TIDMSTAF
RNS Number : 8090Z
Staffline Group PLC
23 September 2020
23 September 2020
STAFFLINE GROUP PLC
('Staffline', the 'Company' or the 'Group')
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHSED 30 JUNE 2020
Staffline Group plc, the recruitment and training group,
announces its unaudited results for the six months ended 30 June
2020.
Six months
Six months to 30 June
to 30 June 2019
2020 Unaudited Percentage
Unaudited Restated movement
Revenue GBP434.9m GBP523.3m (16.9)%
------------- ------------- -----------
Underlying operating (loss)/profit* GBP(0.8)m GBP4.4m (118.2)%
------------- ------------- -----------
Underlying EBITDA (pre-IFRS
16)** GBP1.0m GBP6.5m (84.6)%
------------- ------------- -----------
(Loss) before tax GBP(47.7)m GBP(12.3)m (287.8)%
------------- ------------- -----------
Net debt (pre-IFRS16) GBP36.2m GBP89.9m 60.0%
------------- ------------- -----------
Key Highlights
-- Revenue of GBP434.9m (H1 2019 restated: GBP523.3m)
o Unprecedented surge in food supply chain sector demand
including supermarket customers during lockdown, where volumes were
64% higher than expected between April and May, although this did
not offset the impact of COVID-19 in other sectors during H1
o Despite the shutdown of a number of services due to COVID-19
related social distancing measures, PeoplePlus maintained delivery
of a number of core services. 100% of adult education classroom
capacity was lost between April and June, which has now recovered
to 42% because of social distancing
-- Underlying* operating loss of GBP(0.8)m (H1 2019 restated:
GBP4.4m profit, H2 2019: GBP(5.2)m loss)
o The Board is encouraged with the underlying operating loss of
GBP(0.8)m in H1 2020 which, despite the challenges presented by
COVID-19, is a GBP4.4m improvement in performance at the underlying
operating profit level compared with H2 2019
-- Reported loss before tax of GBP(47.7)m (H1 2019 restated: GBP(12.3)m loss)
o Includes non-underlying items related to non-cash charges for
goodwill impairment of GBP35.3m and amortisation of intangibles of
GBP4.8m
-- Pre-IFRS 16 basis net borrowings of GBP36.2m (H1 2019:
GBP89.9m), benefitting from GBP45.8m of deferred VAT payments,
which are due in March 2021
-- Comprehensive credit facilities agreed in June 2020 with the
Group's lenders providing restructured financing until July
2022
-- Internal actions implemented and ongoing to improve working capital structure
-- Albert Ellis, currently Non-executive Director, appointed
Group Chief Executive Officer of the Group
* Underlying operating profit before goodwill impairment,
amortisation of intangible assets arising on business combinations,
reorganisation costs and other non-underlying costs.
** Underlying operating profit before depreciation and after
operating lease payments.
Current Trading and Outlook
-- In the short term, management continues to focus on
maximising opportunities in the current environment whilst ensuring
that the cost base is prudently managed
-- Promising progress on working capital improvements and with
mitigating actions to help alleviate the probable liquidity
pressures in March 2021
-- Current trading environment remains challenging, with the
ongoing macroeconomic impact of COVID-19 uncertain, the Board is
confident that the actions in the first half of 2020 have increased
the resilience of the Group and placed it on a much improved
strategic and financial platform to take advantage of opportunities
in the future
-- Whilst remaining cautious given the market backdrop with
respect to the scale, and duration, of the ongoing impact of social
distancing restrictions in the UK, the Board anticipates that the
Group will perform in line with expectations for the full year
-- The Group remains on track to achieve a positive result for
2020 on an underlying operating profit basis across each of the
three divisions
Ian Lawson, Executive Chairman of Staffline, commented:
"Staffline continued to successfully service its customer base,
and our business proved resilient in the first half of 2020 despite
COVID-19 significantly impacting a number of the Group's key
sectors. Our teams have worked tirelessly to not only support our
customers in what has been a very challenging trading environment,
but to ensure all of our workforce remains safe."
"Whilst we anticipate a stronger trading performance in H2 2020,
there is a very high level of uncertainty across the market as a
result of COVID-19."
Forward looking statements
Certain statements in this announcement are forward looking
statements. By their nature, forward looking statements involve a
number of risks, uncertainties or assumptions that could cause
actual results or events to di er materially from those expressed
or implied by the forward-looking statements. These risks,
uncertainties or assumptions could adversely a ect the outcome and
nancial e ects of the plans and events described herein. Forward
looking statements contained in this announcement regarding past
trends or activities should not be taken as representation that
such trends or activities will continue in the future. Readers
should not place undue reliance on forward looking statements,
which apply only as of the date of this announcement.
Important notice
This announcement does not constitute or form part of any o er
or invitation to sell, or any solicitation of any o er to purchase
any shares in the Company, 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 or commitment or investment decisions
relating thereto, nor does it constitute a recommendation regarding
the shares of the Company. Past performance cannot be relied upon
as a guide to future performance.
For further information, please contact:
Staffline Group plc via Vigo Communications
www.stafflinegroupplc.co.uk
Ian Lawson, Executive Chairman
Daniel Quint, Interim Chief Financial
Officer
Liberum NOMAD and Broker
www.liberum.com
Bidhi Bhoma / Joshua Hughes 020 3100 2222
Vigo Communications Financial PR 020 7390 0230
www.vigocomms.com staffline@vigocomms.com
Jeremy Garcia / Antonia Pollock
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 Ian Lawson, Executive Chairman.
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 three divisions:
Recruitment GB
Staffline is the UK's leading provider of flexible blue-collar
workers, supplying approximately 40,000 staff per day on average to
around 450 client sites, across a wide range of industries
including agriculture, supermarkets, drinks, driving, food
processing, logistics and manufacturing.
Recruitment Ireland
The recruitment Ireland business is a leading end to end
solutions provider operating across 20 industries, 10 branch
locations, 15 onsite customer locations and offering RPO, MSP,
temporary and permanent solutions across the island of Ireland.
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.
Executive Chairman's Statement
Introduction
Trading in the first half of 2020 was dominated by the impact of
the global COVID-19 pandemic, the associated restriction measures,
and the trends that emerged. As previously flagged, across the
Group's Recruitment divisions, there was an inevitable reduction in
volumes in certain sectors including retail, automotive and
manufacturing, whilst conversely, the Group experienced an
unprecedented increase in food sector demand. In addition,
PeoplePlus transitioned to predominantly digital delivery with
funding support largely on a cost only basis.
The Group has successfully undergone a restructuring in the
year-to-date. This has been focused on reducing the cost base,
implementing improved governance, securing a new financing
agreement with the Group's lenders as well as strengthening the
leadership team, which included refreshing the Board and adding to
the executive leadership team, and appointing a Head of Internal
Audit.
A number of initiatives were introduced to mitigate the
financial impact of the pandemic across the Group. These included a
working capital reduction programme, which saw customer debt which
was more than 30 days overdue reduce by 78% from the beginning of
April to the end of June, and a reduction in the Group's headcount
of 13% between December 2019 and August 2020. Staffline also
utilised the Government's job retention scheme in furloughing
certain of its employees, ceasing to use the scheme significantly
beyond July 2020. The Group is also benefitting from the deferral
of GBP45.8m under HMRC's VAT deferral arrangements, which, in
addition to the refinancing agreements, improves the Group's
liquidity through to March 2021.
As workplace related lockdown restrictions have eased, trading
is beginning to normalise at varying degrees across the Group, with
the ultimate impact of COVID-19 on the wider economy and Staffline
still remaining uncertain. However, management believes that
Staffline is now in a much more resilient position following the
refinancing of the Group's credit facilities in June 2020, which
provided support to Staffline's ongoing business activities.
Improvements are ongoing across the Group's corporate governance,
financial processes, management information channels, as well as in
cross-selling and communications.
A number of Board changes were made in the first half of 2020,
which improved the corporate governance of the Group, with an
Executive Management Team being established which includes myself,
Daniel Quint, Interim Group CFO, and our three highly experienced
divisional Managing Directors. In addition, today we have announced
the appointment of Albert Ellis, currently a non-executive director
of the Group, as Chief Executive Officer.
Operational review
As aforementioned, operations in the first half of 2020 were
significantly impacted by COVID-19 with trading overall in the
second quarter reduced as a result of lockdown restrictions. Each
division has now begun the exercise of reshaping its structure to
create a more robust business operation that will be profitable
over the long term.
Recruitment GB
The response from our Recruitment GB business in meeting the
unprecedented demand arising from the food sector in March and
April was very impressive and the Group was proud to support the
national 'feed the nation' effort. However, this surge in demand
was not sufficient to offset the decline in other sectors during
the first half of the year and therefore divisional revenue was
down 18.1%.
With demand in food now normalised, the Group is beginning to
benefit from the reopening of certain sectors as lockdown measures
have eased, with an overall increase in volumes and strong digital
job application rates. Volumes are anticipated to increase
month-on-month for the remainder of 2020, with our key customers
engaged in planning for the traditional Q4 peak trading period.
However, the peak in 2020 is not expected to be as marked as
previous years. It also remains too early to quantify steady-state
demand levels in the short term.
Recruitment Ireland
The Ireland division experienced similar demand trends as the GB
business, with food sector demand now stable and volumes from
manufacturing customers increasing, albeit steadily. Overall,
volumes are increasing but new normalised levels remain uncertain.
The rebrand of the division as Staffline Recruitment Ireland has
been well received by customers and demonstrates our ongoing
progress in unifying our business divisions. Strategies to share
best practice and in particular, new technologies are now
underway.
PeoplePlus
The majority of services continued to operate during the
pandemic, using digital operating models. However, the loss of
classroom delivery impacted certain areas, and whilst this service
has now restarted, it is not yet running at normal capacity. There
was 100% loss of adult education classroom capacity between April
and June, which is now at 42% capacity because of social
distancing. Significant disruption was also experienced on
apprenticeships with 37% of our learners still not having returned
to their programme. On central and devolved government contracts,
where delivery has not been possible, funding has largely been on a
cost only basis.
In-year new business wins also weakened during the pandemic but
with the rising levels of unemployment in the UK, new government
funding for training and re-skilling is likely and PeoplePlus is
well-placed to benefit from this. Management's response to the
reduced volumes in its services generated run rate overhead
reduction of c.55% between March and August.
Strategic Priorities
As outlined in the Group's full year 2019 results, the Board's
core focus is to create a sustainable business, which in the
current uncertain macroeconomic environment is more important than
ever. The Board and management want Staffline to truly benefit from
both its existing resources and talent, as well as capitalise on
the significant opportunity that exists within our target markets.
