For Immediate Release 23 July 2014
STAFFLINE GROUP PLC
('Staffline' or 'the Group')
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2014
Staffline, the national recruitment, outsourcing, training and Welfare to Work organisation providing people and operational expertise to industry, today announces its preliminary results for the six months ended 30 June 2014.
Financial highlights:
· Revenues up 11.1% to £208.1 million (H1 2013: £187.2 million)
· Gross profit up by 23.8% to £23.7m
· Gross profit margin up by 1.2%, to 11.4% (H1 2013: 10.2%)
· Underlying profit before tax up 30% to £6.4m (H1 2013: £4.9m)
· Fully diluted underlying EPS pre amortisation, acquisition costs and share based payment charges up 31% to 22.2p (H1 2013: 17.0p)
· Interim dividend increased by 32% to 5.0p (H1 2013: 3.8p)
· Successful placing of new shares in May 2014 raised £16m, at a premium to the then prevailing share price, to part fund the acquisition of Avanta
Operational highlights:
• Continued expansion of the OnSite model, increased by 18 sites during the period to 212
• Completed the acquisition of Avanta for a net consideration of £45m, net of cash acquired
o Staffline now top 3 Work Programme provider in UK
o Integration well advanced
o Combined Avanta/EOS operation well placed to grow market share
• Five year growth strategy to reach £1bn revenues in place and on track
• Group continues to trade in line with market expectations for the full year
• Contract win for EOS in Northern Ireland announced today
Commenting on the results and prospects, Andy Hogarth, Chief Executive, said:
"We have made a good start to 2014, buoyed by the continued traction in our core recruitment business and the recent acquisition of Avanta, our largest transaction to date. With Staffline continuing to outperform the broader recruitment sector as regulatory and budgetary constraints create added pressure for UK businesses, demand for our services remains strong.
"Our new business pipeline continues to develop and our newer divisions are beginning to gain market traction. The integration of Avanta is also progressing well and we remain strongly optimistic that we can make further gains in the welfare to work and training arena.
"Current trading remains robust and the confidence we have in our future trading prospects supports our commitment to the 32% increase in our interim dividend."
A presentation for analysts and investors will be held at 9.30am on 23 July 2014 at the offices of Buchanan, 107 Cheapside, London, EC2V 6DN
For further information, please contact: |
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Staffline Group plc |
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Andy Hogarth, Chief Executive |
07931 175775 |
Phil Ledgard, Finance Director |
07432 554437 |
www.staffline.co.uk |
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Liberum |
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NOMAD & Broker |
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Chris Bowman / Richard Bootle www.liberum.com |
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 started as a recruitment organisation specialising in the provision of temporary workers in food processing, manufacturing, e-retail, driving and logistics and has since also grown into a leading provider in the welfare and skills sector. We provide and manage industrial workforces and use training and business improvement techniques to ensure increased levels of efficiency to give our clients a significant commercial advantage. Our recruitment business now operates from well over 200 locations in the UK, Ireland and Poland, supplying up to 33,000 temporary workers each day.
Our recruitment brands now include Select Appointments, providing white collar office staff and Staffline Express, providing blue collar staff, both High Street branch operations. Staffline OnSite is based on clients' premises and also provides both blue collar and white collar temporary staff, Driving + provides HGV drivers, Staffline Agriculture provides workers to the UK farming and growing sectors, while Resourcing Plus offers cost effective permanent recruitment solutions.
Our other areas of operation include Elpis, a national training and consultancy organisation, OSP, a specialist volume recruitment call centre and Avanta (which includes Staffline's original EOS), a provider of Welfare to Work and skills training services across the UK helping the long term unemployed back in to work. We expanded our training capabilities in 2013 with Learning Plus, a technologically advanced e-learning platform designed to deliver extremely cost effective work-based skills training.
