REG - Staffline Group PLC - Unaudited Interim Results
01/08/2023 07:00
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RNS Number : 8182H Staffline Group PLC 01 August 2023
1 August 2023
STAFFLINE GROUP PLC
('Staffline', the 'Company' or the 'Group')
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2023
Resilient H1 performance with full year trading in line with market
expectations*
Board committed to Share buyback programme of up to £4 million
Staffline Group PLC, the recruitment and training group, announces its
unaudited interim results for the six months ended 30 June 2023 ("H1 2023").
Financial highlights
Continuing activities Six months to 30 June 2023 Six months to 30 June 2022 Change
Unaudited Unaudited
Revenue £434.1m £438.0m -0.9%
Gross sales value(1) £496.4m £474.9m +4.5%
Gross profit £38.0m £39.9m -4.8%
Gross margin % 8.8% 9.1% -0.3ppts
Underlying operating profit(2) £2.4m £4.0m -40.0%
Gross profit to underlying operating profit conversion % 6.3% 10.0% -3.7ppts
(Loss) before tax £(4.3)m £(1.0)m -330.0%
Pre-IFRS16 Net debt(3) £(3.5)m £(9.7)m +£6.2m
Alternative performance measures
1. Gross sales value represents the fair value of
consideration received or receivable for the supply of services, including
agency sales, (excluding fees), net of VAT
2. Underlying operating profit before Skills
onerous contract (£1.0m) and exit costs provisions (£1.3m) and amortisation
of intangible assets arising on business combinations (£2.6m)
3. On a Post-IFRS16 basis, net debt was £(8.0)m
at 30 June 2023 (2022: net debt £(13.9)m)
Key highlights:
· Revenues broadly flat in a challenging market
· All three divisions remained profitable on an underlying basis
· Organic growth and renewals across a number of existing customers
o Contract renewal with M&S, a three-year contract extension with Tesco
and sole supply secured with AM Fresh Group, one of the UK's largest suppliers
of fresh produce
o Two-year extension of PeoplePlus' contract with the Ministry of Justice to
provide Prison Education Services
· Restructuring of PeoplePlus' Skills training activities, closing of
in-person training and focus on digital delivery
* Underlying operating profit in line with expectations
· Solid results from the Republic of Ireland
• Positive cash generation with net debt (pre-IFRS16) reduced year
on year by £6.2m
• Increased interest costs limited by interest rate cap
• £4m share buyback programme to be implemented
Current trading and outlook
• Management expects a significant improvement in H2 2023, in line
with the traditional second-half weighting of the Group's Recruitment division
• FY 2023 performance will be underpinned by contributions from
several new opportunities, the anticipated upswing in seasonal retail trading
volumes, and benefits of cost reductions across the Group
• Staffline's strategy is to continue leveraging its scale and
balance sheet strength to increase market share during this period of
macroeconomic uncertainty - optimising the business' operational gearing to
benefit in a recovery
• Accordingly, the Board expects the Group's FY 2023 results to be
in line with expectations*
Albert Ellis, Chief Executive Officer of Staffline, commented:
"The business has delivered a resilient first half performance amidst a
challenging market environment for the recruitment industry. Our management
team has demonstrated exceptional leadership by securing new business wins,
implementing significant structural and cost changes across all businesses,
and strengthening customer relationships with a focus on service delivery.
These actions have underpinned the Board's confidence in full year trading
being in line with expectations*, alongside implementing a £4m share buyback
programme.
We anticipate better trading conditions in the second half of the year with
improved consumer confidence stimulating growth. Whilst the outlook for
permanent recruitment is more subdued, a number of new temporary staffing
contract opportunities are currently in the pipeline, in addition to the
seasonal boost expected in the final half of the year including the Women's
Football and Men's Rugby World Cups.
There is no question, the broader economic environment in the UK and Ireland
will continue to dominate headlines. However, with the increasing return to
work of many classified as economically inactive in the most recent ONS labour
market report, we are cautiously optimistic that the tight labour market is
starting to ease and this will support the economy going forward."
