TIDMSTAF
RNS Number : 5199M
Staffline Group PLC
17 September 2019
17 September 2019
STAFFLINE GROUP PLC
('Staffline', 'the Company' or 'the Group')
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHSED 30 JUNE 2019
Staffline, the recruitment and training organisation, announces
its unaudited interim results for the six months ended 30 June
2019.
Financial highlights:
Statutory *Underlying
2019 2018 Change 2019 2018 Change
GBP'm GBP'm % GBP'm GBP'm %
------------------------ ------- ------ ------- ------ ----------
Revenue 534.6 481.0 +11.1 534.6 481.0 +11.1
------------------------ ------- ------ ---------- ------- ------ ----------
Recruitment 493.2 429.6 +14.8 493.2 429.6 +14.8
------------------------ ------- ------ ---------- ------- ------ ----------
PeoplePlus 41.4 51.4 (19.5) 41.4 51.4 (19.5)
------------------------ ------- ------ ---------- ------- ------ ----------
(Loss)/profit before
tax (7.7) 10.5 (173.3) 1.5 15.0 (90.0)
------------------------ ------- ------ ---------- ------- ------ ----------
Recruitment (6.7) 6.3 (206.3) 2.4 7.9 (69.6)
------------------------ ------- ------ ---------- ------- ------ ----------
PeoplePlus (1.0) 4.2 (123.8) (0.9) 7.1 (112.7)
------------------------ ------- ------ ---------- ------- ------ ----------
% (Loss)/profit margin (1.4%) 2.2% 0.3% 3.1%
------------------------ ------- ------ ---------- ------- ------ ----------
Recruitment (1.4%) 1.5% 0.5% 1.8%
------------------------ ------- ------ ---------- ------- ------ ----------
PeoplePlus (2.4%) 8.2% (2.2%) 13.8%
------------------------ ------- ------ ---------- ------- ------ ----------
Pence Pence % Pence Pence %
------------------------ ------- ------ ---------- ------- ------ ----------
Diluted earnings per
share ("EPS") (22.4) 32.8 (168.3) 5.6 47.2 (88.1)
------------------------ ------- ------ ---------- ------- ------ ----------
Interim dividend per
share - 11.3 - 11.3
------------------------ ------- ------ ---------- ------- ------ ----------
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
------------------------ ------- ------ ---------- ------- ------ ----------
52.3 52.3
Net debt** 89.2 36.9 increase 89.2 36.9 increase
------------------------ ------- ------ ---------- ------- ------ ----------
* Underlying profit before tax excludes amortisation charges on
intangible assets arising on business combinations, acquisition and
exceptional reorganisation costs, exceptional National Minimum Wage
("NMW") remediation and financial penalties, revised audit scope
and increased audit fees and the non-cash charge/credit for
share-based payment costs ("SBPC").
** Net debt including unamortised transaction costs.
The table below reconciles the statutory profit before tax with
the underlying profit before tax:
FY H1
GBP million H1 2019 2018 2018
--------------------------------- -------- ------ ------
Statutory (loss)/profit before
tax (7.7) (9.6) 10.5
--------------------------------- -------- ------ ------
Amortisation of intangible
assets arising on business
combinations 6.2 11.8 4.9
--------------------------------- -------- ------ ------
NMW remediation and financial
penalties - 15.1 -
--------------------------------- -------- ------ ------
Reorganisation costs 2.2 10.6 -
--------------------------------- -------- ------ ------
Others - see note 3 for further
detail 0.8 8.1 (0.4)
--------------------------------- -------- ------ ------
Underlying profit before tax 1.5 36.0 15.0
--------------------------------- -------- ------ ------
Operational highlights:
Recruitment
-- Performance benefitted from the acquisitions made in 2018,
which are now fully integrated. However, activity levels were lower
in the Food, Logistics and Automotive divisions.
-- The Driving division profit performance was ahead of last year, although at a lower margin.
-- Gross margin was slightly lower than last year, although the
Food division was +0.2% higher with price increases being
successfully negotiated as a result of service differentiation and
technology improvements.
-- New business wins included: Oak Furniture Land and M and M
Direct with additional sites won at existing clients: Argos,
Laleham Health and Beauty and Go Outdoors.
-- As previously flagged, there has 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.
-- Customer and staff engagement metrics are showing significant
improvements compared to a year ago, with Net Promoter Score of
35.7 (June 2018: 23.4), Client Happiness 80.0% (June 2018: 74.9%)
and Staff Happiness 80.6% (June 2018: 73.7%).
PeoplePlus
-- Successful transition from a Work Programme provider to the
UK's leading skills and training business is now complete.
-- Prison Education contracts secured are worth a total of
GBP104.6 million over a four-year period, doubling Staffline's
share of the Prison Education market to c. 20%.
-- Contracts worth a total of over GBP35 million over a 27-month
period secured in the latest round of the Education and Skills
Funding Agency's European Social Fund competition.
Outlook
-- Trading remains challenging and the Board now expects the
Group to deliver full year adjusted operating profit (being profits
before interest, tax and non-underlying charges) of approximately
GBP20m. Since the publication of the 2018 Full Year results, weak
consumer confidence has weighed on our end customers, particularly
in food and retail, which has had a direct impact on demand for
Staffline's services.
-- The Board expects net debt to be c2x EBITDA at the year-end
benefiting from the proceeds of the equity capital raise and
trading in the second half of the year.
-- While the Group's near term trading outlook will remain
subject to variances in consumer confidence caused by the
unprecedented levels of uncertainty associated with Brexit, the
Board remains confident in Staffline's medium and long-term growth
prospects.
Chris Pullen, Chief Executive Officer, commented:
"The first six months of 2019 presented a number of unforeseen
challenges for Staffline. The delay in the publication of the 2018
final results created uncertainty, which has been compounded by a
challenging trading environment. As a consequence of this and the
transformation of PeoplePlus, this year's result will be more
heavily weighted than usual towards the final quarter. Brexit has
become the source of unprecedented uncertainty for our end
customers and is increasingly weighing on consumer confidence. The
performance of our end customers in food and retail has a direct
impact on the demand for our services. Despite this, we remain
convinced that the challenges the Group is currently facing are
short-term and that the business is sufficiently differentiated in
its service proposition to return to future growth. We have
developed an excellent platform as a result of the strategies we
have put in place, and look forward to continuing to further
enhance the leading positions we have in each of our core
markets."
Analyst meeting and audio webcast:
A presentation for analysts will be held at 9.30am today at the
offices of Liberum, 25 Ropemaker Street, London, EC2Y 9LY.
Following the meeting, an audio webcast will be available via
the following link:
https://webcasting.brrmedia.co.uk/broadcast/5d77b8f71e79456d8fcc41ae
More information on the Group can be found at
https://www.stafflinegroupplc.co.uk/.
For further information, please contact:
Staffline Group plc via Vigo Communications
Chris Pullen, Group Chief Executive
Officer
Mike Watts, Group Chief Financial Officer
investors@staffline.co.uk
www.stafflinegroupplc.co.uk
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
Jeremy Garcia / Antonia Pollock / Charlie 020 7390 0237
Neish staffline@vigocomms.com
------------------------------------------- -------------------------
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, Group Chief Financial
Officer.
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
Staffline is 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 c. 460 locations in UK,
Republic of Ireland 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
Staffline is 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.
Operational review
Introduction
The first six months of 2019 presented a number of unforeseen
challenges for Staffline. This uncertainty was primarily borne out
of the delay in the publication of the 2018 final results. The
associated extended audit procedures lasted until June 2019 (as
described in the 2018 Annual Report) and impacted the perceptions
surrounding the Group. All of the issues identified, and concerns
raised during this process, have now been rectified and Staffline
is able to move forward with complete confidence in the procedures
that the Group has in place.
Group sales in the first half of 2019 grew 11.1% to GBP534.6m
(H1 2018: GBP481.0m), driven by the acquisitions made during 2018.
Group organic revenue for the period declined by 12.4%, with
Recruitment falling by 10.3% and PeoplePlus falling by 29.5%. This
reflected the trading headwinds in both divisions, and the
transition of the PeoplePlus division to a skills and training
business, as described above. Underlying profit before tax* fell by
90% to GBP1.5m (H1 2018: GBP15.0m). With the business mix
increasingly weighted towards the more seasonal recruitment
business, profits are more heavily weighted towards the second half
of the year.
* Underlying profit before tax excludes amortisation charges on
intangible assets arising on business combinations, acquisition and
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
("SBPC").
In July 2019, the Group completed an equity capital raise to
reduce the indebtedness of the Group. We recognise that the
consequent level of dilution was disappointing for existing
shareholders. However, the equity capital raise delivered net
proceeds of GBP37m, meaning that the financial position of the
Group is now stronger, reducing expected year-end leverage to c2x
EBITDA.
Market overview
On 17 May 2019, the Group issued a Trading Update referencing
headwinds being faced across both its Recruitment and PeoplePlus
divisions. Brexit uncertainty has been impacting the UK labour
market and has led to a number of customers transferring a
significant volume of their temporary workforce into permanent
employment to mitigate the risk of a skills shortage, as the labour
market continues to tighten. Typically, this reaction to
uncertainty reverses over time, but we expect it will continue to
impact temporary worker demand throughout the current year.
More recently, further customer uncertainty has developed as a
direct consequence of the government's more hard-line approach to
Brexit negotiations and the real risk of a no deal Brexit.
Customers are increasingly taking defensive actions and reducing
their exposure to temporary labour, which they perceive to be at
risk from a hard Brexit. This is frustrating as Staffline is
extremely well prepared for a tightening labour market, with
well-developed strategies that will ensure that we continue to be
in a position to supply all our customers' flexible labour
requirements. These strategies include:
-- Utilising our industry-leading worker engagement strategy,
which is reducing year-on-year workforce attrition by over 20%;
-- Promoting our candidate sourcing platform, which is
attracting record numbers of workers into our candidate pools;
and
-- Leveraging our scale as the largest temporary worker provider in the UK.
However, as the UK economy weakens and consumer confidence
remains low, we are continuing to see negative impacts on demand.
We remain convinced that the challenges the Group is currently
facing are short-term and that the business is sufficiently
differentiated in its service proposition. It has an excellent
platform for future growth.
Growth strategy
The Group remains committed to delivering its five-year growth
strategy, which we initiated in 2018. We do not believe the issues
and distractions of H1 2019 have caused any permanent damage to the
business, but that we have simply lost time in the development of
the Group. Our management teams are more eager than ever to deliver
the significant potential that we know exists within the two core
operating divisions. We delivered transformational change in 2018
and have market-leading positions in both of our key operating
sectors. With the distractions of H1 2019 behind us, it is now time
to re-focus on delivering the exciting future prospects for the
Group.
Recruitment
The Recruitment division remains uniquely differentiated from
its competitors through two key strategies:
-- Experience Management: we have developed a unique
methodology, supported by a leading experience management platform,
that enables us to systematically improve worker engagement. Better
engaged workers stay longer and are more productive. The definitive
and measurable benefits of this are now being realised and we
believe that we have found the long sought-after solution to the
previously unanswered question of how to improve the engagement of
a large blue-collar workforce. Our proprietary solution has
significant applications beyond just the scope of our existing
recruitment business.
-- Digital candidate attraction: a comprehensive digital upgrade
to our candidate attraction systems means that Staffline will win
the race to find workers in a tight labour market.
As a consequence of this, we believe that we are best placed to
fulfil our reason for existing which is "to help make our customers
more successful." In a tight labour market with record low
unemployment we are perfectly positioned to take advantage of these
challenges. Furthermore, we believe that better commercial terms
will be available for the Group in the future as a result of
providing a far higher quality and differentiated service.
PeoplePlus
In PeoplePlus, we have created the UK's leading adult skills and
training provider with market leading positions in a number of
sectors. This is an entirely new operating model that has been
created following the termination of the government's Work
Programme. We will continue to build-out and develop this division
by:
-- Ensuring Staffline holds market leading positions in selected skills and training markets;
-- Building a portfolio of service contracts with multiple run off dates;
-- Shifting reliance away from central government funding to
being roughly split evenly between central government, local and
devolved government, and the private sector; and
-- Significantly enhancing our digital learning and engagement
capabilities across all services, both existing and new.
The Group is characterised by its strong market leadership
positions in each of its markets. With strong platforms put in
place during 2018, there is clear opportunity for significant
growth.
The Group is committed to returning as quickly as possible to
high free cash conversion and will continue to benefit from low
operational gearing, low capital expenditure requirements, and a
focus on managing receivables.
Employment rights legislation
On 16 July 2019, the Government announced a consultation on
plans to introduce a new Single Enforcement Body for employment
rights. This will replace seven separate existing bodies that have
varying powers and degrees of authority.
Staffline is committed to leading the industry as exemplars in
compliance and ethical standards. However, as recognised in the
Government's latest announcement, the playing field is far from
level, with significant deviance by companies within the
recruitment sector from proper compliance and ethical standards.
There are two key areas that the government plans to address:
-- Umbrella companies: these are widely used within the industry
in order to avoid paying proper tax, thereby allowing agencies to
achieve commercial advantage. Such schemes, whilst legal, are
wholly unethical. The Government plans to close the relevant
loopholes that allow this
-- Holiday pay: the underpayment of holiday pay is widespread
within the industry. There is currently no enforcement regime
against this and again agencies are able to achieve competitive
advantage by underpaying workers' holiday pay. The government plans
to introduce proper enforcement against this practice
These important changes will undoubtedly take some time for the
government to introduce, however, this will lead to a much-needed
levelling of the playfield within the sector. We expect significant
commercial benefit in due course as a consequence.