Chief Executive and Chairman's Report
The first half of 2014 has, yet again, seen a great deal of operational progress achieved by the Group. Our five year growth strategy is now firmly in place and we have continued to invest in a number of new start up divisions as the Group expands its operational reach and brings in new talent. This cycle of investment has temporarily subdued profitability within the recruitment services segment, however, we have also been able to benefit from the trend towards further consolidation within the recruitment industry which has enabled us to increase the number of OnSites we operate for existing and new clients. Our Welfare to Work division grew dramatically with the acquisition of Avanta Enterprise Ltd in June and we expect the addition of Avanta to our portfolio to have a meaningful financial impact in our full year results. The acquisition also now means that we are the third largest provider of Welfare to Work services to the DWP broadening our reach within the UK. In addition we have today announced that we have been successful in tendering for the Steps to Success contract for the northern contract area of Northern Ireland.
In addition, we completed the purchase of the training and brokerage organisation Skillspoint, in July. This further strengthens our position in the Skills Funding Agency funded training sector, a key strategic growth area for the Group.
Overall, profitability in the Group has increased in line with our expectations.
In July, we were delighted to announce the appointment of Dame Christine Braddock as a non-executive member of the Board. Until recently Christine was CEO of Birmingham Metropolitan College, a position she has held for the past 17 years. In that time she oversaw its growth from a single campus on Bristol Street in Birmingham to 12 locations covering the West Midlands. Christine's experience in both this area and in her earlier career in the Prison Service will help Staffline in our aim to continue to grow our Skills business.
Financial Review
Total sales grew by 11.1% to £208.1m with gross profit increasing by £4.6m, or 23.8% to £23.7m. This strong growth has been principally organic as opposed to previous years being more acquisition led. Net profit before tax, amortisation, acquisition costs and the non-cash charge for share based payment costs (SBPC) rose by 30.0%, from £4.9m to £6.4m. Fully diluted EPS pre amortisation, acquisition costs and SBPC rose from 17.0p to 22.2p.
Our balance sheet has continued to strengthen, with shareholders' funds growing by 47% and exceeding £60m for the first time with the ratio of current assets to current liabilities being in excess of 1.15. Our financial strength is both a major attraction and benefit for our larger OnSite clients since they can be absolutely certain of our ability to supply their temporary workers who are essential to ensure continued production. It is also essential to supporting the growth ambitions of Avanta, where financial strength is a key criteria in contract bidding processes.
Following the acquisition of Avanta net debt increased during the period with a £10m four year term loan and £20m bank guaranteed vendor loan notes, due to be repaid over the next 19 months. The term loan and loan notes are expected to be repaid from the cash flow of Avanta over the next 4 years so net debt is expected to fall quickly over coming periods.
Operational Review
Recruitment
Trading in the first half of 2014 was consistent with the prior six months as the broader UK economy remains a highly competitive environment for many of our clients and therefore for ourselves. Despite this trend we continue to generate significant opportunities for the Group to grow market share in our core business, both organically through growth with new and existing customers as well as by making bolt-on acquisitions. We continue to assess a number of acquisition opportunities but during the first half of the year did not identify any that met our strict criteria within our core recruitment division.
We have increased the net number of OnSites from which we operate by 18, ending the period with a total of 212 locations. This increase has resulted from a number of new clients as well as extensions to existing contracts across sectors including Manufacturing, Logistics & Distribution, Food Processing, Agriculture and Driving.
The Group opened a number of new divisions during 2013, including Driving+, Ireland and Agriculture and we continued to suffer some of the start up costs of these during the period under review. We are confident these new divisions will make a positive impact on profitability in 2015.
In particular, our investment in Driving+ is already seeing positive financial results. With demand now increasing strongly fuelled by changes to driver education regulations, we anticipate resource will become even scarcer in this area. We believe significant opportunities now exist within the driving recruitment sector and we will continue to support this growing division.
Welfare to Work and Training
The completion of the acquisition of Avanta for a net consideration of £45m in June significantly enhanced our position in the Welfare to Work arena. Although it has only contributed for less than one month during the half year period, the financial impact of this transaction at the full year will be far greater.
Avanta is our largest acquisition to date, the strategic rationale underpinning the acquisition was:
· The creation of the UK's third largest Welfare to Work provider which the Directors believe will greatly enhance Staffline's strength in bidding for future contracts
· The enlarged Welfare to Work division will provide complimentary scale and cross selling opportunities to Staffline's existing Onsite operations, which are particularly strong in the East Midlands and North-West of England, where a number of Avanta contracts are held
· The profits of the enlarged group will become more evenly balanced between Welfare to Work and Staffline's broader recruitment services
· Bringing Avanta's experienced management team into Staffline, alongside the existing EOS team, to accelerate the Company's strategic goal of becoming the leading Welfare to Work provider
As announced in June, we are currently integrating our existing Work Programme contract held within Eos into Avanta creating a larger, scaled division. We will however retain the Eos brand for contracts we win in the current round of tendering being conducted by the Ministry of Justice along with any local authority tenders currently being worked on. The MoJ tenders were returned in June 2014 and we are currently awaiting feedback.