Retail investor webcast
Management will be hosting a presentation for retail investors in relation to
the Company's interim results at 8.30am (BST) on Tuesday, 1 August 2023.
The presentation will be hosted on the Investor Meet Company ("IMC") digital
platform and is open to all existing and potential shareholders. Investors can
sign up to IMC for free and add themselves to meet Staffline via:
https://www.investormeetcompany.com/staffline-group-plc/register-investor
(https://www.investormeetcompany.com/staffline-group-plc/register-investor)
Investors who have already registered and have been added to meet the Company
will be automatically invited.
* Underlying operating profit in line with expectations
For further information, please contact:
Staffline Group plc via Vigo Consulting
www.stafflinegroupplc.co.uk (http://www.stafflinegroupplc.co.uk)
Albert Ellis, Chief Executive Officer
Daniel Quint, Chief Financial Officer
Liberum (Nominated Adviser and Broker) 020 3100 2222
www.liberum.com (http://www.liberum.com/)
Richard Lindley / Satbir Kler
Zeus (Joint Broker) 020 3829 5000
www.zeuscapital.co.uk (http://www.zeuscapital.co.uk)
David Foreman (Investment Banking)
Nick Searle (Sales)
Vigo Consulting (Financial PR) 020 7390 0230
www.vigoconsulting.com (http://www.vigoconsulting.com) Staffline@vigoconsulting.com
Jeremy Garcia / Kate Kilgallen
About Staffline
Providing workforce solutions
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.31,000 staff per day on average to around 400 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 and ten onsite
customer locations, supplying c.4,500 staff per day on average, and offering
RPO, MSP, temporary and permanent solutions across the island of Ireland.
PeoplePlus
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.
Chief Executive Officer's review
Introduction
The business delivered a resilient overall performance in the context of the
highly challenging macro-environment.
Revenue remained broadly flat at £434.1 million (H1 2022: £438.0 million),
with gross margin slightly down at 8.8% (H1 2022: 9.1%) due to changes in mix.
Underlying operating profit declined by 40% as expected, on the back of a
slowdown within the retail sector, reduced hours worked in our top customers
and weaker demand for permanent recruitment, particularly in the first
quarter. However, all three divisions remained profitable on an underlying
basis over the period, generating better than expected positive cashflows,
with tight control of costs and debtor days.
Our temporary staffing pipeline has been a key underpin in the first half,
with organic expansion in existing customers expected in both the UK and
Ireland in H2 2023. This growth will come mainly from Recruitment GB's
existing logistics partner, GXO logistics, alongside M&S, Tesco, and
Morrisons. Furthermore, PeoplePlus has secured a two-year extension to its
contract with the Ministry of Justice, to deliver prison education programmes.
Tight control of costs, including the restructuring of the Skills business
within PeoplePlus, continues and the streamlining of operations across the
Group is a key priority to improve overall performance.
The Group continues to enjoy substantial financing headroom created through
strong cash flow including the benefits from its interest rate cap. It is this
stability and confidence that has encouraged the Board to set aside up to £4
million for a share buyback programme.
Market
The broader macro-economic environment continues to shape the UK and Ireland
labour markets as both Staffline's customers and consumers adjust to the
rising cost of living and interest rate increases caused by high inflation. In
the first half, lower levels of demand from the food and online distribution
sectors have been reflected in a decline of "hours worked" in the blue-collar
sector. Conversely, the resilient jobs market seen across the UK has impacted
the Group's skills and training businesses as candidates opt to take up
employment rather than attend training. We remain optimistic about the
white-collar engineering and manufacturing sectors as they continue to show
resilience. Omega, the Group's professional engineering recruiter, report
steady job flows in the first half of the year which are expected to continue
in the second half. In particular, the aerospace manufacturing sector and its
associated supply chain is experiencing high levels of demand as airlines seek
to replenish their fleets following the pandemic.
