TIDMSTAF
RNS Number : 6216C
Staffline Group PLC
22 June 2021
22 June 2021
STAFFLINE GROUP PLC
("Staffline", the "Company" or the "Group")
AUDITED RESULTS FOR THE YEARED 31 DECEMBER 2020
Staffline Group plc, the recruitment and training group,
announces its audited Preliminary results for the year ended 31
December 2020.
Refinancing and Current Trading
-- On 10 June 2021, the Group completed a placing, subscription
and open offer, raising gross proceeds of GBP48.4 million.
Additionally, the Group's debt facilities were refinanced. The
combined refinancing has transformed Staffline's balance sheet
-- As previously announced, Q1 2021 trading was ahead of
management expectations providing increased confidence in the full
year
-- The employment market experienced a structural change in
2020, with increasing levels of unemployment and demand shifting in
favour of essential retail, online and e-commerce sectors,
presenting a number of growth opportunities for Staffline
-- Three-year contract extension agreed with Tesco in 2020 and a
number of contracts recently secured by PeoplePlus with prime
suppliers to deliver the Restart programme
-- The Group has been right-sized and is now re-focused on its
core sectors, which the Board believes Staffline can leverage to
continue sustainable growth
2020 Financial Highlights(1)
-- Revenue of GBP927.6m (2019: restated GBP1,063.0m)
-- Underlying(2) operating profit increased ( 66 %) to GBP4.8m (2019: restated GBP2.9m)
-- Reported operating loss of GBP(44.3)m (2019: restated GBP(36.2)m)
-- Underlying EBITDA (pre-IFRS 16)(3) of GBP9.3m (2019: restated GBP7.0m)
-- Reported loss before tax of GBP(51.6)m (2019: restated GBP(44.4)m)
-- Net borrowings(4) reduced by GBP50.7m to GBP8.8m as at 31
December 2020 (2019: GBP59.5m) on a pre-IFRS 16 basis
-- Net borrowings were GBP14.3m as at 31 December 2020 (2019: GBP67.9m) on an IFRS 16 basis
-- The Group benefitted from the HMRC VAT measures that were
introduced in March 2020, enabling deferral of its payments for the
period March to June 2020, providing a short-term liquidity
improvement
Operational Highlights
-- The health, safety and wellbeing of our employees, customers
and candidates has been our number one priority during the
pandemic
-- The Group responded well to the unprecedented surge in demand
for temporary staff in the essential food and other online
sectors
-- Sustained demand throughout 2020 in the logistics and driving
segments as a result of the transition to online retail
-- Conversely, demand from other sectors such as high street
retail, automotive and manufacturing was diminished throughout the
year
-- Despite the closure of skills centres in line with the
Government's Covid rules, PeoplePlus was able to operate the
majority of its services by delivering a mix of services including
online and digital learning, but most funding support has been on a
cost only basis
-- The Group experienced a strong Christmas peak with high
demand from the Group's food retail customers
-- Year-end Group headcount decreased by 18.2% to 2,202 (2019:
2,692) as a result of transformation and restructuring actions
implemented during the year to right-size the Group for the
future
-- Disposed of the loss-making Apprenticeships business in PeoplePlus
Governance
-- Comprehensive restructuring programme implemented across 2020
improving reporting and governance across the Group, as well as
strengthening the balance sheet, with all three divisions returning
to full underlying operating profit in H2
-- Significantly strengthened the Board, with the appointments
of Ian Lawson, Chairman; Albert Ellis, Chief Executive Officer;
Daniel Quint, Chief Financial Officer, and Ian Starkey and
Catherine Lynch, Non-Executive Directors
-- Designed and implemented leaner organisational structures,
streamlined divisional reporting and focused the Group on its core
activities.
Albert Ellis, Chief Executive Officer, commented:
"The Group has successfully come through one of the most
challenging periods in its existence. Faced with a global pandemic,
our employee well-being and safety was our number one priority, and
the Group would not have been able to service such high levels of
demand without the support of its permanent and temporary workforce
across the UK and Ireland."
"Group net fee income was down 12.7% for the full year but the
impact of the transformation and cost reduction actions resulted in
a significant improvement in underlying operating profit in the
second half compared to the first, enabling the Group to deliver
full-year profits ahead of expectations."
"Trading in the first quarter of 2021 was encouraging with
operating profit ahead of expectations. Whilst market conditions
remain volatile in those sectors which are just opening up
following the lockdown, the successful vaccination programme is
providing a springboard for a strong recovery in the second half of
2021. This, coupled with the Group's successful equity and debt
refinancing in June 2021, that was supported by both new and
existing investors, underpins our optimism for the second half of
the current financial year and we remain on track to meet current
market expectations for the full year."
(1) The results shown above relate to continuing operations. The
2019 results are restated to exclude the results of the
Apprenticeships business sold in December 2020 and the Poland
subsidiaries, which are held for sale.
(2) Underlying operating profit before goodwill impairment,
amortisation of intangible assets arising on business combinations,
reorganisation costs and other non-underlying costs.
(3) Earnings before interest, taxation, depreciation and
amortisation on a pre-IFRS 16 basis
(4) Net debt excludes transaction costs of GBP0.3m (2019:
nil).
Staffline Group plc via Vigo Consulting
www.stafflinegroupplc.co.uk
Albert Ellis, Chief Executive Officer
Daniel Quint, Chief Financial Officer
Liberum Nominated Adviser and Broker
www.liberum.com
Richard Lindley / William Hall 020 3100 2222
Vigo Consulting Financial PR 020 7390 0230
www.vigoconsulting.com staffline@vigoconsulting.com
Jeremy Garcia / Antonia Pollock
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.
Market Abuse Regulation
The person who arranged for the release of this announcement on
behalf of Staffline Group plc was Ian Lawson, Non-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 a leading provider of flexible blue-collar workers,
supplying c.37,000 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 twenty industries, ten branch
locations, fifteen onsite customer locations, supplying c.5,000
staff per day on average, 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 adult education, prison education and
skills-based employability programmes across the country.
Chairman's Statement
Introduction
Our focus for 2020 was to restructure the business and
ultimately restore resilience and stability to the Group. The many
initiatives implemented during the year included strengthening the
balance sheet through a refinancing in June 2020, and a focus on
cash, alongside improving the Group's operational, financial and
governance processes, in order to create a sustainable business for
the future.
In the year ended 31 December 2020, the Group generated revenues
of GBP927.6m and an underlying profit before tax of GBP0.7m.
Strengthening our balance sheet and improving cash generation
were high priorities during the year. At the year-end, the Group
had pre-IFRS 16 net debt of GBP8.8m, with average pre-IFRS 16 net
debt throughout the year of GBP38.1m. The Group's net debt position
benefited by GBP46.5m as a result of the Government's VAT deferral
scheme.
The global Covid-19 pandemic, which dominated much of 2020,
impacted our overall performance to various degrees during the
year. This resulted in some areas of the business benefitting
markedly, such as temporary recruitment for the food sector, which
experienced a significant uptick in demand in Q2 2020. I was
extremely proud of the reaction and contribution of both our people
and the business to the nationwide #FeedTheNation campaign. This
initiative allowed the Group to utilise its significant food retail
experience ensuring our customers were sufficiently staffed and
stocked during the first national lockdown. In addition, our
driving business benefitted from the e-commerce surge, as consumers
transitioned to online shopping during the closure of non-essential
retail.
By contrast, other sectors within the recruitment businesses,
such as manufacturing, high street retail and automotive, were
adversely affected during the year with the temporary nationwide
shutdown of some of these industries. In addition, PeoplePlus
experienced a loss of classroom delivery in the year, however,
well-developed business continuity and resilience plans, together
with digital operating models, meant that the business could
continue to operate the majority of its services.
Where appropriate, we successfully transitioned to working
remotely in March 2020 and did so whilst achieving minimal business
disruption. The Group also utilised the Government's furlough
scheme with certain of its permanent and temporary employees, and
has benefitted from the deferral of VAT, as noted above.
The employment market underwent some structural changes in 2020
with unemployment rising significantly. This presents potential
opportunities for Staffline, both in recruitment, as enterprises
look to appoint temporary workers as opposed to permanent staff,
and for PeoplePlus, as skills and training becomes higher priority
in a bid to get more individuals back into employment.
Staffline entered 2021 with a business that has much stronger
foundations from which to deliver a return to growth. This is
already evident in our performance in Q1 2021, which was ahead of
management expectations, as we benefit from the structural changes
in our business that were implemented last year.
Board composition
The Group's Board of Directors was transformed during 2020 and
our corporate governance processes strengthened significantly. I
firmly believe we now have a strong team in place, both at board
and senior management level, to lead our business through the next
stage of its development.
I was delighted Albert Ellis took up the role of Group Chief
Executive in October 2020 having joined Staffline in March 2020 as
a Non-Executive Director. Albert has considerable experience within
the recruitment sector, and we are already benefitting from his
leadership. In addition, Daniel Quint, who joined Staffline as
interim CFO in December 2019, became permanent from 1 February
2021. Daniel has been involved in a number of important workstreams
since joining the Group and I am very pleased he has taken up the
role on a permanent basis.
Furthermore, we appointed two additional non-executive directors
who joined the Board on 1 January 2021. Ian Starkey, who has
significant audit and financial management experience is now Chair
of our Audit Committee, and Catherine Lynch, who is a highly
experienced HR director, is now Chair of our Remuneration
Committee.
Annual General Meeting
Notice of the 2021 Annual General Meeting of Staffline Group PLC
("AGM") will be published at the same time as the 2020 Annual
report. The AGM will be held at the offices of Liberum Capital
Limited at Ropemaker Place, Level 12, 25 Ropemaker Street, London,
EC2Y 9LY on 28 July 2021 at 9:00 a.m. However, in light of the
Covid--19 pandemic and HM Government's measures to restrict travel
and public gatherings in force, shareholders (other than the two
necessary or to be present in person or by proxy to form a quorum)
are not allowed to attend the meeting in person. The Q&A that
would have taken place at the AGM will instead be made available on
the investors page of the Staffline Group PLC's website.
Summary and Outlook
The health, safety and wellbeing of all of our employees,
suppliers and customers remained our top priority throughout 2020
and into 2021. Our people are central to our success, and on behalf
of the Board I would like to thank every one of our employees for
their exceptional dedication and contribution, during what has been
a particularly challenging time for every individual.
Despite the operational and broader macroeconomic challenges
across 2020, Staffline delivered a robust performance in the year.
Trading across the first three months of 2021 was strong and
underpins our confidence in meeting expectations for the full year.
Having now strengthened our financial position through the recent
fundraising and debt refinancing, we truly believe we have a
platform from which to deliver meaningful growth as we are already
seeing a stronger pipeline developing across all of our
divisions.
The passion and commitment throughout Staffline is very evident.
We have a collective understanding of the significant opportunity
that exists for our business, and myself and the Board believe we
can capitalise on these strengths to deliver value for our
stakeholders.
Ian Lawson
Chairman
Chief Executive Officer's Review
Introduction
I joined the Board in March 2020 as Non-Executive Director, at a
time when the Group was facing significant internal and external
challenges. Having seen the Staffline Group's strengths and
potential opportunities, I was pleased to accept the position of
Chief Executive Officer in October 2020.
Clearly, Staffline's 2020 performance was impacted by the global
Covid-19 pandemic, driven by the associated government
restrictions, and the social and business trends that subsequently
emerged. Our first priority throughout, has been the safety and
wellbeing of our workforce. Those able to, were seamlessly
transitioned to a home working environment, and those who remained
active across our customers' premises were provided with support,
as Covid-secure procedures were implemented. Staffline's response
to the pandemic across the Group has been outstanding and this has
only been made possible by the tremendous collective effort of all
our people, for which I am extremely grateful. My thoughts also go
out to those who have suffered through Covid-19, either directly or
by the loss of friends or family.
In terms of trading, H1 2020 was significantly impacted by the
pandemic with a sharp decline in demand across our three divisions
- Recruitment GB, Recruitment Ireland and PeoplePlus. However,
certain initiatives implemented in the first half to improve the
Group's operational, financial, governance and board profile,
resulted in an improvement in revenues, underlying operating
profit, working capital and net debt in the second half of
2020.
Overall, the Group delivered a creditable performance in 2020,
generating revenues of GBP927.6m and underlying operating profit(1)
of GBP4.8m, which, as announced in January 2021, was ahead of
management's expectations. In addition, as at 31 December 2020, the
Group had pre-IFRS 16 net debt(2) of GBP8.8m (2019: GBP59.5m), with
average pre-IFRS 16 net debt throughout the year of c. GBP38.1m
(2019: c. GBP85.2m), which was a significant improvement against
expectations. This was driven by the GBP46.5m benefit from the
Government's VAT deferral scheme and management actions to reduce
outstanding debtor days, generating c. GBP10.0m of cash.
In temporary recruitment, as previously highlighted, the Group
experienced an increase in levels of demand in March 2020 during
the first national lockdown across the food, driving, logistics and
e-commerce sectors, with this surge in demand normalising later in
the year. Certain other sectors such as manufacturing, high street
retail and the automotive industries were more challenging with
demand across the travel, leisure and aerospace industries
continuing to be supressed. Retail and hospitality were volatile
throughout the year, with easing of restrictions in the summer
benefitting these industries, followed by regional lockdowns in the
second half of the year causing further disruption. In addition,
the Group's permanent recruitment business declined sharply in H1
2020 but saw some recovery in the latter part of the year.
Despite the national lockdown in November and restrictions in
December, the Group still experienced a strong Christmas trading
peak, with significant demand from the Group's food retail
customers. Furthermore, e-commerce and logistics experienced a very
strong trading period as a result of the accelerated nationwide
behavioural shift to online retail.