Pleasingly, we have begun to deliver against our strategic
objectives, which are to:
1) Achieve operational excellence
-- Ongoing progress in streamlining and sharing services across the Group
-- Each division is being re-shaped to maximise profitability and cash generation
2) Optimise service delivery
-- Continue to adhere to high standards of compliance
-- High customer engagement crucial in the current environment
3) Leverage our brand
-- Rebranded the Ireland division under 'Staffline' with
additional divisions to be rebranded in due course
-- Ongoing synergies and opportunities across all our divisions being realised
-- Continue to attract strong levels of candidates
4) Develop and cultivate our talent
-- Commercial business model and working capital training to all
key management to ensure all leaders fully understand the
commercial hurdle framework for new business and what the Group's
key opportunities and risks are
-- Management focused on ensuring our leaders and talented
people across all divisions are given access to a certain level of
development and training
Outlook
In the short-term, Staffline are encouraged by the early
actions, and remain focused on implementing mitigating measures, to
ease the liquidity risk present when the deferred VAT becomes
payable in March 2021. These include a reduction in days sales
outstanding within the Recruitment divisions as well as working
capital deployment decisions moving away from low profit generating
and working capital intensive contracts. Additionally, cost saving
and cost sharing initiatives are being expanded across the Group to
reduce the overall cost base with a review of working capital also
being undertaken. Staffline is a well-established business with
market-leading divisions, which the Board believes will prove
resilient in the medium to long-term and we will be able to
navigate the current volatile market environment.
Whilst we anticipate a stronger trading performance in H2 2020,
there is a very high level of uncertainty across the market as a
result of COVID-19. We continue to focus on maximising trading and
ensuring that the shape of the business is appropriate in order to
drive future profitability. Consequently, the Board remains
cautiously optimistic with regard to the outlook for the full year
and anticipates that the Group will perform in line with
expectations.
Finally, I would like to congratulate Albert on his appointment
as Staffline's new Group CEO and also thank all of my colleagues in
Staffline for their hard work, dedication and commitment over what
has been an extraordinary period.
Ian Lawson
Executive Chairman
22 September 2020
Financial Review
Introduction
Trading in the first half of the 2020 was heavily impacted by
the COVID-19 pandemic but is now starting to recover. In June 2020,
the Group successfully refinanced its credit facilities, as
described below.
Total revenue for H1 decreased by (16.9)% to GBP434.9m (H1 2019
restated: GBP523.3m).
The Group is split into three divisions: Recruitment GB,
flexible blue-collar recruitment; Recruitment Ireland, generalist
recruitment; and PeoplePlus, an adult skills and training
provider.
Recruitment Recruitment Group Total Recruitment Recruitment Group Total
GB Ireland PeoplePlus costs Group GB Ireland PeoplePlus costs Group
6 months 6 months 6 months 6 months 6 months 6 months 6 months 6 months 6 months 6 months
ended ended ended ended ended ended ended ended ended ended
30 June 30 June 30 June 30 June 30 June 2019 2019 2019 2019 2019
2020 2020 2020 2020 2020 Unaudited Unaudited Unaudited Unaudited Unaudited
Unaudited Unaudited Unaudited Unaudited Unaudited Restated Restated Restated Restated Restated
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ ------------ ------------ ----------- ---------- ----------- ------------ ------------ ------------ ---------- ----------
Revenue 332.8 61.9 40.2 - 434.9 406.4 75.5 41.4 - 523.3
------------ ------------ ------------ ----------- ---------- ----------- ------------ ------------ ------------ ---------- ----------
Gross
profit 21.6 5.6 6.9 - 34.1 28.3 8.1 8.9 - 45.3
------------ ------------ ------------ ----------- ---------- ----------- ------------ ------------ ------------ ---------- ----------
Underlying
operating
profit
/(loss) 1.3 1.1 (2.0) (1.2) (0.8) 4.3 2.4 (1.3) (1.0) 4.4
------------ ------------ ------------ ----------- ---------- ----------- ------------ ------------ ------------ ---------- ----------
Revenues in the Recruitment GB division declined by GBP(73.6)m
or (18.1)% to GBP332.8m. The decrease is as a result of the volume
decline in temporary recruitment in sectors such as retail and
manufacturing, which more than offset the increase in trading in
the food sector.
Revenues in the Recruitment Ireland division decreased by
GBP(13.6)m or (18.0)% to GBP61.9m, with COVID-19 lockdowns
occurring across both Northern Ireland and the Republic of Ireland,
significantly impacting volumes.
PeoplePlus revenues decreased by GBP(1.2)m or (2.9)% to
GBP40.2m. The business was supported by digital operating models
which enabled operations to continue throughout the pandemic.
However, classroom delivery of skills training along with prison
education was negatively impacted by COVID-19 restrictions.
The sales mix between the operating divisions was unchanged
compared with H1 2019, with the recruitment businesses accounting
for 91% of revenue (2019: 92%).
Overall, gross profit decreased by 24.7% to GBP34.1m (H1 2019:
GBP45.3m) with gross profit margins reducing to 7.8% (H1 2019:
8.8%). However, this is an increase compared to the H2 2019 gross
profit margin of 7.3%.
The gross margin for Recruitment GB decreased year-on-year, from
7.0% in H1 2019 to 6.6% in H1 2020, following the increase in the
National Minimum Wage in April 2019, from GBP7.83 to GBP8.21 per
hour for over 25s. This does not impact absolute gross profit but
does negatively impact the gross margin percentage achieved. This
dynamic will continue with the increase in April 2020 to GBP8.72
per hour for over 25s.
The gross margin for Recruitment Ireland decreased from 10.7% in
H1 2019 to 9.0% in H1 2020 driven by the reduction of permanent
recruitment which delivers higher gross profit margin.
The gross margin for PeoplePlus decreased from 21.5% in H1 2019
to 17.2% in H1 2020 due to the impact of COVID-19 on revenues which
were primarily supported by cost only recovery from Government
contracts.
Reflecting the impact of the COVID-19 pandemic, underlying
operating loss was GBP(0.8)m (H1 2019 restated: GBP4.4m profit),
with GBP(4.0)m of the year on year decline being generated in Q2 as
lockdown took hold. Total non-underlying charges before tax were
GBP(44.8)m (H1 2019 restated: GBP(14.5)m) as described below.
Finance charges were GBP(2.1)m (H1 2019 restated: GBP(2.2)m). These
movements generated a reported loss before taxation of GBP(47.7)m
in H1 2020 (H1 2019 restated: GBP(12.3)m).
The reported loss after tax for H1 2020 was GBP(46.8)m (H1 2019
restated: GBP(10.6)m).
Non-underlying administrative charges
Non-underlying charges before tax have increased to GBP44.8m in
H1 2020 (H1 2019 restated: GBP14.5m), as shown below. They include
reorganisation costs of GBP1.9m incurred in order to downsize and
reduce the Group's headcount in line with the declines in revenue
and gross profit, transaction costs of GBP0.6m related to the Group
exploring strategic options, GBP2.1m of refinancing costs that
could not be capitalised against the new financial liabilities, a
GBP4.8m charge for the amortisation of intangible assets arising on
business combinations, a GBP35.3m goodwill impairment charge based
on forecasts which include the impact of COVID-19, and a
share-based payment charge of GBP0.1m.
Six-months
Six-months ended June
ended June 2019
Unaudited Unaudited
2020 Restated
Non-underlying charges GBPm GBPm
---------------------------------------------- ----------- -----------
Reorganisation costs 1.9 2.2
Legal investigation professional fees - 0.7
Transaction costs - business acquisitions and
strategic options 0.6 -
Employee dispute settlement - 1.4
Legal claim - 1.0
Refinancing costs 2.1 3.2
Amortisation of intangible assets arising on
business combinations 4.8 6.2
Goodwill impairment 35.3 -
Share-based payment charges/(credits) (equity
and cash-settled) 0.1 (0.2)
---------------------------------------------- ----------- -----------
Total non-underlying charges before tax 44.8 14.5
---------------------------------------------- ----------- -----------
Taxation
The total tax credit for H1 2020 of GBP0.9m (H1 2019 restated:
GBP1.7m), which amounts to 1.9% (H1 2019 restated: 13.8%) of the
loss for the period, relates principally to the movement of
deferred tax balances, together with certain non-underlying items
being non-taxable.
Prior year restatements and review of internal controls
Following the extended 2018 audit, the Board continued with
detailed reviews to further improve the Group's internal controls.
As previously announced, these reviews identified accounting errors
relating to the preparation of the 2018 annual results. The 2018
statement of financial position, being the 2019 opening reserves
contains prior year adjustments. There are consequential
adjustments to the income statement and cash flow statement for the
six months ended 30 June 2019 and the statement of financial
position at 30 June 2019 (presented as comparatives). See note 1
for further details.
Statement of financial position, cash generation and
financing
The Group's total equity decreased by GBP(47.0)m over the six
months from the 31 December 2019 restated position, following the
total comprehensive loss for H1 2020 of GBP(47.0)m.
The movement in net debt is shown in the table below. The
movement in working capital includes a decrease in trade and other
receivables and accrued income of GBP9.1m, both due to the decline
in trading as a result of COVID-19 as well as a focus on reduction
in overdue debt, and an increase in trade and other payables and
provisions of GBP12.1m, primarily due to the deferral of VAT
payments between March and June 2020, in line with the provisions
set out by HMRC.
Movement in net debt H1 2019
H1 2020 Unaudited
Unaudited Restated
GBPm GBPm
--------------------------------------------- ---------- ----------
Opening net debt (pre IFRS16) (59.5) (63.8)
Underlying EBITDA (pre IFRS16) 1.0 6.5
Non-underlying items (4.6) (7.9)
Movements in working capital 21.2 (12.7)
Taxation and interest paid (2.8) (3.3)
Capital investment (net of disposals) (1.1) (3.4)
Cash flows relating to acquisitions - (5.3)
Payments out of restricted funds 9.2 -
Impact of foreign exchange loss on operating
activities 0.4 -
Closing net debt (pre IFRS16) (36.2) (89.9)
IFRS16 lease liabilities (6.9) (8.9)
--------------------------------------------- ---------- ----------
Closing net debt (post IFRS16) (43.1) (98.8)
--------------------------------------------- ---------- ----------
The Group ended H1 2020 with pre-IFRS16 net debt of GBP36.2m
compared to GBP89.9m at H1 2019. Post-IFRS16 net debt was GBP43.1m
at H1 2020 compared to GBP98.8m at H1 2019.
The table below reconciles underlying EBITDA (e arnings before
interest, taxation, depreciation and amortisation) , used in the
net debt analysis above, to operating loss.