Our existing training business, Elpis, has traded successfully which has led to greater profitability in 2014. Learning Plus, the electronic learning platform (now 100% owned following the buyout of our JV partner in 2013) has also traded well as we have developed a significant number of new training courses during the period.
After the period end we completed the acquisition of Skillspoint, a Leicester based skills training brokerage business. Skillspoint offers a wide range of innovative solutions for employers, holds its own Skills Funding Agency contract and has an OFSTED level two accreditation. This allows the company to deliver traineeships, making it one of few private training providers to be able to do so.
We continue to see significant opportunity to grow our market share within training in the second half of the financial year.
Health & Safety
Staffline has appointed an external Health and Safety professional to work closely with us to ensure we continue to work as efficiently and as safely as possible. External independent audits are regularly undertaken to reinforce our Health and Safety culture.
ISO 9001 and Investors in People (IIP)
Staffline successfully concluded the external assessment for continued accreditation demonstrating its robust process and procedures. Formal assessments are currently underway to renew our 10 year IIP accreditation.
Environmental Policy
We have successfully completed the trialling of online applications which have significantly reduced the need for paper based applications with an additional benefit having given us a significantly improved audit trail of all applications. The use of email payslips remains at over 90%, significantly reducing wasted printer ink, cartridges, paper and Post Office resources. These steps are very encouraging as we further reduce our carbon footprint whilst continuing to grow.
People
With the Group further expanding, we have seen an increase to 568 employees in our recruitment business and Shared Services with an additional 979 people employed by the combined EOS/Avanta, bringing the Group's total workforce to 1,547.
Our residential management development programme has delivered Leadership and Self Awareness together with Coaching and Motivating a Winning Team with further programmes booked in for later this year.
We continue to place great emphasis on the training and development of our people in line with our vision and values.
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. We are active supporters of the Stronger Together initiative to help prevent exploitation and trafficking of workers.
Investing for Growth
As part of our five year growth plan we have invested some significant sums in both new divisions and new contracts.
We are confident that these divisions will develop in the coming years and contribute to driving profit growth. As part of our strategic plans we have continued to invest in our bespoke management information system, Infinity+, which will further improve our operating efficiency. We have invested in excess of £400,000 in our disaster recovery system and are confident that this is now industry leading.
We have now undertaken a new five year strategic growth plan aimed at broadening our market reach and increasing the scale of all of our divisions, the aim of which is to achieve revenues of £1bn by 2017. We are currently 18 months in to this journey and remain on track to achieve our target.
Current Trading
We have started the second half of the year well, buoyed by the recent hot weather which has seen a significant increase in seasonal demand for contractors from many of our clients and is also reflected in the strong retail figures for recent months. In particular, we have also seen strong levels of demand in our driving businesses highlighting the systemic shortage of available HGV drivers in the UK.
The integration of Avanta with our existing Welfare to Work division is progressing well and we expect Avanta to have a significant impact financially and operationally in the second half of the year.
We continue to look for further bolt-on acquisitions within our core recruitment business and remain in discussions with a number of companies. Our new business pipeline in both our recruitment services business and our Welfare to Work division remains promising with a significant number of opportunities being seen by the Group. The board therefore remains confident that the Group will meet current market expectations for the full year.
Finally, as an expression of our confidence of the Group's prospects, the Directors propose to increase the interim dividend by 32% from 3.8p to 5.0p. This dividend will be payable on 14 November 2014 to shareholders on the register at 17 October 2014. The ex-dividend date is 16 October 2014.