The PeoplePlus division was also adversely impacted by the
pandemic, with training programmes disrupted or delayed and the
majority of services transitioned to predominantly digital delivery
with funding support largely on a cost only basis. As part of a
broader restructuring of the Group, PeoplePlus successfully
completed the disposal of its Apprenticeships business in December
2020, enabling the division to re-focus on its core employability
and adult skills capabilities. I am pleased to report that
PeoplePlus continued to recover during the year and reported an
underlying operating profit in H2 2020 compared to a loss in the
first half.
As the pandemic spread, we took decisions to implement new and
safer ways of working. This ensured that we were able to continue
to deliver our services, navigating the new macroeconomic landscape
whilst adjusting the working environment - in many cases in
consultation with our customers - to ensure our employees, both
permanent and temporary, remained safe at work.
We have entered 2021 in a much stronger position than a year
earlier as a result of the significant changes we have implemented
across our business. Despite the ongoing Covid-19 pandemic, and as
announced in our trading update in April 2021, trading in the first
quarter of 2021 was relatively strong, and coupled with our recent
refinancing, we enter the second half of 2021 with a sense of
cautious optimism.
Restructuring
As highlighted in the Chairman's statement, the Group
implemented a comprehensive restructuring programme during 2020. A
key priority of this was to improve the quality of our reporting
and governance across the Group. This, alongside a strengthening of
our Board, is coming to fruition, as we seek to future-proof
Staffline for sustainable long-term growth. Alongside these
changes, the Group refinanced its bank facilities in June 2020,
ensuring the business had sufficient working capital to support our
day-to-day activities. The combined debt and equity refinancing in
June 2021 completed the exercise to strengthen the balance
sheet.
Elsewhere, we have changed our organisational structure,
streamlining divisional reporting and ensuring that we are focused
on our core activities. In addition, we have sought to right-size
our business, which has included rationalising both our people
costs and property estate, the disposal of a non-core business,
alongside seeking supply chain synergies by aligning our new group
structure with our market leading IT capabilities and solutions.
These changes delivered c.GBP15.0m of annualised cost savings.
One of the most exciting strategic transformations has been our
shift in focus to core complementary services packaged together in
a portfolio, with professional recruitment and permanent placements
a key driver of margin improvement and cash generation.
As a management team, we believe that Staffline is now in a much
more resilient position and our renewed focus on our core
capabilities will, in time, improve customer retention and
ultimately lead to greater levels of cross-selling opportunities
across the Group.
Responsible business
Staffline is a purpose-led organisation with a long successful
track record across both recruitment and training activities. With
sustainable employment one of the most desired objectives across
society, Staffline provides the solutions to not only connect
skilled people to companies, but also to help individuals develop
their skills and careers. Our purpose is to bring together skilled
people to build better organisations for the future.
We impact individuals' lives in a number of ways, including
providing temporary employment to c. 40,000 blue collar workers a
day, enabling them to work flexibly, and easily change their career
focus. We had particular success through our #FeedTheNation
campaign in March 2020, providing employment in the food production
and logistics sectors for over 25,000 displaced workers. We work to
help people transform their lives, get jobs and keep jobs, and
develop their careers.
A number of the services that Staffline provides are
specifically to assist those in society's most difficult
situations. We provide c. 20,000 prisoner learners with not only
the skills to find work, but also life skills such as parenting
advice. In addition, our WayOutTV solution is watched by a further
50,000 prisoner learners across the UK. We are also one of the
largest providers of independent living in the UK, helping
vulnerable individuals' stay in their homes for longer.
We have also created a social recruitment model which connects
employers with individuals who might otherwise struggle to find
work, with corporates such as Amazon and Tesco utilising this
model. In addition, we work closely with individuals who want to
exit long-term employment and set up their own business giving them
the advice and skills necessary to do so.
Our goal is to truly embed Environmental, Social and Governance
("ESG") targets across our business and we have been building out
our strategy in this regard. By focusing on these three key areas
we believe we can have the most impact across our key stakeholders
and are currently introducing new targets to increase
accountability across the business. We are committed to helping to
build a sustainable future for society, and the unprecedented
events of this year have strengthened our resolve. With the
anticipated rise in unemployment anticipated in the coming months
as a result of the pandemic, we believe Staffline's purpose will
become more important than ever before.
Operational review
Recruitment GB
The Recruitment GB division was set up well to handle the
challenges presented by the Covid-19 pandemic. Over 60% of the
division supports the food and food logistics sector, and growth in
demand in this sector increased by 10% versus 2019. As a result of
the accelerated investment in the division's digital technology and
intelligent automation, such as the Recruiter Chatbot, "Flin",
integrated with the Group's candidate database management system,
Staffline was well-placed to ensure that it could deliver
fulfilment levels against challenging timescales. We were also able
to leverage the benefits of the wider Group as we jointly developed
the #FeedTheNation programme.
As lockdowns eased during the year, Recruitment GB's Recruitment
Procurement Outsourcing ("RPO") division, Datum, supported house
builders and construction clients. Additionally, Recruitment GB's
professional permanent recruitment businesses, Omega, in England
and Wales and Brightwork, in Scotland, helped to source engineering
and technical specialists. The business successfully supported its
essential food, retail and logistics customers as the country
shifted ever more to online delivery models.
Following a strategic review, the business gave notice to exit
low margin contracts, the most significant of which was 2 Sisters
Food Group. New business and organic growth was secured in exciting
sectors such as digital and online food delivery businesses, with
Ocado and Hello Fresh being just two examples. A number of
Recruitment GB's core customers also agreed extended contract terms
in 2021 as a result of the successful support during a very
challenging 2020.
Recruitment Ireland
After a positive Q1 2020, during which Recruitment Ireland
delivered underlying operating profit of GBP0.7m on revenue of
GBP33m, management acted quickly to counteract the effects of the
Covid-19 outbreak on its core markets. Decisive action was taken in
respect of overheads, enabling this division to remain profitable
for the remaining nine months of the year, despite a fall in demand
and the severe and extended lockdown implemented in the Republic of
Ireland. Pleasingly, Recruitment Ireland maintained margins of 8.7%
for the year, despite significant industry-wide challenges in
certain sectors such as non-food manufacturing and a fall in
permanent recruitment throughout the summer.
The division maintained its position as market leader in
Northern Ireland, with over 21% market share, and is now the second
largest recruitment agency on the island of Ireland. Recruitment
Ireland had new business success during 2020, including adding
customers Finnebrogue, the artisan food producer, and Liberty IT,
the technology business. In addition, the business supplied Tesco
with contingent retail staff, secured additional business with the
Northern Ireland Civil Service and was awarded a place on the
Nightingale Framework to support the Covid-19 response.
PeoplePlus
PeoplePlus adapted quickly to the impact of the Covid-19
pandemic, deploying its business continuity plans successfully with
all services maintained. Customers and learners were supported by
market leading digital services that had been developed prior to
the pandemic and were further enhanced during this period. In a
monitoring visit of PeoplePlus' educational services in England in
late 2020, Ofsted noted the support this approach had provided to
learners. The impact of lost classroom capacity in both adult
education and prison services was, however, significant, partly
recovering in the summer of 2020, before reducing again as further
local and national lockdowns occurred.
The fixed cost nature of the business model resulted in a loss
in the first half of the year. With much reduced capacity and
declining revenues, the leadership team implemented a
transformation of the business which included focusing on core
services and reducing the overhead base significantly, whilst
changing the delivery model to a mix of online digital as well as
traditional in-person learning.
This transformation coincided with the emergence of rising
unemployment as a defining factor in the economy and led to a
strategic refocus of the PeoplePlus division. PeoplePlus disposed
of the majority of its Apprenticeship business in December 2020 to
support this strategic pivot. The Chancellor's "Plan for Jobs"
created a significant pipeline of new public sector funding in
these core markets, including investments in traineeships, a
long-term unemployed programme, "Restart", and further adult
education budget.
The Group announced on 2 June 2021 that PeoplePlus has secured
three significant contracts with two of the UK's leading
outsourcing providers within the Restart programme.
Looking ahead, PeoplePlus, with its leading market positions and
reputation for high performance, is well positioned across a number
of opportunities. Therefore, bid disciplines will remain an
important part of PeoplePlus' sustainable growth strategy.
The recruitment landscape and our offering
Given Staffline's significant market position in blue collar
recruitment and the strong reputation we have with our blue-chip
client base for delivery and fulfilment, I firmly believe we are
ideally placed to benefit from the full recovery of the UK and
Ireland economies.
The UK is still considered to be the world's third largest
recruitment market, accounting for c. 10% of the global $498
billion in global staffing revenues, with the UK contributing c.
$51.9 billion and the Republic of Ireland, $2.5 billion(3)
pre-pandemic. Despite the ongoing uncertainty and economic impact
of Covid-19, the UK recruitment market has proven overall to be
highly resilient in the last twelve months. The recruitment market
has also historically proven to return to early growth quite
rapidly post a crisis or recession versus other sectors, and our
focus has been to ensure that we are optimally placed to capitalise
on this potential increase in the second half of 2021 following the
vaccine rollout in the UK.
Prior to the pandemic, we operated within a tight labour market
across wide and diverse sectors. These historic dynamics have now
shifted into essential sectors, such as food and distribution,
online retail and e-commerce. As a result, we have seen a
significant increase in online activity and accelerated demand for
logistics, warehouse and driving. This shift in demand, ultimately
driven by the pandemic, appears to have permanently changed
consumer behaviour, illustrated by the expansion of the networks
and footprints of Hello Fresh and Ocado, which are just two of the
Group's customers. The pandemic has also negatively impacted
travel, aerospace, hospitality (particularly in city centres and
"on-the-go food"), high street retail and automotive and
manufacturing.
Whilst the global uncertainty relating to the pandemic
continues, we are pleased to see the global roll-out of vaccination
programmes worldwide. However, whilst we have adapted at pace to
new levels of demand, so long as the impacts on the macroeconomic
environment persist, we expect to see some continued volatility in
our markets. There has also been a seismic shift in working
practices as a result of Covid-19 and we believe many businesses
will be adopting these for the long term.
Given our market position, we are confident that we are
well-placed to capitalise on the new world of work, and so are
investing in key areas that we believe will drive future growth. We
remain committed to investing in digital technology to improve our
customer and candidate experience, providing assurance and
transparency, and with the use of our market leading data, also
providing insights and identifying labour trends, which will
further embed our valued customer relationships.
Strategy
As already noted, I took up the role of CEO in October 2020, and
alongside the executive management team, we have focused on
creating a sustainable business, with our strategy underpinned by
the following key priorities, as outlined in our capital markets
presentation in November 2020, which are:
1) Operational excellence - focusing on simplicity, leadership,
strong processes, organisational design and implementing
performance measurement through KPIs
2) Governance - developing a dynamic and skilled Board, aligning
Group polices, strengthening the finance and internal audit
function and ensuring a robust governance framework
3) Cost base - right-sizing the business, including identifying
synergies in shared services, property utilisation and supply chain
and scale economies, to underpin our competitive position in the
market
4) Digital and technology - bringing together the IT estate
under one leadership team, the appointment of a Group CIO and
driving forward intelligent automation and a strong digital
platform, whilst strengthening the Group's business continuity
infrastructure
5) Clients and branding - aligning the Group's brands and brand
values and upgrading existing client relationships by investing in
relationships and building key strategic partnerships. Driving
organic sales as a key priority, whilst leveraging the significant
opportunities to increase cross-selling across the Group
6) Talent - ensuring market leading attraction, retention and
compensation policies are in place, introducing performance and
productivity measurements combined with competitive incentive and
reward schemes, both short and long term
Stakeholders
Due to our position and the breadth of our business coverage in
terms of sectors, we have a wide range of stakeholders from
governments, consumers, through to our employees, business
partners, shareholders, the community and environment. These
relationships are all critical to us as we deliver against our
Purpose, Vision and Values - to build and develop the most reliable
integrated workforce in the country and be the leading creator of
opportunities, jobs and new ideas in the employability, skills and
justice sectors. We work hard to engage with all our stakeholders
and to create a balance of long-term value for each through our
strategy. An overview of how the Board has fulfilled its duty, as
set out in Section 172 of the Companies Act 2006, to promote our
long-term success, while considering the interests of our
stakeholders and our impact on the community and environment, is
explained on pages 28 to 32 of the Group's Annual Report.
Outlook
Our initial view, which was taken in spring 2020, was that the
pandemic would create sustained and significant volatility in
staffing demand, creating new growth sectors whilst impacting
others. This has proven to be correct, and we anticipate some
uncertainty ahead in several of our markets. Despite this, the
Group delivered a robust performance in 2020 and has undergone some
fundamental changes which have positioned it for future growth as
we benefit from the resurgence in our core markets. Our new
strategy so far has proven successful, and we will continue to
drive the Group forward in the coming period towards our long-term
ambitions.
Results for the year so far have been strong and all three
divisions are expected to achieve market expectations for the full
year, with a key assumption being that economic growth returns in
the second half of the year following the easing of lockdown, and
the successful rollout of the vaccination programme. In addition,
our recent equity fundraise of GBP48.4 million of gross proceeds,
and debt refinancing, provides us with a renewed platform to
capitalise on the opportunities that exist for our businesses.
Over the coming year, we will continue to invest in our people,
data, technology, and our go-to market strategy, leveraging the
power of our platform to reduce the cost of customer and candidate
acquisition. Our current objective remains to continue winning
market share, working towards our ultimate goal of becoming the
number one talent provider across our chosen markets.