Board changes
As noted in the 2018 Annual Report, the Company announced that
John Crabtree, Chairman intended to step down as a director of
Staffline. John will leave the Board today and we are pleased to
announce that Tracy Lewis will assume the role of Non-Executive
Chairman with immediate effect. Tracy has been Non-Executive
Director of Staffline since 2016 and has a deep understanding of
our business and we believe she is well placed to help drive the
Company through its next stage of development. We would like to
record our thanks to John for his outstanding service to the
Company over the last 14 years.
The Company is also pleased to announce the appointment of
Richard Thomson as Non-Executive Director with effect from 17
September 2019. Richard brings with him a wealth of commercial and
financial experience, and we look forward to benefitting from the
complementary expertise he will bring to Staffline.
In addition, the Board has held constructive discussions with
HRnet Group since they announced a 29.9% interest in the Company.
It is the Board's intention to appoint Adeline Sim as a
Non-Executive Director of the Company, as a representative of HRnet
Group. Shareholders will be updated on this appointment in due
course.
Finally, Ed Barker, Non-Executive Director and Chair of the
Audit Committee has notified the Board of his intention to step
down as a director and a process has been initiated to find a
successor. Ed has been on the Board for five years and the Board
would like to thank Ed for his contribution.
Current trading and outlook
Trading remains challenging and the Board now expects the Group
to deliver full year adjusted operating profit (being profits
before interest, tax and non-underlying charges) of approximately
GBP20m. Since the publication of the 2018 Full Year results, weak
consumer confidence has weighed on our end customers, particularly
in food and retail, which has had a direct impact on demand for
Staffline's services.
The Board expects net debt to be c2x EBITDA at the year-end
benefiting from the proceeds of the equity capital raise and
trading in the second half of the year.
In the uncertain political climate, we remain responsive and
focused on adapting to new regulations and government change.
Despite the potential changes which the UK's exit from the EU may
bring over time, our scale and capabilities mean that organisations
increasingly look to Staffline's market leading position to ensure
their access to a flexible and efficient workforce.
There has also been a slow-down 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 of 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, with over 60% of 2020 revenues already
contracted, the Group maintains a positive outlook 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. We remain confident that this market is
attractive. In addition, the other elements of PeoplePlus, which
are expected to contribute c.85% of PeoplePlus revenue in 2020,
continue to develop well.
The Board expects a greater weighting towards 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 of the year. As always, but more so this year, the Christmas
peak trading period will be important in contributing to the
Group's results for the full year.
Looking to the future, the Board believes that the Group has
laid strong foundations for growth, having built market-leading
positions in both of our core markets. This has also given the
Group a certain amount of resilience to the aforementioned
headwinds that we expect Staffline to continue to weather in the
short-term.
I look forward to providing further updates as we get back to
focusing on our growth strategy and looking to deliver value for
all our key stakeholders.
Chris Pullen
Chief Executive Officer
16 September 2019
Financial review
Profitability
Group sales in the period grew by 11.1% to GBP534.6m (H1 2018:
GBP481.0m). Group organic revenue, excluding business acquisitions
in the past twelve months, declined by 12.4%, with Recruitment
falling by 10.3% and PeoplePlus falling by 29.5%.
Gross profit decreased by GBP8.6m, or 16.0%, to GBP45.0m (H1
2018: GBP53.6m). A change in the sales mix between the two
divisions has had an impact on the Group's gross profit margin,
with a reduction from 11.1% in H1 2018 to 8.4% in H1 2019.
Recruitment, at a gross profit margin of 7.2% (H1 2018: 7.8%),
represented 92.3% of sales this year (89.3% H1 2018), whereas sales
fell at our higher margin PeoplePlus division (H1 2019 margin:
22.5%, H1 2018: 39.5%). Gross profit in our Recruitment division
grew by GBP2.4m (7.2%), which was more than offset by the reduced
activity in PeoplePlus where revenues decreased by 19.5% and gross
profit decreased by GBP11.0m to GBP9.3m. Underlying overhead costs
were higher at GBP41.3m (H1 2018: GBP37.3m), due to the full period
effect of acquisitions made during 2018.
Underlying profit* reduced by 90% to GBP1.5m (H1 2018:
GBP15.0m). On this basis, underlying diluted Earnings Per Share
from continuing operations also fell, by 88%, to 5.6p (H1 2018:
47.2p). Statutory declared loss before tax decreased by 173% to
GBP7.7m (H1 2018: profit before tax of GBP10.5m), due to the
trading headwinds in both divisions, and the transition of the
PeoplePlus division to a skills and training business, as described
above.
* Underlying profit before tax excludes amortisation charges on
intangible assets arising on business combinations, acquisition and
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
("SBPC").
Taxation
The tax charge on underlying profits before taxation was GBPnil,
an effective tax rate of nil%, which is below the average actual
composite UK corporation tax rate of 19.0% due to the availability
and utilisation of tax losses brought forward.
Balance sheet
Net assets decreased by GBP6.7m to GBP84.3m during the period
(31 December 2018: GBP91.0m), attributable to the loss after tax
for the period and the impact on the brought forward profit and
loss account balance of the transition to IFRS 16 Leases. The main
balance sheet movements during the six months also related to the
transition to IFRS 16, as well as working capital movements and
increased borrowings. Total assets fell by GBP13.2m (3.8%) whilst
total liabilities fell by GBP6.5m (2.6%).
Cash flows
Net cash outflow from operating activities for the period was
GBP13.2m, below the GBP5.6m inflow reported in the comparative
period in 2018. A GBP13.5m decrease in underlying profit before tax
for the Group together with increased working capital requirements
(H1 2019: working capital outflow of GBP16.6m during the six
months, compared to an outflow of GBP13.0m in H1 2018) were
responsible for this movement. The Recruitment division's debtor
days at 30 June 2019 are 28.8 days (30 June 2018: 25.5 days). This
increase in debtor days is attributable to the 2018 acquisitions
and the impact on cash collection of integrating these businesses
into the division's pre-existing credit control processes and
systems.
Net debt
The Group's net debt position, including unamortised transaction
fees, of GBP89.2m increased from the 2018 year-end position of
GBP63.0m. This increase has been primarily driven by the payment of
deferred consideration on 2018 acquisitions, a reduction in VAT and
payroll tax liabilities (timing issue) and the settlement of
certain non-underlying costs provided for as at 31 December 2018.
The Board expects net debt to be c2x EBITDA at the year-end
benefitting from the equity capital raise and trading in the second
half.
Refinancing: Amendments to Credit Facilities
Following discussions with the lenders of the existing GBP120m
revolving credit facility ("RCF"), the Company and the lenders
agreed on 26 June 2019 to certain amendments to the RCF. In
summary:
Previous Current
arrangement arrangement
Revolving credit facility GBP95m GBP95m
("RCF")
------------- -------------
Overdraft (carved out GBP25m GBP25m
from RCF)
------------- -------------
Accordion GBP30m -
------------- -------------
Total facility GBP150m GBP120m
------------- -------------
Expiry date June 2022 June 2022
------------- -------------
Option to extend by Yes No longer
one year available
------------- -------------
The lenders have agreed to a waiver of all quarterly financial
covenant tests for the period ending 30 June 2019. The key revised
terms to the RCF are:
i) Relaxation of the September and December 2019 leverage
covenants followed by a gradual reduction of the leverage covenant
to net debt of less than 2x EBITDA by 31 December 2020;
ii) Restrictions on new material share, business and asset acquisitions until January 2021;
iii) No dividends to be declared by the Company for the 2019 and
2020 financial years;
iv) Repayment and cancellation of revolving facility commitments
by GBP10m on both 15 November 2019 and 15 November 2020;
v) Net proceeds of the July 2019 share issue in excess of GBP30m
are to be used to reduce, and cancel, the Credit Facilities
available.
In consideration of the aforementioned amendments, an amendment
fee has been paid to the lenders and certain other changes are
being made to the Credit Facility (including the removal of the
accordion option and the ability to request the lenders to extend
the Credit Facility for an additional 12 months beyond July 2022).
The expiry date for the Credit Facility remains in July 2022. The
Company has agreed to pay the lenders an exit fee based on a
percentage of the outstanding commitments when the Credit Facility
expires or, if sooner, refinanced.
Restatement of June 2018 Financial Position
In accordance with IFRS 3 Business Combinations, the directors
made an initial assessment of the fair values of the acquired
assets and liabilities, resulting in Other Intangible assets of
GBP2.3m being created in the consolidated statement of financial
position as at 30 June 2018. During the year ended 31 December
2018, the Directors undertook a review of the provisional fair
values, with adjustments being reflected within the carrying value
of Other Intangible assets as at the acquisition date. Net
adjustments of GBP0.7m were made during the year (increase in the
holiday pay provision), increasing the Other Intangible assets
relating to OneCall Recruitment by GBP0.7m to GBP3.0m, shown as a
prior year restatement of the June 2018 Consolidated Statement of
Financial Position. The gross carrying amount of consolidated
"Customer Contracts and Brands" as at 30 June 2018 was increased by
GBP0.7m, from GBP65.6m (previously reported) to GBP66.3m (as
restated). Net assets as at 30 June 2018 are unaffected by these
adjustments, as the GBP0.7m increase in Other Intangible assets is
offset by a similar increase in holiday pay provisions.
Issue of new shares
On 27 June 2019, Staffline announced a proposed GBP34m Placing
of ordinary 10p shares to institutional shareholders (to raise c.
GBP30m net of expenses) and an Open Offer to qualifying
shareholders of GBP7m.
On 15 July 2019, an Extraordinary General Meeting of the Company
was held to vote on these proposals. All resolutions were passed by
shareholders.
On 15 July 2019, a total of 40,986,097 ordinary 10p shares were
issued by the Company, resulting in a total of 68,930,486 ordinary
10p shares now being in issue.
After deducting related expenses of GBP4.2m, a net GBP36.8m was
raised by the Company, to be used to reduce its borrowings.
Events after the balance sheet date
During July 2019, the Group lost a historical legal claim
involving share incentives payable to an ex-employee. The final
cost of GBP1.4m will be taken as a non-underlying charge in the
second half of 2019. Other than the issue of new shares noted
above, there were no events between the balance sheet date of 30
June 2019 and the approval of these condensed financial statements
accounts on 16 September 2019 that are required to be bought to the
attention of the shareholders.
Related party transactions
Related party transactions are disclosed in note 16 to the
condensed set of financial statements.
Transition to IFRS16 Leases
IFRS 16 Leases is effective for accounting periods beginning on
or after 1 January 2019. Therefore these interim financial
statements cover the first period to which the transition to IFRS
16 is applicable. The Group has adopted the modified retrospective
approach to transition, meaning that the cumulative transitional
adjustments to assets, liabilities and equity have been recognised
on 1 January 2019 and no comparative figures have been restated.
For the rest of the six-month period to 30 June 2019, and as at
this date, all leasing arrangements that are covered by the
provisions of IFRS 16 have been accounted for in-line with this new
accounting standard. Details regarding the transition, including
the relevant balances and the transitional adjustments themselves,
are presented in note 17 to the condensed set of financial
statements.
Going concern
As noted earlier in this statement, Staffline finalised a
renegotiation of its banking facilities on 26 June 2019. In
addition, an additional GBP36.8m of net funds were raised on 15
July 2019 through the issue of new ordinary 10p shares. The
Directors have reviewed likely outcomes for both trading and cash
generation, based on the updated profit expectation of
approximately GBP20m confirmed today, and are satisfied that the
Group has sufficient resources to continue in operational existence
for the foreseeable future, and a period of not less than 12 months
from the date of this report. Accordingly, they continue to adopt
the going concern basis in preparing these financial statements.
Should a further downside occur the Board will reassess this
position.
Dividend
The Group has suffered a number of trading headwinds during the
first half of 2019, together with significant one-off exceptional
costs recognised in 2018, which were higher than previously
estimated. Consequently, cash headroom is forecast to be limited
during 2019 and 2020. Whilst this remains the case, the Company
cannot pay a dividend. This situation will be kept under constant
review and at such time as the Board believes that it is
appropriate to reinstate the payment of a dividend, we intend to
revert to the pre-existing dividend policy of maintaining a
dividend cover ratio of between 4.0 and 4.5 times underlying EPS if
in a net debt position.
Mike Watts
Chief Financial Officer
16 September 2019
Responsibility statement
The Directors are responsible for preparing the Half Yearly
Financial Report, in accordance with applicable laws and
regulations. The Directors confirm that to the best of their
knowledge:
1. This condensed set of financial statements, which should be
read in conjunction with the Annual Report for the year ended 31
December 2018, has been prepared in accordance with AIM Rules for
Companies - Part One, Section 18 "Half-yearly reports";
2. The Interim Management Report includes a fair review of the
indication of important events during the first six months; and
3. This condensed set of financial statements includes a
description of principal risks and uncertainties for the remaining
six months of the year and disclosure of related parties'
transactions and changes therein.
