For Immediate Release |
25 February 2013 |
STAFFLINE GROUP PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2012
Staffline, the national recruitment and outsourcing organisation providing people and operational expertise to industry, today announces its preliminary results for the year ended 31 December 2012.
Financial highlights:
· Revenues up 27% to £367.0 million (2011: £288.3 million)
· Adjusted group operating profit up 4% to £10.7 million (2011: £10.3 million)
· Adjusted profit before tax up 2% to £10.3 million (2011: £10.1m)
· Reported profit before tax up 13% to £8.5 million (2011: £7.5 million)
· Adjusted earnings per share up 2% to 35.9p (2011: 35.1p)
· Basic earnings per share up 15% to 29.7p (2011: 25.9p)
· Final dividend of 5.0p; total dividend of 8.1p (2011: 7.1p); increase of 14%
· Net debt at year end of £4.6m (2011: £4.9m)
All adjusted figures exclude amortisation of intangible assets
Operational highlights:
· Continued growth of the OnSite platform
o Increased by 16 sites during the reporting period to 179 (2011: 163)
o Represents 85% of Group sales (2011: 85%)
· Four acquisitions completed and integrated successfully during 2012, including Select Appointments Ltd, the specialist white collar recruitment business acquired in October 2012
· Target to expand Select to over 100 locations from current 30
· Staffline Express branch network increased by 4 to 22 locations
· Welfare to Work business, EOS, continues to perform ahead of the market
o EOS now ranked as a top three performer nationally
o EOS positioned to generate significant profits during 2013
· Strong start to trading in 2013 underpinned by an excellent new business pipeline from new and existing customers
Commenting on the results and prospects for 2012, Andy Hogarth, Chief Executive, said:
"2012 has been another year of progress for Staffline despite being a difficult year for the recruitment industry. Not only have we continued to see strong organic growth in our core Onsite business we have delivered very encouraging operating results from our EOS division from which we expect to see increased profits in 2013.
Acquisitions still remain a key growth strategy for the business and the move into white collar recruitment with the acquisition of Select Appointments is particularly exciting, allowing us to replicate the success of our blue collar recruitment in this sector.
We have started 2013 with continued confidence and believe our business remains very well placed to continue to drive profit growth and further enhance shareholder value. The Board is therefore pleased to propose a 14% increase to the full year dividend of 8.1p, a sign of confidence in both our business and the markets in which we operate."
For further information, please contact: |
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Staffline Group plc |
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Andy Hogarth, Chief Executive |
07931 175775 |
Tim Jackson, Finance Director |
07720 458626 |
www.staffline.co.uk |
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Liberum Capital Limited |
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NOMAD & Broker |
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Chris Bowman / Richard Bootle |
020 3100 2222 |
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Buchanan |
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Jeremy Garcia/ Gabriella Clinkard |
020 7466 5000 |
www.buchanan.uk.com
About Staffline
Staffline Group plc is a recruitment organisation specializing in food processing, manufacturing, e-retail, driving and logistics. Staffline provides and manages industrial workforces and uses training and business improvement techniques to ensure increased levels of efficiency to give their clients a significant commercial advantage. Operating from over 200 locations in the UK, Staffline supplies up to 30,000 blue collar workers each day. Brands include Staffline Express and Select Appointments, the High Street branch operations, OnSite based on clients' premises, Elpis Training a national training and consultancy organisation, OSP a specialist volume recruitment call centre and EOS, a Welfare to Work provider.
A presentation for analysts will be held at 9.30am on February 25 2013 at the offices of Buchanan, 107 Cheapside, London, EC2V 6DN
Chairman's Statement
We are delighted to report that the Group grew revenue and profits during 2012, driven by a combination of organic growth and acquisitions. This good performance was achieved against a backdrop of a challenging macroeconomic outlook and an extremely competitive recruitment market. Whilst this creates many challenges at an operational level, we have continued to grow our Onsite platform, increasing sites by a further 16 this year to 179. Our move in to the Welfare to Work arena during 2011, with the acquisition of EOS, is showing early signs of success and we expect profitability from this division to grow significantly during 2013.
We also completed the acquisition of Select Appointments Limited, a long established specialist staffing services business providing office and administration staff across the UK. This transaction will see Staffline expand its services into the 'White Collar' arena for the first time, in a move which will see the Group seek to replicate the success of our 'Blue Collar' business.
Therefore, I remain confident of the Group's ability to continue to grow. We are seeing further opportunities for both acquisitions and organic growth due to on-going changes in the industry and the ever greater need of our clients to increase their productivity whilst being provided reliable and efficient staffing solutions.