Once again, I would like to thank both our temporary and
permanent employees for their significant contribution, in what was
a challenging year for the Group.
Albert Ellis
Chief Executive Officer
21 June 2021
(1) Underlying operating profit before goodwill impairment,
amortisation of intangible assets arising on business combinations,
reorganisation costs and other non-underlying costs.
(2) Net debt excludes transaction costs of GBP0.3m (2019:
nil)
(3) Staffing Industry Analysts 2019 report
Financial Review
Introduction
During what was an extremely challenging year nationwide, the
Group encountered mixed market demands across its divisions.
Overall, total revenue for the year of GBP927.6m (2019: restated
GBP1,063.0m) was lower than the previous year by 12.7%.
The Group comprises three divisions, namely, Recruitment GB,
flexible blue-collar recruitment; Recruitment Ireland, generalist
recruitment; and PeoplePlus, adult skills and training
provision.
Underlying divisional performance and key performance indicators
- continuing operations
Recruit Total
Recruitment Recruitment Group Total ment GB Recruitment PeoplePlus Group Group
GB Ireland PeoplePlus Costs Group Restated Ireland Restated Costs Restated
2020 2020 2020 2020 2020 2019 2019 2019 2019 2019
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------- ----------- ----------- ---------- ------ ------- -------- ----------- ---------- ------ --------
Revenue 732.1 120.5 75.0 - 927.6 840.0 147.7 75.3 - 1,063.0
Year-on-year
revenue
(decline)/increase (12.8)% (18.4)% (0.4)% - (12.7)% (7.5)% 40.3% (30.0)% - (5.2)%
Gross profit 46.2 10.5 17.9 - 74.6 56.6 15.6 15.3 - 87.5
Gross profit as a %
of revenue 6.3% 8.7% 23.9% - 8.0% 6.7% 10.6% 20.3% - 8.2%
Underlying
operating
profit/(loss) 4.2 1.6 1.6 (2.6) 4.8 4.6 4.3 (3.5) (2.5) 2.9
Underlying
operating profit
as a % of revenue 0.6% 1.3% 2.1% - 0.5% 0.5% 2.9% (4.6)% - 0.3%
Underlying
operating profit
as a % of gross
profit 9.1% 15.2% 8.9% - 6.4% 8.1% 27.6% (22.9)% - 3.3%
Pre-IFRS 16 net
debt excluding
unamortised
transaction costs - - - - 8.8 - - - - 59.5
Post-IFRS 16 net
debt excluding
unamortised
transaction costs - - - - 1 4.3 - - - - 6 7.9
Hours worked by
temporary workers 58.4m 6.7m - - 65.1m 68.6m 9.4m - - 78.0m
------------------- ----------- ----------- ---------- ------ ------- -------- ----------- ---------- ------ --------
Comparative results have been restated to exclude the activities
that were discontinued in 2020
Revenues in our Recruitment GB division declined by GBP(107.9)m
or (12.8)%. Demand from customers varied significantly by sector
depending on the effect of the Covid-19 pandemic on their
businesses. In particular, demand from supermarket, logistics and
online retail customers remained strong. The initial lockdown in
the spring caused severe disruption to manufacturing and
non-essential retail businesses from which they have not yet fully
recovered. The division typically experiences a pre-Christmas peak
in demand during Q4 and did so in 2020, particularly from the
e-commerce and logistics sectors. Despite the effect of the various
forms of lockdown across the country, Q4 2020 hours worked were
16.0 million compared to 17.4 million in 2019, only an (8.0)%
reduction. Revenue generated from temporary recruitment accounted
for over 99% of total revenue. Gross profit generated from
temporary recruitment accounted for 97% of the total, with the
remaining 3% of gross profit generated from permanent
recruitment.
Revenues in our Recruitment Ireland division reduced by
GBP(27.2)m or (18.4)% mainly due to the effects of the pandemic and
the uncertainty related to Brexit. Revenue generated from temporary
recruitment accounted for 99% of total revenue compared to 1% from
permanent recruitment. Gross profit generated from temporary
recruitment accounted for 91% of the total, with the remaining 9%
of gross profit generated from permanent recruitment.
PeoplePlus revenues, excluding the Apprenticeships business sold
during 2020, decreased by GBP(0.3)m. Whilst classroom training was
severely curtailed, the division was quick to transition to online
solutions, largely maintaining overall revenues compared to
2019.
The sales mix between the operating divisions was broadly
unchanged over the year, with the recruitment businesses accounting
for 92% of 2020 revenue (2019: Restated 93%). The recruitment
businesses contributed 76% of the Group's gross profit (2019:
83%).
Overall gross profit decreased by (14.7)% to GBP74.6m (2019:
restated GBP87.5m) with overall gross profit margin slightly lower
at 8.0% (2019: 8.2%), which has been influenced by the sales mix,
particularly in Recruitment GB. PeoplePlus achieved a gross margin
of 23.9% in 2020, which compares to 20.3% in 2019 (restated for the
disposal of the Apprenticeships business), largely due to improved
productivity following the restructuring programme during the year.
The gross profit margin for Recruitment GB decreased to 6.3% (2019:
6.7%). This was principally due to the shift towards lower margin
sectors such as food production, due to the pandemic, and also some
increased costs for social distancing in the workplace. The
increase in the National Minimum Wage in April 2020, from GBP8.21
to GBP8.72 per hour for over 25s, does not impact absolute gross
profit but does negatively impact the gross margin percentage
achieved and this dynamic will continue with increases in April
each year. The gross profit margin for Recruitment Ireland reduced
to 8.7% (2019: 10.6%) driven by the reduction in permanent
recruitment business, which consistently achieves a gross margin of
100%.
For continuing operations (excluding the exited Apprenticeships
business), reported loss before taxation was GBP(51.6)m in 2020
(2019: restated GBP(44.4)m). Notwithstanding the significant
challenges faced in the year, underlying operating profit was
GBP4.8m (2019: restated GBP2.9m). Total non-underlying charges on
continuing activities before tax were GBP52.3m (2019: GBP42.3m), of
which GBP45.3m were non-cash, and are described below. Finance
charges were GBP7.3m (2019: GBP8.2m). This included GBP3.2m (2019:
GBP3.2m) of non-underlying finance charges relating to the June
2020 refinancing of the debt facilities, also described below.
The underlying profit before tax on continuing operations for
2020 was GBP0.7m (2019: restated GBP(2.1)m). Underlying profit
before taxation as a percentage of revenue was 0.1% (2019: restated
(0.2)%). The reported underlying profit after tax on continuing
operations for 2020 was GBP3.4m (2019 restated: GBP(1.1)m
loss).
Non-underlying administrative charges
In the reporting of its financial performance, the Group uses
certain measures that are not defined under IFRS, the Generally
Accepted Accounting Principles ("GAAP") under which the Group
reports. The Directors believe that these non-GAAP measures assist
with the understanding of the performance of the business. These
non-GAAP measures are not a substitute for, or superior to, any
IFRS measures of performance but they have been included as a means
of comparing performance year-on-year.
Non-underlying items of income or expenditure are items that are
non-recurring or of a particular size or nature such that they
require separate identification. Non-underlying items are included
in total reported results but are excluded from underlying results.
These items can vary significantly from year to year and therefore
create volatility in reported earnings which does not reflect the
Group's underlying performance. It should be noted that whilst the
amortisation of intangible assets arising on business combinations
has been added back, the revenue from those acquisitions has not
been eliminated.
Non-underlying charges on continuing activities before tax
amounted to GBP52.3m in 2020 (2019: GBP42.3m) as shown below. They
include exceptional reorganisation, rationalisation and
restructuring costs in 2020 of GBP4.0m relating principally to a
rationalisation programme across all the divisions in order to
reduce the number of properties occupied and reducing
administration headcount, transaction costs of GBP0.5m related to
the Group exploring strategic options, refinancing costs totalling
GBP3.2m, a GBP9.2m charge for the amortisation of intangible assets
arising on business combinations, a GBP35.3m goodwill impairment
charge, and a share-based payment charge of GBP0.1m.
The charge in the year for amortisation of intangible assets
arising on business combinations relates principally to the
following acquisitions: Vital Recruitment (charge GBP3.2m: asset
will be fully amortised by February 2023), Milestone (GBP1.0m
charge: asset will be fully amortised by September 2020),
Passionate about People (charge GBP2.3m: asset will be fully
amortised by October 2023), Grafton (GBP1.3m: asset will be fully
amortised by June 2023), Brightwork (charge GBP0.7m: asset will be
fully amortised by April 2022).
2020 2019
Non-underlying charges - Continuing operations GBPm GBPm
-------------------------------------------------------- ----- ------
Reorganisation, rationalisation and restructuring
costs 4.0 3.7
Legal investigation professional fees - 1.0
NMW remediation and financial penalties - (0.7)
Revised audit scope and increased audit fees - 0.8
Transaction costs - business acquisitions and strategic
options 0.5 0.9
Finance costs - refinancing arrangement fees and
exit fees 3.2 3.2
Amortisation of intangible assets arising on business
combinations 9.2 10.9
Goodwill impairment 35.3 22.3
Share-based payment charges (equity and cash-settled) 0.1 0.2
-------------------------------------------------------- ----- ------
Total non-underlying charges before tax for continuing
operations 52.3 42.3
-------------------------------------------------------- ----- ------
Discontinued activities
On 1 December 2020, the Group sold its loss-making
Apprenticeships training business for a nominal sum. The sale
agreement required PeoplePlus to provide working capital support to
the purchaser in the form of reimbursement of relevant salary costs
incurred between December 2020 and March 2021, which will be repaid
over twelve months commencing May 2021.
The Apprenticeships business recorded an underlying operating
loss of GBP(2.2)m for the year (2019: GBP(3.6)m), before
reorganisation and exit costs of GBP(2.5)m (2019: GBPnil).
In addition, the Group is in active discussions to sell its
subsidiaries in Poland to the incumbent management team.
Consequently, the results of the Polish activities are deemed to be
discontinued and the business is held for sale. The loss for 2020
was GBP(0.1)m before non-underlying costs of GBP(0.2)m.
The results of these businesses
are as follows:
2020 2020 2020 2019 2019 2019
Apprentice-ships Poland Total Apprentice-ships Poland Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- ----------------- ------- ------ ----------------- ------- ------
Revenue 7.2 1.0 8.2 12.6 1.1 13.7
Cost of sales (8.3) (1.0) (9.3) (13.6) (1.1) (14.7)
-------------------------------- ----------------- ------- ------ ----------------- ------- ------
Gross profit (1.1) - (1.1) (1.0) - (1.0)
Administrative expenses (1.1) (0.1) (1.2) (2.6) (0.1) (2.7)
-------------------------------- ----------------- ------- ------ ----------------- ------- ------
Underlying operating loss (2.2) (0.1) (2.3) (3.6) (0.1) (3.7)
Non-underlying costs (2.5) (0.2) (2.7) - - -
-------------------------------- ----------------- ------- ------ ----------------- ------- ------
Operating loss (4.7) (0.3) (5.0) (3.6) (0.1) (3.7)
Tax credit 0.8 - 0.8 0.7 - 0.7
-------------------------------- ----------------- ------- ------ ----------------- ------- ------
Loss for the period (3.9) (0.3) (4.2) (2.9) (0.1) (3.0)
-------------------------------- ----------------- ------- ------ ----------------- ------- ------
Government support
The global Covid-19 pandemic created unprecedented disruption to
the business. Consequently, a large number of our temporary workers
and a much smaller number of administrative staff were placed on
furlough at times throughout the year. The total support received
in the year amounted to GBP31.4m.
In addition, the Group took advantage of the forbearance scheme
for the deferral of VAT due between March and June 2020. The total
deferral agreed with HMRC under the UK scheme amounted to GBP42.4m
after offset of a Corporation Tax refund due in relation to the
financial year 2018. Repayment of the balance is due to be paid in
instalments, which commenced in June 2021.
Taxation
The total tax credit for the year of GBP3.1m (2019: restated
GBP3.4m), which amounts to 6.0% (2019: restated 7.7%) of the loss
for the year, relates to the movement of deferred tax balances. The
Group has no current Corporation Tax liability in respect of either
the current or prior years and as a result is anticipating a refund
of amounts that were paid on account. An element of losses incurred
during 2018 will be set against taxed profits in previous years,
which will also result in a refund. Remaining tax losses of
GBP15.4m carried forward in all divisions have been recognised as a
deferred tax asset.
The amortisation charge relating to intangible assets arising on
business combinations is not deductible under UK corporation tax
and is therefore added back to taxable profits. A deferred tax
liability is recognised in respect of other intangible assets. This
liability is reduced each year in line with the amortisation
charge, giving rise to a deferred tax credit each year. No deferred
tax is recognised on JSOP charges.
Earnings per share
Statutory basic and diluted loss per share on continuing
activities were both (71.5)p (2019: both (89.6)p).
For the year the weighted average number of shares (basic) is
67,790,086 (2019: increased by 22,121,263).
Removing the non-underlying charges, and their respective
taxation impacts, results in underlying basic and diluted earnings
per share on continuing activities both being 5.0p (2019: restated,
both (2.4)p loss).
Improving internal controls
The Board has continued with the implementation of enhanced
control procedures and oversight and has appointed a Head of
Internal Audit during the year. In addition, the Board has been
further strengthened by the appointment of two Non-Executive
Directors after the year-end.
Statement of financial position, cash generation and
financing
The Group's total equity decreased by GBP(53.6)m (2019:
GBP(6.7)m) over the year. This is as a result of the total
comprehensive loss for the year of GBP(53.6)m, which included the
goodwill impairment of GBP(35.3)m that was recognised in H1 2020
and amortisation of intangibles arising from business combinations
of GBP(9.2)m.