By order of the Board
Chris Pullen Mike Watts
Chief Executive Officer Chief Financial Officer
16 September 2019
Consolidated statement of comprehensive income
For the six months ended 30 June 2019
Six- month Six-
Six-month period month
period ended period Six-month Year
ended 30 June ended period ended
30 June 2019 30 June ended 31
2019 Non- 2019 30 June December
Underlying underlying Total 2018 2018
Unaudited Unaudited Unaudited Unaudited Audited
Note GBP'm GBP'm GBP'm GBP'm GBP'm
----------- ----------- ---------- ---------- ----------
Continuing operations
------------------------------------------------------ ----- ----------- ----------- ---------- ---------- ----------
Revenue 2 534.6 - 534.6 481.0 1,127.5
------------------------------------------------------ ----- ----------- ----------- ---------- ---------- ----------
Cost of sales (489.6) - (489.6) (427.4) (1,005.6)
------------------------------------------------------ ----- ----------- ----------- ---------- ---------- ----------
Gross profit 45.0 - 45.0 53.6 121.9
------------------------------------------------------ ----- ----------- ----------- ---------- ---------- ----------
Administrative expenses
(underlying) (41.3) - (41.3) (37.3) (82.8)
------------------------------------------------------ ----- ----------- ----------- ---------- ---------- ----------
Underlying operating profit,
before non-underlying
administrative expenses 3.7 - 3.7 16.3 39.1
------------------------------------------------------ ----- ----------- ----------- ---------- ---------- ----------
Administrative expenses
(non-underlying)* 3 - (9.2) (9.2) (4.5) (45.6)
------------------------------------------------------ ----- ----------- ----------- ---------- ---------- ----------
Operating profit/(loss) 2 3.7 (9.2) (5.5) 11.8 (6.5)
------------------------------------------------------ ----- ----------- ----------- ---------- ---------- ----------
Finance costs (2.2) - (2.2) (1.3) (3.1)
------------------------------------------------------ ----- ----------- ----------- ---------- ---------- ----------
Profit/(loss) for the
period before taxation 1.5 (9.2) (7.7) 10.5 (9.6)
---------- ---------- ----------
Underlying 1.5 15.0 36.0
Non-underlying* 3 (9.2) (4.5) (45.6)
---------- ---------- ----------
Tax expense 4 - 1.7 1.7 (2.0) 1.1
------------------------------------------------------ ----- ----------- ----------- ---------- ---------- ----------
Profit/(loss) from continuing
operations 1.5 (7.5) (6.0) 8.5 (8.5)
---------- ---------- ----------
Underlying 1.5 12.2 28.8
Non-underlying* 3 (7.5) (3.7) (37.3)
---------- ---------- ----------
Items that will not be reclassified to the statement
of comprehensive income - actuarial gains and
losses, net of deferred tax (0.3) - (0.5)
--------------------------------------------------------------------------------------- ---------- ---------- ----------
Items that may be reclassified to the statement
of comprehensive income - cumulative translation
loss - - -
--------------------------------------------------------------------------------------- ---------- ---------- ----------
Net profit/(loss) and
total comprehensive income
for the period (6.3) 8.5 (9.0)
------------------------------------------------------ ----- ----------- ----------- ---------- ---------- ----------
Earnings per ordinary
share 5
------------------------------------------------------ ----- ----------- ----------- ---------- ---------- ----------
Continuing operations:
Basic (22.4p) 14.3p (32.5p)
------------------------------------------------------ ----- ----------- ----------- ---------- ---------- ----------
Diluted (22.4p) 14.2p (32.5p)
------------------------------------------------------ ----- ----------- ----------- ---------- ---------- ----------
*the non-underlying result includes amortisation of intangible
assets arising on business combinations, business acquisition
costs, exceptional reorganisation costs, exceptional NMW
remediation and financial penalties, enhanced audit scope fees and
the non-cash charge/credit for share based payment costs.
The accompanying notes on pages 19 to 41 form an integral part
of these financial statements.
Consolidated statement of changes in equity
For the six months ended 30 June 2019
Unaudited
Share based Profit
Own shares payment and loss
Share capital JSOP Share premium reserve account Total equity
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
At 1 January 2019
(reported) 2.8 (4.8) 41.2 0.3 51.5 91.0
---------------------------- ---------------- ------------- -------------- ------------ ---------- -------------
Transition to IFRS 16:
Leases
(notes 1, 17) - - - - (0.4) (0.4)
---------------------------- ---------------- ------------- -------------- ------------ ---------- -------------
At 1 January 2019
(restated) 2.8 (4.8) 41.2 0.3 51.1 90.6
---------------------------- ---------------- ------------- -------------- ------------ ---------- -------------
Dividends (note 5) - - - - - -
---------------------------- ---------------- ------------- -------------- ------------ ---------- -------------
Vesting of Joint Share
Ownership
Plan ("JSOP") shares - - - - - -
---------------------------- ---------------- ------------- -------------- ------------ ---------- -------------
Issue of new shares - - - - - -
---------------------------- ---------------- ------------- -------------- ------------ ---------- -------------
Transactions with owners 2.8 (4.8) 41.2 0.3 51.1 90.6
---------------------------- ---------------- ------------- -------------- ------------ ---------- -------------
(Loss) for the period - - - - (6.0) (6.0)
---------------------------- ---------------- ------------- -------------- ------------ ---------- -------------
Actuarial (losses) (note 9) - - - - (0.3) (0.3)
---------------------------- ---------------- ------------- -------------- ------------ ---------- -------------
Cumulative translation
adjustments - - - - - -
---------------------------- ---------------- ------------- -------------- ------------ ---------- -------------
Total comprehensive income
for the period, net of tax - - - - (6.3) (6.3)
---------------------------- ---------------- ------------- -------------- ------------ ---------- -------------
At 30 June 2019 (unaudited) 2.8 (4.8) 41.2 0.3 44.8 84.3
---------------------------- ---------------- ------------- -------------- ------------ ---------- -------------
The accompanying notes on pages 19 to 41 form an integral part
of these financial statements.
Consolidated statement of changes in equity
For the six months ended 30 June 2018
Unaudited
Share based Profit
Own shares payment and loss
Share capital JSOP Share premium reserve account Total equity
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
At 1 January 2018 (audited) 2.8 (8.9) 40.3 0.1 61.5 95.8
------------------------------ --------------- ------------ -------------- ------------ ---------- -------------
Transition to IFRS15: Revenue
Recognition - - - - (1.0) (1.0)
------------------------------ --------------- ------------ -------------- ------------ ---------- -------------
At 1 January 2018 (restated) 2.8 (8.9) 40.3 0.1 60.5 94.8
------------------------------ --------------- ------------ -------------- ------------ ---------- -------------
Dividends (note 5) - - - - (4.0) (4.0)
------------------------------ --------------- ------------ -------------- ------------ ---------- -------------
Vesting of Joint Share
Ownership
Plan ("JSOP") shares - - - - - -
------------------------------ --------------- ------------ -------------- ------------ ---------- -------------
Issue of new shares (note 13) - (0.9) 0.9 - - -
------------------------------ --------------- ------------ -------------- ------------ ---------- -------------
Transactions with owners - (0.9) 0.9 - (4.0) (4.0)
------------------------------ --------------- ------------ -------------- ------------ ---------- -------------
Profit for the period - - - - 8.5 8.5
------------------------------ --------------- ------------ -------------- ------------ ---------- -------------
Actuarial gains and losses
(note 9) - - - - - -
------------------------------ --------------- ------------ -------------- ------------ ---------- -------------
Cumulative translation
adjustments - - - - - -
------------------------------ --------------- ------------ -------------- ------------ ---------- -------------
Total comprehensive income
for the period, net of tax - - - - 8.5 8.5
------------------------------ --------------- ------------ -------------- ------------ ---------- -------------
At 30 June 2018 (unaudited) 2.8 (9.8) 41.2 0.1 65.0 99.3
------------------------------ --------------- ------------ -------------- ------------ ---------- -------------
The accompanying notes on pages 19 to 41 form an integral part
of these financial statements.
Consolidated statement of changes in equity
For the year ended 31 December 2018
Audited
Share based
Own shares payment Profit and
Share capital JSOP Share premium reserve loss account Total equity
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
-------------------------- --------------- ------------ -------------- ------------ -------------- -------------
At 1 January 2018
(audited) 2.8 (8.9) 40.3 0.1 61.5 95.8
-------------------------- --------------- ------------ -------------- ------------ -------------- -------------
Transition to IFRS15:
Revenue
Recognition - - - - (1.0) (1.0)
-------------------------- --------------- ------------ -------------- ------------ -------------- -------------
At 1 January 2018
(restated) 2.8 (8.9) 40.3 0.1 60.5 94.8
-------------------------- --------------- ------------ -------------- ------------ -------------- -------------
Dividends (note 5) - - - - (7.1) (7.1)
-------------------------- --------------- ------------ -------------- ------------ -------------- -------------
Issue of 2018 Joint Share
Ownership
Plan ("JSOP") shares - (0.9) 0.9 - - -
-------------------------- --------------- ------------ -------------- ------------ -------------- -------------
Settlement of 2013 JSOP
shares - 5.0 - - 7.1 12.1
-------------------------- --------------- ------------ -------------- ------------ -------------- -------------
Save as you earn ("SAYE")
share
scheme
- equity settled - - - 0.2 - 0.2
-------------------------- --------------- ------------ -------------- ------------ -------------- -------------
Transactions with owners - 4.1 0.9 0.2 - 5.2
-------------------------- --------------- ------------ -------------- ------------ -------------- -------------
(Loss) for the year - - - - (8.5) (8.5)
-------------------------- --------------- ------------ -------------- ------------ -------------- -------------
Actuarial (losses) (note
9) - - - - (0.5) (0.5)
-------------------------- --------------- ------------ -------------- ------------ -------------- -------------
Cumulative translation
adjustments - - - - - -
-------------------------- --------------- ------------ -------------- ------------ -------------- -------------
Total comprehensive
income
for the year, net of tax - - - - (9.0) (9.0)
-------------------------- --------------- ------------ -------------- ------------ -------------- -------------
At 31 December 2018 2.8 (4.8) 41.2 0.3 51.5 91.0
-------------------------- --------------- ------------ -------------- ------------ -------------- -------------
The accompanying notes on pages 19 to 41 form an integral part
of these financial statements.
Consolidated statement of financial position
As at 30 June 2019
30 June 2018 31 December
30 June 2019 Unaudited 2018
Unaudited (as restated) Audited
Note GBP'm GBP'm GBP'm
Assets
-------------------------------- ----- ------------- --------------- ------------
Non-current assets
-------------------------------- ----- ------------- --------------- ------------
Goodwill 6 116.3 101.9 116.3
-------------------------------- ----- ------------- --------------- ------------
Other intangible assets 7 38.3 33.0 42.9
-------------------------------- ----- ------------- --------------- ------------
Property, plant and equipment 8 17.1 8.2 8.6
-------------------------------- ----- ------------- --------------- ------------
Retirement benefit asset 9 0.5 1.4 0.8
-------------------------------- ----- ------------- --------------- ------------
Deferred tax asset 4 1.0 0.6 0.9
-------------------------------- ----- ------------- --------------- ------------
173.2 145.1 169.5
-------------------------------- ----- ------------- --------------- ------------
Current
-------------------------------- ----- ------------- --------------- ------------
Trade and other receivables 148.8 121.6 156.4
-------------------------------- ----- ------------- --------------- ------------
Corporation tax recoverable 3.2 - 1.3
-------------------------------- ----- ------------- --------------- ------------
Cash and cash equivalents 10 5.0 6.7 16.2
-------------------------------- ----- ------------- --------------- ------------
157.0 128.3 173.9
-------------------------------- ----- ------------- --------------- ------------
Total assets 330.2 273.4 343.4
-------------------------------- ----- ------------- --------------- ------------
Liabilities
-------------------------------- ----- ------------- --------------- ------------
Current
-------------------------------- ----- ------------- --------------- ------------
Trade and other payables 114.4 110.4 136.1
-------------------------------- ----- ------------- --------------- ------------
Other current liabilities 11 2.3 10.0 7.8
-------------------------------- ----- ------------- --------------- ------------
Borrowings 12 - 8.6 -
-------------------------------- ----- ------------- --------------- ------------
Lease liabilities 17 2.4 - -
-------------------------------- ----- ------------- --------------- ------------
Corporation tax payable 4 - 3.0 -
-------------------------------- ----- ------------- --------------- ------------
119.1 132.0 143.9
-------------------------------- ----- ------------- --------------- ------------
Non-current
-------------------------------- ----- ------------- --------------- ------------
Borrowings (net of unamortised
debt costs) 12 94.2 35.0 79.2
-------------------------------- ----- ------------- --------------- ------------
Other non-current liabilities
inc. provisions 20.2 2.4 22.6
-------------------------------- ----- ------------- --------------- ------------
Lease liabilities 17 6.8 - -
-------------------------------- ----- ------------- --------------- ------------
Deferred tax liabilities 4 5.6 4.7 6.7
-------------------------------- ----- ------------- --------------- ------------
126.8 42.1 108.5
-------------------------------- ----- ------------- --------------- ------------
Total liabilities 245.9 174.1 252.4
-------------------------------- ----- ------------- --------------- ------------
Equity
-------------------------------- ----- ------------- --------------- ------------
Share capital 13 2.8 2.8 2.8
-------------------------------- ----- ------------- --------------- ------------
Own shares (4.8) (9.8) (4.8)
-------------------------------- ----- ------------- --------------- ------------
Share premium 41.2 41.2 41.2
-------------------------------- ----- ------------- --------------- ------------
Share based payment reserve 0.3 0.1 0.3
-------------------------------- ----- ------------- --------------- ------------
Profit and loss account 44.8 65.0 51.5
-------------------------------- ----- ------------- --------------- ------------
Total equity 84.3 99.3 91.0
-------------------------------- ----- ------------- --------------- ------------
Total equity and liabilities 330.2 273.4 343.4
-------------------------------- ----- ------------- --------------- ------------
The accompanying notes on pages 19 to 41 form an integral part
of these financial statements.