Reconciliation of operating loss to EBITDA H1 2019
H1 2020 Unaudited
Unaudited Restated
GBPm GBPm
------------------------------------------- ---------- ----------
Operating loss (43.5) (6.9)
Non-underlying costs 42.7 11.3
------------------------------------------- ---------- ----------
Underlying operating (loss) / profit (0.8) 4.4
------------------------------------------- ---------- ----------
Depreciation 3.5 3.0
------------------------------------------- ---------- ----------
Underlying EBITDA 2.7 7.4
------------------------------------------- ---------- ----------
Principal repayment of lease liabilities (1.7) (0.9)
------------------------------------------- ---------- ----------
Underlying EBITDA (pre IFRS16) 1.0 6.5
------------------------------------------- ---------- ----------
Note: Underlying operating profit before goodwill impairment,
amortisation of intangible assets arising on business combinations,
reorganisation costs and other non-underlying costs.
The Group's headroom relative to available committed banking
facilities as at 30 June 2020 was GBP38.4m (30 June 2019: GBP28.9m)
as set out below:
H1 2020 H1 2019
Unaudited Unaudited
GBPm GBPm
-------------------------------------------------- ---------- ----------
Cash at bank 32.3 5.0
Cash at bank held outside of facility* - (1.2)
Overdraft facility unutilised - 25.0
Committed revolving credit facility unutilised - 0.1
Available receivables finance facility unutilised 6.1 -
-------------------------------------------------- ---------- ----------
Banking facility headroom 38.4 28.9
-------------------------------------------------- ---------- ----------
* excluded from headroom in H1 2019
Refinancing: Amendments to Credit Facilities June 2020
Following discussions with the lenders of the revolving credit
facility, the Company and the lenders agreed on 26 June 2020 to a
revised financing structure. In summary:
Previous New arrangement
arrangement
Revolving credit facility GBP78.2m GBP30.0m
("RCF")
------------- ----------------
Overdraft GBP25.0m -
------------- ----------------
Receivables Finance Facility - GBP73.2m
("RFF") (invoice discounting)
- maximum
------------- ----------------
Total Facility GBP103.2m GBP103.2m
------------- ----------------
Expiry date July 2022 July 2022
------------- ----------------
The key terms of the new facilities are below, with other terms
of the RCF remaining in place:
i) Repayment and cancellation of RCF commitments by GBP10.0m on 31 July 2020;
ii) The RFF can initially be drawn down against the receivables
of the Recruitment GB division and the Northern Ireland part of the
Recruitment Ireland division;
iii) Interest on the RFF accruing at 3.50% plus Bank of England base rate;
iv) Minimum EBITDA and minimum liquidity covenants until a
return to leverage and interest cover covenants in January 2022.
The minimum EBITDA covenants have been calculated by reference to
the Group's downside case;
v) Restrictions on new material share, business and asset acquisitions until July 2022; and
vi) No dividends to be declared by the Company until July 2022.
In consideration of these amendments, a fee was paid to the
lenders of GBP0.7m.
The Group is also funded through customer financing agreements
with some of its key customers. In addition, the Group has an
uncommitted separate receivables financing facility with a maximum
value of GBP25m.
Dividend policy
As a condition of refinancing the credit facility, no dividends
will be declared by the Company for the 2020 financial year.
Going concern
The unaudited interim results have been prepared on a going
concern basis. The Directors have reviewed this basis and made full
disclosure in note 1, concluding that there is a material
uncertainty which may cast significant doubt upon the Group's and
the Company's ability to continue as a going concern and that,
therefore, the Group and Company may be unable to realise their
assets and discharge their liabilities in the normal course of
business. Nevertheless, after engaging in dialogue with key
stakeholders and considering the uncertainties described in note 1,
as well as the mitigating actions available to the Group as
described in note 1, the Directors have a reasonable expectation
that the Group and Company have adequate resources to continue in
operational existence for the foreseeable future.
International Financial Reporting Standards
There have been no new accounting standards or interpretations
in the first half of 2020 which materially impact the Group's
performance or financial position.
Daniel Quint
Interim Chief Financial Officer
22 September 2020
Consolidated statement of comprehensive income
For the six months ended 30 June 2020
Six-month Six-month
period Six-month period Six-month
ended period ended period
30 June ended 30 30 June ended
2020 June 2020 2020 30 June Year ended
Underlying Non- underlying Total 2019 Unaudited 31 December
Unaudited Unaudited Unaudited Restated 2019 Audited
Note GBP'm GBP'm GBP'm GBP'm GBP'm
------------ ----------------- ----------- ---------------- --------------
Continuing operations
------------------------------- ----- ------------ ----------------- ----------- ---------------- --------------
Revenue 2 434.9 - 434.9 523.3 1,076.7
Cost of sales (400.8) - (400.8) (478.0) (990.2)
------------------------------- ----- ------------ ----------------- ----------- ---------------- --------------
Gross profit 34.1 - 34.1 45.3 86.5
------------------------------- ----- ------------ ----------------- ----------- ---------------- --------------
Administrative expenses
(underlying) (34.9) - (34.9) (40.9) (87.3)
------------------------------- ----- ------------ ----------------- ----------- ---------------- --------------
Underlying operating
(loss)/profit
before non-underlying
administrative
expenses (0.8) - (0.8) 4.4 (0.8)
------------------------------- ----- ------------ ----------------- ----------- ---------------- --------------
Administrative expenses
(non-underlying)* 3 - (42.7) (42.7) (11.3) (39.1)
------------------------------- ----- ------------ ----------------- ----------- ---------------- --------------
Operating loss 2 (0.8) (42.7) (43.5) (6.9) (39.9)
------------------------------- ----- ------------ ----------------- ----------- ---------------- --------------
Finance costs (2.1) (2.1) (4.2) (5.4) (8.2)
------------------------------- ----- ------------ ----------------- ----------- ---------------- --------------
Loss for the period before
taxation (2.9) (44.8) (47.7) (12.3) (48.1)
----------- ---------------- --------------
Underlying (2.9) 2.2 (5.8)
Non-underlying* 3 (44.8) (14.5) (42.3)
----------- ---------------- --------------
Tax credit 0.6 0.3 0.9 1.7 4.1
----------- ---------------- --------------
Underlying 0.6 - 1.7
Non-underlying 0.3 1.7 2.4
----------- ---------------- --------------
Loss from continuing
operations (2.3) (44.5) (46.8) (10.6) (44.0)
----------- ---------------- --------------
Underlying (2.3) 2.2 (4.1)
Non-underlying* 3 (44.5) (12.8) (39.9)
----------- ---------------- --------------
Items that will not be reclassified to the statement
of comprehensive income - actuarial gains and
losses, net of deferred tax (0.6) (0.3) (0.7)
Items that may be reclassified to the statement
of comprehensive income - cumulative translation
adjustment 0.4 - -
----------------------------------------------------------------------- ----------- ---------------- --------------
Net loss and total comprehensive income
for the period (47.0) (10.9) (44.7)
---------------------------------------------------- ----------------- ----------- ---------------- --------------
Earnings per ordinary share 4
Continuing operations:
Basic (69.1p) (39.6p) (96.3p)
------------------------------- ----- ------------ ----------------- ----------- ---------------- --------------
Diluted (69.1p) (39.6p) (96.3p)
------------------------------- ----- ------------ ----------------- ----------- ---------------- --------------
*the non-underlying result includes amortisation of intangible
assets arising on business combinations, 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 17 to 35 form an integral part
of these financial statements
Consolidated statement of changes in equity
For the six months ended 30 June 2020
Unaudited Share-based Profit
Share Own shares Share payment and loss Total
capital JSOP premium reserve account equity
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
--------------------------- --------- ----------- --------- ------------ ---------- --------
At 1 January 2020 6.9 (4.8) 75.1 0.5 (1.9) 75.8
Save As you Earn ("SAYE")
share scheme - equity
settled - - - 0.1 - 0.1
--------------------------- --------- ----------- --------- ------------ ---------- --------
Transactions with owners - - - 0.1 - 0.1
--------------------------- --------- ----------- --------- ------------ ---------- --------
Loss for the period - - - - (46.8) (46.8)
Actuarial losses - - - - (0.6) (0.6)
Cumulative translation
adjustments - - - - 0.4 0.4
--------------------------- --------- ----------- --------- ------------ ---------- --------
Total comprehensive
loss for the period,
net of tax - - - - (47.0) (47.0)
--------------------------- --------- ----------- --------- ------------ ---------- --------
At 30 June 2020 6.9 (4.8) 75.1 0.6 (48.9) 28.9
--------------------------- --------- ----------- --------- ------------ ---------- --------
Consolidated statement of changes in equity
For the six months ended 30 June 2019
Unaudited Profit
Share-based and loss Total
Share Own shares Share payment account equity
capital JSOP premium reserve Restated Restated
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
At 31 December 2018 (reported) 2.8 (4.8) 41.2 0.3 51.5 91.0
-------------------------------- ---------- ------------- --------- ------------ ---------- ----------
Prior year adjustments
for year ended 31 December
2017 (note 1) - - - - (0.9) (0.9)
Prior year adjustments
for year ended 31 December
2018
(note 1) - - - - (7.5) (7.5)
-------------------------------- ---------- ------------- --------- ------------ ---------- ----------
At 31 December 2018 (restated) 2.8 (4.8) 41.2 0.3 43.1 82.6
-------------------------------- ---------- ------------- --------- ------------ ---------- ----------
Transition to IFRS 16:
Leases (note 9) Amended - - - - (0.1) (0.1)
-------------------------------- ---------- ------------- --------- ------------ ---------- ----------
At 1 January 2019 (restated) 2.8 (4.8) 41.2 0.3 43.0 82.5
-------------------------------- ---------- ------------- --------- ------------ ---------- ----------
Loss for the period (restated) - - - - (10.6) (10.6)
Actuarial losses - - - - (0.3) (0.3)
Total comprehensive loss
for the period, net of
tax (restated) - - - - (10.9) (10.9)
-------------------------------- ---------- ------------- --------- ------------ ---------- ----------
At 30 June 2019 (restated) 2.8 (4.8) 41.2 0.3 32.1 71.6
-------------------------------- ---------- ------------- --------- ------------ ---------- ----------
The accompanying notes on pages 17 to 35 form an integral part
of these financial statements.