Andy Hogarth John Crabtree
Chief Executive Chairman
23 July 2014
Consolidated statement of comprehensive income
For the six month period to 30 June 2014
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Before amortisation, acquisition costs and share based payment charge Unaudited |
Acquisition costs, amortisation, share based payment charge Unaudited |
Total Unaudited |
Six month period ended 30 June 2013 Unaudited |
Year ended 31 December 2013 Audited |
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Note |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
Continuing operations |
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Sales revenue |
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208,050 |
- |
208,050 |
187,227 |
416,193 |
Cost of sales |
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(184,302) |
- |
(184,302) |
(168,043) |
(374,171) |
Gross profit |
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23,748 |
- |
23,748 |
19,184 |
42,022 |
Administrative expenses |
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(17,133) |
- |
(17,133) |
(14,096) |
(29,178) |
Operating profit before amortisation of intangibles, acquisition costs and share based payment charge |
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6,615 |
- |
6,615 |
5,088 |
12,844 |
Administrative expenses - Acquisition costs |
|
- |
(685) |
(685) |
- |
- |
Administrative expenses - Share based payment charge |
|
- |
(2,917) |
(2,917) |
(616) |
(2,154) |
Administrative expenses-Amortisation of intangibles |
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- |
(868) |
(868) |
(891) |
(1,766) |
Profit from operations |
|
6,615 |
(4,470) |
2,145 |
3,581 |
8,924 |
Finance costs |
|
(200) |
- |
(200) |
(165) |
(360) |
Profit for the period before taxation |
|
6,415 |
(4,470) |
1,945 |
3,416 |
8,564 |
Tax expense |
|
(1,318) |
872 |
(446) |
(926) |
(1,165) |
Net profit and total comprehensive income for the period |
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5,097 |
(3,598) |
1,499 |
2,490 |
7,399 |
Total comprehensive income attributable to: |
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Non-controlling interest |
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|
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- |
59 |
- |
Owners of the parent |
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|
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1,499 |
2,431 |
7,399 |
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Earnings per ordinary share |
3 |
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Basic |
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6.6p |
11.1p |
33.3p |
Diluted |
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6.5p |
11.0p |
33.1p |
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|
|
|
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Consolidated statement of changes in equity
For the six month period to 30 June 2014
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Share capital |
Own shares JSOP |
Share premium |
Share based payment reserve |
Profit and loss account |
Total attribute-able to owners of parent |
Non-controlling interest |
Total equity |
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£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
At 1 January 2014 (audited) |
2,569 |
(9,211) |
24,195 |
31 |
28,166 |
45,750 |
- |
45,750 |
Share options issued in equity settled share based payments |
- |
- |
- |
15 |
- |
15 |
- |
15 |
Issue of share capital |
200 |
- |
15,176 |
- |
- |
15,376 |
- |
15,376 |
Transactions with owners |
200 |
- |
15,176 |
15 |
- |
15,391 |
- |
15,391 |
Profit for the period |
- |
- |
- |
- |
1,499 |
1,499 |
- |
1,499 |
Total comprehensive income for the period |
- |
- |
- |
- |
1,499 |
1,499 |
- |
1,499 |
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|
|
|
|
|
|
|
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At 30 June 2014 (unaudited) |
2,769 |
(9,211) |
39,371 |
46 |
29,665 |
62,640 |
- |
62,640 |
Consolidated statement of changes in equity
For the six month period to 30 June 2013
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Share capital |
Own shares JSOP |
Share premium |
Share based payment reserve |
Profit and loss account |
Total attribute-able to owners of parent |
Non- controlling interest |
Total equity |
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
At 1 January 2013 (audited) |
2,289
|
(1,157)
|
15,969
|
75
|
22,673
|
39,849
|
(40)
|
39,809
|
Share options issued in equity settled share based payments |
- |
- |
- |
26 |
- |
26 |
- |
26 |
Share options exercised |
76 |
- |
294 |
(34) |
34 |
370 |
- |
370 |
Transactions with owners |
76 |
- |
294 |
(8) |
34 |
396 |
- |
396 |
Profit for the period |
- |
- |
- |
- |
2,431 |
2,431 |
59 |
2,490 |
Total comprehensive income for the period |
- |
- |
- |
- |
2,431 |
2,431 |
59 |
2,490 |
Balance at 30 June 2013 (unaudited) |
2,365 |
(1,157) |
16,263 |
67 |
25,138 |
42,676 |
19 |
42,695 |