The movement in net debt is shown in the table below. Movements
in working capital include a decrease in trade and other
receivables of GBP27.6m (comprising c.GBP17.6m due to the decline
in trading volumes and c.GBP10.0m due to improved collection
rates), and a decrease in trade and other payables and provisions
of GBP22.8m, primarily due to a reduction in VAT liabilities due to
lower trading volumes and payment timing.
Movement in net debt (excluding unamortised
transaction costs)
2020 2019 Restated
GBPm GBPm
------------------------------------------------ ------ -------------
Opening net debt (pre-IFRS 16) (59.5) (63.0)
Cash generated before change in working capital
and share options 3.4 0.6
Principal repayment of lease liabilities (3.4) (3.2)
Change in trade and other receivables 27.6 24.6
Deferred VAT (net of corporation tax offset) 42.4 -
Change in trade, other payables and provisions (7.8) (23.8)
Taxation and interest paid, and movement in
unamortised borrowing costs (9.0) (7.1)
Capital investment (net of disposals) (2.4) (5.1)
Cash flows relating to acquisitions (0.3) (7.2)
Net proceeds from equity issue - 38.0
Payments from/(into) restricted funds for
NMW 11.8 (12.7)
Settlement of NMW liabilities from restricted
funds (11.8) -
Other 0.2 (0.6)
Closing net debt (pre-IFRS 16) (8.8) (59.5)
IFRS 16 lease liabilities (5.5) (8.4)
------------------------------------------------ ------ -------------
Closing net debt (post-IFRS 16) (14.3) (67.9)
------------------------------------------------ ------ -------------
The table below reconciles underlying EBITDA (e arnings before
interest, taxation, depreciation and amortisation) , on continuing
operations to operating loss.
2019
2020 Restated
Reconciliation of operating loss to EBITDA GBPm GBPm
------------------------------------------- ------ ---------
Operating loss (44.3) (36.2)
Non-underlying costs 49.1 39.1
------------------------------------------- ------ ---------
Underlying operating profit 4.8 2.9
------------------------------------------- ------ ---------
Depreciation 7.4 7.3
------------------------------------------- ------ ---------
Underlying EBITDA 12.2 10.2
------------------------------------------- ------ ---------
Lease rental payments (2.9) (3.2)
------------------------------------------- ------ ---------
Underlying EBITDA (pre-IFRS 16) 9.3 7.0
------------------------------------------- ------ ---------
Note: Underlying operating profit before goodwill impairment,
amortisation of intangible assets arising on business combinations,
reorganisation costs and other non-underlying costs. EBITDA
represents Earnings Before Interest, Taxation, Depreciation and
Amortisation.
The Group's headroom relative to available committed banking
facilities as at 31 December 2020 was GBP79.4m (2019: GBP43.7m) as
set out below:
2020 2019
GBPm GBPm
-------------------------------------------------- ----- -----
Cash at bank 24.5 25.0
Receivables Financing Facility ("RFF") unutilised 54.9 -
Overdraft facility unutilised - 18.6
Committed revolving credit facility unutilised - 0.1
-------------------------------------------------- ----- -----
Banking facility headroom 79.4 43.7
-------------------------------------------------- ----- -----
Refinancing: Amendments to Credit Facilities June 2020
Following discussions with the providers of the revolving credit
facility, the Company and the lenders agreed on 26 June 2020 to a
revised financing structure. In summary:
Previous Revised At 31 December
arrangement arrangement 2020
Revolving credit facility GBP78.2m GBP30.0m GBP20.0m
("RCF")
------------- ------------- ---------------
Overdraft GBP25.0m - -
------------- ------------- ---------------
Receivables Finance Facility - GBP73.2m GBP68.2m
("RFF") (invoice discounting)
- maximum
------------- ------------- ---------------
Total Facility GBP103.2m GBP103.2m GBP88.2m
------------- ------------- ---------------
Expiry date July 2022 July 2022 July 2022
------------- ------------- ---------------
The previous RCF was reduced from GBP95.0m to GBP78.2m with
cancellations in July 2019 and November 2019.
The key terms of the revised 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.
An arrangement fee was paid to the lenders of GBP0.7m in
relation to the Receivables Finance Facility.
On 8 October 2020 the limit on the RFF was reduced to GBP68.2m
following the transfer of certain customer trade receivables to new
customer financing arrangements.
The Group is also funded through a number of separate,
non-recourse, customer financing arrangements whereby specific
customers' invoices are settled in advance of their normal
settlement date. The balance funded under these arrangements as at
31 December 2020 was GBP43.0m (2019: GBP35.1m). In addition, the
Group has an uncommitted, non-recourse, separate receivables
financing facility with a maximum value of GBP25m. The balance
funded under this facility at 31 December 2020 was GBP24.3m (2019:
GBP25.7m).
Equity fundraise and debt refinancing
At the time of the refinancing of the Group's facilities on 26
June 2020, the Group's liquidity forecast for the period ending 31
December 2021, which was prepared in support of that refinancing,
indicated that the Group would not have sufficient funds to repay
deferred VAT, believed at the time to be due for repayment in full
on or before 31 March 2021.
In September 2020, the UK Government announced that an
instalment payment scheme would be introduced, and details of the
final scheme were published on 23 February 2021. The revised
repayment profile had the effect of delaying the potential
liquidity shortfall from March 2021 to later in the year.
In order to address the liquidity shortfall, the Directors
engaged professional advisors in late 2020 to assess the Group's
options for refinancing its debt facilities and to engage with
potential lenders. On 20 May 2021, following a detailed appraisal
by the Directors, the Company and certain subsidiary undertakings,
entered into a new Receivables Financing Agreement ("RFA") to
replace the existing Group funding arrangements. The RFA contained
certain requirements to be met before completion, the most
significant of which was that the Company raise new equity capital
of at least GBP40.0m. This condition was satisfied and the RFA
became effective on 10 June 2021.
The key terms of the new facility, which is provided jointly by
RBS Invoice Finance Limited, ABN AMRO Asset Based Finance N.V., UK
Branch and Leumi ABL Limited, are set out below:
I. Maximum receivables financing facility of GBP90.0m over a
four-and-a-half-year term, with a one-year extension option;
II. An Accordion option of up to an additional GBP15.0m, subject to lender approval;
III. Security on all of the assets and undertakings of the
Company and certain subsidiary undertakings;
IV. Interest accruing at 2.75% over SONIA, with a margin ratchet
downward to 2.0%, dependent upon the Group's leverage reducing to
3.00x;
V. A non-utilisation fee of 0.35% of the margin;
VI. Maximum net debt (averaged over a rolling three months) to
EBITDA leverage covenant commencing at 5.95x followed by a gradual
reduction to 4.0x by October 2023; and
VII. Minimum interest cover covenant of 2.25x the last twelve months EBITDA to finance charges
An arrangement fee of GBP0.9m was paid to the lenders in respect
of the RFA.
The new facility enabled the cancellation of the existing
facilities, comprising the RCF of GBP20.0m and the RFF of GBP68.2m
and also the non-recourse Receivables Purchase Facility of
GBP25.0m. The Group will continue to have access to its existing
customer financing arrangements in respect of specific customers,
under which invoices are settled in advance of normal credit
terms.
The Group announced a proposed Placing, Subscription and Open
Offer (the "Fundraise") on 21 May 2021 following conditional
agreement of the debt refinancing the previous day. The Fundraise
comprised the following elements:
-- A total of 87,249,500 new ordinary shares of 10 pence each
placed at a price of 50 pence per share (the "Issue Price") to
certain existing shareholders, new institutional investors and
certain Directors and employees of the Group;
-- A total of 750,500 new ordinary shares of 10 pence each to
certain Directors and employees of the Group at the Issue Price,
and;
-- An open offer to existing shareholders of 10 shares for every
78 ordinary shares held, for a total of 8,837,242 new ordinary
shares of 10 pence each at the Issue Price.
The total gross proceeds of the Fundraise, which was approved by
the shareholders in a General Meeting on 9 June 2021, were
GBP48.4m. The total costs of the Fundraise and debt refinancing
were c. GBP4.0m. The net proceeds are to be used to reduce total
indebtedness and to provide working capital for growth.
Dividends
As a condition of refinancing the debt facility, dividends are
permitted to be paid from 1 July 2022 subject to no default of the
RFA and no forecast default on a 6 month look forward basis from
the date of the dividend payment.
Going Concern
The financial statements have been prepared on a going concern
basis. The Directors have reviewed this basis and have made full
disclosure in note 3, concluding that there is a reasonable
expectation that the Group and Company have adequate resources to
continue in operational existence for the foreseeable future.
Daniel Quint
Chief Financial Officer
21 June 2021
Consolidated statement of comprehensive income
For the year ended 31 December 2020
2019 2019 Non-
2020 2020 Non- Underlying underlying* 2019 Total
Underlying underlying* 2020 Total Restated Restated Restated
Note GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ---- ----------- ------------ ---------- ----------- ------------ ----------
Continuing operations
------------------------------ ---- ----------- ------------ ---------- ----------- ------------ ----------
Revenue 4 927.6 - 927.6 1,063.0 - 1,063.0
Cost of sales 5 (853.0) - (853.0) (975.5) - (975.5)
------------------------------ ---- ----------- ------------ ---------- ----------- ------------ ----------
Gross profit 74.6 - 74.6 87.5 - 87.5
------------------------------ ---- ----------- ------------ ---------- ----------- ------------ ----------
Administrative expenses 5 (69.8) (49.1) (118.9) (84.6) (39.1) (123.7)
------------------------------ ---- ----------- ------------ ---------- ----------- ------------ ----------
Operating (loss)/profit 4.8 (49.1) (44.3) 2.9 (39.1) (36.2)
------------------------------ ---- ----------- ------------ ---------- ----------- ------------ ----------
Finance costs (4.1) (3.2) (7.3) (5.0) (3.2) (8.2)
------------------------------ ---- ----------- ------------ ---------- ----------- ------------ ----------
(Loss)/profit for the
year before taxation 0.7 (52.3) (51.6) (2.1) (42.3) (44.4)
------------------------------ ---- ----------- ------------ ---------- ----------- ------------ ----------
Tax credit 6 2.7 0.4 3.1 1.0 2.4 3.4
------------------------------ ---- ----------- ------------ ---------- ----------- ------------ ----------
(Loss)/profit from continuing
activities 3.4 (51.9) (48.5) (1.1) (39.9) (41.0)
------------------------------ ---- ----------- ------------ ---------- ----------- ------------ ----------
Loss from discontinued
operations (4.2) (3.0)
------------------------------ ---- ----------- ------------ ---------- ----------- ------------ ----------
Loss for the year (52.7) (44.0)
------------------------------ ---- ----------- ------------ ---------- ----------- ------------ ----------
Items that will not be reclassified to
profit and loss - actuarial losses, net
of tax (0.8) (0.7)
Items that may be reclassified to profit
and loss - cumulative translation loss (0.1) -
--------------------------------------------------------------- ---------- ----------- ------------ ----------
Total comprehensive loss for the
year (53.6) (44.7)
------------------------------------------------- ------------ ---------- ----------- ------------ ----------
Loss per ordinary share 7
Continuing operations:
Basic and diluted (71.5)p (89.6)p
Discontinued operations:
Basic and diluted (6.2)p (6.7)p
------------------------------ ---- ----------- ------------ ---------- ----------- ------------ ----------
* An analysis of the non-underlying items is provided in note 5
Comparative results have been restated for the effect of the
activities that were discontinued in 2020.
The accompanying notes form an integral part of these financial
statements.
Consolidated statement of changes in equity
For the year ended 31 December 2020
Share-
Own based Profit
Share shares Share payment and loss Total
capital JSOP premium reserve account equity
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- -------- ------- -------- -------- --------- -------
At 1 January 2019 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 on pension scheme,
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
----------------------------------- -------- ------- -------- -------- --------- -------
Save As You Earn ("SAYE") share
scheme - equity-settled - - - 0.1 (0.1) -
----------------------------------- -------- ------- -------- -------- --------- -------
Transactions with owners - - - 0.1 (0.1) -
----------------------------------- -------- ------- -------- -------- --------- -------
Loss for the year - - - - (52.7) (52.7)
Actuarial loss on pension scheme,
net of taxation - - - - (0.8) (0.8)
Cumulative translation adjustments - - - - (0.1) (0.1)
----------------------------------- -------- ------- -------- -------- --------- -------
Total comprehensive loss for
the year, net of tax - - - - (53.6) (53.6)
----------------------------------- -------- ------- -------- -------- --------- -------
At 31 December 2020 6.9 (4.8) 75.1 0.6 (55.6) 22.2
----------------------------------- -------- ------- -------- -------- --------- -------
The accompanying notes form an integral part of these financial
statements.