John Crabtree OBE
Chairman
25 February 2013
Chief Executive's Report
I'm pleased to report the Group has enjoyed another successful year with sales up by 27% and profit after tax up by 15%. We are particularly pleased with this performance given that we suffered the expected reduction in profitability (due to the level of investment committed to supporting our Department for Works and Pensions ("DWP") contracts) within EOS. As a result of this upfront investment, we had expected at the start of the year that net profit for the Group would remain flat, so it is particularly pleasing to be able to report an increase in operating profit for 2012. We are confident that profitable growth for the Group will continue during 2013, enabling the Board to propose an increased final dividend of 5.0p, (2011: 4.2p) making the full year dividend 8.1p, (2011: 7.1p). This represents an increase of 14% to the full year dividend and we intend to continue to grow the dividend broadly in line with earnings.
Operational Review
2012 continued in much the same vein as 2011 with the trading environment remaining difficult. Despite this, sales in our recruitment business grew by 27% and profitability grew by 18%. Sales also grew in our Welfare to Work division, by 33% but, as expected, operating profit before amortisation declined during the year by 48%. This anticipated reduction is due to the structure of the Work Programme contract we operate with the DWP and the upfront investment incurred in 2012. We are confident that profitability will be significantly improved in 2013. In addition we suffered losses on our two European Social Fund contracts due to a shortfall in expected referrals from Local Authorities. The effect on the overall Group results is that our profitability has risen by 4% at the adjusted operating profit level, from £10.3m to £10.7m.More significantly after tax profit increased from £5.6m to £6.4m. Demand for our Onsite offering continues to generate significant market interest with a good pipeline of new business, the overall trend to outsourcing remaining prevalent for many clients.
The number of OnSites we operate from has continued to increase, from 163 in December 2011 to 179 at December 2012; this includes openings from a mixture of new and existing clients and some from acquisitions. Our Onsite model continues to be a driving factor in our success and we anticipate further growth across the UK.
Our branch network operation, Staffline Express, grew by 4 locations during the year and now operates from 22 branches.
Acquisitions during the period included the well-known British recruitment brand, Select Appointments Ltd ('Select'), from the Netherlands company Randstad. Select has been established in the UK for 30 years and specialises in both temporary and permanent placements in the white collar market. Select has for the past four years been an exclusively franchise operated business and it is our intention to continue with this model of operation which is capital light and limits the Group's business risk. We are looking to expand the number of operating branches from 30 at the time of acquisition to over 100 in the next three years, concentrating growth in the major cities and conurbations of the UK. We welcome an approach from individuals looking to operate their own recruitment business with the backing of a national organisation.
The acquisition of Select represents an exciting strategic step for the Group as we seek to further broaden our operational reach. Not only is the Select brand instantly recognisable but its established franchise network will provide a stable footing for the Group as we seek to expand our services into the white collar staffing market.
We acquired EOS Works Ltd (EOS), the Welfare to Work service provider, in April 2011 and commenced activities with the Coalition Governments new Work Programme Contract in Solihull, Birmingham and the Black Country in June 2011. In October that year, EOS was awarded two further contracts by the DWP, due to be worth £53m over three years. Both contracts are financed by the European Social Fund (ESF), with one operating in our existing Work Programme area in the Midlands and the other based in Yorkshire and Humberside. The nature of all of these contracts means that there is a significant tie up of working capital during the first 18 months which then gradually unwinds as profitability is achieved. At the 31st December 2012 the total additional working capital committed to Eos was £3.2m. Despite the significant amounts of negative publicity surrounding the Work Programme we are extremely pleased with our progress so far, with EOS appearing in the top 3 (out of 40) for all the major performance measures recorded by the DWP. To date we have helped over 8,000 long term unemployed back in to work. Regarding the ESF contracts, whilst we are again performing well against our competition they have been significantly less busy than initially expected, incurred losses in 2012, and are expected to do little more than break even during 2013 despite a number of financial changes by the DWP. This is a matter we continue to discuss with them.
Market Overview
Gangmaster Licencing Authority (GLA)
We are convinced that the GLA has done much to improve standards and drive many sub-standard operators out of the regulated sector. Unfortunately there is considerable evidence that many of these Gangmasters have moved into both the Construction and Hospitality sectors, both of which are unregulated. In addition we have recently experienced an increase in the number of illegal and unlicensed people operating as labour suppliers, sometimes using indentured labour from Eastern Europe.