Consolidated statement of changes in equity
For the year ended 31 December 2019
Audited Share-
Own based Profit
Share shares Share payment and loss Total
capital JSOP premium reserve account equity
GBPm GBPm GBPm GBPm GBPm GBPm
At 31 December 2018
(reported) 2.8 (4.8) 41.2 0.3 51.5 91.0
-------------------------------- --------- -------- --------- --------- ---------- --------
Prior year adjustments
for year ended 31 December
2017 (note 1) - - - - (0.9) (0.9)
Prior year adjustments
for year ended 31 December
2018 (note 1) - - - - (7.5) (7.5)
-------------------------------- --------- -------- --------- --------- ---------- --------
At 31 December 2018
(restated) 2.8 (4.8) 41.2 0.3 43.1 82.6
-------------------------------- --------- -------- --------- --------- ---------- --------
Transition to IFRS16:
Leases - - - - (0.1) (0.1)
-------------------------------- --------- -------- --------- --------- ---------- --------
At 1 January 2019 (restated) 2.8 (4.8) 41.2 0.3 43.0 82.5
-------------------------------- --------- -------- --------- --------- ---------- --------
Issue of share capital 4.1 - 36.9 - - 41.0
Costs of issue of share
capital - - (3.0) - - (3.0)
Save As You Earn ("SAYE")
share scheme - equity-settled - - - 0.2 (0.2) -
-------------------------------- --------- -------- --------- --------- ---------- --------
Transactions with owners 4.1 - 33.9 0.2 (0.2) 38.0
-------------------------------- --------- -------- --------- --------- ---------- --------
Loss for the year - - - - (44.0) (44.0)
Actuarial loss, net
of taxation - - - - (0.7) (0.7)
-------------------------------- --------- -------- --------- --------- ---------- --------
Total comprehensive
loss for the year,
net of tax - - - - (44.7) (44.7)
-------------------------------- --------- -------- --------- --------- ---------- --------
At 31 December 2019 6.9 (4.8) 75.1 0.5 (1.9) 75.8
-------------------------------- --------- -------- --------- --------- ---------- --------
The accompanying notes on pages 17 to 35 form an integral part
of these financial statements.
Consolidated statement of financial position
As at 30 June 2020
30 June 2019 31 December
30 June 2020 Unaudited 2019
Unaudited Restated Audited
Note GBP'm GBP'm GBP'm
-------------------------------- ----- ------------- ------------- ------------
Assets
Non-current assets
Goodwill 5 59.6 117.2 94.9
Other intangible assets 28.9 38.3 34.0
Property, plant and equipment 12.6 16.1 14.6
Retirement benefit asset - 0.5 -
Deferred tax asset 1.9 1.0 1.4
-------------------------------- ----- ------------- ------------- ------------
103.0 173.1 144.9
-------------------------------- ----- ------------- ------------- ------------
Current assets
Trade and other receivables
(due after more than one year
GBP0.6m, 2019: nil) 6 129.3 151.7 137.7
Cash and cash equivalents 7 32.3 5.0 25.0
Restricted cash 7 3.5 - 12.7
-------------------------------- ----- ------------- ------------- ------------
165.1 156.7 175.4
-------------------------------- ----- ------------- ------------- ------------
Total assets 268.1 329.8 320.3
-------------------------------- ----- ------------- ------------- ------------
Liabilities
Current
Trade and other payables 8 150.7 122.1 126.4
Borrowings 9 38.5 - 6.4
Other liabilities 1.3 2.3 0.7
Provisions 5.1 21.1 16.0
Lease liabilities 9 2.3 2.4 2.6
-------------------------------- ----- ------------- ------------- ------------
197.9 147.9 152.1
-------------------------------- ----- ------------- ------------- ------------
Non-current
Borrowings 9 30.0 94.9 78.1
Other liabilities 0.4 1.3 1.4
Provisions 2.1 2.0 2.4
Lease liabilities 9 4.6 6.5 5.8
Deferred tax liabilities 4.2 5.6 4.7
-------------------------------- ----- ------------- ------------- ------------
41.3 110.3 92.4
-------------------------------- ----- ------------- ------------- ------------
Total liabilities 239.2 258.2 244.5
-------------------------------- ----- ------------- ------------- ------------
Equity
Share capital 10 6.9 2.8 6.9
Own shares (4.8) (4.8) (4.8)
Share premium 75.1 41.2 75.1
Share-based payment reserve 0.6 0.3 0.5
Profit and loss account (48.9) 32.1 (1.9)
-------------------------------- ----- ------------- ------------- ------------
Total equity 28.9 71.6 75.8
-------------------------------- ----- ------------- ------------- ------------
Total equity and liabilities 268.1 329.8 320.3
-------------------------------- ----- ------------- ------------- ------------
The accompanying notes on pages 17 to 35 form an integral part
of these financial statements.
Consolidated statement of cash flows
For the six months ended 30 June 2020
Six months
Six months ended 30 Year
ended 30 June ended 31
June 2019 December
2020 Unaudited 2019
Unaudited Restated Audited
Note GBP'm GBP'm GBP'm
Cash flows from operating activities 11 19.7 (13.9) 1.6
---------------------------------------------- ----- ----------- ----------- ----------
Taxation paid (net) (0.7) (1.3) (1.1)
---------------------------------------------- ----- ----------- ----------- ----------
Net cash inflow/(outflow) from operating
activities 19.0 (15.2) 0.5
---------------------------------------------- ----- ----------- ----------- ----------
Cash flows from investing activities
- trading
Purchase of intangible assets - software (0.5) (2.1) (3.2)
Purchases of property, plant and equipment (0.6) (1.9) (2.5)
Proceeds on sale of property, plant
and equipment - 0.6 0.6
---------------------------------------------- ----- ----------- ----------- ----------
(1.1) (3.4) (5.1)
---------------------------------------------- ----- ----------- ----------- ----------
Free cash generated from/(absorbed
by) operations 17.9 (18.6) (4.6)
---------------------------------------------- ----- ----------- ----------- ----------
Cash flows from investing activities
- acquisitions
Acquisition of businesses - deferred
consideration for prior period acquisitions - (5.3) (7.2)
---------------------------------------------- ----- ----------- ----------- ----------
- (5.3) (7.2)
---------------------------------------------- ----- ----------- ----------- ----------
Total cash flows arising from investing
activities (1.1) (8.7) (12.3)
---------------------------------------------- ----- ----------- ----------- ----------
Total cash flows arising from operating
and investing activities 17.9 (23.9) (11.8)
---------------------------------------------- ----- ----------- ----------- ----------
Cash flows from financing activities:
New loans 38.5 25.6 24.9
Repayments of loans in acquired entities - (10.0) -
Loan repayments (48.1) - (26.8)
Finance lease principal repayments (1.7) (0.9) (3.2)
Interest paid (2.1) (2.0) -
Payment from/(into) restricted fund 9.2 - (12.7)
Gross proceeds from the issue of share
capital - - 41.0
Costs relating to the issue of share
capital - - (3.0)
---------------------------------------------- ----- ----------- ----------- ----------
Net cash flows (used in)/from financing
activities (4.2) 12.7 14.2
---------------------------------------------- ----- ----------- ----------- ----------
Net change in cash and cash equivalents 13.7 (11.2) 2.4
---------------------------------------------- ----- ----------- ----------- ----------
Cash and cash equivalents at beginning
of period 18.6 16.2 16.2
---------------------------------------------- ----- ----------- ----------- ----------
Cash and cash equivalents at end of
period 7 32.3 5.0 18.6
---------------------------------------------- ----- ----------- ----------- ----------
The accompanying notes on pages 17 to 35 form an integral part
of these financial statements.
Notes to the summary financial statements
For the six months ended 30 June 2020
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 2020 (including the comparatives
for the six-month period ended 30 June 2019 and the year ended 31
December 2019) were approved and authorised for issue by the Board
of Directors on 23 September 2020.
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 2019 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 2019 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 contain a Material
uncertainty related to going concern, which is more fully described
on pages 60 to 62 of the 2019 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 2019, 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 2020.
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.
The unaudited Group financial statements have been prepared on a
going concern basis using the significant accounting policies and
measurement bases summarised in the December 2019 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
These financial statements are prepared on a going concern basis
notwithstanding that the Group has reported an underlying loss
before tax of GBP2.9m (H1 2019 restated: GBP2.2m underlying profit
before tax) and an unadjusted loss before tax of GBP47.7m (H1 2019
restated: GBP12.3m loss before tax). As at 30 June 2020, the Group
had net current liabilities (excluding restricted cash) of GBP36.3m
(H1 2019 restated: net assets of GBP8.8m) and net assets of
GBP28.9m (H1 2019 restated: GBP71.6m). The Group generated an
underlying pre-IFRS 16 EBITDA profit (prior to exceptional and
non-recurring items) of GBP1.0m (H1 2019: restated: GBP6.5m).
The Group meets its day to day working capital requirements from
a GBP30.0m revolving credit facility, a GBP73.2m receivables
financing facility, an uncommitted (non-recourse) invoice
discounting facility with a limit of GBP25.0m, supply chain
financing arrangements with certain customers and the Group's cash
balances. The Group's revolving credit facility and receivables
financing facility mature on 4 July 2022 and its GBP25.0m
uncommitted (non-recourse) invoice discounting facility is
currently on a rolling basis. The revolving credit facility reduced
by GBP10.0m to GBP20.0m on 31 July 2020. The revolving credit
facility and receivables financing facility are subject to
covenants summarised below.
On 20 March 2020, the Government announced that no VAT payments
due from businesses between 20 March 2020 and the end of June 2020
would be required to be made and that these would become payable on
or before 31 March 2021. This payment delay provides the Group with
an immediate and significant short-term liquidity improvement of
GBP45.8m.
The net debt position of the Group (excluding unamortised
transaction costs) has reduced during the period from GBP59.5m at
December 2019 to GBP36.2m on a pre-IFRS 16 basis.
As at 30 June 2020, the Group had cash at bank of GBP32.3m
(excluding GBP3.5m held in an escrow account to fund outstanding
liabilities in relation to National Minimum Wage ("NMW")),
available facility of GBP6.1m under its receivables financing
facility, resulting in aggregate available liquidity of
GBP38.4m.
Due to the sharp decline in profits in 2019 and the elevated net
debt levels, a breach of lending covenants would have occurred in
2019 and 2020 were it not for flexibility shown by the Group's
lenders by providing deferrals and amendments in respect of the
Group's interest cover and leverage covenants until 30 June 2020.
The Directors entered into discussions with the Group's lenders to
amend and partially refinance its financing facilities and amend
its covenants package through to 4 July 2022, culminating in the
refinancing arrangement completed on 26 June 2020.
In order to commercially assess the Group's request to amend its
financing facilities and covenants package, an independent business
review was commissioned by the lenders. Following completion of
this review and subsequent negotiations with the Group's lenders,
the Group and the lenders subsequently agreed and implemented an
amendment and partial refinancing of the Group's GBP103.2m
revolving credit financing facilities on 26 June 2020, that
resulted in GBP73.2m of the revolving credit facilities being
replaced with a receivables financing facility and a GBP30.0m
revolving credit facility being retained. As noted above, the
revolving credit facility reduced by GBP10.0m to GBP20.0m on 31
July 2020.
The interest cover and leverage covenants included under the
previous revolving credit facility have been replaced in the
amended revolving credit facility and receivables financing
facility with a minimum EBITDA covenant (tested quarterly from 31
December 2020 to 31 December 2021), reverting back to the original
covenant package from 1 January 2022 to the end of the facilities,
with the minimum look-forward liquidity covenant (tested weekly)
being retained. The minimum EBITDA covenants have been calculated
by reference to the Group's downside case.