Consolidated statement of cash flows
For the six-month period to 30 June 2019
Six-month Six-month
period period Year ended
to 30 June to 30 June 31 December
2019 2018 2018
Unaudited Unaudited Audited
Note GBP'm GBP'm GBP'm
Cash flows from operating activities 14 (13.2) 5.6 13.1
---------------------------------------------- ----- ------------ ------------ -------------
Taxation paid (net) 4 (1.3) (3.3) (6.4)
---------------------------------------------- ----- ------------ ------------ -------------
Net cash (outflow)/inflow from operating
activities (14.5) 2.3 6.7
---------------------------------------------- ----- ------------ ------------ -------------
Cash flows from investing activities
- trading
---------------------------------------------- ----- ------------ ------------ -------------
Purchase of intangible assets - software 7 (2.1) (1.3) (2.7)
---------------------------------------------- ----- ------------ ------------ -------------
Purchases of property, plant and equipment 8 (1.9) (1.6) (3.7)
---------------------------------------------- ----- ------------ ------------ -------------
Proceeds on sale of property, plant
and equipment 0.6 - -
---------------------------------------------- ----- ------------ ------------ -------------
(3.4) (2.9) (6.4)
---------------------------------------------- ----- ------------ ------------ -------------
Free cash (absorbed by)/generated
from operations (17.9) (0.6) 0.3
---------------------------------------------- ----- ------------ ------------ -------------
Cash flows from investing activities
- acquisitions
---------------------------------------------- ----- ------------ ------------ -------------
Acquisition of businesses - cash paid,
net of cash acquired - (17.4) (34.4)
---------------------------------------------- ----- ------------ ------------ -------------
Acquisition of businesses - deferred
consideration for prior period acquisitions
(June 2018 reanalysed - was previously
reported under "financing activities) (5.3) (1.0) (1.6)
---------------------------------------------- ----- ------------ ------------ -------------
(5.3) (18.4) (36.0)
---------------------------------------------- ----- ------------ ------------ -------------
Cash flows from financing activities:
---------------------------------------------- ----- ------------ ------------ -------------
New loans (net of transaction fees) 24.9 - 36.3
---------------------------------------------- ----- ------------ ------------ -------------
Repayments of loans in acquired entities (10.0) - (13.6)
---------------------------------------------- ----- ------------ ------------ -------------
Loan repayments - (4.4) (4.4)
---------------------------------------------- ----- ------------ ------------ -------------
Finance lease principal repayments (0.9) - -
---------------------------------------------- ----- ------------ ------------ -------------
Interest paid (2.0) (1.2) (2.7)
---------------------------------------------- ----- ------------ ------------ -------------
Dividends paid - - (7.1)
---------------------------------------------- ----- ------------ ------------ -------------
Proceeds from sale of Joint Share
Ownership Plan shares - - 12.1
---------------------------------------------- ----- ------------ ------------ -------------
Proceeds from the issue of share capital - - -
---------------------------------------------- ----- ------------ ------------ -------------
Net cash flows from/(used in) financing
activities 12.0 (5.6) 20.6
---------------------------------------------- ----- ------------ ------------ -------------
Net change in cash and cash equivalents (11.2) (24.6) (15.1)
---------------------------------------------- ----- ------------ ------------ -------------
Cash and cash equivalents at beginning
of period 16.2 31.3 31.3
---------------------------------------------- ----- ------------ ------------ -------------
Cash and cash equivalents at end of
period 10 5.0 6.7 16.2
---------------------------------------------- ----- ------------ ------------ -------------
Underlying operating profit 3.7 16.3 39.1
---------------------------------------------- ----- ------------ ------------ -------------
% free cash conversion of underlying
operating profit* (384%) (4%) 19%
---------------------------------------------- ----- ------------ ------------ -------------
* Free cash conversion of underlying profit excludes one-off
JSOP settlement costs in full year 2018 of GBP7.1m.
The accompanying notes on pages 19 to 41 form an integral part
of these financial statements.
Notes to the summary financial statements
For the half year ended 30 June 2019
1 Interim accounts and accounting policies
Staffline Group plc, a Public Limited Company, is incorporated
and domiciled in the United Kingdom.
The unaudited condensed interim Group financial statements for
the six-month period ended 30 June 2019 (including the comparatives
for the six-month period ended 30 June 2018 and the year ended 31
December 2018) were approved and authorised for issue by the Board
of Directors on 16 September 2019.
It should be noted that accounting estimates and assumptions are
used in the preparation of the interim financial information.
Although these estimates are based on management's best knowledge
and judgement of current events, actual results may ultimately
differ from those estimates. The unaudited interim Group financial
statements have been prepared using the accounting policies as
described in the December 2018 audited year-end Annual Report and
have been consistently applied. In addition, IFRS 16 ("Leases") has
been implemented from 1 January 2019.
The interim Group financial information contained within this
report does not constitute statutory accounts as defined in the
Companies Act 2006, section 434. The full accounts for the year
ended 31 December 2018 received an unqualified report from the
auditors and did not contain a statement under Section 498(2) or
(3) of the Companies Act 2006, but did include an Emphasis of
Matter on the impact of non-compliance of National Minimum Wage
legislation which is more fully described on page 63 of the 2018
Annual Report. A copy of the statutory accounts for that year has
been delivered to the Registrar of Companies.
Basis of preparation
The unaudited interim Group financial statements, which should
be read in conjunction with the audited Annual Report for the year
ended 31 December 2018, have been prepared in accordance with AIM
Rules for Companies - Part One, Section 18 "Half-yearly
reports".
The interim Group financial statements consolidate those of the
parent company and all its subsidiaries as at 30 June 2019.
Subsidiaries are all entities to which the Group is exposed, or has
rights, to variable returns and has the ability to affect those
returns through power over the subsidiary. All Recruitment division
subsidiary interim accounts are prepared to the nearest Sunday to
30 June, so 2019 accounts are for the 26 weeks ended 30 June 2019,
2018 accounts being for the 26 weeks ended 1 July 2018. All
PeoplePlus subsidiaries have an interim reporting date of 30 June
2019 (2018: 30 June 2018).
The consolidated Group financial statements have been prepared
on a going concern basis using the significant accounting policies
and measurement bases summarised in the December 2018 audited
year-end Annual Report, and in accordance with International
Financial Reporting Standards (IFRS) as adopted by the EU and with
the Companies Act 2006 as applicable to companies reporting under
IFRS. The financial statements are prepared under the historical
cost convention except for contingent consideration and cash
settled share options which are measured at fair value. The
consolidated financial statements are presented in sterling, which
is also the functional currency of the parent company.
Going concern
As noted earlier in this statement, Staffline finalised a
renegotiation of its banking facilities on 26 June 2019. In
addition, an additional GBP36.8m of net funds were raised on 15
July 2019 through the issue of new ordinary 10p shares. The
Directors have reviewed likely outcomes for both trading and cash
generation, based on the updated profit expectation of
approximately GBP20m confirmed today, and are satisfied that the
Group has sufficient resources to continue in operational existence
for the foreseeable future, and a period of not less than 12 months
from the date of this report. Accordingly, they continue to adopt
the going concern basis in preparing these financial statements.
Should a further downside occur the Board will reassess this
position.
Adoption of new or amended IFRS: IFRS 16 Leases
The Group has applied IFRS 16 Leases for the first time for its
interim reporting period commencing 1 January 2019. The Group had
to change its accounting policy following the adoption of IFRS
16.
IFRS 16 introduces new or amended requirements with respect to
lease accounting. It introduces significant changes to the lessee
accounting by removing the distinction between operating and
finance lease, requiring the recognition of a right-of-use asset
and a lease liability at commencement for all leases, except for
short-term leases and leases of low value assets. In contrast to
lessee accounting, the requirements for lessor accounting have
remained largely unchanged.
The Group is not party to any material leases where it acts as a
lessor, but the Group does have a large number of material property
and equipment leases, under which it is a lessee.
The Group assesses whether a contract is or contains a lease, at
inception of the contract. The Group recognises a right-of-use
asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short-term
leases (defined as leases with a lease term of 12 months or less)
and leases of low value assets (defined as those with annual lease
charges of less than GBP1,000). For these leases, subject to
recognition exemption, the Group recognises the lease payments as
an operating expense on a straight-line basis over the term of the
lease unless another systematic basis is more representative of the
time pattern in which economic benefits from the leased assets are
consumed.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted by using the rate implicit in the lease. If this rate
cannot be readily determined, the Group uses its incremental
borrowing rate. The lease liability is subsequently measured by
increasing the carrying amount to reflect interest on the lease
liability (using the effective interest method) and by reducing the
carrying amount to reflect the lease payments made.
The right-of-use assets comprise the initial measurement of the
corresponding lease liability, lease payments made at or before the
commencement day and any initial direct costs. They are
subsequently measured at cost less accumulated depreciation and
impairment losses.
Right-of-use assets are depreciated over the shorter period of
lease term and useful life of the underlying asset. If a lease
transfers ownership of the underlying asset or the cost of the
right-of-use asset reflects that the Group expects to exercise a
purchase option, the related right-of-use asset is depreciated over
the useful life of the underlying asset. The depreciation starts at
the commencement date of the lease. The Group does not have any
leases that include purchase options or transfer ownership of the
underlying asset.
The right-of-use assets are presented within the same line item
as that within which the corresponding underlying assets would be
presented if they were owned - for the Group this is property,
plant and equipment.
The Group has applied IFRS 16 using the modified retrospective
approach, without restatement of the comparative information. In
respect of those leases the Group previously treated as operating
leases, the Group has elected to measure its right of use assets
arising from property leases using the approach set out in IFRS
16.C8(b)(i). Under IFRS 16.C8(b)(i) right of use assets are
calculated as if the Standard applied at lease commencement, but
discounted using the borrowing rate at the date of initial
application.
Other leases previously treated as operating leases have been
measured following the approach in IFRS 16.C8(b)(ii), whereby right
of use assets are set equal to the lease liability, adjusted for
prepaid or accrued lease payments, including un-amortised lease
incentives.
The Group's weighted average incremental borrowing rate applied
to lease liabilities as at 1 January 2019 is 2%.
The impact of the transition to IFRS 16 at 1 January 2019, as
well as the impact on the Group's Consolidated Statement of
Comprehensive Income for the six-month period to 30 June 2019 is
disclosed in note 17.
Prior year adjustment: June 2018 Consolidated Statement of
Financial Position (see note 7)
During the year end 31 December 2018, the Group acquired the
entire share capital of One Call Recruitment Limited (June
2018).
In accordance with IFRS 3 Business Combinations, the directors
made an initial assessment of the fair values of the acquired
assets and liabilities, resulting in Other Intangible assets of
GBP2.3m being created in the consolidated statement of financial
position as at 30 June 2018.
During the year ended 31 December 2018, the Directors undertook
a review of the provisional fair values, with adjustments being
reflected within the carrying value of Other Intangible assets as
at the acquisition date. Net adjustments of GBP0.7m were made
during the year (increase in the holiday pay provision), increasing
the Other Intangible assets relating to OneCall Recruitment by
GBP0.7m to GBP3.0m, shown as a prior year restatement of the June
2018 Consolidated Statement of Financial Position. The gross
carrying amount of consolidated "Customer Contracts and Brands" as
at 30 June 2018 was increased by GBP0.7m, from GBP65.6m (previously
reported) to GBP66.3m (as restated).
Net assets as at 30 June 2018 are unaffected by these
adjustments, as the GBP0.7m increase in Other Intangible assets is
being offset by a similar increase in holiday pay provisions.
2 Segmental reporting
Management currently identifies two operating segments: the
provision of workforce recruitment and management to industry
(called Recruitment) and the provision of skills training and
probationary services (called PeoplePlus). These operating segments
are monitored by the Chief Operating Decision Maker, the Group's
Board, and strategic decisions are made on the basis of segment
operating results. Segment information for the reporting half year
is as follows:
Total Total
Recruitment PeoplePlus Group Recruitment PeoplePlus Group
Six months Six months Six months Six months Six months Six months
ended 30 ended ended ended 30 ended ended
June 2019 30 June 30 June June 2018 30 June 30 June
Unaudited 2019 2019 Unaudited 2018 2018
Unaudited Unaudited Unaudited Unaudited
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
-------------- ------------- -------------
Segment continuing
operations:
-------------------------- -------------- ------------- ------------- -------------- ------------- -------------
Revenue from external
customers 493.2 41.4 534.6 429.6 51.4 481.0
-------------------------- -------------- ------------- ------------- -------------- ------------- -------------
Cost of sales (457.5) (32.1) (489.6) (396.3) (31.1) (427.4)
-------------------------- -------------- ------------- ------------- -------------- ------------- -------------
Segment gross profit 35.7 9.3 45.0 33.3 20.3 53.6
-------------------------- -------------- ------------- ------------- -------------- ------------- -------------
Administrative expenses
(underlying) (29.7) (8.6) (38.3) (23.7) (11.3) (35.0)
-------------------------- -------------- ------------- ------------- -------------- ------------- -------------
Depreciation and software
amortisation
(underlying) (1.4) (1.6) (3.0) (0.4) (1.9) (2.3)
-------------------------- -------------- ------------- ------------- -------------- ------------- -------------
Segment underlying
operating
profit* 4.6 (0.9) 3.7 9.2 7.1 16.3
-------------------------- -------------- ------------- ------------- -------------- ------------- -------------
Administrative expenses
- share based payment
credit/(charge) 0.3 (0.1) 0.2 0.4 - 0.4
-------------------------- -------------- ------------- ------------- -------------- ------------- -------------
Amortisation of
intangible
assets arising on
business
combinations (6.2) - (6.2) (2.0) (2.9) (4.9)
-------------------------- -------------- ------------- ------------- -------------- ------------- -------------
Administrative expenses
- exceptional
reorganisation
costs (3.2) - (3.2) - - -
-------------------------- -------------- ------------- ------------- -------------- ------------- -------------
Segment operating
(loss)/profit (4.5) (1.0) (5.5) 7.6 4.2 11.8
-------------------------- -------------- ------------- ------------- -------------- ------------- -------------
Finance costs (2.2) - (2.2) (1.3) - (1.3)
-------------------------- -------------- ------------- ------------- -------------- ------------- -------------
(Loss)/profit for the
period before taxation (6.7) (1.0) (7.7) 6.3 4.2 10.5
-------------------------- -------------- ------------- ------------- -------------- ------------- -------------
Tax expense 1.3 0.4 1.7 (1.1) (0.9) (2.0)
-------------------------- -------------- ------------- ------------- -------------- ------------- -------------
Net (loss)/profit for
the period (5.4) (0.6) (6.0) 5.2 3.3 8.5
-------------------------- -------------- ------------- ------------- -------------- ------------- -------------
Total non-current assets 103.8 69.4 173.2 97.9 47.2 145.1
-------------------------- -------------- ------------- ------------- -------------- ------------- -------------
Total current assets 141.1 15.9 157.0 112.3 16.0 128.3
-------------------------- -------------- ------------- ------------- -------------- ------------- -------------
Total assets 244.9 85.3 330.2 210.2 63.2 273.4
-------------------------- -------------- ------------- ------------- -------------- ------------- -------------
Total liabilities 223.8 22.1 245.9 155.6 18.5 174.1
-------------------------- -------------- ------------- ------------- -------------- ------------- -------------
Capital expenditure
inc software 3.7 0.3 4.0 1.8 1.1 2.9
-------------------------- -------------- ------------- ------------- -------------- ------------- -------------
* Segment underlying operating profit before amortisation of
intangible assets arising on business combinations, business
acquisition costs, exceptional reorganisation costs, exceptional
NMW remediation and financial penalties, enhanced audit scope fees
and the non-cash charge/credit for share based payment costs.