Marshall Evans, who was Operations Director until the 25th February, continues to be a member of the Board of Directors of the GLA as well as being a member of the REC council and the Chairman of the Policy Committee. I also sit on the board of the Association of Labour Providers. These roles allow us to understand and influence future industry trends and Government policy.
PAYE and Travel and Subsistence Schemes
We have been encouraged in our long term opposition to the abusive use of travel and subsistence schemes by a more robust response from Government agencies. Whilst during the year we continued to lose a number of clients to competitors operating these schemes we also won business from customers who are realising the potential liabilities they face if they allow their supplier to use these schemes unscrupulously.
Health & Safety
Our health and safety management system continues to develop using the HSE HSG65 - "Successful Health and Safety Management" guidance as the framework. 2012 saw yet another reduction in the Accident Frequency Rate, to 0.16, which is a further reduction of 16% on the previous year. Staffline continues to develop its positive culture through its Safety Committee and Safety Champions.
ISO 9001 and Investors in People (IIP)
In November 2012 Staffline have successfully passed an official ISO external audit confirming continued accreditation, reaffirming our systems and processes are fully compliant with the ISO 9001 standards. As part of our continuous development culture, Staffline remains proud of our Investors in People status.
People
With the continued expansion of the Group, we have seen an increase to 428 employees in our recruitment business and Shared Services this year, giving average sales per employee of £827,000 compared to £763,000 in 2011. In addition a further 224 people are employed by EOS, bringing the Group's total workforce to 652.
In 2012, continuing on the great success of development in operations we enjoyed in 2011, 16 employees passed their REC Certificate in Recruitment Practice, 24 passed the Real Account Management course, 12 achieved Delight the Customer, 10 passed the external business writing course and 4 achieved the Chartered Institute of Environmental Health Level 4 exam in Food Hygiene.
In addition , within our Shares Services staff, 3 attended Advanced Certificate in Payroll Techniques, 3 First Aid at Work, 1 Professional CIMA Qualification Dip.MA, with many others attending courses in tax, credit control and other relevant subjects. We congratulate them all on their achievements.
2012 saw the introduction of our residential Leadership Development Course, attended by 20 potential senior managers of the future, which was a great success and continues with a further 20 delegates in 2013.
Compliance
We take compliance with legislation and industry standards extremely seriously, offering a total commitment to all of our clients to ensure that all of our workers, whether or not covered by the legislation, are recruited and supplied to the standards required by the Gangmaster Licencing Authority. This total commitment gives our clients the assurance that all UK ethical and legal standards are fully met. We operate a confidential helpline for our workers to report any concerns and conduct regular surveys to ensure we are achieving our own high standards.
Investing for Growth
To help us achieve the highest compliance standards we are continuing to develop our new bespoke management information system, Infinity+, which will further improve our operating efficiency. All of the Group's locations are now live with Infinity+ and we are already deriving a wide range of benefits from it. The new system will provide the platform for further development that will deliver greater efficiencies in the business processes.
Agency Workers Regulations
These regulations, introduced in October 2011, require recruitment businesses to ensure that temporary contractors working alongside comparable client employed staff are, amongst other things, paid the same amount and enjoy the same holidays. The initial concern amongst some industry commentators that these regulations might cause disruption has not materialised.
Board Changes
As indicated in the announcement made on 21 February 2013, Marshall Evans has decided to retire from the Board and assume a part-time role with the Group going forward. I would like to personally thank Marshall for providing excellent help and support over the past 10 years and for playing a central role in the growth and success of Staffline. His continued availability, albeit on a part-time basis, and his decision to remain a member of the Board of the REC and the GLA, will be greatly appreciated.
I am also pleased to acknowledge the promotion of Shaun Brittain to Joint Managing Director of Staffline Recruitment Ltd. Shaun will be resigning from the Group Board following this promotion to focus on his broader day to day operational duties. Andrew Coop, currently Operations Director at Staffline, will also hold the title of Joint Managing Director of Staffline Recruitment Ltd, and will be responsible for Logistics and Distribution services.
Diane Martyn has agreed to become Group Managing Director having joined Staffline as Non-Executive Director last year. Diane will become a full time Executive Director and remain on the Group Board.
Finally I would once again thank all our employees for their dedication in ensuring we always offer the best and most innovative service to our clients.
Current Trading
The first 7 weeks of trading have started strongly and we have developed an excellent pipeline from new and existing customers for the first half of 2013. We have opened a specialised Driving division in Great Britain and in addition have committed to our existing business in Ireland with the appointment of a Divisional Director and team with responsibility for the Group's growth in that country. We have also recruited the new senior team to manage Select Appointments.