The latest UK labour market statistics from the ONS depict mixed trends over
the period. The unemployment rate has risen to 4.0% due to the stagnant
economy, and the cost-of-living crisis has led to formerly economically
inactive workers re-entering the workforce. Overall, job vacancies declined by
85,000 in the quarter ending June 2023, leaving around 1,034,000 vacancies.
Despite the reduced demand, there is still resilience in the job market,
which, combined with an easing in the skills shortage in blue-collar, supports
a more favourable environment for fulfilment.
Customers have responded to the current market conditions by reviewing their
supply chains and engaging with the Group, recognising the benefit of
Staffline's scale and reach and Datum's managed service product. Companies are
now driven to find cost savings, with the result that our pipeline of
potential managed services is stronger than it has been in a long time.
Strategy
The Group remains focused on delivering across its strategic, operational, and
financial objectives:-
• Capitalising on market leadership in the blue-collar market to
grow organically and gain market share
• Cross selling and expanding the recruitment portfolio; managed
services and permanent recruitment
• Transformation of PeoplePlus through focusing on Employability
(Restart) and Prison Education
• Investing in the Republic of Ireland
The Group's balance sheet has been further strengthened, providing a solid
foundation for continued investment and initiating cash returns to
shareholders.
Operational review
Recruitment
The core of the Group's recruitment activities remains our sizable temporary
blue-collar footprint across the UK and Ireland, which is yielding both new
business opportunities and organic growth in existing customers. It is clear
that the Group's scale, reach, delivery excellence and strengthening financial
position continue to attract new and existing customers. Our strategy is to
grow and achieve permanent market share gains.
Recruitment GB
H1 2023 H1 2022 % Var
£'m £'m
Revenue 341.2 345.2 -1.2%
Gross Profit 23.5 24.6 -4.5%
Underlying operating profit 1.8 2.3 -21.7%
A combination of macro-economic headwinds and lower levels of consumer
spending impacted volumes of permanent recruitment, particularly in the first
quarter, as well as also affecting client demand for temporary labour. This
led to reduced hours across the blue-collar market, alongside lower staff
numbers in the automotive sector.
Nevertheless, Recruitment GB continued to gain market share with their major
customers securing multiple renewals in the period, most notably the expansion
announced today with GXO Logistics, the three-year contract extension with
Tesco, as well as with a number of other major logistics customers, the
majority of which will come on stream towards in H2 2023.
Mixed results from specialist recruitment saw Omega report good results as the
engineering and defence sectors faced acute skills shortages, but Datum saw
lower levels of activity from its construction clients and the Driving
business remains well below historical levels.
Recruitment Ireland
H1 2023 H1 2022 % Var
£'m £'m
Revenue 54.5 55.8 -2.3%
Gross Profit 6.1 6.3 -3.2%
Underlying operating profit 0.8 1.5 -46.7%
Our Irish operations have been affected by both the wider economic headwinds
as well as the ongoing power sharing impasse at Stormont. These factors have
contributed to the weakening permanent recruitment market, particularly in
relation to public sector clients in Northern Ireland. The prior year
comparatives benefitted from exceptionally strong demand for permanent
recruitment. The division produced solid results from customer on-site
locations and ongoing growth across the Republic of Ireland, which partly
mitigated against the shortfall in permanent recruitment.
Despite the above challenges, gross profit margin percentage overall only
declined by 0.1ppts to 11.2% in H1 2023, with temporary recruitment margin up
to 9.4% (H1 2022: 9.2%), reflecting the changes in mix in favour of the
Republic of Ireland.