Consolidated statement of financial position
As at 31 December 2020
Consolidated Company
------------------------------ ---- ----------------- --------------
2019
2020 Restated 2020 2019
Note GBPm GBPm GBPm GBPm
------------------------------ ---- ------ --------- ------ ------
Assets
Non-current
Goodwill 8 59.6 94.9 - -
Other intangible assets 24.3 34.0 - -
Investments - - 67.8 75.0
Property, plant and equipment 9 9.6 14.6 - -
Deferred tax asset 4.4 1.4 - -
------------------------------ ---- ------ --------- ------ ------
97.9 144.9 67.8 75.0
------------------------------ ---- ------ --------- ------ ------
Current
Trade and other receivables 104.8 132.4 7.7 51.3
Current tax asset 1.7 5.3 0.2 -
Cash and cash equivalents 11 24.5 25.0 - -
Restricted cash 11 0.9 12.7 - -
------------------------------ ---- ------ --------- ------ ------
131.9 175.4 7.9 51.3
------------------------------ ---- ------ --------- ------ ------
Total assets 229.8 320.3 75.7 126.3
------------------------------ ---- ------ --------- ------ ------
Liabilities
Current
Trade and other payables 153.3 126.4 3.8 8.8
Borrowings 12 13.0 6.4 - -
Other liabilities - 0.7 - -
Provisions 3.8 16.0 - -
Lease liabilities 10 1.6 2.6 - -
171.7 152.1 3.8 8.8
------------------------------ ---- ------ --------- ------ ------
Non-current
Borrowings 12 20.0 78.1 20.0 78.1
Other liabilities 7.3 1.4 0.4 1.4
Provisions 1.2 2.4 - -
Lease liabilities 10 3.9 5.8 - -
Deferred tax liabilities 3.5 4.7 - -
------------------------------ ---- ------ --------- ------ ------
35.9 92.4 20.4 79.5
------------------------------ ---- ------ --------- ------ ------
Total liabilities 207.6 244.5 24.2 88.3
------------------------------ ---- ------ --------- ------ ------
Equity
Share capital 13 6.9 6.9 6.9 6.9
Own shares (4.8) (4.8) (4.8) (4.8)
Share premium 75.1 75.1 75.1 75.1
Share-based payment reserve 0.6 0.5 - -
Profit and loss account (55.6) (1.9) (25.7) (39.2)
------------------------------ ---- ------ --------- ------ ------
Total equity 22.2 75.8 51.5 38.0
------------------------------ ---- ------ --------- ------ ------
Total equity and liabilities 229.8 320.3 75.7 126.3
------------------------------ ---- ------ --------- ------ ------
The accompanying notes form an integral part of these financial
statements.
The 2019 balance sheet has been restated to present Current Tax
assets being corporation tax receivable.
Consolidated statement of cash flows
For the year ended 31 December 2020
2020 2019
Note GBPm GBPm
------------------------------------------------------ ---- ------ ------
Cash flows from operating activities 14 65.8 1.6
------------------------------------------------------ ---- ------ ------
Taxation paid 6 (0.5) (1.1)
Net cash inflow from operating activities 65.3 0.5
------------------------------------------------------ ---- ------ ------
Cash flows from investing activities - trading
Purchases of property, plant and equipment 9 (1.3) (2.5)
Sale of property, plant and equipment 0.2 0.6
Purchase of intangible assets - software (1.3) (3.2)
Cash flows from investing activities - acquisitions
Acquisition of businesses - deferred consideration
for prior year acquisitions (0.3) (7.2)
------------------------------------------------------ ---- ------ ------
Total cash flows arising from investing activities (2.7) (12.3)
------------------------------------------------------ ---- ------ ------
Total cash flows arising from operating and investing
activities 62.6 (11.8)
------------------------------------------------------ ---- ------ ------
Cash flows from financing activities
New loans (net of transaction fees) 43.0 24.9
Reduction in Receivables Finance Facility (29.7) -
Loan repayments (58.1) (26.8)
Principal repayment of lease liabilities (3.4) (3.2)
Interest paid (8.5) (6.0)
Payment from/(into) restricted fund 11.8 (12.7)
Settlement of NMW liabilities from restricted funds (11.8) -
Gross proceeds from the issue of share capital - 41.0
Costs relating to the issue of share capital - (3.0)
------------------------------------------------------ ---- ------ ------
Net cash flows from financing activities (56.7) 14.2
------------------------------------------------------ ---- ------ ------
Net change in cash and cash equivalents 5.9 2.4
------------------------------------------------------ ---- ------ ------
Cash and cash equivalents at beginning of year 18.6 16.2
Cash and cash equivalents at end of year 11 24.5 18.6
------------------------------------------------------ ---- ------ ------
The accompanying notes form an integral part of these financial
statements.
Notes to the financial information
For the year ended 31 December 2020
1 Nature of operations
The principal activities of Staffline Group plc and its
subsidiaries ("the Group") include the provision of recruitment and
outsourced human resource services to industry and the provision of
skills training and probationary services.
2 General information and statement of compliance
Staffline Group plc, a Public Limited Company limited by shares
listed on AIM ("the Company"), is incorporated and domiciled in
England, United Kingdom. The Company acts as the holding company of
the Group. The Company's registration number is 05268636.
The financial information set out in this document does not
constitute the Group's statutory accounts for the years ended 31
December 2020 or 2019 but is derived from those accounts. Statutory
accounts for 2019 have been delivered to the registrar of
companies. The auditors have reported on those accounts; their
reports were (i) unqualified, (ii) contained an Emphasis of Matter
highlighting a materiality uncertainly related to going concern and
(iii) did not contain a statement under section 498 (2) or (3) of
the Companies Act 2006. Statutory accounts for 2020 will be
delivered to the registrar of companies in due course. The auditors
have reported on those accounts; their reports were (i)
unqualified, and (ii) did not contain a statement under section 498
(2) or (3) of the Companies Act 2006.
The financial statements for the year ended 31 December 2020
(including the comparatives for the year ended 31 December 2019)
were approved and authorised for issue by the Board of Directors on
21 June 2021. This results announcement for the year ended 31
December 2020 was also approved by the Board on 21 June 2021.
3 Accounting policies
Basis of preparation
The Consolidated financial statements are prepared for the year
ended 31 December 2020. The Consolidated financial statements of
the Group have been prepared on a going concern basis using the
significant accounting policies and measurement bases summarised
below, and in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006. The
financial statements are prepared under the historical cost
convention except for cash-settled share options which are measured
at fair value.
There are no new accounting pronouncements which have become
effective in the year.
Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Chief Executive Officer's Review. The financial
position of the Group, its cash flows, liquidity position and
borrowing facilities are described in the Financial Review.
As described in the Chief Executive Officer's Review, despite
the challenging trading conditions experienced across all divisions
in the Group during 2020, the Group reported an underlying
operating profit for the year on continuing activities. In the
recruitment divisions, the impact of Covid-19 was mixed with
customers in the food distribution and online retail sectors
experiencing increased demand. Other sectors such as manufacturing
and automotive industries were severely impacted by the lockdowns
and subsequent reduced demand. The Group's PeoplePlus division was
impacted by the disruption to its training programmes, with all
face-to-face training cancelled or transferred to digital delivery.
In response to the pandemic, the Directors enabled the majority of
its permanent staff to work from home and provided additional
support with Covid-secure working practices implemented at
customers' premises.
As a result of the pandemic, trading volumes in the first half
of the year were severely impacted. The Directors maintained tight
cost control throughout with overheads at reduced levels,
additionally benefitting from previous restructuring programmes.
These initiatives resulted in improved performance in the second
half of the year as lockdown restrictions eased, resulting in
underlying profit and positive cash generation.
The Directors had previously highlighted that the Group's
financial forecasts indicated a liquidity issue in early 2021 when
VAT of GBP46.5m, deferred from the period between March to June
2020, had to be repaid. On 24 September 2020 the UK Government
announced that an instalment payment scheme would be introduced,
and details of the final scheme were published on 23 February 2021.
The revised repayment profile of equal instalments over eight
months commencing June 2021 had the effect of delaying the
potential liquidity shortfall from March 2021 to later in the
year.
In order to address the liquidity shortfall the Directors
engaged professional advisors in late 2020 to assess the Group's
options for refinancing its debt facilities and to engage with
potential lenders. On 20 May 2021, following a detailed appraisal
by the Directors, the Company and certain subsidiary undertakings,
entered into a new GBP90m Receivables Financing Agreement ("RFA")
to replace the existing Group funding arrangements. The RFA
contained certain requirements to be met before completion, the
most significant of which was that the Company raise new equity
capital of at least GBP40.0m. This condition was satisfied and the
RFA became effective on 10 June 2021.
The new facility enabled the cancellation of the existing
facilities, comprising the RCF of GBP20.0m and the RFF of GBP68.2m
and also the non-recourse Receivables Purchase Facility of
GBP25.0m. The Group will continue to have access to its existing
customer financing arrangements in respect of specific customers,
under which invoices are settled in advance of normal credit
terms.
The Group announced a proposed Placing, Subscription and Open
Offer (the "Fundraise") on 21 May 2021 following conditional
agreement of the debt refinancing. The Fundraise comprised the
following elements:
-- A total of 87,249,500 new ordinary shares of 10 pence each
placed at a price of 50 pence per share (the "Issue Price") to
certain existing shareholders, new institutional investors and
certain Directors and employees of the Group;
-- A total of 750,500 new ordinary shares of 10 pence each to
certain Directors and employees of the Group at the issue price,
and;
-- An open offer to existing shareholders of 10 shares for every
78 ordinary shares held, for a total of 8,837,242 new ordinary
shares of 10 pence each at the issue price.
The total proceeds of the Fundraise, which was approved by the
shareholders in a General Meeting on 9 June 2021, was GBP48.4m. The
total cost of the Fundraise and debt refinancing was GBP4.0m. The
net proceeds are to be used to reduce total indebtedness and to
provide working capital for growth.
The Directors have prepared updated forecasts and cash flow
projections to 31 December 2022, which is considered to be a
reasonable period over which a reasonable view can be formed. These
forecasts, which incorporate the effect of the Fundraise and debt
refinancing described above, have been used to assess going concern
and have been stress-tested by applying sensitivity analysis,
principally involving significant reductions to revenues across all
three divisions, over the period to 31 December 2022.
The Covid-19 pandemic caused considerable disruption to
significant parts of the business, and even as lockdown and social
distancing measures are eased, there remains uncertainty over the
rate at which economic activity will recover. The Group reacted
swiftly to the immediate effects of the pandemic in the first half
of 2020 with tight cost control combined with support from the
government through the furlough scheme and the VAT payment
deferral. The sensitivity testing undertaken on the future
forecasts, demonstrated that there are a number of mitigating
actions available to the Group, which would constrain losses and
conserve working capital.
The sensitivity analysis also demonstrated that under the
stress-tests applied, the Group would be able to comply with the
financial covenants, as specified in the RFA, which are described
in note 12.
In forming their opinion, the Directors have performed a robust
assessment of the principal risks and uncertainties facing the
Group. Consequently, the Directors believe that the Group is well
placed to manage its business risks successfully.
At 31 December 2020, the Group had net debt of GBP8.8m (2019:
GBP59.5m), on a pre-IFRS 16 basis, and following the debt
refinancing has committed facilities until 1 December 2025. Further
details of the financial position of the Group, its cash flows,
liquidity position and borrowing facilities are described in the
Financial Review.
As at 18 June 2021, the Group had cash at bank of GBP63.2m and
an unutilised facility of GBP25.5m under its RFA, resulting in
aggregate available liquidity of GBP88.7m.
As a result, the Directors have formed a judgement, at the time
of approving the financial statements, that there is a reasonable
expectation that the Group has adequate resources to continue in
operational existence and meet its liabilities as they fall due
over the assessment period. The Directors have not identified any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Group's ability to continue as a going concern for a period of at
least eighteen months from when the financial statements are
authorised for issue. For this reason, the Directors continue to
adopt the going concern basis in preparing the financial
statements.
Consolidation of subsidiaries
The Group financial statements consolidate those of the parent
Company and all of its subsidiaries as at 31 December 2020 in
accordance with IFRS 10. Subsidiaries are all entities to which the
Group is exposed or has rights to variable returns and the ability
to affect those returns through control over the subsidiary. The
results of subsidiaries whose accounts are prepared in a currency
other than sterling; are translated at the average rates of
exchange during the period and their year-end balances at the
year-end rate of exchange. Translation adjustments are taken to the
profit and loss reserves.
Material intra-Group balances and transactions, and any
unrealised gains or losses arising from intra-Group transactions,
are eliminated in preparing these financial statements.
Underlying profit - non-GAAP measures of performance
In the reporting of its financial performance, the Group uses
certain measures that are not defined under IFRS, the Generally
Accepted Accounting Principles ("GAAP") under which the Group
reports. The Directors believe that these non-GAAP measures assist
with the understanding of the performance of the business. These
non-GAAP measures are not a substitute, or superior to, any IFRS
measures of performance but they have been included as the
Directors consider them to be an important means of comparing
performance year-on-year and they include key measures used within
the business for assessing performance.
Non-underlying items of income and expenditure
These non-underlying charges are regarded as recurring or
non-recurring items of income or expenditure of a particular size
and/or nature relating to the operations of the business that in
the Directors' opinion require separate identification. These items
are included in "total" reported results but are excluded from
"underlying" results. These items can vary significantly from year
to year and therefore create volatility in reported earnings which
does not reflect the Group's underlying performance.
Underlying EBITDA
Underlying operating profit before the deduction of underlying
depreciation and amortisation charges. This is considered a useful
measure because it approximates the underlying cash flow by
eliminating depreciation and amortisation charges.
Net debt
Net debt is the amount of bank debt less available cash balances
excluding escrow funds. This is a key measure as it is one on which
the terms of the banking facilities are based and shows the level
of external debt utilised by the Group to fund operations. Net debt
is also presented on a pre-IFRS 16 basis which excludes lease
liabilities.
The Directors acknowledge that the adjustments made to arrive at
underlying profit may not be comparable to those made by other
companies, mainly in respect of the adjustment for share-based
payment charges including both equity and cash-settled components.
It should be noted that whilst the amortisation of
acquisition-related intangible assets has been added back, the
revenue from those acquisitions has not been eliminated.