Segment information for the year ended 31 December 2018 is as
follows:
Recruitment PeoplePlus Total Group
Year ended Year ended Year ended
31 December 31 December 31 December
2018 2018 2018
Audited Audited Audited
GBP'm GBP'm GBP'm
-------------- -------------- --------------
Segment continuing operations:
------------------------------------------- -------------- -------------- --------------
Sales revenue from external customers 1,020.0 107.5 1,127.5
------------------------------------------- -------------- -------------- --------------
Cost of sales (938.5) (67.1) (1,005.6)
------------------------------------------- -------------- -------------- --------------
Segment gross profit 81.5 40.4 121.9
------------------------------------------- -------------- -------------- --------------
Administrative expenses (underlying) (56.6) (21.6) (78.2)
------------------------------------------- -------------- -------------- --------------
Depreciation and software amortisation
(underlying) (0.8) (3.8) (4.6)
------------------------------------------- -------------- -------------- --------------
Segment underlying operating profit* 24.1 15.0 39.1
------------------------------------------- -------------- -------------- --------------
Administrative expenses - share based
payment charge (1.0) (0.2) (1.2)
------------------------------------------- -------------- -------------- --------------
NMW remediation and financial penalties (15.1) - (15.1)
------------------------------------------- -------------- -------------- --------------
Administrative expenses - reorganisation
costs and other exceptional items (1.8) (13.8) (15.6)
------------------------------------------- -------------- -------------- --------------
Administrative expenses - transaction
costs (1.1) (0.8) (1.9)
------------------------------------------- -------------- -------------- --------------
Amortisation of intangible assets arising
on business combinations (6.1) (5.7) (11.8)
------------------------------------------- -------------- -------------- --------------
Segment operating (loss) (1.0) (5.5) (6.5)
------------------------------------------- -------------- -------------- --------------
Finance costs (3.1) - (3.1)
------------------------------------------- -------------- -------------- --------------
Segment (loss) before taxation (4.1) (5.5) (9.6)
------------------------------------------- -------------- -------------- --------------
Tax expense - 1.1 1.1
------------------------------------------- -------------- -------------- --------------
Segment (loss) from continuing operations (4.1) (4.4) (8.5)
------------------------------------------- -------------- -------------- --------------
Total non-current assets 103.2 66.3 169.5
------------------------------------------- -------------- -------------- --------------
Total current assets 152.5 21.4 173.9
------------------------------------------- -------------- -------------- --------------
Total assets 255.7 87.7 343.4
------------------------------------------- -------------- -------------- --------------
Total liabilities 226.1 26.3 252.4
------------------------------------------- -------------- -------------- --------------
Capital expenditure inc software 4.2 2.2 6.4
------------------------------------------- -------------- -------------- --------------
All head office costs are allocated to the Recruitment division
in the above results. This results from the historical nature of
the Group and reflects where the costs are predominantly
incurred.
During the six-month period to 30 June 2019, no customers in the
Recruitment segment nor the PeoplePlus segment contributed to
greater than 10% of the Group's revenue of GBP534.6m, (six months
to 30 June 2018: none).
There has been no change in the basis of segmentation or in the
basis of measurement of segment profit or loss in the period.
3 Administrative expenses (non-underlying)
Six months
Six months ended 30 Year ended
ended 30 June 2018 31 December
June 2019 Unaudited 2018
Unaudited GBP'm Audited
GBP'm GBP'm
----------------------------------------------------- ------------- ------------ -------------
Included within administrative expenses are the following non-underlying
costs:
--------------------------------------------------------------------------------------------------
Reorganisation costs 2.2 - 10.6
------------------------------------------------------ ------------- ------------ -------------
Impairment of intangible fixed assets
(reorganisation related) - - 2.5
------------------------------------------------------ ------------- ------------ -------------
Impairment of tangible fixed assets (reorganisation
related) - - 0.7
------------------------------------------------------ ------------- ------------ -------------
NMW remediation and financial penalties - - 15.1
------------------------------------------------------ ------------- ------------ -------------
Professional fees 1.0 - 1.8
------------------------------------------------------ ------------- ------------ -------------
Transaction costs - business acquisitions - - 1.9
------------------------------------------------------ ------------- ------------ -------------
Non-recurring expenses 3.2 - 32.6
------------------------------------------------------ ------------- ------------ -------------
Amortisation of intangible assets arising
on business combinations (licences and
customer contracts) 6.2 4.9 11.8
------------------------------------------------------ ------------- ------------ -------------
Share based payment charges/(credits) (0.2) (0.4) 1.2
------------------------------------------------------ ------------- ------------ -------------
9.2 4.5 45.6
----------------------------------------------------- ------------- ------------ -------------
Tax credit on above non-underlying costs
(note 4) (1.7) (0.8) (8.3)
------------------------------------------------------ ------------- ------------ -------------
Post taxation effect on above non-underlying
costs 7.5 3.7 37.3
------------------------------------------------------ ------------- ------------ -------------
Reorganisation costs of GBP2.2m during the current period relate
to a fundamental restructuring of the Recruitment division and
represents staff redundancy and property closure costs.
Professional fees of GBP1.0m during the current period represent
the legal and professional fees incurred in conducting the
independent legal investigation into the allegations made on 29
January 2019. This is more thoroughly covered on pages 19 and 20
within the Chief Executive Officers' section of the 2018 Annual
Report.
4 Taxation
Six months Six months Year ended
ended 30 ended 30 June 31 December
June 2019 2018 Unaudited 2018
Unaudited GBP'm Audited
GBP'm GBP'm
--------------------------------------------- ----------- ---------------- -------------
The tax charge for the period consists
of:
--------------------------------------------- ----------- ---------------- -------------
UK corporation tax/(credit) at
19.0% (0.6) 2.9 1.3
---------------------------------------------- ----------- ---------------- -------------
Adjustments in respect of prior
years - - (0.1)
---------------------------------------------- ----------- ---------------- -------------
UK current tax (credit)/charge (0.6) 2.9 1.2
---------------------------------------------- ----------- ---------------- -------------
Deferred tax
--------------------------------------------- ----------- ---------------- -------------
Timing differences arising in the
year - intangible fixed asset amortisation (1.1) (0.8) (2.5)
---------------------------------------------- ----------- ---------------- -------------
Timing differences arising in the - (0.1) -
year - others
--------------------------------------------- ----------- ---------------- -------------
Adjustments in respect of prior
years - - 0.2
---------------------------------------------- ----------- ---------------- -------------
UK deferred tax (credit) (1.1) (0.9) (2.3)
---------------------------------------------- ----------- ---------------- -------------
Total UK tax (credit)/charge for
the period (1.7) 2.0 (1.1)
---------------------------------------------- ----------- ---------------- -------------
Recruitment division (1.3) 1.1 -
---------------------------------------------- ----------- ---------------- -------------
PeoplePlus division (0.4) 0.9 (1.1)
---------------------------------------------- ----------- ---------------- -------------
Total UK tax (credit)/charge for
the period (1.7) 2.0 (1.1)
---------------------------------------------- ----------- ---------------- -------------
Underlying trading - 2.8 7.2
---------------------------------------------- ----------- ---------------- -------------
Non-underlying trading (1.7) (0.8) (8.3)
---------------------------------------------- ----------- ---------------- -------------
Total UK tax (credit)/charge for
the period (1.7) 2.0 (1.1)
---------------------------------------------- ----------- ---------------- -------------
The current tax charge for the period, as recognised in the statement
of comprehensive income, is higher than the standard rate of UK corporation
tax of 19.0%. The differences are explained below:
--------------------------------------------------------------------------------------------
Profit/(loss) for the period before
taxation (7.7) 10.5 (9.6)
---------------------------------------------- ----------- ---------------- -------------
Standard UK tax rate - composite 19.0% 19.0% 19.0%
---------------------------------------------- ----------- ---------------- -------------
Tax on profit/(loss) for the period
at the standard rate (1.5) 2.0 (1.8)
---------------------------------------------- ----------- ---------------- -------------
Effect of:
--------------------------------------------- ----------- ---------------- -------------
Depreciation charge in excess of
capital allowances - 0.1 0.3
---------------------------------------------- ----------- ---------------- -------------
Amortisation of intangible assets
arising on business combinations 1.2 0.8 2.2
---------------------------------------------- ----------- ---------------- -------------
Expenses not allowable - - 0.6
---------------------------------------------- ----------- ---------------- -------------
Tax losses available (0.2) - (0.2)
---------------------------------------------- ----------- ---------------- -------------
Adjustments in respect of prior
years - (0.1)
---------------------------------------------- ----------- ---------------- -------------
Others (net) (0.1) - 0.2
---------------------------------------------- ----------- ---------------- -------------
Actual UK current tax expense/(credit) (0.6) 2.9 1.2
---------------------------------------------- ----------- ---------------- -------------
Underlying pre-tax profit for the
period 1.5 15.0 36.0
---------------------------------------------- ----------- ---------------- -------------
Effective % underlying current
tax rate - 19.3% 19.4%
---------------------------------------------- ----------- ---------------- -------------
Effective % underlying total tax
charge - 18.7% 20.0%
The effective % underlying current tax rate, at nil %, is below
the standard UK corporation tax rate of 19.0% due to the
availability and utilisation of tax losses brought forward.
Six months Six months Year ended
ended 30 ended 30 June 31 December
June 2019 2018 Unaudited 2018
Unaudited GBP'm Audited
GBP'm GBP'm
The current tax liability at the end of the period and movements during
the period can be analysed as follows:
----------------------------------------------------------------------------------------
(Asset)/liability at the beginning
of the period (1.3) 3.4 3.4
----------------------------------------- ----------- ----------------- -------------
(Credit)/charge on profits for
the period (0.6) 2.9 1.2
----------------------------------------- ----------- ----------------- -------------
Paid in the period (net of repayments) (1.3) (3.3) (6.4)
----------------------------------------- ----------- ----------------- -------------
Liabilities on business acquisitions
/ others - - 0.5
----------------------------------------- ----------- ----------------- -------------
(Asset)/liability at the end of
the period (3.2) 3.0 (1.3)
----------------------------------------- ----------- ----------------- -------------
Balance of 2019 liabilities/(assets) (0.6) - -
---------------------------------------- ----------- ----------------- -------------
Balance of 2018 liabilities/(assets) (2.6) 2.9 (1.3)
----------------------------------------- ----------- ----------------- -------------
Balance of 2017 liabilities 0.1 0.1 0.1
----------------------------------------- ----------- ----------------- -------------
Balance of 2016 liabilities/(assets) (0.1) - (0.1)
----------------------------------------- ----------- ----------------- -------------
(Asset)/liability at the end of
the period (3.2) 3.0 (1.3)
----------------------------------------- ----------- ----------------- -------------
Deferred tax asset and liability balances at the period end
can be analysed as follows:
------------------------------------------------------------------------- -------------
Assets
---------------------------------------- ----------- ----------------- -------------
Capital allowances 0.9 0.6 0.9
----------------------------------------- ----------- ----------------- -------------
IFRS 16 Leases transition 0.1 - -
---------------------------------------- ----------- ----------------- -------------
Share based payment liability - - -
---------------------------------------- ----------- ----------------- -------------
1.0 0.6 0.9
---------------------------------------- ----------- ----------------- -------------
Liabilities
---------------------------------------- ----------- ----------------- -------------
Acquired intangible assets 5.5 4.5 6.6
----------------------------------------- ----------- ----------------- -------------
Retirement benefits 0.1 0.2 0.1
----------------------------------------- ----------- ----------------- -------------
5.6 4.7 6.7
---------------------------------------- ----------- ----------------- -------------
IFRS 16 Leases has been applied by the Group for the first time.
The date of initial application of IFRS 16 for the Group is 1
January 2019. There has been minimal effect on either the taxation
charges and credits for the six months to June 2019 as the addition
depreciation charge of GBP1.0m (see note 8) is deductible for
corporation tax purposes as is the lease interest charge, the
combined charges being substantially in line with the IAS 17
operating lease charge.
Except for the establishment of a GBP0.1m deferred tax asset as
at 1 January 2019, being the effect of differences between IAS 17
operating lease charges and IFRS 16 depreciation and interest
charges, there has been no effect on either deferred tax assets or
liabilities.