The amended revolving credit facility and receivables financing
facility now include a cross-default clause that is triggered if
there is a withdrawal, or reduction in the facility size and/or
advance rate, of the GBP25.0m uncommitted (non-recourse) invoice
discounting facility. The Group has a 28-day cure period in
relation to the cross-default clause.
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Executive Chairman's Statement on pages 4 to 6.
The financial position of the Group, its cash flows, liquidity
position and borrowing facilities are described on pages 7 to
11.
As described in the Executive Chairman's Statement above, the
Group experienced challenging trading conditions across all
divisions in the period, dominated by the impact of the global
COVID-19 pandemic, and reported an operating loss for the period.
The Directors consider that the outlook presents significant
challenges in terms of sales volumes over the coming months. The
unprecedented and ever-changing impact of COVID-19, uncertainties
specifically related to post-Brexit transition arrangements, well
documented issues within the non-food sectors (including retail,
manufacturing and automotive) and a slowdown in new contracts and
apprenticeship starts are all impacting on sales volumes. Whilst
the Directors have instigated measures to manage liquidity
(described below), these circumstances create material
uncertainties over future trading results and cash flows.
The Directors have prepared base and sensitised cash flow
information for the period ending 31 December 2021, which
incorporates the Directors current view of the impact of the
trading and economic risks and uncertainties noted above. Based
upon a review of the Group's forecasts and associated cash flows
for the period ending 31 December 2021, the Group's liquidity
forecast (considering its available financing facilities) for this
period is sufficient to cover the Group's and the Company's
commitments during that period with the exception of a portion of
the deferred VAT falling due on or before 31 March 2021, which
represents a material uncertainty in relation to the Group's
liquidity, although the Directors are working on options to
mitigate this liquidity risk.
This potential liquidity issue may also result in a potential
breach of the Group's minimum look-forward liquidity covenant under
the recently amended revolving credit facility and receivables
financing facility. In addition, it should be noted that there is a
risk of a potential breach of the Group's new minimum EBITDA
covenant if trading performance is sufficiently below forecast,
although the minimum EBITDA covenants are set based on the Group's
downside case. If required, the Directors will enter into
discussions with its financing providers in respect of any
potential covenant breaches. As noted above, the Group has been in
active discussions with its financing providers and achieved
covenant deferrals and amendments during 2019 and 2020.
It should also be noted that the uncommitted nature of the
Group's GBP25.0m (non-recourse) invoice discounting facility,
accompanied by the cross-default clause included in its amended
revolving credit facility and receivables financing facility,
represents a material uncertainty in respect of the Group's
financing and liquidity during the period to 31 December 2021. If
this cross-default clause were to be triggered, the Directors have
a 28 day cure period to enter into discussions with its financing
providers to commence actions to resolve this matter, which could
include the reinstatement of the facility, replacement of the
facility with new third party financing and/or an equity capital
injection. Based on recent discussions with the provider of the
Group's GBP25.0m (non-recourse) invoice discounting facility, the
Directors understanding is that the provider presently remains
supportive of the Group absent any unforeseen circumstances.
The Directors believe they can continue to operate within
existing lending levels for the foreseeable future based on the
following mitigating actions:
-- The Group has changed the composition of the board of
Directors and implemented improvements in corporate governance
which will support more robust control, decision making and
accountability within the Group leading to a considerably enhanced
ability to drive, measure and deliver change.
-- The Directors, with support from the senior leadership team,
have commenced the implementation of a turnaround plan. The
turnaround plan focuses on profit improvement and yield management
measures (including contract renegotiations and exit from marginal
or unprofitable contracts), cost reduction initiatives (including a
reduction in non-critical business spend) and working capital
improvement initiatives (including tight control over the timing of
payments and a continued drive to further improve cash collections
including a renegotiation of payment terms on certain contracts and
the possible implementation of additional supply chain financing
arrangements with certain customers) to ensure that lending limits
and covenants are not breached.
-- If required, the Directors will enter into discussions with
HMRC to further defer some (or all) of the deferred VAT falling due
on or before 31 March 2021.
-- The Directors will explore other options to replace the
Group's existing financing facilities and/or recapitalise the Group
(including the possibility of a future equity capital raise,
replacement third party financing and/or disposals).
Without successful implementation of the mitigating actions
noted above, and the ongoing support from the Group's financing
providers (including the uncommitted (non-recourse) invoice
discounting facility), the Group would likely be unable to operate
within its banking facilities.
The Directors have concluded that the combination of the
circumstances mentioned above represents a material uncertainty
which may cast significant doubt upon the Group's and the Company's
ability to continue as a going concern and that, therefore, the
Group and Company may be unable to realise their assets and
discharge their liabilities in the normal course of business.
Nevertheless, after engaging in dialogue with key stakeholders and
considering the uncertainties described above as well as the
mitigating actions available to the Group (including the turnaround
plan), the Directors have a reasonable expectation that the Group
and Company have adequate resources to continue in operational
existence for the foreseeable future.
For these reasons, the Directors continue to adopt the going
concern basis of accounting in preparing these financial
statements. These financial statements do not include the
adjustments that would result if the Group and Company were unable
to continue as a going concern.
Prior period restatements
Following the extended 2018 audit, the Board continued with
detailed reviews to further improve the Group's internal controls.
These reviews identified accounting errors relating to the
preparation of the 2018 annual results. The 2017 statement of
financial position, being the 2018 opening reserves, and the 2018
income statement, 2018 statement of financial position and 2018
cash flow statement (presented as comparatives in the 2019 Annual
Financial Statements) contained prior year adjustments. Overall,
the 2018 opening reserves position was decreased by GBP0.9m and the
total 2018 income statement impact was a GBP7.5m reduction in
profit after tax. Certain of these adjustments have affected the
statement of financial position at 30 June 2019 and the result for
the six-month period then ended and, accordingly, the comparative
results have been restated.
During the preparation of the Group's Annual Financial
Statements for the year ended 31 December 2019, additional
adjustments were made, which have been assessed as relating
directly to the period ended 30 June 2019.
These adjustments are set out in the tables below.
Restatement of Consolidated statement of comprehensive
income
For the six months ended 30 June 2019
Unaudited Partner
2019 agency
Total & Contract Holiday 2019
As expenses Trading Revenue exit Employee Refinan-cing Legal pay Total
reported accruals adjust-ments adjustments costs settlement costs claim accrual Restated
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- -------- -------- ------------ ----------- -------- ---------- ------------ ----- ------- --------
1 1 2 3 4 5 6 7
Continuing
operations
Revenue 534.6 - (2.8) (8.5) - - - - - 523.3
Cost of sales (489.6) 1.7 2.6 8.5 (0.4) - - - (0.8) (478.0)
--------------- -------- -------- ------------ ----------- -------- ---------- ------------ ----- ------- --------
Gross profit 45.0 1.7 (0.2) - (0.4) - - - (0.8) 45.3
Administrative
expenses (50.5) 0.7 - - - (1.4) - (1.0) - (52.2)
--------------- -------- -------- ------------ ----------- -------- ---------- ------------ ----- ------- --------
Operating loss (5.5) 2.4 (0.2) - (0.4) (1.4) - (1.0) (0.8) (6.9)
Finance costs (2.2) - - - - - (3.2) - - (5.4)
--------------- -------- -------- ------------ ----------- -------- ---------- ------------ ----- ------- --------
Loss for the
period
before
taxation (7.7) 2.4 (0.2) - (0.4) (1.4) (3.2) (1.0) (0.8) (12.3)
Tax credit 1.7 - - - - - - - - 1.7
--------------- -------- -------- ------------ ----------- -------- ---------- ------------ ----- ------- --------
Loss for the
period (6.0) 2.4 (0.2) - (0.4) (1.4) (3.2) (1.0) (0.8) (10.6)
Items that will
not be
reclassified
to profit and
loss
- actuarial
losses,
net of tax (0.3) - - - - - - - - (0.3)
--------------- -------- -------- ------------ ----------- -------- ---------- ------------ ----- ------- --------
Total
comprehensive
loss for the
period (6.3) 2.4 (0.2) - (0.4) (1.4) (3.2) (1.0) (0.8) (10.9)
--------------- -------- -------- ------------ ----------- -------- ---------- ------------ ----- ------- --------
Loss per
ordinary
share
Continuing
operations:
Basic (22.4)p (39.6)p
Diluted (22.4)p (39.6)p
--------------- -------- -------- ------------ ----------- -------- ---------- ------------ ----- ------- --------
Restatement of Consolidated statement of financial position
As at 30 June 2019
Unaudited Adjust-
ments
2019 from Contract Holiday
As prior exit Employee Refinan-cing Legal pay Reclass-ification 2019
reported years costs settlement costs claim accrual adjustments Restated
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ -------- --------- -------- ---------- ------------ ------ -------- ----------------- --------
1 3 4 5 6 7 8
Assets
Non-current
Goodwill 116.3 0.9 - - - - - - 117.2
Other
intangible
assets 38.3 - - - - - - - 38.3
Property,
plant
and
equipment 17.1 (1.0) - - - - - - 16.1
Retirement
benefit
net asset 0.5 - - - - - - - 0.5
Deferred tax
asset 1.0 - - - - - - - 1.0
------------ -------- --------- -------- ---------- ------------ ------ -------- ----------------- --------
173.2 (0.1) - - - - - - 173.1
------------ -------- --------- -------- ---------- ------------ ------ -------- ----------------- --------
Current
Trade and
other
receivables 148.8 (1.2) - - - - - - 147.6
Corporation
tax
recoverable 3.2 0.9 - - - - - - 4.1
Cash and
cash
equivalents 5.0 - - - - - - - 5.0
157.0 (0.3) - - - - - - 156.7
------------ -------- --------- -------- ---------- ------------ ------ -------- ----------------- --------
Total assets 330.2 (0.4) - - - - - - 329.8
------------ -------- --------- -------- ---------- ------------ ------ -------- ----------------- --------
Liabilities
Current
Trade and
other
payables 114.4 3.0 0.3 1.4 1.2 1.0 0.8 21.1 143.2
Other
liabilities 2.3 - - - - - - - 2.3
Lease
liabilities 2.4 - - - - - - - 2.4
119.1 3.0 0.3 1.4 1.2 1.0 0.8 21.1 147.9
------------ -------- --------- -------- ---------- ------------ ------ -------- ----------------- --------
Non-current
Borrowings 94.2 - - - 0.7 - - - 94.9
Other
liabilities - - - - 1.3 - - - 1.3
Provisions* 20.2 2.8 0.1 - - - - (21.1) 2.0
Lease
liabilities 6.8 (0.3) - - - - - - 6.5
Deferred tax
liabilities 5.6 - - - - - - - 5.6
------------ -------- --------- -------- ---------- ------------ ------ -------- ----------------- --------
126.8 2.5 0.1 - 2.0 - - (21.1) 110.3
------------ -------- --------- -------- ---------- ------------ ------ -------- ----------------- --------
Total
liabilities 245.9 5.5 0.4 1.4 3.2 1.0 0.8 - 258.2
------------ -------- --------- -------- ---------- ------------ ------ -------- ----------------- --------
Equity
Share
capital 2.8 - - - - - - - 2.8
Own shares (4.8) - - - - - - - (4.8)
Share
premium 41.2 - - - - - - - 41.2
Share-based
payment
reserve 0.3 - - - - - - - 0.3
Profit and
loss
account 44.8 (5.9) (0.4) (1.4) (3.2) (1.0) (0.8) - 32.1
------------ -------- --------- -------- ---------- ------------ ------ -------- ----------------- --------
Total equity 84.3 (5.9) (0.4) (1.4) (3.2) (1.0) (0.8) - 71.6
------------ -------- --------- -------- ---------- ------------ ------ -------- ----------------- --------
Total equity
and
liabilities 330.2 (0.4) - - - - - - 329.8
------------ -------- --------- -------- ---------- ------------ ------ -------- ----------------- --------
1) Adjustments from prior years
As shown above, the statement of financial position at 30 June
2019 has been adjusted for the aggregate effect of the prior year
adjustments relating the years ended 31 December 2017 and 2018.
