wins (Wiggle, Pukka Pies, PepsiCo, Argos, Ocado,
Huntapac, Hermes) whilst growing our presence with existing
customers (Asda, Royal Mail, Morrisons, Muller, Lidl, Bakkavor).
Our new business pipeline remains strong.
PeoplePlus division
-- Close to completing the transformation away from the Work
Programme to becoming the UK's leading skills and training
provider.
-- Acquisition of LearnDirect Apprenticeships has enabled Staffline to create the UK's leading Apprenticeship Levy business with significant progress in securing Apprenticeship Levy wins.
-- The Work Programme contract ended in March 2019, following an
agreement with the Department for Work and Pensions ("DWP").
-- Significant exceptional costs have been incurred in 2018
relating to the structural reorganisation of the division into the
UK's leading skills and training business, all of which have been
charged in 2018. The Board do not anticipate any further
exceptional costs in relation to the reorganisation of the
PeoplePlus division.
-- Multiple contract wins in the year, driving a strategic step
change for the business, notably New Enterprise Allowance
extension, Gloucestershire Carers Hub and, at the end of the year,
a doubling of our Prison Education contract.
-- Division successfully repositioned with a diversified set of
contracts and customers with multiple end dates.
Post balance sheet events
-- Following a weak start to the year, 2019 underlying EBIT
guidance reduced to a range of GBP23m to GBP28m.
-- Staffline is today announcing a proposed Placing of new
ordinary shares to raise GBP34m via an accelerated bookbuild, in
conjunction with future covenant waivers from the Group's lenders.
In addition, Staffline is also announcing a proposed Open Offer of
new ordinary shares to raise up to a further GBP7m.
Publication of non-statutory accounts
The financial information set out in this announcement does not
constitute statutory accounts as defined in Section 434 of the
Companies Act 2006 but have been extracted from the Group's 2018
financial statements upon which the auditor's opinion is not
modified and does not include any statement under Section 498 of
the Companies Act 2006, but does include an Emphasis of Matter on
the impact of non-compliance of National Minimum Wage legislation
non-compliance which is more fully described on page 63 of the 2018
Annual Report.
Dividends
The Group has suffered a number of trading headwinds during the
first half of 2019, together with significant one-off exceptional
costs which are higher than previously estimated. As a consequence,
no final dividend is proposed for the year, with no dividend
expected to be proposed in respect of 2019 or 2020.
Board Change
John Crabtree, Chairman has advised the Board of his intention
to step down as a Director of the Company and a succession plan
will now be instigated. The Board wish to place on record its
appreciation of John's service to Staffline over the past 8 years.
Further the Board will appoint a further non-executive Director to
the Board in the near term and shareholders will be updated in due
course.
Outlook
On 17 May 2019 the Group issued a trading update referencing
headwinds faced in both of its training and recruitment divisions.
The Group's outlook for 2019 remains challenging but, following a
weak start to 2019, we are trading in line with revised market
expectations. The Board continues to expect the Group to report
underlying operating profits for the year ending 31 December 2019
in the range of GBP23-28m and, before proceeds of any equity
capital raise, net debt at year end to be in line with current
market expectations.
The ongoing Brexit uncertainty is impacting the UK labour market
and led to a number of customers transferring a significant volume
of their temporary workforce into permanent employment to mitigate
the risk of that labour market tightening. Typically, this reaction
to uncertainty reverses over time, but we expect it will continue
to impact temporary worker demand throughout the current year.
There has also been a slowdown in new contract momentum in the
current financial year, which the Company largely attributes to the
impact of the delay in publication of the 2018 Full Year
results.
Notwithstanding these current headwinds, the Recruitment
division is beginning to see the definitive benefits from the
Company's market-leading approach to worker engagement and
digitally enabled candidate attraction. Management expects this
strategy to result in increasing differentiation and to support
future growth.
In PeoplePlus, the successful transition from a Work Programme
provider to the UK's leading skills and training company is almost
complete. With c. 60% of 2020 revenues already contracted, the
Group maintains a positive outlook for PeoplePlus in 2020 under its
new operating model. However, performance in 2019 will be affected
by continued delays in apprenticeship new starts. This is partially
as a result of the slow take-up of the Apprenticeship Levy scheme
nationally, but also a reflection of the current economic
uncertainty. Sectors such as retail for example, are delaying
Apprenticeships whilst store restructure programmes are completed,
however management remains confident that this market is
attractive, notwithstanding this timing effect. However, the other
elements of PeoplePlus, which are expected to contribute c.85% of
PeoplePlus revenue in 2020, continue to develop well.