5 Earnings per share and dividends
The calculation of basic earnings per share is based on the
earnings attributable to ordinary shareholders divided by the
weighted average number of shares in issue during the period, after
deducting any shares held in the Joint Share Ownership Plan or
"JSOP" - "own shares" (1,140,000 shares at 30 June 2019, 1,140,000
shares at 31 December 2018, 2,315,400 shares at 30 June 2018). The
calculation of the diluted earnings per share is based on the basic
earnings per share as adjusted to further take into account the
expected issue of ordinary shares resulting from any share options
granted to Directors and share options granted to employees in 2017
and 2018 under the SAYE scheme. Details of the earnings and
weighted average number of shares used in the calculations are set
out below:
Basic Basic Diluted Diluted
six- month six- month six- month six-month
period period Basic period period Diluted
ended ended Year ended ended ended Year ended
30 June 30 June 31 December 30 June 30 June 31 December
2019 2018 2018 2019 2018 2018
Unaudited Unaudited Audited Unaudited Unaudited Audited
Earnings from continuing
operations (GBP'm) (6.0) 8.5 (8.5) (6.0) 8.5 (8.5)
----------------------------- ------------ ------------ ------------- ------------ ------------ -------------
Weighted daily average
number of shares 000 26,804 25,629 26,167 26,804 25,877 26,167
----------------------------- ------------ ------------ ------------- ------------ ------------ -------------
Earnings per share
(pence):
----------------------------- ------------ ------------ ------------- ------------ ------------ -------------
Continuing operations (22.4p) 33.2p (32.5p) (22.4p) 32.8p (32.5p)
----------------------------- ------------ ------------ ------------- ------------ ------------ -------------
Underlying Earnings
from continuing operations
(GBP'm)* 1.5 12.2 28.8 1.5 12.2 28.8
----------------------------- ------------ ------------ ------------- ------------ ------------ -------------
Underlying earnings
per share (pence)* 5.6p 47.6p 110.1p 5.6p 47.2p 110.1p
----------------------------- ------------ ------------ ------------- ------------ ------------ -------------
*Underlying earnings after adjusting for amortisation of
intangible assets arising on business combinations, business
acquisition costs, exceptional reorganisation costs, exceptional
NMW remediation and financial penalties, enhanced audit scope fees
and the non-cash charge/credit for share-based payment costs.
The weighted daily average number of shares on a basic
(undiluted) basis has been increased by 637,000 shares, since 31
December 2018, reflecting the full year effect of the 1,175,000
shares sold by the 2013 JSOP scheme in July 2018 to satisfy its
requirements on the vesting of that scheme on 30 June 2018.
Dividends
During the 6-month period to 30 June 2019, Staffline Group plc
paid no dividends to its equity shareholders (H1 2018: GBPnil).
No interim dividend for 2019 is proposed (2018: GBP3.0m, 11.3p
per share, paid in November 2018).
Dividends totalling GBP7.1m or 27.0p per share were paid during
the year ended 31 December 2018. No final dividend in respect of
the 2018 financial year (2018: GBP4.1m, being the final 2017
dividend of 15.7p per share, paid in July 2018) was declared.
6 Goodwill
Division Total
Gross carrying amount GBP'm
At 1 July 2018 as reported 101.9
------------------------------------------------------------ ------
Fair value adjustment - Endeavour Group
Limited Recruitment 0.4
--------------------------------------------- ------------- ------
Additions - Grafton Recruitment Limited Recruitment 4.5
--------------------------------------------- ------------- ------
Additions - Passionate About People Limited Recruitment 9.5
--------------------------------------------- ------------- ------
At 31 December 2018 116.3
------------------------------------------------------------ ------
Additions -
--------------------------------------------- ------------- ------
At 30 June 2019 116.3
------------------------------------------------------------ ------
The breakdown of Goodwill carrying value by division is listed
below:
30 June 30 June 31 December
2019 2018 2018
GBP'm
GBP'm GBP'm
---------------------- -------- -------- ------------
Recruitment division 59.3 44.9 59.3
---------------------- -------- -------- ------------
PeoplePlus division 57.0 57.0 57.0
---------------------- -------- -------- ------------
Total 116.3 101.9 116.3
---------------------- -------- -------- ------------
Management consider there to be two cash-generating units, being
Recruitment - a group of companies headed up by Staffline
Recruitment Limited - and PeoplePlus - a group of companies headed
up by PeoplePlus Group Limited (in line with the business segments
defined in note 2).
Based on the closing share price of GBP1.18 per share as at 30
June 2019, the Company's market value was GBP33.0m, significantly
lower than the carrying value of net assets of GBP86.8m. This
constitutes an indicator for impairment.
We have therefore tested these two cash-generating units for
impairment. For both segments, the recoverable amount of goodwill
was determined based on a value-in-use calculation, covering a
detailed forecast for 2019 and 2020, followed by an extrapolation
of expected cash flows over the next three years with a pre-tax
discount rate of 11.0% (31 December 2018: 11.0%) based on the
Group's weighted average cost of capital.
The results of the impairment review performed showed
significant headroom in both cash-generating units and accordingly
no impairment is noted. The Directors do not believe that any
reasonably possible changes in the assumptions used in calculating
the value-in-use would result in the recoverable amount of Goodwill
falling below the carrying value and impairment becoming necessary.
The review also indicates that no provision is required to write
down the carrying value of other intangible assets and tangible
fixed assets (31 December 2018: GBPnil).
In making our assessment of the recoverability of assets within
each cash-generating unit ("CGU") a number of judgements and
assumptions were required. These were disclosed in detail in the
Group's 2018 Annual Report and the same judgements and assumptions
have been applied in the impairment assessment performed as at 30
June 2019.
7 Other Intangible assets
The Group's other intangible assets include the customer
contracts and lists obtained through the acquisition of businesses
plus acquired software and licences. There are no intangible assets
with restricted title.
Customer contracts Customer
Software Licenses and brands lists Total
GBP'm GBP'm GBP'm GBP'm GBP'm
Gross carrying amount
At 1 July 2018 as reported 11.5 2.0 65.6 5.5 84.6
----------------------------- --------- --------- ------------------- --------- ------
Restatement - see note
1 - - 0.7 - 0.7
----------------------------- --------- --------- ------------------- --------- ------
At 1 July 2018 as restated 11.5 2.0 66.3 5.5 85.3
----------------------------- --------- --------- ------------------- --------- ------
Additions 1.4 - - - 1.4
----------------------------- --------- --------- ------------------- --------- ------
Additions through business
combinations - - 18.8 - 18.8
----------------------------- --------- --------- ------------------- --------- ------
At 1 January 2019 12.9 2.0 85.1 5.5 105.5
----------------------------- --------- --------- ------------------- --------- ------
Additions 2.1 - - - 2.1
----------------------------- --------- --------- ------------------- --------- ------
At 30 June 2019 15.0 2.0 85.1 5.5 107.6
----------------------------- --------- --------- ------------------- --------- ------
Amortisation and impairment
----------------------------- --------- --------- ------------------- --------- ------
At 1 July 2018 5.3 2.0 39.5 5.5 52.3
----------------------------- --------- --------- ------------------- --------- ------
Charged in the period
- operating 0.9 - 6.9 - 7.8
----------------------------- --------- --------- ------------------- --------- ------
Charged in the period
- impairment 2.5 - - - 2.5
----------------------------- --------- --------- ------------------- --------- ------
At 1 January 2019 8.7 2.0 46.4 5.5 62.6
----------------------------- --------- --------- ------------------- --------- ------
Charged in the period
- operating 0.5 - 6.2 - 6.7
----------------------------- --------- --------- ------------------- --------- ------
At 30 June 2019 9.2 2.0 52.6 5.5 69.3
----------------------------- --------- --------- ------------------- --------- ------
Net book value
----------------------------- --------- --------- ------------------- --------- ------
At 30 June 2019 5.8 - 32.5 - 38.3
----------------------------- --------- --------- ------------------- --------- ------
At 31 December 2018 4.2 - 38.7 - 42.9
----------------------------- --------- --------- ------------------- --------- ------
At 30 June 2018 as restated 6.2 - 26.8 - 33.0
----------------------------- --------- --------- ------------------- --------- ------
As at 30 June 2019, there are six individually material other
intangible assets:
Customer contracts,
Software brands Total
GBP'm GBP'm GBP'm
------------------------------------- --------- -------------------- ------
Customer contracts/brands in
Passionate About People Group - 9.6 9.6
------------------------------------- --------- -------------------- ------
Customer contracts in Endeavour
Group - 9.4 9.4
------------------------------------- --------- -------------------- ------
Customer contracts in Grafton
Recruitment - 5.3 5.3
------------------------------------- --------- -------------------- ------
Customer contracts in One Call
Recruitment - 2.3 2.3
------------------------------------- --------- -------------------- ------
Customer contracts in Brightwork - 2.0 2.0
------------------------------------- --------- -------------------- ------
Payroll and Credit Control software
developed for Recruitment division 5.2 - 5.2
------------------------------------- --------- -------------------- ------
Others 0.6 3.9 4.5
------------------------------------- --------- -------------------- ------
Net book value at 30 June 2019 5.8 32.5 38.3
------------------------------------- --------- -------------------- ------
8 Property, plant and equipment
Land and Computer Fixtures Motor Right Total
buildings equipment and fittings vehicles of use
assets
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Gross carrying amount
----------------------- ------------ ------------ -------------- ----------- -------- -------
At 1 July 2018 5.3 8.8 2.2 0.1 - 16.4
----------------------- ------------ ------------ -------------- ----------- -------- -------
Additions 0.3 1.7 0.1 - - 2.1
----------------------- ------------ ------------ -------------- ----------- -------- -------
Acquired on business
combinations - 0.1 0.2 0.1 - 0.4
----------------------- ------------ ------------ -------------- ----------- -------- -------
At 31 December 2018
(reported) 5.6 10.6 2.5 0.2 - 18.9
----------------------- ------------ ------------ -------------- ----------- -------- -------
Transition to IFRS
16: Leases (notes
1, 17) - - - - 16.8 16.8
----------------------- ------------ ------------ -------------- ----------- -------- -------
At 1 January 2019 5.6 10.6 2.5 0.2 16.8 35.7
----------------------- ------------ ------------ -------------- ----------- -------- -------
Additions 0.1 1.3 0.2 - 0.3 1.9
----------------------- ------------ ------------ -------------- ----------- -------- -------
Disposals (0.6) - (0.1) - - (0.7)
----------------------- ------------ ------------ -------------- ----------- -------- -------
At 30 June 2019 5.1 11.9 2.6 0.2 17.1 36.9
----------------------- ------------ ------------ -------------- ----------- -------- -------
Depreciation
----------------------- ------------ ------------ -------------- ----------- -------- -------
At 1 July 2018 2.4 5.0 0.7 0.1 - 8.2
----------------------- ------------ ------------ -------------- ----------- -------- -------
Charged for the
period - operating 0.2 0.7 0.4 0.1 - 1.4
----------------------- ------------ ------------ -------------- ----------- -------- -------
Charged for the
period - impairment 0.5 0.2 - - - 0.7
----------------------- ------------ ------------ -------------- ----------- -------- -------
At 1 January 2019 3.1 5.9 1.1 0.2 - 10.3
----------------------- ------------ ------------ -------------- ----------- -------- -------
Transition to IFRS
16: Leases (notes
1, 17) - - - - 7.2 7.2
----------------------- ------------ ------------ -------------- ----------- -------- -------
At 1 January 2019 3.1 5.9 1.1 0.2 7.2 17.5
----------------------- ------------ ------------ -------------- ----------- -------- -------
Charged for the
period - operating - 1.1 0.2 - 1.2 2.5
----------------------- ------------ ------------ -------------- ----------- -------- -------
Disposals (0.1) - (0.1) - - (0.2)
----------------------- ------------ ------------ -------------- ----------- -------- -------
At 30 June 2019 3.0 7.0 1.2 0.2 8.4 19.8
----------------------- ------------ ------------ -------------- ----------- -------- -------
Net book value
----------------------- ------------ ------------ -------------- ----------- -------- -------
At 30 June 2019 2.1 4.9 1.4 - 8.7 17.1
----------------------- ------------ ------------ -------------- ----------- -------- -------
At 31 December 2018 2.5 4.7 1.4 - - 8.6
----------------------- ------------ ------------ -------------- ----------- -------- -------
At 30 June 2018 2.9 3.8 1.5 - - 8.2
----------------------- ------------ ------------ -------------- ----------- -------- -------
In the current year, the Group, for the first time, has applied
IFRS 16 Leases. The date of initial application of IFRS 16 for the
Group is 1 January 2019.
The Group has applied IFRS 16 using the modified retrospective
approach, without restatement of the comparative information. In
respect of these leases the Group previously treated as operating
leases, the Group has elected to measure its right of use assets
arising from property leases using the approach set out in IFRS
16.C8(b)(i). Right of use assets, principally property related
assets, comprise the initial measurement of the corresponding lease
liability, lease payments made at or before the commencement day
and any initial direct costs. They are subsequently measured at
cost less accumulated depreciation and impairment losses.
9 Retirement benefit asset
One of the Group's subsidiaries operates a defined benefit
pension scheme for its staff. The scheme is closed to new entrants.
The last actuarial valuation of the scheme was at 31 July 2016.