All of these alternative performance measures are utilised by
the Board to monitor performance and financial position. They show
a comparable level of performance excluding one-off items, with
which underlying performance and ability to service debt can be
judged.
Business combinations
The Group applies the acquisition method in accounting for
business combinations. The consideration transferred by the Group
to obtain control of a subsidiary is calculated as the sum of the
acquisition-date fair value of assets transferred, liabilities
incurred and the equity interests of the Group, which includes the
fair value of any asset or liability arising from a contingent
consideration arrangement. Acquisition costs are expensed as
incurred.
Goodwill is stated after separate recognition of identifiable
intangible assets. It is calculated as the sum of a) fair value of
consideration transferred, b) the recognised amount of any
non-controlling interest in the acquiree and c) acquisition-date
fair value of any existing equity interest in the acquiree, over
the acquisition-date fair values of identifiable net assets. If the
fair values of identifiable net assets exceed the sum calculated
above, the excess amount (i.e. gain on a bargain purchase) is
recognised in the statement of comprehensive income
immediately.
Segment reporting
The Group has three material reportable operating segments: the
provision of recruitment and outsourced human resource services to
industry, in Great Britain (Recruitment GB) an also in Ireland
(Recruitment Ireland), plus the provision of skills training and
probationary services, together "PeoplePlus". Each of these
reportable operating segments is managed separately as each
requires different technologies, marketing approaches and other
resources. For management purposes, the Group uses the same
measurement policies as those used in its financial statements.
4 Segmental reporting
Management currently identifies three reportable 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. The Group's reporting
segments are determined based on the Group's internal reporting to
the Chief Operating Decision Maker (CODM). The CODM has been
determined to be the Group Chief Executive, with support from the
Board.
Whilst there are individual legal entities within the three
reportable segments, they are operated and reviewed as single units
by the Board of Directors. Each legal entity within a reportable
segment has the same management team, head office and have similar
economic characteristics. The Group's strategy, historically and
going forward, has been to integrate new acquisitions into the main
trading entities within each reportable segment.
Segment information for the reporting year is as follows:
Recruitment Total
Recruitment Recruitment Group Total GB Recruitment PeoplePlus Group Group
GB Ireland PeoplePlus Costs Group Restated** Ireland Restated** Costs Restated
2020 2020 2020 2020 2020 2019 2019 2019 2019 2019
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ----------- ----------- ---------- ------ ------- ----------- ----------- ---------- ------ --------
Segment
continuing
operations:
Sales revenue
from external
customers 732.1 120.5 75.0 - 927.6 840.0 147.7 75.3 - 1,063.0
Cost of sales (685.9) (110.0) (57.1) - (853.0) (783.4) (132.1) (60.0) - (975.5)
---------------- ----------- ----------- ---------- ------ ------- ----------- ----------- ---------- ------ --------
Segment gross
profit 46.2 10.5 17.9 - 74.6 56.6 15.6 15.3 - 87.5
---------------- ----------- ----------- ---------- -------
Administrative
expenses (38.2) (8.2) (13.4) (2.6) (62.4) (49.1) (10.7) (15.3) (2.5) (77.6)
Depreciation,
software &
lease
amortisation (3.8) (0.7) (2.9) - (7.4) (2.9) (0.6) (3.5) - (7.0)
---------------- ----------- ----------- ---------- ------ ------- ----------- ----------- ---------- ------ --------
Segment
underlying
operating
profit/(loss)* 4.2 1.6 1.6 (2.6) 4.8 4.6 4.3 (3.5) (2.5) 2.9
---------------- ----------- ----------- ---------- ------ ------- ----------- ----------- ---------- ------ --------
Reorganisation
costs including
asset
impairment (2.0) (0.7) - (1.3) (4.0) (1.3) - (1.0) (1.4) (3.7)
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)
Transaction
costs - - - (0.5) (0.5) - - - (0.9) (0.9)
Amortisation
of intangibles
arising on
business
combinations (7.6) (1.4) (0.2) - (9.2) (8.0) (1.3) (1.6) - (10.9)
Goodwill
impairment (18.8) - (16.5) - (35.3) (14.3) - (8.0) - (22.3)
Share-based
payment
charge - - (0.1) - (0.1) (0.1) - (0.1) - (0.2)
---------------- ----------- ----------- ---------- ------ ------- ----------- ----------- ---------- ------ --------
Segment
(loss)/profit
from operations (24.2) (0.5) (15.2) (4.4) (44.3) (20.0) 3.0 (14.4) (4.8) (36.2)
---------------- ----------- ----------- ---------- ------ ------- ----------- ----------- ---------- ------ --------
Finance costs (2.5) (0.2) (0.1) (4.5) (7.3) (1.7) - (0.1) (6.4) (8.2)
---------------- ----------- ----------- ---------- ------ ------- ----------- ----------- ---------- ------ --------
Segment
(loss)/profit
before taxation (26.7) (0.7) (15.3) (8.9) (51.6) (21.7) 3.0 (14.5) (11.2) (44.4)
---------------- ----------- ----------- ---------- ------ ------- ----------- ----------- ---------- ------ --------
Tax
credit/(charge) 0.6 0.2 0.7 1.6 3.1 2.6 0.5 0.1 0.2 3.4
---------------- ----------- ----------- ---------- ------ ------- ----------- ----------- ---------- ------ --------
Segment
(loss)/profit
from continuing
operations (26.1) (0.5) (14.6) (7.3) (48.5) (19.1) 3.5 (14.4) (11.0) (41.0)
---------------- ----------- ----------- ---------- ------ ------- ----------- ----------- ---------- ------ --------
Recruitment Total
Recruitment Recruitment Staffline Total GB Recruitment PeoplePlus Staffline Group
GB Ireland PeoplePlus Group Group Restated Ireland Restated Group Restated
2020 2020 2020 2020 2020 2019 2019 2019 2019 2019
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ----------- ----------- ---------- ---------- ----- ----------- ----------- ---------- ---------- --------
Total
non-current
assets 45.9 11.5 40.5 - 97.9 71.3 16.1 57.5 - 144.9
--------------- ----------- ----------- ---------- ---------- ----- ----------- ----------- ---------- ---------- --------
Total current
assets 97.9 15.6 18.4 - 131.9 134.1 21.4 19.9 - 175.4
--------------- ----------- ----------- ---------- ---------- ----- ----------- ----------- ---------- ---------- --------
Total assets
(consolidated) 143.8 27.1 58.9 - 229.8 205.4 37.5 77.4 - 320.3
--------------- ----------- ----------- ---------- ---------- ----- ----------- ----------- ---------- ---------- --------
Total
liabilities
(consolidated) 142.3 22.6 22.1 20.6 207.6 119.4 28.3 16.4 80.4 244.5
--------------- ----------- ----------- ---------- ---------- ----- ----------- ----------- ---------- ---------- --------
Cash capital
expenditure
inc
software 1.2 0.1 1.3 - 2.6 3.7 0.1 1.9 - 5.7
--------------- ----------- ----------- ---------- ---------- ----- ----------- ----------- ---------- ---------- --------
* Segment underlying operating profit before goodwill
impairment, amortisation of intangible assets arising on business
combinations, reorganisation costs and other non-underlying
costs.
**The prior year has been restated to exclude Apprenticeships
from PeoplePlus and to exclude Poland from Recruitment GB.
Revenues can be analysed by country as follows (97% of revenues
arising within the UK in 2020, 96% in 2019):
Recruitment Total
Recruitment Recruitment Total GB Recruitment PeoplePlus Group
GB Ireland PeoplePlus Group Restated Ireland Restated Restated
2020 2020 2020 2020 2019 2019 2019 2019
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- ----------- ----------- ---------- ------ ----------- ----------- ---------- ---------
UK 732.1 91.4 75.0 898.5 840.0 110.9 75.3 1,026.2
Republic of Ireland - 29.1 - 29.1 - 36.8 - 36.8
732.1 120.5 75.0 927.6 840.0 147.7 75.3 1,063.0
-------------------- ----------- ----------- ---------- ------ ----------- ----------- ---------- ---------
The comparative results have been restated to exclude the
discontinued activities.
No customer contributed more than 10% of the Group's revenue
during either 2020 or 2019.
5 Expenses by nature
Expenses by nature are as follows:
Underlying expenses
2019
2020 Restated
GBPm GBPm
----------------------------------------------------- ----- ---------
Employee benefits expenses - cost of sales 827.9 939.7
Other cost of sales 25.1 35.8
Employee benefits expenses - administrative expenses 40.5 45.4
Depreciation and software amortisation 7.4 7.3
Operating lease expenses 1.5 1.2
Other administrative expenses 20.4 30.7
----------------------------------------------------- ----- ---------
922.8 1,060.1
----------------------------------------------------- ----- ---------
Disclosed as:
Cost of sales 853.0 975.5
Administrative expenses 69.8 84.6
----------------------------------------------------- ----- ---------
922.8 1,060.1
----------------------------------------------------- ----- ---------
Auditors' remuneration
2020 2019
GBP'000 GBP'000
--------------------------------------------------------- -------- --------
Fees payable to the company's auditor for the audit
of the company's annual accounts 15 15
Fees payable to the company's auditor and its associates
for other services:
- Audit of the accounts of subsidiaries 680 1,176
- Audit of the pension scheme 18 11
- Audit related assurance services 154 200
--------------------------------------------------------- -------- --------
Total 867 1,402
--------------------------------------------------------- -------- --------
For 2019, GBP805,000 of the above was for additional audit
procedures including prior year adjustments, which is considered to
be non-underlying.
Non-underlying expenses - continuing operations
2020 2019
Note GBPm GBPm
-------------------------------------------------------- ---- ----- -----
Reorganisation, rationalisation and restructuring
costs 1 4.0 3.7
Legal investigation professional fees - 1.0
NMW remediation costs and financial penalties - (0.7)
Revised audit scope and increased audit fees - 0.8
Transaction costs - business acquisitions and strategic
options 2 0.5 0.9
Refinancing costs 3 3.2 3.2
Amortisation of intangible assets arising on business
combinations (licences, customer contracts) 4 9.2 10.9
Goodwill impairment 5 35.3 22.3
Share-based payment charges - other senior executives 0.1 0.2
-------------------------------------------------------- ---- ----- -----
52.3 42.3
-------------------------------------------------------- ---- ----- -----
Tax credit on above non-underlying expenses (0.4) (2.4)
-------------------------------------------------------- ---- ----- -----
Post taxation effect on above non-underlying expenses 51.9 39.9
-------------------------------------------------------- ---- ----- -----
1. During the year the Group has continued its reorganisation,
rationalisation and restructuring programme across all the
divisions in order to reduce the number of properties occupied and
reducing administration headcount. In the prior year the Group
implemented a strategy of transitioning the PeoplePlus division
away from a predominantly Work Programme driven business to a
skills and training business.
2. Costs have been incurred in the current year and prior years
in relation to advice on the Group's strategic options.
3. The Group's credit facilities were restructured during the
year at a cost of GBP3.2m (2019: GBP3.2m). Further details of the
refinancing are given in note 12.
4. The charge for amortisation of intangible assets arising on
business combinations relates principally to the acquisitions of
the Endeavour Group, Passionate About People, Grafton Recruitment,
Milestone and Brightwork.
5. The results of an impairment review showed that further
impairment charges to goodwill were required in the Recruitment GB
and PeoplePlus cash-generating units of GBP18.8m (2019: GBP14.3m)
and GBP16.5m (2019: GBP8.0m) respectively. Further details are
given in note 8.
6 Tax expense
The tax credit on the loss for the year consists of:
2019
2020 Restated
Continuing activities GBPm GBPm
-------------------------------------------- ----- ---------
Corporation tax
UK corporation tax at 19.00% (2019: 19.00%) 0.8 0.7
Adjustments in respect of prior years - (1.7)
-------------------------------------------- ----- ---------
UK current tax (credit)/charge 0.8 (1.0)
-------------------------------------------- ----- ---------
Deferred tax
Timing differences arising in the year (3.3) (1.6)
Adjustments in respect of prior years (0.6) (0.8)
-------------------------------------------- ----- ---------
UK deferred tax credit (3.9) (2.4)
-------------------------------------------- ----- ---------
Total UK tax credit for the year (3.1) (3.4)
-------------------------------------------- ----- ---------
In the prior year, the net "adjustments in respect of prior
years" credit of GBP2.5m (current GBP1.7m credit, deferred GBP0.8m
credit) arose largely from the use of trading losses to reduce
previously estimated tax liabilities (current) and the recognition
of trading losses available to offset current and future profits
generated by the Group's subsidiaries in Ireland.
The tax credit for the year, as recognised in the statement of
comprehensive income, is lower than the standard rate of
corporation tax in the UK of 19.00% (2019: lower than the 19.00%
standard rate). The differences are explained below:
2019
2020 Restated
GBPm GBPm
Total Total
----------------------------------------- ------ ---------
Loss for the year before taxation (51.6) (44.4)
Tax rate 19% 19%
------------------------------------------- ------ ---------
Tax on loss for the year at the standard
rate (9.8) (8.4)
------------------------------------------- ------ ---------
Effect of:
Goodwill impairment 6.7 4.2
Change in deferred tax rate to 19.00% 0.5 0.2
Expenses not allowable 0.9 0.7
Adjustments in respect of prior years (0.6) (2.5)
Tax losses available (0.8) 2.4
Actual tax credit (3.1) (3.4)
------------------------------------------- ------ ---------
On underlying profit/(loss) (2.7) (1.0)
On non-underlying loss (0.4) (2.4)
------------------------------------------- ------ ---------
Actual tax credit (3.1) (3.4)
------------------------------------------- ------ ---------
Effective total tax rate for the year 6.0% 7.7%
------------------------------------------- ------ ---------
The total tax credit for the year of GBP3.1m (2019: restated
GBP3.4m), which amounts to 6.0% (2019: 7.7%) of the loss for the
year, relates principally to the movement of deferred tax balances
including the recognition of deferred taxation of carried forward
tax losses. The Group has no current corporation tax liability in
respect of either the current or prior years. An amount of overpaid
corporation tax of GBP4.1m has been offset against the balance of
VAT that was deferred between March and June 2020. The remaining
corporation tax amounts receivable were received in early 2021.