Trading has continued as expected since 17 May 2019. The Board
reiterates the above underlying operating profit guidance for the
full year but expects a greater weighting toward the second half of
the year than normal due to the transformation in PeoplePlus and
the difficulties the Recruitment business has faced in the first
half.
Chris Pullen, Chief Executive Officer of Staffline,
commented:
"The delay in the publication of our 2018 results has clearly
been frustrating for all involved, but with the historical National
Minimum Wage issues now resolved, we expect Staffline to return to
normalised trading and to capitalise on its leading position in its
key markets and deliver future growth.
Despite these challenges, 2018 was a year of transformation
across both of our operating divisions as we set the foundations
for the clearly identifiable future growth opportunities within
both of these divisions.
In Recruitment, we have completed a fundamental cultural change
and created a highly differentiated operating model based on
Experience Management, putting the worker at the heart of
everything we do. Our unique methodology is producing measurable
improvements in worker engagement, which is resulting in defined
improvements in retention and productivity. We exist to help make
our customers more successful. In a tight labour market, this
leading strategy supports this aim and clearly differentiates our
service offering. Historical issues with National Minimum Wage
compliance have been fully rectified across a number of food
production facilities. With lessons learned, we look forwards to
operating with uncompromisingly high standards into the future.
In PeoplePlus, the previous long-term core of the business has
been the Government's Work Programme. Following its success and the
current historically low levels of unemployment, the scheme went
into a wind-down phase in 2018 with the last customers finishing in
March 2019. PeoplePlus' strategy has been to leverage the core
skills and competences within the organisation to fully repurpose
as a skills and training business. This ambitious transformation is
near completion and PeoplePlus is now the UK's leading skills and
training provider."
Market Abuse Regulation:
This announcement is released by Staffline Group plc and
contains inside information for the purposes of the Market Abuse
Regulation (EU) 596/2014 ("MAR") and is disclosed in accordance
with the Company's obligations under Article 17 of MAR. The person
who arranged for the release of this announcement on behalf of
Staffline Group plc was Mike Watts, Chief Financial Officer.
For further information, please contact:
Staffline Group plc via Vigo Communications
www.stafflinegroupplc.co.uk
Chris Pullen, Chief Executive Officer
Mike Watts, Chief Financial Officer
Liberum: NOMAD and Joint Broker
Steve Pearce / Joshua Hughes
www.liberum.com 020 3100 2222
Berenberg: Joint Broker
Chris Bowman / Toby Flaux
www.berenberg.com 020 3207 7800
Vigo Communications Financial PR 020 7390 0230
www.vigocomms.com staffline@vigocomms.com
Jeremy Garcia / Antonia Pollock / Charlie
Neish
About Staffline - Recruitment, Training and Support
Enabling the Future of Work(TM)
Staffline is the UK's market leading Recruitment and Training
group. It has two divisions:
Recruitment Division
The UK's leading provider of flexible blue-collar workers,
supplying over 60,000 staff per day to c. 1,600 private sector
clients, across a wide range of industries including agriculture,
drinks, driving, food processing, logistics and manufacturing. It
operates from over 450 locations in UK, Eire and Poland. Its world
leading Customer Experience platform provides optimised
customer-based staffing management solutions whilst providing
market-leading levels of job satisfaction for workers.
PeoplePlus Division
The leading adult skills and training provider in the UK,
delivering apprenticeships, adult education, prison education and
skills-based employability programmes across the country.
Skills and Training - market leading provider of Apprenticeships
(both Levy and non-Levy), learning and development, adult education
and health and well-being programmes to the Private and Public
sector.
Justice and Community - largest independent provider of
education and training services for prisoners and ex-offenders, as
well as individual support services for carers and people with
disabilities, both at home and in the work place.
Employability - market leading provider of programmes providing
back-to-work education, skills support services to the unemployed
and enterprise advice to individuals wanting to start their own
business.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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