The amounts recognised in the Statement of financial position
are determined as follows:
30 June 30 June 31 December
2019 2018 2018
GBP'm GBP'm GBP'm
---------------------------------------------- -------- -------- ------------
Fair value of plan assets (see below) 9.7 9.6 9.2
---------------------------------------------- -------- -------- ------------
Present value of funded obligations
(see below) (9.2) (8.2) (8.4)
---------------------------------------------- -------- -------- ------------
Asset in the Statement of financial
position 0.5 1.4 0.8
---------------------------------------------- -------- -------- ------------
% funding ratio 105% 117% 110%
---------------------------------------------- -------- -------- ------------
Net actuarial gain/(loss) for the
period (0.3) - (0.5)
---------------------------------------------- -------- -------- ------------
Bonds (69% of assets as at 30 June
2019) 6.7 6.5 6.6
---------------------------------------------- -------- -------- ------------
Equities (30% of assets as at 30 June
2019) 2.9 3.0 2.5
---------------------------------------------- -------- -------- ------------
Cash (1% of assets as at 30 June 2019) 0.1 0.1 0.1
---------------------------------------------- -------- -------- ------------
Fair value of plan assets 9.7 9.6 9.2
---------------------------------------------- -------- -------- ------------
At beginning of the period 8.4 8.4 8.4
---------------------------------------------- -------- -------- ------------
Interest cost on liabilities 0.1 0.1 0.2
---------------------------------------------- -------- -------- ------------
Service cost - current accrual cost 0.1 0.1 0.3
---------------------------------------------- -------- -------- ------------
Actuarial (gain)/loss on change in
assumptions 0.6 (0.4) (0.3)
---------------------------------------------- -------- -------- ------------
Benefits paid - net of members contributions - - (0.2)
---------------------------------------------- -------- -------- ------------
Present value of funded obligations 9.2 8.2 8.4
---------------------------------------------- -------- -------- ------------
Membership numbers: active 16 25 21
---------------------------------------------- -------- -------- ------------
Membership numbers: total 264 274 266
---------------------------------------------- -------- -------- ------------
The principal assumptions used in
the valuations above are as follows:
---------------------------------------------- -------- -------- ------------
Price inflation (RPI) 3.15% 3.0% 3.15%
---------------------------------------------- -------- -------- ------------
Price inflation (CPI) 2.15% 2.0% 2.15%
---------------------------------------------- -------- -------- ------------
Pensionable salary increases 3.15% 3.0% 3.15%
---------------------------------------------- -------- -------- ------------
Future pension increases for leavers
(RPI) 3.15% 3.0% 3.15%
---------------------------------------------- -------- -------- ------------
Discount rate (derived from AA rated
corporate bonds yield curve) and expected
rate of return) 2.25% 2.7% 2.80%
---------------------------------------------- -------- -------- ------------
IAS 19, together with IFRIC 14 ("The limit on a defined pension
asset"), only allows a surplus to be recognised as an asset in the
balance sheet to the extent that it can be recovered through
reduced contributions in the future or through refunds from the
scheme. The "Rules of The A4E Retirement Benefit Scheme" dated 24
September 2012 states in section 4.1 paragraph 2 that: If a
valuation discloses that a value of The Scheme assets exceeds the
value of its liabilities the Trustees may reduce this surplus by
paying it to the Employer (less tax) to the extent permitted by
section 37 of the 1995 Pensions Act (payment of surplus to
employer). The Directors are therefore satisfied that the full
surplus be so recognised.
10 Cash and cash equivalents
30 June 30 June 31 December
2019 2018 2018
GBP'm GBP'm GBP'm
----------------------------------------- -------- -------- ------------
Cash and cash equivalents 5.0 6.7 16.2
----------------------------------------- -------- -------- ------------
Bank overdraft - - -
----------------------------------------- -------- -------- ------------
Cash and cash equivalents per cash flow
statement 5.0 6.7 16.2
----------------------------------------- -------- -------- ------------
Cash and cash equivalents consist of cash on hand and balances
with banks only. At 30 June 2019, GBP5.0m (30 June 2018: GBP6.7m,
31 December 2018: GBP16.2m) of cash on hand and balances with banks
were held by subsidiary undertakings but these balances are
available for use by Staffline Group plc. GBP1.2m (30 June 2018:
GBP1.6m, 31 December 2018: GBP3.8m) of the half year-end cash
balance was held with HSBC Holdings plc, Royal Bank of Scotland plc
(includes Ulster Bank and NatWest Bank) and Bank of Ireland Group
plc, outside of the group overdraft facility with Lloyds Banking
Group plc.
Long term credit ratings for the four banks are currently as
follows:
Fitch Standard Moody's
& Poors
--------------------------- ------ --------- --------
Lloyds Banking Group plc A+ BBB+ A3
--------------------------- ------ --------- --------
Bank of Ireland Group plc BBB BBB- Baa3
--------------------------- ------ --------- --------
HSBC Holdings plc AA- A A2
--------------------------- ------ --------- --------
Royal Bank of Scotland plc A BBB Baa2
--------------------------- ------ --------- --------
The group's banking facility headroom versus available bank
facilities is as follows:
30 June 30 June 31 December
2019 2018 2018
GBP'm GBP'm GBP'm
------------------------------------------------ -------- -------- ------------
Cash and cash equivalents 5.0 6.7 16.2
------------------------------------------------ -------- -------- ------------
Less: held outside of Group overdraft
facility (1.2) (1.6) (3.8)
------------------------------------------------ -------- -------- ------------
Overdraft facility 25.0 15.0 25.0
------------------------------------------------ -------- -------- ------------
Committed revolving credit facility unutilised 0.1 7.5 15.0
------------------------------------------------ -------- -------- ------------
Bank guarantee - - -
------------------------------------------------ -------- -------- ------------
Banking Facility Headroom 28.9 27.6 52.4
------------------------------------------------ -------- -------- ------------
11 Other current liabilities
31 December
30 June 30 June 2018
2019 2018 GBP'm
GBP'm GBP'm
------------------------------------ ---------- ---------- ------------
Dividends payable - 4.0 -
------------------------------------ ---------- ---------- ------------
Deferred consideration 2.3 - 7.8
------------------------------------ ---------- ---------- ------------
Joint Share Ownership Plan current
liability - 6.0 -
------------------------------------ ---------- ---------- ------------
2.3 10.0 7.8
------------------------------------ ---------- ---------- ------------
12 Borrowings
30 June 30 June 31 December
2019 2018 2018
GBP'm GBP'm GBP'm
---------------------------------------- -------- -------- ------------
Current liabilities:
---------------------------------------- -------- -------- ------------
Term loan - 8.8 -
---------------------------------------- -------- -------- ------------
Unamortised transaction costs - (0.2) -
---------------------------------------- -------- -------- ------------
- 8.6 -
---------------------------------------- -------- -------- ------------
Non-current liabilities:
---------------------------------------- -------- -------- ------------
Revolving credit facility 94.9 35.0 80.0
---------------------------------------- -------- -------- ------------
Term loan - -
---------------------------------------- -------- -------- ------------
Unamortised transaction costs (0.7) - (0.8)
---------------------------------------- -------- -------- ------------
94.2 35.0 79.2
---------------------------------------- -------- -------- ------------
Total borrowings 94.2 43.6 79.2
---------------------------------------- -------- -------- ------------
Total borrowings excluding unamortised
transaction costs 94.9 43.8 80.0
---------------------------------------- -------- -------- ------------
Less: Cash and cash equivalents (note
10) 5.0 6.7 16.2
---------------------------------------- -------- -------- ------------
Net debt as disclosed in consolidated
statement of
cash flows (note 14) 89.9 37.1 63.8
---------------------------------------- -------- -------- ------------
The revolving credit facility ("RCF") are secured by a debenture
over all the assets of the Group.
Interest accrues on the RCF at between 1.4% and 2.0% plus LIBOR,
depending upon the level of leverage as defined in the banking
covenants. The RCF is drawn down each month.
On 26 June 2019 the Group re-financed its outstanding
borrowings. A new Facility Agreement was entered into, providing
the Group with a GBP120m committed RCF with a GBP25m overdraft
facility carved out from the GBP120.0m committed RCF. Further
details are set out in the Interim Financial Review on page 10.
13 Share capital
30 June 31 December
30 June 2018 Unaudited 2018
2019 Unaudited GBP'm Audited
GBP'm GBP'm
------------------------------------- ---------------- ---------------- ------------
Allotted and issued
------------------------------------- ---------------- ---------------- ------------
27,944,389 (June and December 2018:
27,944,389) ordinary 10p shares 2.794 2.794 2.794
------------------------------------- ---------------- ---------------- ------------
Six months Six months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
000 000 000
------------------------------------- ----------- ----------- --------------
Shares issued and fully paid at the
beginning of the period 27,944 27,849 27,849
------------------------------------- ----------- ----------- --------------
Shares issued during the period - 95 95
------------------------------------- ----------- ----------- --------------
Shares issued and fully paid at end
of period 27,944 27,944 27,944
------------------------------------- ----------- ----------- --------------
All ordinary shares have the same rights and there are no
restrictions on the distribution of dividends or repayment of
capital with the exception of the 1,140,400 shares (31 December
2018: 1,140,400 shares; 30 June 2018: 2,315,400 shares) held by the
Employee Benefit Trust where the right to dividends has been
waived.
Subsequent to 30 June 2019, a further 40,986,097 ordinary 10p
shares were issued by the Company on 15 July 2019 at a price of
100p per share, resulting in the issued share capital increasing to
68,930,486 ordinary shares of 10p each.
On the adoption of new Articles of Association in May 2014, the
Company removed the limit on authorised share capital.
14 Cash flows from operating activities
Six-month Six-month Year ended
period ended period ended 31 December
30 June 2019 30 June 2018
Unaudited 2018 Audited
GBP'm Unaudited GBP'm
GBP'm
------------------------------------------------- -------------- -------------- -------------
Profit/(loss) before taxation (7.7) 10.5 (9.6)
------------------------------------------------- -------------- -------------- -------------
Adjustments for:
------------------------------------------------- -------------- -------------- -------------
Finance costs 2.2 1.3 3.1
------------------------------------------------- -------------- -------------- -------------
Depreciation, loss on disposal and amortisation
- underlying 2.9 2.3 4.6
------------------------------------------------- -------------- -------------- -------------
Depreciation, loss on disposal and amortisation
- non- underlying 6.2 4.9 15.0
------------------------------------------------- -------------- -------------- -------------
Operating profit before changes in working
capital and share options 3.6 19.0 13.1
------------------------------------------------- -------------- -------------- -------------
Change in trade and other receivables 7.6 (2.1) (10.7)
------------------------------------------------- -------------- -------------- -------------
Change in trade, other payables and provisions (24.2) (10.9) 16.6
------------------------------------------------- -------------- -------------- -------------
Impact of foreign exchange loss on operating - - -
activities
------------------------------------------------- -------------- -------------- -------------
Cash generated from operations (13.0) 6.0 19.0
------------------------------------------------- -------------- -------------- -------------
Employee cash settled share options (non-cash
charge/(credit)) (0.2) (0.4) 1.0
------------------------------------------------- -------------- -------------- -------------
Employee equity settled share options - - 0.2
------------------------------------------------- -------------- -------------- -------------
Settlement of cash settled JSOP liabilities - - (7.1)
------------------------------------------------- -------------- -------------- -------------
Net cash inflow from operating activities (13.2) 5.6 13.1
------------------------------------------------- -------------- -------------- -------------
Movement in net debt GBP'm GBP'm GBP'm
-------------------------------------------------- ------- ------- -------
Net debt at beginning of the period (excluding
transaction fees) (63.8) (16.8) (16.8)
-------------------------------------------------- ------- ------- -------
Unwinding of discount on loan notes - (0.1) -
-------------------------------------------------- ------- ------- -------
Loan repayments 10.0 4.4 4.4
-------------------------------------------------- ------- ------- -------
New loans, including RCF drawdown (24.9) - (36.3)
-------------------------------------------------- ------- ------- -------
Change in cash and cash equivalents (11.2) (24.6) (15.1)
-------------------------------------------------- ------- ------- -------
Net debt at end of period (excluding transaction
fees) (89.9) (37.1) (63.8)
-------------------------------------------------- ------- ------- -------
Represented by: GBP'm GBP'm GBP'm
-------------------------------------- ------- -------- -------
Cash and cash equivalents (note 10) 5.0 6.7 16.2
-------------------------------------- ------- -------- -------
Current borrowings (note 12) - (8.6) -
-------------------------------------- ------- -------- -------
Non-current borrowings (note 12) (94.2) (35.0) (79.2)
-------------------------------------- ------- -------- -------
Net debt including transaction fees (89.2) (36.9) (63.0)
-------------------------------------- ------- -------- -------
Transaction fees (0.7) (0.2) (0.8)
-------------------------------------- ------- -------- -------
Net debt at end of period (excluding
transaction fees) (89.9) (37.1) (63.8)
-------------------------------------- ------- -------- -------
Non-cash items above represent employees cash settled share
options, the unwinding of the discount on loan notes and the
movement of transaction costs in relation to debt issue fees.
15 Principal risks and uncertainties
The UK Listing Authority's Disclosure and Transparency Rules
requires a description of the principal risks and uncertainties for
the remaining six months of the year.
The Staffline Group plc Board of Directors has completed a
robust and detailed assessment of the Group's risk management
processes and the Group's risk register. The Group is exposed to a
variety of potential risks and uncertainties which require on-going
monitoring and management in order to mitigate against any adverse
impact on long-term performance. The Board recognises that
effective risk management is a critical part of achieving our
strategic objectives. It employs a variety of systems and policies
to respond effectively to these risks and uncertainties to protect
the continued strategic success of the Group. Risk registers are
maintained within both divisions of the Group, which are
consolidated twice a year, with the output formally reviewed by the
Audit and Risk Committee. The Board reviews risks and uncertainties
under four principal types, Strategic and market related,
Operational and compliance, Reputational and Financial.
There are a number of potential risks and uncertainties which
could have a material impact on the Group's performance over the
remaining six months of the financial year and could cause actual
results to differ materially from expected and historical results.
The Directors do not consider that the principal risks and
uncertainties have changed since the publication of the Annual
Report for the year ended 31 December 2018. A detailed explanation
of the risks summarised below, and how the Group seeks to mitigate
the risks, can be found on pages 40 to 44 of the 2018 Annual Report
which is available at
www.stafflinegroupplc.co.uk/investor-relations/.
i. National Minimum Wage compliance (operational, reputational):
The payment of the National Minimum Wage ("NMW") is a legal
requirement which must cover all working time including preparation
time, security checks and the provision of personal protective
equipment. The payment of the NMW is regulated by HMRC who are
tasked with enforcing compliance with the regulations. This can
include site audits to check compliance. Failure to fully comply
can lead to remediation payments and fines being levied by HMRC. A
provision of GBP15.1m was made during 2018 to settle all historic
liabilities and negotiations are still to be finalised.
ii. Shortage of staffing resource (strategic):
Candidate attraction remains challenging. With UK unemployment
rates remaining at around 4%, record employment rates and continued
uncertainties around Brexit and foreign labour leading to a
reduction in net migration, there is a risk that our Recruitment
division will not be able to obtain sufficient resource to fulfil
its contractual obligations.
iii. Business interruption - information security breach or
cyber-attack (operational, reputational):
There are two issues the Group focuses on with regard to this
risk, being
Major IT failure: As with all large-scale businesses, including
those in the market sectors in which we operate, we are reliant on
our IT systems to support and operate our business.