The impairment of goodwill is not deductible under UK
corporation tax and is therefore added back to taxable profits. A
deferred tax liability is recognised in respect of intangible
assets arising on acquired businesses. This liability is reduced
each year in line with the amortisation charge, giving rise to a
deferred tax credit each year. No deferred tax is recognised on
JSOP charges.
A reduction in the UK corporation tax rate from 19% to 17%
(effective from 1 April 2020) was substantively enacted on 6
September 2016, and the UK deferred tax asset/(liability) as at 31
December 2019 was calculated based on that rate. In the 11 March
2020 Budget, it was announced that the UK tax rate would remain at
19% and not reduce to 17% from 1 April 2020.
No material tax charges arise on overseas profits or losses and
accordingly no disclosures relating to overseas tax are included
within the financial statements.
7 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 year, after
deducting any shares held in the Joint Share Ownership Plan or
"JSOP" - "own shares" (2020 and 2019 year-end 1,140,400 shares).
The calculation of the diluted earnings per share is based on the
basic earnings per share as adjusted to further take into account
the potential issue of ordinary shares resulting from 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
Basic Restated Diluted Restated
2020 2019 2020 2019
--------------------------------------------- ---------- ---------- ---------- ----------
Loss from continuing operations (GBPm) (48.5) (41.0) (48.5) (41.0)
Weighted average number of shares 67,790,086 45,668,823 67,790,086 45,668,823
Loss per share from continuing operations
(p) (71.5)p (89.6)p (71.5)p (89.6)p
--------------------------------------------- ---------- ---------- ---------- ----------
Underlying (loss)/earnings from continuing
operations (GBPm) 3.4 (1.1) 3.4 (1.1)
Underlying (loss)/earnings per share
(p)* 5.0p (2.4)p 5.0p (2.4)p
--------------------------------------------- ---------- ---------- ---------- ----------
Loss from discontinued operations (GBPm) (4.2) (3.0) (4.2) (3.0)
Weighted average number of shares 67,790,086 45,668,823 67,790,086 45,668,823
Loss per share from discontinued operations
(p) (6.2)p (6.6)p (6.2)p (6.6)p
--------------------------------------------- ---------- ---------- ---------- ----------
Underlying (loss)/earnings from discontinued
operations (GBPm) (1.9) (3.0) (1.9) (3.0)
Underlying (loss)/earnings per share
(p)* (2.8)p (6.6)p (2.8)p (6.6)p
--------------------------------------------- ---------- ---------- ---------- ----------
* Underlying operating profit before goodwill impairment,
amortisation of intangible assets arising on business combinations,
reorganisation costs and other non-underlying costs.
The weighted average number of shares for the year ended 31
December 2019 (basic) was increased by 22,121,263 shares to take
account of the effect of the placing and open offer in July 2019
whereby 40,986,097 new ordinary shares were issued.
Dividends
No dividends have been paid in either the current or prior years
and no final dividend for 2020 has been proposed.
8 Goodwill
Gross carrying amount by reportable segment
Recruitment Recruitment
GB Ireland PeoplePlus Total
Gross carrying amount GBPm GBPm GBPm GBPm
------------------------------------ ----------- ----------- ---------- -----
At 31 December 2019 54.5 5.7 57.0 117.2
------------------------------------ ----------- ----------- ---------- -----
Impairment adjustment
At 1 January 2019 14.3 - 8.0 22.3
Charged in the year 18.8 - 16.5 35.3
------------------------------------ ----------- ----------- ---------- -----
At 31 December 2020 33.1 - 24.5 57.6
------------------------------------ ----------- ----------- ---------- -----
Net book amount at 31 December 2019 21.4 5.7 32.5 59.6
------------------------------------ ----------- ----------- ---------- -----
Net book amount at 31 December 2019 40.2 5.7 49.0 94.9
------------------------------------ ----------- ----------- ---------- -----
Impairment - Goodwill
Management consider there to be three cash-generating units
("CGU"), being Recruitment GB, Recruitment Ireland and PeoplePlus,
in line with the reportable operating segments defined in note 4.
These three cash-generating units have been tested for
impairment.
An impairment review was done at the half year reporting period.
This led to an impairment being noted in the Recruitment GB and
PeoplePlus cash-generating units. The impairment review was
performed using forecasts, adjusted for the impact of the Covid-19
pandemic, using discount rates of 11.7% for Recruitment GB, 10.9%
for Recruitment Ireland and 11.7% for PeoplePlus. 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.
An updated review was conducted as at 31 December 2020, the
recoverable amount of goodwill was determined based on a
value-in-use calculation, using forecasts for 2021-23, followed by
an extrapolation of expected cash flows over the next two years
with a 0% growth rate for each cash-generating unit. The budget and
forecast are prepared by the individual reportable segments of the
Group taking into account individual contracts, historic
performance and new contract wins. Pre-tax discount rates of 13.0%
for Recruitment GB, 12.0% for Recruitment Ireland and 10.8% for
PeoplePlus (2019: 11.7% for Recruitment GB and PeoplePlus and 10.9%
for Recruitment Ireland) 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 for GBP73.1m Recruitment
GB, GBP19.6m for Recruitment Ireland and GBP49.9m for PeoplePlus,
all being value-in-use.
The results of the impairment review at 31 December 2020 showed
headroom in all cash-generating units and accordingly no further
impairment was noted. The same calculations indicated that an
impairment was required to the Company's carrying value of its
investment in PeoplePlus of GBP6.9m.
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
reportable segments, they are operated and reviewed as single units
by the Board of Directors. Each reportable 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 reportable 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 13.0% for Recruitment GB, 12.0% for
Recruitment Ireland and 10.8% for PeoplePlus and a terminal growth
value of 0%. These rates are based on the latest weighted average
costs of capital for each operating segment. These rates have
increased this year primarily due to a movement in the risk-free
rate. The calculations highlighted headroom of GBP31.6m for
Recruitment GB, headroom of GBP4.6m for Recruitment Ireland and
headroom of GBP13.0m for PeoplePlus. A 1% increase in the discount
rates reduces the headroom to GBP25.9m for Recruitment GB, reduces
headroom to GBP2.9m for Recruitment Ireland and reduces headroom to
GBP8.7m 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% reduces the
headroom to GBP24.3m for Recruitment GB, reduces headroom to
GBP2.6m for Recruitment Ireland and reduces headroom to GBP8.0m for
PeoplePlus. A sustained underperformance of 23% would be required
before any impairment was necessary to the goodwill.
As at 31 December 2020 the Company had no goodwill (2019:
GBPnil).
9 Property, plant and equipment
Land and Computer Fixtures Motor
buildings equipment and fittings vehicles Total
Gross carrying amount GBPm GBPm GBPm GBPm GBPm
---------------------------------- ---------- ---------- ------------- --------- -----
At 1 January 2019 15.2 11.0 2.5 0.2 28.9
Additions 1.6 2.2 0.1 - 3.9
Disposals (1.2) (0.2) (0.3) - (1.7)
---------------------------------- ---------- ---------- ------------- --------- -----
At 31 December 2019 15.6 13.0 2.3 0.2 31.1
---------------------------------- ---------- ---------- ------------- --------- -----
Additions 0.3 1.2 0.1 - 1.6
Disposals (1.2) (2.9) (1.1) - (5.2)
---------------------------------- ---------- ---------- ------------- --------- -----
At 31 December 2020 14.7 11.3 1.3 0.2 27.5
---------------------------------- ---------- ---------- ------------- --------- -----
Depreciation
At 1 January 2019 3.1 6.1 1.9 0.2 11.3
Charged in the year - operating 2.9 2.2 0.5 - 5.6
Charged in the year - impairment* 0.5 - - - 0.5
Disposals (0.5) (0.2) (0.2) - (0.9)
---------------------------------- ---------- ---------- ------------- --------- -----
At 31 December 2019 6.0 8.1 2.2 0.2 16.5
---------------------------------- ---------- ---------- ------------- --------- -----
Charged in the year - operating 2.8 2.7 0.1 - 5.6
Disposals (0.9) (2.2) (1.1) - (4.2)
---------------------------------- ---------- ---------- ------------- --------- -----
At 31 December 2020 7.9 8.6 1.2 0.2 17.9
---------------------------------- ---------- ---------- ------------- --------- -----
Net book value
---------------------------------- ---------- ---------- ------------- --------- -----
At 31 December 2020 6.8 2.7 0.1 - 9.6
---------------------------------- ---------- ---------- ------------- --------- -----
At 31 December 2019 9.6 4.9 0.1 - 14.6
---------------------------------- ---------- ---------- ------------- --------- -----
* The impairment of right-of-use assets in 2019 relates to onerous leases
In the year ended 31 December 2019, the Group applied IFRS 16
Leases. The date of initial application of IFRS 16 for the Group
was 1 January 2019. The Group applied IFRS 16 using the modified
retrospective approach, without restatement of the comparative
information. In respect of these leases, which were previously
treated as operating leases, the Group elected to measure the
carrying value as if the Standard had been applied since the
commencement date but discounted using the Group's incremental
borrowing rate at the date of initial application. Right-of-use
assets, principally property related assets, comprise the initial
measurement of the corresponding lease liability, lease payments
made at or before the commencement day and any initial direct
costs. They are subsequently measured at cost less accumulated
depreciation and impairment losses.
Additional information on the right-of-use assets by class of
assets at 31 December 2020 is as follows:
At 31 December 2020
Depreciation
Carrying amount expense Impairment
----------------- --------------- ------------ ----------
Office buildings 5.0 (2.6) -
IT equipment 0.2 (0.1) -
----------------- --------------- ------------ ----------
5.2 (2.7) -
----------------- --------------- ------------ ----------
At 31 December 2019
Depreciation
Carrying amount expense Impairment
----------------- --------------- ------------ ----------
Office buildings 7.6 (2.5) (0.5)
IT equipment 0.3 (0.1) -
----------------- --------------- ------------ ----------
7.9 (2.6) (0.5)
----------------- --------------- ------------ ----------
As at 31 December 2020 the Company had no property, plant and
equipment assets (2019: GBPnil).
10 Leases
Lease liabilities are presented in the statement of financial
position as follows:
2020 2019
GBPm GBPm
------------ ----- -----
Current 1.6 2.6
Non-current 3.9 5.8
5.5 8.4
------------ ----- -----
The Group has leases for its operational and administrative
offices, and some IT equipment. With the exception of short-term
leases and leases of low-value underlying assets, each lease is
reflected on the balance sheet as a right-of-use asset and a lease
liability. The Group classifies its right-of-use assets in a
consistent manner to its property, plant and equipment (see Note
9).
Unless there is a contractual right for the Group to sublet the
asset to another party, the right-of-use asset can typically only
be used by the Group. Leases are either non-cancellable or may only
be cancelled by incurring a substantive termination fee. Some
leases contain an option to extend the lease for a further term.
The Group is prohibited from selling or pledging the underlying
leased assets as security. For leases over office buildings the
Group must keep those properties in a good state of repair and
return the properties in their original condition at the end of the
lease. Further, the Group must insure items of property, plant and
equipment and incur maintenance costs on such items in accordance
with the lease contracts.
The table below describes the nature of the Group's leasing
activities by type of right-of-use asset recognised on the balance
sheet:
Range Average No of leases
No of right-of-use of remaining remaining with extension
Right-of-use asset assets leased term (years) lease term options
------------------- ------------------ ------------- ----------- ---------------
0.1 -
Office building 49 14.2 3.3 18
0.1 -
IT equipment 5 3.8 2.0 -
------------------- ------------------ ------------- ----------- ---------------
The lease liabilities are secured by the related underlying
assets. Future minimum lease payments at 31 December 2020 were as
follows:
Minimum lease payments due
------------------ -----------------------------------------------------------
Within After
one year 1-2 years 2-3 years 3-4 years 5 years Total
------------------ --------- --------- --------- --------- -------- -----
31 December 2020
Lease payments 1.7 1.1 0.8 0.6 1.7 5.9
Finance charges (0.1) (0.1) (0.1) - (0.1) (0.4)
------------------ --------- --------- --------- --------- -------- -----
Net present value 1.6 1.0 0.7 0.6 1.6 5.5
------------------ --------- --------- --------- --------- -------- -----
31 December 2019
Lease payments 2.8 1.9 1.2 0.7 2.3 8.9
Finance charges (0.2) (0.1) (0.1) - (0.1) (0.5)
------------------ --------- --------- --------- --------- -------- -----
Net present value 2.6 1.8 1.1 0.7 2.2 8.4
------------------ --------- --------- --------- --------- -------- -----
Lease payments not recognised as a liability
The Group has elected not to recognise a lease liability for
short term leases (leases with an expected term of 12 months or
less) or for leases of low value assets. Payments made under such
leases are expensed on a straight-line basis. In addition, certain
variable lease payments are not permitted to be recognised as lease
liabilities and are expensed as incurred.
The expense relating to payments not included in the measurement
of the lease liability is as follows:
2020 2019
GBPm GBPm
--------------------------- ----- -----
Short-term leases 0.6 0.6
Leases of low value assets 0.8 0.5
1.4 1.1
--------------------------- ----- -----
The Group had not committed to any leases that had not yet
commenced.