Certain of these adjustments also have an effect on the result
reported for the six months ended 30 June 2019 in the statement of
comprehensive income. Full detail of all the adjustments was
provided in the Group's Annual Report for the year ended 31
December 2019.
Partner Agency and overhead costs under-accrued - Accruals
understated by GBP2.4m; Cost of sales understated by GBP1.7m and
administrative expenses understated by GBP0.7m
Weaknesses in accounting processes and review procedures during
the latter part of 2018 and early 2019 meant that a significant
number of weekly charges from partner agencies were not fully
accrued at 31 December 2018. A detailed review, undertaken in late
2019, highlighted the error, which amounted to an understatement of
cost of sales of GBP1.7m in that year. For similar reasons, a large
number of relatively small value supplier invoices for overhead
costs were also not accrued resulting in an understatement of
administrative expenses of GBP0.7m (of which GBP0.3m is
non-underlying). The adjustment reverses in the six months ended 30
June 2020.
Trade receivables and revenues understated by GBP2.8m and trade
payables and cost of sales understated by GBP2.6m
The Recruitment GB division reported its results to 30 December
2018, which was inconsistent with the rest of the Group, which
reported to 31 December 2018. An adjustment is required to
recognise an additional day's trading to align the results of the
division with the rest of the Group.
2) Revenue adjustments - Revenue and cost of sales understated by GBP8.5m
In prior periods, revenues arising from 'agency style' contracts
in the Datum business (part of the Recruitment GB division), which
was acquired during 2018, have been incorrectly reported on a gross
rather than on a net basis as required IFRS 15: Revenue from
Contracts with Customers. Revenues and cost of sales have been
reduced by GBP20.2m for this item.
For management reporting purposes the Recruitment GB division
reports periodic revenues after deduction of certain employment
related direct costs. For statutory reporting purposes an
adjustment should have been made in order to correctly report
revenues as amounts invoiced to third party customers and to
include the costs within cost of sales. A restatement adjustment of
GBP11.7m is required to increase revenues and cost of sales for
this item.
3) Contract exit costs understated - Trade payables understated
by GBP0.3m, provisions understated by GBP0.1m and cost of sales
understated by GBP0.4m
As described in the Group's Annual Report for the year ended 31
December 2019, the Group's contract with the Ministry of Justice
("MOJ"), via The Warwickshire and West Mercia Community
Rehabilitation company ("CRC"), was terminated early by the MOJ.
This resulted in an impairment adjustment to the CRC assets of
GBP0.8m. The reassessment of contract at December 2019 revealed
that additional exit costs of GBP0.3m would be incurred for which
the liability crystallised in the first half of 2019.
4) Employee settlement -Trade and other payables overstated, and
non-underlying administrative expenses understated by GBP1.4m
During the year ended 31 December 2019, the Group settled a
legal claim involving share incentives payable to an ex-employee,
amounting to GBP1.4m. The outcome of the case was known at 30 June
2019 and the cost should have been recognised in that period.
5) Refinancing costs - Non-underlying finance costs understated
by GBP3.2m, trade and other payables understated by GBP1.2m,
borrowings understated by GBP0.7m and non-current other liabilities
understated by GBP1.3m
Refinancing costs associated with the refinancing on 26 June
2019 were previously carried forward and amortised over the period
of the related finance. Subsequently, the Group was advised that
the costs should have been charged to the income statement as
modification costs in accordance with the requirements of IFRS9
Financial Instruments.
6) Legal claim - Accruals and non-underlying administration costs understated by GBP1.0m
The Group has received a formal legal claim in respect of the
sale of A4e's Indian business to the management team in 2014. The
substance of the claim was known before 30 June 2019 and should
have been recognised at that time.
7) Holiday pay accrual -Trade and other payables and cost of sales understated by GBP0.8m
The Group makes provision for the future cost of holiday pay
earned by workers up to the reporting date. During the 2019 audit
of the Recruitment GB division it was discovered that no provision
had been made for holiday pay accrued by workers in the 'drivers'
category. The omission occurred because prior to 2019 their pay was
processed on a separate payroll system and the accrual was
overlooked.
8) Reclassification adjustments -Provisions overstated, and
trade and other payables understated by GBP21.1m
Provision items that are likely to be payable in less than one
year were incorrectly classified as due after more than one
year.
2 Segmental reporting
Management identifies three operating segments: Recruitment GB,
the provision of workforce recruitment and management to industry;
Recruitment Ireland, the provision of generalist recruitment
services; and PeoplePlus, the provision of skills training and
probationary services. 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:
Group
costs Total
Recruitment Recruitment Group Recruitment Recruitment PeoplePlus Six Group
GB Ireland PeoplePlus costs Total GB Ireland Six months months Six
Six Six Six Six Group Six months Six months ended ended months
months months months months ended ended ended 30 30 ended
ended ended ended ended 30 30 June 30 June June June 30 June
30 June 30 June 30 June 30 June June 2019 2019 2019 2019 2019
2020 2020 2020 2020 2020 Unaudited Unaudited Unaudited Unaudited Unaudited
Unaudited Unaudited Unaudited Unaudited Unaudited Restated Restated Restated Restated Restated
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
------------------ ------------ ------------ ----------- ---------- ----------- ------------ ------------ ------------ ---------- ----------
Segment
continuing
operations:
Revenue from
external
customers 332.8 61.9 40.2 - 434.9 406.4 75.5 41.4 - 523.3
Cost of sales (311.2) (56.3) (33.3) - (400.8) (378.1) (67.4) (32.5) - (478.0)
------------------ ------------ ------------ ----------- ---------- ----------- ------------ ------------ ------------ ---------- ----------
Segment gross
profit 21.6 5.6 6.9 - 34.1 28.3 8.1 8.9 - 45.3
------------------ ------------ ------------ ----------- ---------- ----------- ------------ ------------ ------------ ---------- ----------
Administrative
expenses
(underlying) (18.7) (4.1) (7.4) (1.2) (31.4) (22.7) (5.6) (8.6) (1.0) (37.9)
Depreciation
and software
amortisation
(underlying) (1.6) (0.4) (1.5) - (3.5) (1.3) (0.1) (1.6) - (3.0)
------------------ ------------ ------------ ----------- ---------- ----------- ------------ ------------ ------------ ---------- ----------
Segment
underlying
operating
profit/(loss)* 1.3 1.1 (2.0) (1.2) (0.8) 4.3 2.4 (1.3) (1.0) 4.4
------------------ ------------ ------------ ----------- ---------- ----------- ------------ ------------ ------------ ---------- ----------
Share-based
payment
(charge)/credit - - (0.1) - (0.1) 0.3 - (0.1) - 0.2
Amortisation
of intangible
assets arising
on business
combinations (4.7) - (0.1) - (4.8) (6.2) - - - (6.2)
Reorganisation
costs (0.3) (0.1) (1.2) (0.3) (1.9) (2.9) - - - (2.9)
Employee
settlement - - - - - - - - (1.4) (1.4)
Legal claim - - - - - - - (1.0) - (1.0)
Strategic
options - - - (0.6) (0.6) - - - - -
Goodwill
impairment (18.8) - (16.5) - (35.3) - - - - -
------------------ ------------ ------------ ----------- ---------- ----------- ------------ ------------ ------------ ---------- ----------
Segment operating
(loss)/profit (22.5) 1.0 (19.9) (2.1) (43.5) (4.5) 2.4 (2.4) (2.4) (6.9)
Refinancing
costs -
non-underlying - - - (2.1) (2.1) - - - (3.2) (3.2)
Finance costs (0.6) - - (1.5) (2.1) (0.8) - - (1.4) (2.2)
------------------ ------------ ------------ ----------- ---------- ----------- ------------ ------------ ------------ ---------- ----------
(Loss)/profit
for the period
before taxation (23.1) 1.0 (19.9) (5.7) (47.7) (5.3) 2.4 (2.4) (7.0) (12.3)
------------------ ------------ ------------ ----------- ---------- ----------- ------------ ------------ ------------ ---------- ----------
Tax
credit/(expense) 0.7 - 0.2 - 0.9 1.3 (0.3) 0.4 0.3 1.7
------------------ ------------ ------------ ----------- ---------- ----------- ------------ ------------ ------------ ---------- ----------
Net (loss)/profit
for the period (22.4) 1.0 (19.7) (5.7) (46.8) (4.0) 2.1 (2.0) (6.7) (10.6)
------------------ ------------ ------------ ----------- ---------- ----------- ------------ ------------ ------------ ---------- ----------
Total non-current
assets 47.2 15.8 40.0 - 103.0 92.0 11.7 69.4 - 173.1
------------------ ------------ ------------ ----------- ---------- ----------- ------------ ------------ ------------ ---------- ----------
Total current
assets 122.4 21.3 20.2 - 163.9 112.0 28.8 15.9 - 156.7
------------------ ------------ ------------ ----------- ---------- ----------- ------------ ------------ ------------ ---------- ----------
Total assets 169.6 37.1 60.2 - 266.9 204.0 40.5 85.3 - 329.8
------------------ ------------ ------------ ----------- ---------- ----------- ------------ ------------ ------------ ---------- ----------
Total liabilities 160.2 23.0 24.2 30.6 238.0 119.9 22.0 22.1 94.2 258.2
------------------ ------------ ------------ ----------- ---------- ----------- ------------ ------------ ------------ ---------- ----------
Capital
expenditure
inc software 0.6 - 0.5 - 1.1 3.7 - 0.3 - 4.0
------------------ ------------ ------------ ----------- ---------- ----------- ------------ ------------ ------------ ---------- ----------
* Segment underlying operating profit before amortisation of
intangible assets arising on business combinations, reorganisation
costs, other non-underlying costs and the non-cash charge/credit
for share-based payment costs.