Business Interruption - Breach of security (Cyber-Crime): The
Group holds sensitive personal information in respect of temporary
workers, participants of our various PeoplePlus contracts, and our
own staff. There is increased evidence of cyber-crime. Breaches or
attacks could lead to potential reputational damage with a
potential resultant loss of revenue, financial penalties for the
Group and diversion of management time.
iv. PeoplePlus development strategy (strategic):
During 2018 the PeoplePlus division underwent a fundamental
transformation, from being Work Programme centric to be the UK's
leading Skills and Training provider. With the reliance on a
long-term contract gone, and a change in strategic direction, new
contracts are required to support this change and replace the Work
Programme revenues and profits.
v. Ofsted grade 2 rating not maintained (reputational)
PeoplePlus is regulated by Ofsted for the quality of provision
of teaching across a number of contracts, including the
apprenticeship levy. Ofsted grades the quality of the teaching from
1 (Outstanding) to 4 (Inadequate). A rating of 4 can result in a
loss of government funding and removal from the register of
apprenticeship training providers ("RoATP").
vi. Brexit (strategic):
Following the outcome of the UK referendum to leave the EU,
there are a number of related uncertainties, being economic
uncertainty and a potential further tightening of the labour market
with the uncertainty over the final Brexit outcome leading to a
reduction in the number of EU citizens coming to the UK for
employment. These uncertainties are dependent upon the nature of
the finalised withdrawal agreement, the associated transition
period, and future immigration policy.
vii. Loss of Gangmasters Labour Abuse Authority ("GLAA") licence
(reputational):
The Group is licensed with the GLAA and works closely with the
Authority to maintain high standards of compliance controls.
Regulation within the Recruitment sector has increased year-on-year
and we have seen the powers and resources at the GLAA and other
regulatory bodies increase. We face the risk that one of our
members of staff may deliberately by-pass the procedures set up
which ensure we fully comply with our industry legislative
requirements and related best practice standards.
16 Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note. There were no material transactions with
Directors of the Company during the period, except for those
relating to remuneration. There were no share transactions with any
Director during the six-month period.
Excluding their interests in share options and Joint Share
Ownership Plans, which are unchanged and are fully disclosed in the
2018 Annual Report, the beneficial holdings of the Directors as at
30 June 2019 in the Company's issued share capital at 30 June 2019
are as follows:
Ordinary shares % of total
of 10p each in issue
Ed Barker 1,104 -
---------------- -----------
John Crabtree
OBE 25,305 0.1%
---------------- -----------
Chris Pullen 20,659 0.1%
---------------- -----------
47,068 0.2%
---------------- -----------
Subsequent to the half year end, on 16 July 2019, the Directors
participated in a Placing of new ordinary shares of 10p at GBP1.00
each as follows:
Ordinary shares
of 10p each
Ed Barker 10,000
----------------
John Crabtree
OBE 25,000
----------------
Tracy Lewis 100,000
----------------
Chris Pullen 100,000
----------------
Mike Watts 18,000
----------------
253,000
----------------
17 IFRS 16 Transition note
The application of IFRS 16 to leases previously classified as
operating leases under IAS 17 resulted in the recognition of
right-of-use assets, and lease liabilities, as summarised
below:
31 Dec 2018
As previously Impact of 1 Jan 2019
reported IFRS 16 Restated
Balance sheet (extract) GBP'm GBP'm GBP'm
---------------------------- -------------- --------- ----------
Non-current assets
---------------------------- -------------- --------- ----------
Property, plant and
equipment 8.6 9.6 18.2
---------------------------- -------------- --------- ----------
Deferred tax asset 0.9 0.1 1.0
---------------------------- -------------- --------- ----------
Total impact on assets 9.5 9.7 19.2
---------------------------- -------------- --------- ----------
Current liabilities
---------------------------- -------------- --------- ----------
Lease liabilities - 2.1 2.1
---------------------------- -------------- --------- ----------
Non-current liabilities
---------------------------- -------------- --------- ----------
Lease liabilities - 8.0 8.0
---------------------------- -------------- --------- ----------
Total impact on liabilities - 10.1 10.1
---------------------------- -------------- --------- ----------
Total impact on net
assets (0.4)
---------------------------- -------------- --------- ----------
Equity
---------------------------- -------------- --------- ----------
Profit and loss account 51.5 (0.4) 51.1
---------------------------- -------------- --------- ----------
Total impact on equity 51.5 (0.4) 51.1
---------------------------- -------------- --------- ----------
In terms of the income statement, the application of IFRS 16
resulted in a decrease in operating lease rental charges and an
increase in depreciation and interest expense compared to IAS 17.
During the six months ended 30 June 2019, the impact of IFRS 16 on
the Consolidated Statement of Comprehensive Income is summarised
below:
Statement of comprehensive Operating Post-IFRS
income (extract) 6 months Pre-IFRS 16 lease rentals Depreciation Interest 16
to June 2019 GBP'm GBP'm GBP'm GBP'm GBP'm
--------------------------- ----------- -------------- -------------- ---------- ---------
Revenue 534.6 534.6
--------------------------- ----------- -------------- -------------- ---------- ---------
Cost of sales (489.6) (489.6)
--------------------------- ----------- -------------- -------------- ---------- ---------
Gross profit 45.0 - - - 45.0
--------------------------- ----------- -------------- -------------- ---------- ---------
Administrative expenses (50.6) 1.3 (1.2) - (50.5)
--------------------------- ----------- -------------- -------------- ---------- ---------
Operating (loss)/profit (5.6) 1.3 (1.2) - (5.5)
--------------------------- ----------- -------------- -------------- ---------- ---------
Finance cost (2.1) (0.1) (2.2)
--------------------------- ----------- -------------- -------------- ---------- ---------
(Loss)/Profit before
income tax (7.7) 1.3 (1.2) (0.1) (7.7)
--------------------------- ----------- -------------- -------------- ---------- ---------
Of the total right-of-use assets of GBP9.6m recognised at 1
January 2019, GBP9.5m related to leases of property and GBP0.1m to
leases of plant and equipment.
The table below presents a reconciliation from operating lease
commitments disclosed at 31 December 2018 to lease liabilities
recognised at 1 January 2019.
GBP'm
---------------------------------------------------------- ------
Operating lease commitments disclosed under IAS 17
at 31 December 2018 15.2
---------------------------------------------------------- ------
Short-term and low value lease commitments straight-line
expensed under IFRS 16 (4.0)
---------------------------------------------------------- ------
Effect of discounting (1.1)
---------------------------------------------------------- ------
Payments due in periods covered by extension options -
that are included in the lease term
---------------------------------------------------------- ------
Finance lease liabilities recognised under IAS 17 -
at 31 December 2018
---------------------------------------------------------- ------
Lease liabilities recognised at 1 January 2019 10.1
---------------------------------------------------------- ------
18 Note on the unaudited interim accounts
The unaudited interim accounts are prepared for and addressed
only to the Company's shareholders as a whole and to no other
person. The Company, its Directors, employees, agents and advisers
accept and assume no liability to any person in respect of this
trading update save as would arise under English law. Statements
contained in this trading update are based on the knowledge and
information available to the Group's Directors at the date it was
prepared and therefore facts stated, and views expressed, may
change after that date.
Forward looking statements
This document and any materials distributed in connection with
it may include forward-looking statements, beliefs, opinions or
statements concerning risks and uncertainties, including statements
with respect to the Group's business, financial condition and
results of operations. Those statements and statements which
contain the words "anticipate", "believe", "intend", "estimate",
"expect" and words of similar meaning, reflect the Group's
Directors' beliefs and expectations and involve risk and
uncertainty because they relate to events and depend on
circumstances that will occur in the future and which may cause
results and developments to differ materially from those expressed
or implied by those statements and forecasts. No representation is
made that any of those statements or forecasts will come to pass or
that any forecast results will be achieved. You are cautioned not
to place any reliance on such statements or forecasts. Those
forward-looking and other statements speak only as at the date of
this trading update. The Group undertakes no obligation to release
any update of, or revisions to, any forward-looking statements,
opinions (which are subject to change without notice) or any other
information or statement contained in this trading update.
Furthermore, past performance of the Group cannot be relied on as a
guide to future performance.
No statement in this document is intended as a profit forecast
or a profit estimate and no statement in this document should be
interpreted to mean that earnings per Staffline Group plc share for
the current or future financial years would necessarily match or
exceed the historical published earnings per Staffline Group plc
share.
Nothing in this document is intended to constitute an invitation
or inducement to engage in investment activity. This document does
not constitute or form part of any offer for sale or subscription
of, or any solicitation of, any offer to purchase or subscribe for,
any Securities. Nor shall it, or any part of it, or the fact of its
distribution form the basis of, or be relied on in connection with,
any contract, commitment or investment decision in relation
thereto. This document does not constitute a recommendation
regarding any securities.
Staffline Group plc
Group five-year summary (unaudited)
Financial reporting half years ended 30 June GBP'm (prior years
as restated)
2019 2018 2017 2016 2015
-------- -------- ------- ------- -------
Comprehensive income (6 months)
-------- -------- ------- ------- -------
Turnover 534.6 481.0 427.8 414.7 297.2
-------- -------- ------- ------- -------
Underlying operating profit 3.7 16.3 17.5 16.7 10.9
-------- -------- ------- ------- -------
% margin 0.7% 3.4% 4.1% 4.0% 3.7%
-------- -------- ------- ------- -------
Reported operating profit (5.5) 11.8 7.7 12.9 1.6
-------- -------- ------- ------- -------
Reported profit/(loss) after taxation (6.0) 8.5 3.7 10.1 (0.6)
-------- -------- ------- ------- -------
Underlying diluted earnings per
share (diluted) 5.6p 47.2p 50.1p 48.5p 32.2p
-------- -------- ------- ------- -------
Declared dividend per share n/a 11.3p 11.0p 10.5p 7.5p
-------- -------- ------- ------- -------
Dividend cover v underlying diluted
EPS n/a 4.2x 4.6x 4.6x 4.3x
-------- -------- ------- ------- -------
Financial position (half year end)
-------- -------- ------- ------- -------
Goodwill 116.3 101.9 94.2 91.5 89.5
-------- -------- ------- ------- -------
Intangible assets 38.3 33.0 25.2 30.4 14.1
-------- -------- ------- ------- -------
Property, plant and equipment 17.1 8.2 7.4 11.2 16.2
-------- -------- ------- ------- -------
Trade and other receivables 148.8 121.6 105.1 100.9 97.4
-------- -------- ------- ------- -------
Cash and cash equivalents 5.0 6.7 20.0 17.0 20.1
-------- -------- ------- ------- -------
Trade and other payables (114.4) (110.4) (97.1) (95.1) (88.4)
-------- -------- ------- ------- -------
Lease liabilities (9.2) - - - -
-------- -------- ------- ------- -------
Borrowings (exc deal fees) (94.9) (43.8) (52.5) (61.2) (69.9)
-------- -------- ------- ------- -------
Deferred tax net (liability)/asset (4.6) (4.1) (2.7) (3.5) (1.7)
-------- -------- ------- ------- -------
Other (net liabilities) (18.1) (13.8) (15.8) (10.8) (13.1)
-------- -------- ------- ------- -------
Net assets 84.3 99.3 83.8 80.4 64.2
-------- -------- ------- ------- -------
Net (debt)/cash (exc deal fees) (89.9) (37.1) (32.5) (44.2) (49.8)
-------- -------- ------- ------- -------
Goodwill, intangibles 154.6 134.2 119.4 121.9 103.6
-------- -------- ------- ------- -------
Other net assets 19.6 2.2 (3.1) 2.7 10.4
-------- -------- ------- ------- -------
Cash flows (6 months)
-------- -------- ------- ------- -------
Underlying operating profit 3.7 16.3 17.5 16.7 10.9
-------- -------- ------- ------- -------
Non-underlying cash costs (3.2) - - - (0.4)
-------- -------- ------- ------- -------
Depreciation, amortisation - operating 2.9 2.3 2.2 2.4 1.8
-------- -------- ------- ------- -------
Working capital movements (16.6) (13.0) (2.2) 7.1 (4.4)
-------- -------- ------- ------- -------
Capital expenditure, inc software
(net of disposal proceeds) (3.4) (2.9) (1.5) (4.2) (1.1)
-------- -------- ------- ------- -------
Taxation paid (net) (1.3) (3.3) (3.1) - (3.2)
-------- -------- ------- ------- -------
Free cash from operations (17.9) (0.6) 12.9 22.0 3.6
-------- -------- ------- ------- -------
Interest paid (2.0) (1.2) (1.3) (1.3) (0.6)
-------- -------- ------- ------- -------
Business acquisitions inc debt acquired (5.3) (18.4) (7.2) (1.1) (35.1)
-------- -------- ------- ------- -------
Issue of share capital - - 0.3 - -
-------- -------- ------- ------- -------
Finance lease liabilities (0.9) (0.1) - (0.1) -
-------- -------- ------- ------- -------
Others - (0.1) - (0.1) -
-------- -------- ------- ------- -------
(Increase)/reduction in net debt (26.1) (20.3) 4.7 19.5 (32.1)
-------- -------- ------- ------- -------
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
IR LLFVDAFIRLIA
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