Total cash outflow for leases for the year ended 31 December
2020 was GBP4.8m (2019: GBP2.9m).
11 Cash
2020 2019
Group Group
GBPm GBPm
-------------------------- ------ ------
Cash and cash equivalents 24.5 25.0
Restricted cash 0.9 12.7
-------------------------- ------ ------
Cash and cash equivalents and overdrafts consist of cash on hand
and balances with banks only. At the year-end GBP24.5m (2019:
GBP25.0m) of cash on hand and balances with banks were held by
subsidiary undertakings; however, this balance is available for use
by the Group.
Cash and cash equivalents amounting to GBP24.5m (2019:
GBP25.0m), as disclosed in the consolidated statement of cash flows
comprises cash balances of GBP24.5m (2019: GBP25.0m), less
overdrafts of GBPnil (2019: GBP6.4m).
Restricted cash relates to amounts held in escrow to satisfy the
NMW remediation and financial penalties relating to historic HMRC
National Minimum Wage breaches. This balance is excluded from net
debt.
Long-term credit ratings for the four banks are currently as
follows:
Standard
Fitch & Poor's Moody's
-------------------------- ----- --------- --------
Lloyds Banking Group plc A+ BBB+ A3
Bank of Ireland Group plc BBB BBB- Baa2
HSBC Holdings plc A+ A- A2
Royal Bank of Scotland plc A+ A A1* / A2
-------------------------- ----- --------- --------
The Group's headroom versus available committed bank facilities
is as follows:
2020 2019
GBPm GBPm
----------------------------------------------- ----- -----
Cash at bank (as above) 24.5 25.0
Receivables Finance Facility 54.9 -
Overdraft facility - 18.6
Committed revolving credit facility unutilised - 0.1
Banking facility headroom 79.4 43.7
----------------------------------------------- ----- -----
12 Borrowings
Borrowings are repayable as follows:
2020 2019
Group Group
GBPm GBPm
----------------------------------------------------- ------ ------
In one year or less or on demand* 14.9 9.0
In more than one year but not more than two years* 21.0 1.8
In more than two years but not more than five years* 1.3 79.9
In more than five years* 1.6 2.2
Unamortised transaction costs (0.3) -
----------------------------------------------------- ------ ------
Total borrowings 38.5 92.9
----------------------------------------------------- ------ ------
* Ageing of balances above is shown excluding unamortised transaction fees
2020 2019
Group Group
GBPm GBPm
--------------------------------------------------- ------ ------
Split:
Current liabilities:
Receivables Finance Facility 13.3 -
Unamortised transaction costs (0.3) -
Bank overdraft - 6.4
Lease liabilities 1.6 2.6
--------------------------------------------------- ------ ------
14.6 9.0
--------------------------------------------------- ------ ------
Non-current liabilities:
Revolving credit facility 20.0 78.1
Lease liabilities 3.9 5.8
23.9 83.9
--------------------------------------------------- ------ ------
Total borrowings 38.5 92.9
--------------------------------------------------- ------ ------
Total borrowings excluding unamortised transaction
costs 38.8 92.9
Less: Cash (note 11) (24.5) (25.0)
--------------------------------------------------- ------ ------
Net debt 14.3 67.9
--------------------------------------------------- ------ ------
On 26 June 2019 the Group and its lenders agreed to certain
amendments to the RCF. The lenders agreed to a waiver of all
quarterly nancial covenant tests for the period ended 30 June 2019.
The key amendments to the RCF were:
i) Relaxation of the September and December 2019 leverage
covenants followed by a gradual reduction of the leverage covenant
to net debt of less than 2x EBITDA by 31 December 2020;
ii) Restrictions on new material share, business and asset acquisitions until January 2021;
iii) No dividends to be declared by the Company for the 2019 and 2020 financial years;
iv) Repayment and cancellation of revolving facility commitments
by GBP10.0m on both 15 November 2019 and 15 November 2020;
v) Net proceeds of the July 2019 share issue in excess of
GBP30.0m to be used to reduce, and cancel, the Credit Facilities
available.
In consideration of these amendments, an amendment fee has been
paid to the lenders and certain other changes were made to the
Credit Facility (including the removal of the accordion option and
the ability to request the lenders to extend the Credit Facility
for an additional 12 months beyond July 2022). The expiry date for
the Credit Facility remains in June 2022. The Company has agreed to
pay the lenders an exit fee based on a percentage of the
outstanding commitments when the Credit Facility expires or, if
sooner, refinanced.
Interest accrues on the borrowings at between 1.4% and 2.0% plus
LIBOR, depending upon the level of adjusted leverage as defined in
the banking covenants.
On 24 July 2019, following the share issue, GBP6.8m was used to
reduce, and cancel, part of the Credit Facilities. On 15 November
2019, in line with the amendments above, GBP10.0m was used to
further reduce, and cancel, part of the Credit Facilities.
In December 2019, the Company agreed an amendment to the Credit
Facilities which included:
i) The deferral of testing covenants at December 2019; and
ii) The agreement to waive any potential covenant breaches and
defaults arising as a result of the prior year adjustments.
Subsequently, between January and May 2020, the Company agreed
amendments to the Credit Facilities which included further
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
refinancing has been accounted for as a substantial
modification.
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.
vi) No dividends to be declared by the Company until July 2022
On 31 July 2020, the RCF was reduced by GBP10.0m from GBP30.0m
to GBP20.0m. On 8 October 2020, following the removal of two
customers from the RFF, the maximum availability on the RFF was
reduced by GBP5.0m from GBP73.2m to GBP68.2m.
As at the 31 December 2020 the Group also had 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 31
December 2020 was GBP24.3m (2019: GBP25.7m) and the value of
invoices funded under the Customer Financing arrangements was
GBP43.0m (2019: GBP35.1m). Costs incurred in relation to these
arrangements are charged to profit and loss as finance charges when
incurred.
On 10 June 2021, the entered into a new Receivables Financing
Agreement ("RFA") to replace the existing Group funding
arrangements. The RFA contained certain requirements to be met
before completion, the most significant of which was that the
Company raise new equity capital of at least GBP40.0m. This
condition was satisfied and the RFA became effective on 10 June
2021.
The key terms of the new facility, which is provided jointly by
RBS Invoice Finance Limited, ABN AMRO Asset Based Finance N.V., UK
Branch and Leumi ABL Limited, are set out below:
I. Maximum receivables financing facility of GBP90.0m over a
four-and-a-half-year term, with a one-year extension option;
II. An Accordion option of up to an additional GBP15.0m, subject to lender approval;
III. Security on all of the assets and undertakings of the
Company and certain subsidiary undertakings;
IV. Interest accruing at 2.75% over SONIA, with a margin ratchet
downward to 2.0%, dependent upon the Group's leverage reducing to
3.00x;
V. A non-utilisation fee of 0.35% of the margin
VI. Maximum net debt (averaged over a rolling three months) to
EBITDA leverage covenant commencing at 5.95x followed by a gradual
reduction to 4.0x by October 2023
VIII. Minimum interest cover covenant of 2.25x the last twelve
months EBITDA to finance charges
The new facility enabled the cancellation of the existing
facilities, comprising the RCF of GBP20.0m and the RFF of GBP68.2m
and also the non-recourse Receivables Purchase Facility of
GBP25.0m.
EBITDA is defined as earnings before interest, taxation,
depreciation and amortisation.
13 Share capital
2020 2019
GBPm GBPm
------------------------------- ----- -----
Allotted and issued
68,930,486 ordinary 10p shares 6.9 6.9
------------------------------- ----- -----
2020 2019
Number Number
----------------------------------------------- ---------- ----------
Shares issued and fully paid at the beginning
of the year 68,930,486 27,944,389
Shares issued during the year - 40,986,097
----------------------------------------------- ---------- ----------
Shares issued and fully paid at the end of the
year 68,930,486 68,930,486
----------------------------------------------- ---------- ----------
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 held at 31
December 2020 (2019: 1,140,400) by the Employee Benefit Trust where
the right to dividends has been waived.
On 15 July 2019, a total of 40,986,097 ordinary 10p shares were
issued by the Company, resulting in a total of 68,930,486 ordinary
10p shares being in issue.
The Group announced a proposed Placing, Subscription and Open
Offer (the "Fundraise") on 21 May 2021 following conditional
agreement of the debt refinancing the previous day. The Fundraise
comprised the following elements:
-- A total of 87,249,500 new ordinary shares of 10 pence each
placed at a price of 50 pence per share (the "Issue Price") to
certain existing shareholders and new institutional investors;
-- A total of 750,500 new ordinary shares of 10 pence each to
certain Directors and employees of the Group at the issue price,
and;
-- An open offer to existing shareholders for 10 shares for
every 78 ordinary shares held, for a total of 8,837,242 new
ordinary shares of 10 pence each at the issue price.
14 Cash flows from operating activities - consolidated
Reconciliation of loss before taxation to net cash inflow from
operating activities
2019
2020 Restated
GBPm GBPm
-------------------------------------------------------- ------ ---------
Loss before taxation from:
Continuing operations (51.6) (44.4)
Discontinued operations (5.0) (3.7)
-------------------------------------------------------- ------ ---------
(56.6) (48.1)
Adjustments for:
Finance costs 7.3 8.2
Depreciation and amortisation - underlying 7.4 7.3
Depreciation, loss on disposal and amortisation
- non-underlying 9.2 10.9
Loss on disposal of property, plant and equipment
- discontinued operations 0.8 -
Impairment of goodwill 35.3 22.3
Cash generated before changes in working capital
and share options 3.4 0.6
Change in trade and other receivables 27.6 24.6
Change in trade, other payables and provisions 34.6 (23.8)
Impact of foreign exchange loss on operating activities 0.1 -
-------------------------------------------------------- ------ ---------
Cash generated from operations 65.7 1.4
-------------------------------------------------------- ------ ---------
Employee equity-settled share options 0.1 0.2
Net cash inflow from operating activities 65.8 1.6
-------------------------------------------------------- ------ ---------
Movement in net debt
2020 2019
GBPm GBPm
----------------------------------------------------- ------ ------
Net debt at 1 January (excluding transaction fees) (67.9) (74.2)
----------------------------------------------------- ------ ------
Loan repayments 58.1 1.9
Drawdown from Receivables Finance Facility (43.0) -
Reduction in Receivables Finance Facility 29.7 -
Lease payments, additions, disposals and interest 2.9 2.0
Change in cash and cash equivalents 5.9 2.4
----------------------------------------------------- ------ ------
Net debt at 31 December (excluding transaction fees) (14.3) (67.9)
----------------------------------------------------- ------ ------
Represented by:
Cash and cash equivalents (note 11) 24.5 25.0
Current borrowings (note 12) (13.0) (6.4)
Lease liabilities (note 10) (5.5) (8.4)
Non-current borrowings (note 12) (20.0) (78.1)
----------------------------------------------------- ------ ------
Net debt including transaction fees (14.0) (67.9)
----------------------------------------------------- ------ ------
Transaction fees (unamortised balance) (0.3) -
----------------------------------------------------- ------ ------
Net debt at 31 December (excluding transaction fees) (14.3) (67.9)
----------------------------------------------------- ------ ------
The movements in net debt, excluding transaction fees, can be
further summarised as follows:
Revolving Receivables Movements
Lease credit Finance from financing
Overdrafts liabilities facility Facility activities Cash Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ ---------- ------------ --------- ----------- --------------- ----- ------
Net debt as at 1
January 2019 - (10.4) (80.0) - (90.4) 16.2 (74.2)
Cash flows during
the year (6.4) 3.2 1.9 - (1.3) 8.8 7.5
Non-cash movements
in leases - (1.2) - - (1.2) - (1.2)
Net debt at 31 December
2019 (6.4) (8.4) (78.1) - (92.9) 25.0 (67.9)
------------------------ ---------- ------------ --------- ----------- --------------- ----- ------
Cash flows during
the year 6.4 3.1 58.1 (13.3) 54.3 (0.5) 53.8
Non-cash movements
in leases - (0.2) - - (0.2) - (0.2)
------------------------ ---------- ------------ --------- ----------- --------------- ----- ------
Net debt at 31 December
2020 - (5.5) (20.0) (13.3) (38.8) 24.5 (14.3)
------------------------ ---------- ------------ --------- ----------- --------------- ----- ------
15 Changes in accounting policies
There were no new accounting pronouncements requiring adoption
in the year and no changes to accounting policies.
16 Post balance sheet events
With the exception of the following, there were no events not
disclosed elsewhere, between the balance sheet date of 31 December
2020 and the approval of these accounts on 21 June 2021, that are
required to be brought to the attention of shareholders:
A number of Board changes occurred after the balance sheet date,
as disclosed in the Chairman's Statement.
On 20 May 2021 the Company, and certain subsidiary undertakings,
entered into a new Receivables Financing Agreement ("RFA") to
replace the existing Group funding arrangements. The RFA contained
certain pre-conditions before completion, the most significant of
which was that the Company raise new equity capital of at least
GBP40.0m. On 9 June 2021 the Shareholders approved the Fundraise at
a General Meeting and on the following day, 96,837,242 new ordinary
shares were admitted to trading on AIM.
Upon confirmation, on 10 June 2021, that the Fundraise had
raised over GBP40.0m, the Group formally entered into the new RFA
and, as a result, the existing debt, comprising the RCF, RFF and
non-recourse Receivable Purchase Facility, were settled.
Further details of the refinancing and Fundraise are provided in
the Finance Review and in notes 12 and 13.
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END
FR EAEKFASFFEAA
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