Segment information for the year ended 31 December 2019 is as
follows:
Recruitment Recruitment
GB Ireland PeoplePlus Group Costs Total Group
2019 2019 2019 2019 2019
GBPm GBPm GBPm GBPm GBPm
-------------------------------------- ----------- ----------- ---------- ------------- -----------
Segment continuing operations:
Sales revenue from external customers 841.1 147.7 87.9 - 1,076.7
Cost of sales (784.5) (132.1) (73.6) - (990.2)
-------------------------------------- ----------- ----------- ---------- ------------- -----------
Segment gross profit 56.6 15.6 14.3 - 86.5
-------------------------------------- ----------- ----------- ---------- ------------- -----------
Administrative expenses (49.2) (10.7) (17.9) (2.5) (80.3)
Depreciation, software & lease
amortisation (2.9) (0.6) (3.5) - (7.0)
-------------------------------------- ----------- ----------- ---------- ------------- -----------
Segment underlying operating
profit/(loss)* 4.5 4.3 (7.1) (2.5) (0.8)
-------------------------------------- ----------- ----------- ---------- ------------- -----------
Reorganisation costs including
asset impairment (1.3) - - (1.3)
Legal investigation professional
fees (1.0) - - - (1.0)
NMW remediation costs and financial
penalties 0.7 - - - 0.7
Audit scope extension (0.6) - (0.2) - (0.8)
Administrative expenses - transaction
costs - - - (0.9) (0.9)
Employee dispute settlement - - - (1.4) (1.4)
Legal claim - (1.0) - (1.0)
Amortisation of intangibles arising
on business combinations (8.0) (1.3) (1.6) - (10.9)
Goodwill impairment (14.3) - (8.0) - (22.3)
Administrative expenses - share-based
payment charge (0.1) - (0.1) - (0.2)
-------------------------------------- ----------- ----------- ---------- ------------- -----------
Segment (loss)/profit from operations (20.1) 3.0 (18.0) (4.8) (39.9)
-------------------------------------- ----------- ----------- ---------- ------------- -----------
Finance costs (1.7) - (0.1) (6.4) (8.2)
-------------------------------------- ----------- ----------- ---------- ------------- -----------
Segment (loss)/profit before
taxation (21.8) 3.0 (18.1) (11.2) (48.1)
-------------------------------------- ----------- ----------- ---------- ------------- -----------
Tax credit 2.6 0.5 0.8 0.2 4.1
-------------------------------------- ----------- ----------- ---------- ------------- -----------
Segment (loss)/profit from continuing
operations (19.2) 3.5 (17.3) (11.0) (44.0)
-------------------------------------- ----------- ----------- ---------- ------------- -----------
Total non-current assets 71.3 16.1 57.5 - 144.9
-------------------------------------- ----------- ----------- ---------- ------------- -----------
Total current assets 134.1 21.4 19.9 - 175.4
-------------------------------------- ----------- ----------- ---------- ------------- -----------
Total assets (consolidated) 205.4 37.5 77.4 - 320.3
-------------------------------------- ----------- ----------- ---------- ------------- -----------
Total liabilities (consolidated) 119.4 28.3 16.4 80.4 244.5
-------------------------------------- ----------- ----------- ---------- ------------- -----------
Capital expenditure inc software 3.7 0.1 1.9 - 5.7
-------------------------------------- ----------- ----------- ---------- ------------- -----------
No customer contributed more than 10% of the Group's revenue in
either of the six months ended 2019 or 2020.
3 Administrative expenses (non-underlying)
Six months
Six months ended 30 Year ended
ended 30 June 2019 31 December
June 2020 Unaudited 2019
Unaudited Restated Audited
GBP'm GBP'm GBP'm
---------------------------------------------- ------------ ----------- -------------
Included within administrative expenses are the following non-underlying
costs:
Reorganisation costs 1.9 2.2 1.3
NMW remediation and financial penalties - - (0.7)
Legal investigation professional fees - 0.7 1.0
Transaction costs - business acquisitions
and strategic options 0.6 - 0.9
Revised audit scope and increased audit
fees - - 0.8
Employee dispute settlement - 1.4 1.4
Legal claim - 1.0 1.0
Refinancing costs 2.1 3.2 3.2
Goodwill impairment (see note 5) 35.3 - 22.3
Amortisation of intangible assets arising
on business combinations (licences and
customer contracts) 4.8 6.2 10.9
Share-based payment charges/(credits) 0.1 (0.2) 0.2
----------------------------------------------- ------------ ----------- -------------
44.8 14.5 42.3
---------------------------------------------- ------------ ----------- -------------
Tax credit on above non-underlying costs (0.3) (1.7) (2.4)
Post taxation effect on above non-underlying
costs 44.5 12.8 39.9
----------------------------------------------- ------------ ----------- -------------
Reorganisation costs of GBP1.9m during the period relate to
further restructuring of the Recruitment GB division and represents
staff redundancy and property closure costs.
Transaction costs relate to advice in connection with the
Group's strategic options.
Costs incurred for refinancing the Group's bank credit
facilities, as described in note 9, comprise legal and advisory
fees.
Goodwill impairment arises from the revision of the carrying
values of the Recruitment GB and PeoplePlus divisions using
forecasts updated for the effect of the COVID-19 pandemic. Further
details are provided in note 5.
4 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 2020, at 30 June
2019 and at 31 December 2019). 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 certain
Directors and share options granted to employees in 2017, 2018 and
2019 under the SAYE scheme.
Details of the earnings and weighted average number of shares
used in the calculations are set out below:
Basic Diluted Diluted
six- month six- month six-month
Basic six- period Basic period period Diluted
month period ended Year ended ended ended Year ended
ended 30 30 June 31 December 30 June 30 June 31 December
June 2020 2019 2019 2020 2019 2019
Unaudited Unaudited
Unaudited Restated Audited Unaudited Restated Audited
----------------------------- -------------- ------------ ------------- ------------ ------------ -------------
Loss from continuing
operations (GBPm) (46.8) (10.6) (44.0) (46.8) (10.6) (44.0)
Weighted daily average
number of shares
(000) 67,790 26,804 45,669 67,790 26,804 45,669
Loss per share from
continuing operations
(p) (69.1)p (39.6)p (96.3)p (69.1)p (39.6)p (96.3)p
----------------------------- -------------- ------------ ------------- ------------ ------------ -------------
Underlying (Loss)/earnings
from continuing operations
(GBPm)* (2.3) 2.1 (4.1) (2.3) 2.1 (4.1)
----------------------------- -------------- ------------ ------------- ------------ ------------ -------------
Underlying earnings
per share (p)* (3.4)p 7.8p (9.0)p (3.4)p 7.8p (9.0)p
----------------------------- -------------- ------------ ------------- ------------ ------------ -------------
*Underlying earnings after adjusting for amortisation of
intangible assets arising on business combinations, business
acquisition costs, exceptional reorganisation costs, the non-cash
charge/credit for share-based payment costs.
Dividends
During the six-month period to 30 June 2020, Staffline Group plc
paid no dividends to its equity shareholders (H1 2019: GBPnil).
No interim dividend for 2020 is proposed (2019: GBPnil).
5 Goodwill
Total
Unaudited
Gross carrying amount Division GBP'm
---------------------------- ---------------- -----------
At 1 July 2019 as reported 116.3
Recruitment GB
Prior year adjustment & Ireland 0.9
---------------------------- ---------------- -----------
At 1 July 2019 as restated 117.2
Impairment Recruitment GB (14.3)
Impairment PeoplePlus (8.0)
---------------------------- ---------------- -----------
At 31 December 2019 94.9
---------------------------------------------- -----------
Impairment Recruitment GB (18.8)
Impairment PeoplePlus (16.5)
---------------------------- ---------------- -----------
At 30 June 2020 59.6
---------------------------------------------- -----------
The breakdown of Goodwill carrying value by division is listed
below:
30 June 30 June 31 December
2020 2019 2019
Unaudited Unaudited Audited
GBP'm GBP'm GBP'm
--------------------- ----------- ----------- ------------
Recruitment GB 21.4 54.3 40.2
Recruitment Ireland 5.7 5.9 5.7
PeoplePlus 32.5 57.0 49.0
--------------------- ----------- ----------- ------------
Total 59.6 117.2 94.9
--------------------- ----------- ----------- ------------
The goodwill attributable to the Group's operations in Ireland,
which was previously included within the Recruitment division, is
now shown separately.
Impairment - Goodwill
Management consider there to be three cash-generating units
("CGU"), being Recruitment GB, Recruitment Ireland and PeoplePlus,
in line with the operating segments defined in note 2. These three
cash-generating units have been tested for impairment.
In the prior year, only two CGU's were identified, with
Recruitment GB and Recruitment Ireland being taken together. Whilst
the cash flows generated from acquisitions cannot be separately
identified, they are all allocated to the three cash-generating
units and the goodwill relating to each acquisition is similarly
allocated.
The recoverable amount of goodwill was determined based on a
value-in-use calculation, using forecasts for 2020-22, adjusted for
the impact of the COVID-19 pandemic, followed by an extrapolation
of expected cash flows over the next two years with a 0% growth
rate for each cash-generating unit. Pre-tax discount rates of 11.7%
for Recruitment GB, 10.9% for Recruitment Ireland and 11.7% for
PeoplePlus (2018: 11.0% for all CGU's) were used based on the
weighted average costs of capital for each operating segment.
The recoverable amounts of the CGU's, having considered the
higher of value-in-use and fair value less costs to sell, were
GBP49.8m for Recruitment GB, GBP19.8m for Recruitment Ireland and
GBP39.0m for PeoplePlus, all being value-in-use.
The results of the impairment review performed showed headroom
in the Recruitment Ireland cash-generating unit and accordingly no
impairment noted, but that impairments to goodwill were required in
the Recruitment GB and PeoplePlus CGU's of GBP18.8m and GBP16.5m
respectively (year ended 31 December 2019: GBP14.3m and GBP8.0m,
respectively). The review also indicated that no provision is
required to write down the carrying value of other intangible
assets and tangible fixed assets (year ended 31 December 2019:
GBPnil).
In making the assessment of the recoverability of assets within
each CGU a number of judgements and assumptions were required.
The critical judgement relates to the determination of the
CGU's. Whilst there are individual legal entities within the three
segments, they are operated and reviewed as single units by the
Board of Directors. Each operating segment has its own management
team and head office. The Group's strategy, historically and going
forward, has been to integrate new acquisitions into the main
trading entities within each operating segment.