Despite the on-going threat arising from the abusive use by some competitors of Travel and Subsistence schemes , the majority of our clients appreciate the reassurance that we offer as a financially stable, ethical and fully compliant public company. Our new business pipeline continues to grow as clients increasingly search for best in class staffing solutions both from a regulatory and business perspective.
I am therefore confident that the Group will enjoy another year of substantial and profitable growth in 2013.
Andy Hogarth
Chief Executive
25 February 2013
Finance Director's Report
Financial Highlights
The total revenues for the year increased by 27% to £367.0m (2011: £288.3m) reflecting the impact of strong demand for our services from existing customers, new business wins in 2011 and 2012 and also the impact of the acquisitions made during last year and this year. The successful growth of our OnSite business has continued albeit with increased competitive pressure on operating margins. This has resulted in a reduction in overall gross margin to 9.5% (2011: 10.8%). However, adjusted profit from operations has increased by 4% to £10.7m (2011: £10.3m). The charge for amortisation has reduced by £0.8m to £1.8m as historic acquisitions become fully amortised. The charge for employee share options has increased by £0.2m to £0.4m largely due to the share price increasing significantly during the closing months of 2012.
The investment in acquisitions, the Welfare to Work business and the growth in working capital offset by continued strong cash flow generation, has led to finance charges increasing to £0.4m (2011: £0.1m) and this has reduced interest cover to a still comfortable 24 times (2011: 60 times). The interest rates on our overdraft facility remain unchanged during the year, at 2.25% (2011: 2.0%) over bank base rate, while the rate for term borrowings remained at 1.0% (2011: 1.0%) over bank base rate and the Revolving Credit Facility at 2.25% to 2.5% over LIBOR.
Profit before tax for the year increased to £8.5m (2011: £7.5m) and profit after tax increased to £6.4m (2011: £5.6m).
Earnings per Share
The basic earnings per share increased by 15% to 29.7p (2011: 25.9p) and the diluted earnings per share increased by 14% to 28.7p (2011: 25.0p).
Dividends
The Directors propose a final dividend of 5.0p per share against 4.2p per share last year. This gives a total dividend for the year of 8.1p per share which is 14% ahead of the 7.1p per share paid in respect of 2011.
Subject to shareholder approval at the AGM, the final dividend will be paid on 3 July 2013 to shareholders on the register on 31 May 2013.
Acquisitions
During the year we completed four acquisitions for a total consideration of £5.0m. This amount is comprised of £2.8m cash paid at completion, and further potential consideration of £2.2m, £1.0m of which is dependent on future profitability. The acquisitions will add around £18.9m to turnover in a full year, and have resulted in the recognition in the Group balance sheet of additions to goodwill of £0.9m and additions to intangible assets of £0.9m. The intangible assets will be amortised over a period ranging from 1 to 2 years. The acquisitions have been funded from existing bank facilities together with an additional Revolving Credit Facility of £2.5m.
Balance Sheet
The Group balance sheet has strengthened during the year, with net current assets rising by £6.6m to £11.7m (2011: £5.1m) and a strengthened ratio of current assets to current liabilities of 1.23 (2011: 1.11). It is also pleasing to report that despite the significant growth in the business and investment in acquisitions gearing has reduced to 12% (2011: 15%). The Group continues to be focused on cash generation and ensuring a robust balance sheet to support the growth of the business.
Financing
The Group's current bank facilities include a term loan of £0.6m, repayable in quarterly instalments up to June 2013, a revolving credit facility of up to £7.5m and an overdraft of up to £15.0m. At 31 December 2012 the Group was in a net cash position (excluding the revolving credit facility and term loans). The overdraft facility is renewable annually and was renewed in February 2013 on similar terms to last year. The Board believes that these facilities will ensure that the Group has sufficient headroom to manage the current operations as well as supporting the continued growth of the business.
Post tax cash generation during the year has been strong and the relentless focus on debtor management has succeeded in limiting our working capital increase to £2.4m despite the 27% increase in sales. The growth and investment in the business offset by strong operational cash generation have resulted in net debt falling slightly to £4.6m (2011: £4.9m). The investment included £4.1m in acquisitions during the year covering Select Appointments Limited, Go New Recruitment Limited and 2 other businesses, and a further £0.4m investment in our systems development.
Tim Jackson
Finance Director
25 February 2013