The key estimates in determining the value of each CGU are:
1. The discount rate. In the calculations we have utilised a
pre-tax discount rate of 11.7% for Recruitment GB, 10.9% for
Recruitment Ireland and 11.7% for PeoplePlus and a terminal growth
value of 0%. The calculations highlighted an impairment of GBP18.8m
for Recruitment GB, headroom of GBP7.6m for Recruitment Ireland and
an impairment of GBP16.5m for PeoplePlus. A 1% increase in the
discount rates increases the impairment to GBP22.9m for Recruitment
GB, reduces headroom to GBP5.8m for Recruitment Ireland and
increases the impairment to GBP19.7m for PeoplePlus.
2. The achievability of the forecasted future cash flows. There
is an inherent uncertainty regarding the achievability of
forecasts, as there are macro-economic factors outside of the
Group's control. A sustained underperformance of 10% increases the
impairment to GBP23.7m for Recruitment GB, reduces headroom to
GBP5.6m for Recruitment Ireland and increases the impairment to
GBP20.4m for PeoplePlus. A sustained underperformance of 40% would
be required before any impairment was necessary to the goodwill
allocated to Recruitment Ireland.
6 Trade and other receivables
30 June
30 June 2019 31 December
2020 Unaudited 2019
Unaudited Restated Audited
GBP'm GBP'm GBP'm
------------------------------------- ----------- ----------- ------------
Trade and other receivables 113.2 136.2 118.1
Accrued income 9.5 11.4 14.3
Corporation tax recoverable 6.0 4.1 5.3
------------------------------------- ----------- ----------- ------------
128.7 151.7 137.7
Amounts falling due after more than
one year
Other receivable 0.6 - -
------------------------------------- ----------- ----------- ------------
129.3 151.7 137.7
------------------------------------- ----------- ----------- ------------
7 Cash and cash equivalents
30 June 30 June 31 December
2020 2019 2019
Unaudited Unaudited Audited
GBP'm GBP'm GBP'm
------------------------------------ ----------- ----------- ------------
Cash and cash equivalents 32.3 5.0 25.0
Bank overdraft - - (6.4)
------------------------------------ ----------- ----------- ------------
Cash and cash equivalents per cash
flow statement 32.3 5.0 18.6
------------------------------------ ----------- ----------- ------------
Cash and cash equivalents consist of cash on hand and balances
with banks only. At 30 June 2020, GBP32.3m (30 June 2019: GBP5.0m,
31 December 2019: GBP18.6m) of cash on hand and balances with banks
were held by subsidiary undertakings but these balances are
available for use by the Group.
Restricted cash relates to amounts held in escrow to satisfy the
NMW remediation and financial penalties relating to historic HMRC
National Minimum Wage breaches.
Long term credit ratings for the four banks used by the Group
are currently as follows:
Fitch Standard Moody's
& Poors
-------------------------- ------ --------- --------
Lloyds Banking Group plc A+ BBB+ A3
-------------------------- ------ --------- --------
Bank of Ireland Group plc BBB BBB- Baa2
-------------------------- ------ --------- --------
HSBC Holdings plc A+ A- A2
-------------------------- ------ --------- --------
The group's banking facility headroom versus available bank
facilities is as follows:
30 June 30 June 31 December
2020 2019 2019
Unaudited Unaudited Audited
GBP'm GBP'm GBP'm
---------------------------------------- ----------- ----------- ------------
Cash and cash equivalents 32.3 5.0 25.0
Less: held outside of Group overdraft
facility - (1.2) (0.6)
Overdraft facility - 25.0 18.6
Committed revolving credit facility
unutilised - 0.1 0.1
Available receivables finance facility
balance 6.1 - -
---------------------------------------- ----------- ----------- ------------
Banking Facility Headroom 38.4 28.9 43.1
---------------------------------------- ----------- ----------- ------------
8 Trade and other payables
30 June
30 June 2019 31 December
2020 Unaudited 2019
Unaudited Restated Audited
GBP'm GBP'm GBP'm
------------------------------------ ------------ ----------- ------------
Trade and other payables 8.6 15.8 18.2
Accruals and deferred income 64.4 63.3 60.7
Other taxation and social security 77.7 43.0 47.5
150.7 122.1 126.4
------------------------------------ ------------ ----------- ------------
9 Borrowings
30 June
30 June 2019 31 December
2020 Unaudited 2019
Unaudited Restated Audited
GBP'm GBP'm GBP'm
--------------------------------------- ----------- ----------- ------------
Current liabilities:
Overdraft - - 6.4
Receivables finance facility 38.5 - -
Lease liabilities 2.3 2.4 2.6
40.8 2.4 9.0
--------------------------------------- ----------- ----------- ------------
Non-current liabilities:
Revolving credit facility 30.0 94.9 78.1
Lease liabilities 4.6 6.5 5.8
--------------------------------------- ----------- ----------- ------------
34.6 101.4 83.9
--------------------------------------- ----------- ----------- ------------
Total borrowings 75.4 103.8 92.9
--------------------------------------- ----------- ----------- ------------
Less: Cash and cash equivalents
(note 7) (32.3) (5.0) (25.0)
--------------------------------------- ----------- ----------- ------------
Net debt as disclosed in consolidated
statement of cash flows (note 11) 43.1 98.8 67.9
--------------------------------------- ----------- ----------- ------------
During the period, the Company agreed amendments to its existing
Credit Facilities which included deferrals of covenant testing and
the reporting of such testing.
Following discussions with the lenders of the RCF, the Company
and the lenders agreed on 26 June 2020 to a revised financing
structure. The key elements of the new facilities are, a reduced
RCF of GBP30.0m (previously GBP78.2m) and a Receivables Finance
Facility ("RFF") (invoice discounting) of a maximum of GBP73.2m,
and the removal of the overdraft facility of GBP25.0m.
The key terms of the new facilities are below, with other terms
of the RCF remaining in place:
i) Expiry date July 2022;
ii) Repayment and cancellation of RCF commitments by GBP10.0m on 31 July 2020;
iii) The RFF can initially be draw down against the receivables
of the Recruitment GB division and Northern Ireland part of the
Recruitment Ireland division;
iv) Interest on the RFF accruing at 3.50% plus Bank of England base rate; and
v) Minimum EBITDA and minimum liquidity covenants until a return
to minimum leverage, interest and asset cover covenants in January
2022.
The Group also has available a separate GBP25.0m uncommitted,
non-recourse, Receivables Financing Facility against certain
customer receivables, and a number of separate Customer Financing
arrangements whereby specific customer invoices are settled in
advance of their normal settlement date. The balance funded under
this Receivables Financing Facility at 30 June 2020 was GBP11.3m
(2019: GBP20.6m) and the value of invoices funded under the
Customer Financing arrangements was GBP13.9m (2019: GBP22.5m).
Costs incurred in relation to these arrangements are charged to
profit and loss as finance charges when incurred.
10 Share capital
30 June 31 December
30 June 2019 Unaudited 2019
2020 Unaudited GBP'm Audited
GBP'm GBP'm
----------------------------------- ---------------- ---------------- -------------
Allotted and issued
68,930,486 (June 2019: 27,944,389
and December 2019: 68,930,486)
ordinary 10p shares 6.9 2.8 6.9
----------------------------------- ---------------- ---------------- -------------
Six months Six months Year ended
ended 30 ended 30 31 December
June 2020 June 2019 2019
'000 '000 '000
----------------------------------- ---------------- ---------------- -------------
Shares issued and fully paid at
the beginning of the period 68,930 27,944 27,944
Shares issued during the period - - 40,986
----------------------------------- ---------------- ---------------- -------------
Shares issued and fully paid at
end of period 68,930 27,944 68,930
----------------------------------- ---------------- ---------------- -------------
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 (30 June 2019:
1,140,400 shares, 31 December 2019: 1,140,400 shares) held by the
Employee Benefit Trust where the right to dividends has been
waived.
On 15 July 2019, a further 40,986,097 ordinary 10p shares were
issued by the Company 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.
11 Cash flows from operating activities
Six-month Six-month
period ended period ended Year ended
30 June 2020 30 June 2019 31 December
Unaudited Unaudited 2019
GBP'm Restated Audited
GBP'm GBP'm
------------------------------------------------ --------------- -------------- -------------
Loss before taxation (47.7) (12.3) (48.1)
Adjustments for:
Finance costs 2.1 2.2 8.2
Depreciation and amortisation - underlying 3.5 3.0 7.3
Depreciation and amortisation - non-underlying 4.8 6.1 10.9
Impairment of goodwill 35.3 - 22.3
------------------------------------------------ --------------- -------------- -------------
Operating (loss)/profit before changes
in working capital and share options (2.0) (1.0) 0.6
------------------------------------------------ --------------- -------------- -------------
Change in trade and other receivables 9.1 10.4 24.6
Change in trade, other payables and
provisions 12.1 (23.1) (23.8)
Impact of foreign exchange loss on 0.4 - -
operating activities
------------------------------------------------ --------------- -------------- -------------
Cash generated from/(utilised by) operations 19.6 (13.7) 1.4
------------------------------------------------ --------------- -------------- -------------
Employee cash settled share options
(non-cash charge/(credit)) 0.1 (0.2) -
Employee equity settled share options - - 0.2
------------------------------------------------ --------------- -------------- -------------
Net cash inflow/(outflow) from operating
activities 19.7 (13.9) 1.6
------------------------------------------------ --------------- -------------- -------------
Six-month Six-month
period ended period
30 June 2020 ended 30 Year ended
Unaudited June 2019 31 December
GBP'm Unaudited 2019
Restated Audited
GBP'm GBP'm
---------------------------------------- --------------- ----------- -------------
Net debt at beginning of the period (67.9) (63.8) (63.8)
Transition to IFRS 16 Leases - (10.1) (10.4)
Lease payments, additions, disposals
and interest 1.5 1.9 2.0
Loan repayments 48.1 10.0 1.9
New loans, including RFF/RCF drawdowns (38.5) (25.6) -
Change in cash and cash equivalents 13.7 (11.2) 2.4
---------------------------------------- --------------- ----------- -------------
Net debt at end of period (43.1) (98.8) (67.9)
---------------------------------------- --------------- ----------- -------------
Represented by:
Cash and cash equivalents (note 7) 32.3 5.0 25.0
Current borrowings (note 9) (38.5) - (6.4)
Lease liabilities (note 9) (6.9) (8.9) (8.4)
Non-current borrowings (note 9) (30.0) (94.9) (78.1)
---------------------------------------- --------------- ----------- -------------
Net debt at end of period (43.1) (98.8) (67.9)
---------------------------------------- --------------- ----------- -------------
12 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 period.
The directors holding office at 30 June 2020 have the following
beneficial interests in the Company's share capital:
Number
----------------- --------
Ian Lawson 131,577
Daniel Quint 25,857
Richard Thomson 25,320
----------------- --------
182,754
----------------- --------
The directors have no current interests in share options or
Joint Share Ownership Plans.
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END
IR FFFVVAEIFFII
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