PeoplePlus
H1 2023 H1 2022 % Var
£'m £'m
Revenue 38.4 37.0 +3.8%
Gross Profit 8.4 9.0 -6.7%
Underlying operating profit 1.2 1.6 -25.0%
Operating profit is down 25% due to the change in mix, with a greater
proportion of higher margin employability and self-employment activity in the
prior year comparatives. Additionally, H1 2023 includes the losses resulting
from ongoing market headwinds in relation to the demand for in-person Adult
Education support (Skills). In response, PeoplePlus is in the process of
closing its classroom-based operations in England, to focus on digital
education delivery and growing B2B support services, whilst working to deliver
broader overhead reductions to improve efficiencies and margins.
PeoplePlus has remained profitable, supported by the ongoing delivery of the
Restart programme, which continues to perform in line with
expectations. Elsewhere, our sizable new contract to provide education
services within the Werrington Young Offender Institution is progressing well,
in addition to our broader Prison Education contracts where we have entered
the first year of a successful two-year extension. Preparation is well
underway ahead of the subsequent recommissioning of these services.
Board changes
On 17 April 2023, Amanda Aldridge joined the Company as a Non-Executive
Director ("NED"). Amanda is an experienced NED and worked at KPMG LLP for 33
years until 2017, including 20 years as a partner. Amanda chairs the Group's
Audit Committee and has been appointed to Staffline's Remuneration and
Nomination Committees, replacing Ian Starkey.
Outlook
Staffline remains well placed to capitalise on its market leadership,
bolstered by additional market share gains during the first half and a
pipeline of solid opportunities expected to come on stream in H2 2023,
particularly in Recruitment GB and Ireland.
Whilst Staffline's Northern Irish business has been impacted by the decline in
demand for public sector permanent recruitment, new staffing opportunities in
H2 2023 look promising. On the UK mainland, increasing demand for temporary
staff for the pre-Christmas peak trading period, and a number of global
sporting events in H2, underpin our expectations of increased profits in the
remainder of the year. In addition, the Group's ongoing cost reduction
programme, specifically the closure of in-person Skills training in
PeoplePlus, will benefit the second half.
Confidence in the Group's balance sheet and future cash flows underpins the
Board's decision to set aside up to £4 million for a share buyback programme.
Accordingly, the Board expects the Group's FY 2023 results to be in line with
expectations*.
Albert Ellis
Chief Executive Officer
1 August 2023
* Underlying operating profit in line with expectations
Financial Review
Introduction
The Group delivered resilient results in the context of the challenging
macro-economic environment, as evidenced in reduced temporary worker hours as
a result of declining consumer spend. In addition, permanent recruitment has
also softened in H1 2023. Notwithstanding these pressures, the Group's balance
sheet strengthened with pre-IFRS16 net debt reducing by £6.2m to £(3.5)m.
Significant headroom of £58.7m (2022: £46.7m) exists in the Group's banking
facility alongside material headroom in financial covenants.
The Group continues to protect its financial position, having purchased a
three-year interest rate cap product in October 2021 limiting the Group's
exposure to increases in interest rates. This has been hugely beneficial
during the last twelve months, when the Bank of England base rate increased
from 1.25% to 5.00%.
Trading performance
Total revenue for H1 2023 decreased by (0.9)% to £434.1m (2022: £438.0m)
resulting from reduced food and distribution sector volumes, offset by the new
revenues from the BMW contract that commenced toward the end of H1 2022. Gross
profit has decreased to £38.0m (2022: £39.9m) alongside a marginal decrease
in gross margin to 8.8% from 9.1% in 2022. The reduction in gross margin % is
driven by both the softening in permanent recruitment, as well as the
reduction in higher margin employability training activity in H1 2022.
The Group comprises three divisions: Recruitment GB, flexible blue collar
recruitment; Recruitment Ireland, generalist recruitment; and PeoplePlus,
adult skills, training and employability provision.
Underlying divisional performance
Six months ended 30 June 2023 Six months ended 30 June 2022
Recruitment GB Recruitment Ireland PeoplePlus Group costs Recruitment GB Recruitment Ireland Group costs Total
Unaudited Unaudited Unaudited Unaudited Total Unaudited Unaudited PeoplePlus Unaudited Group
Group Unaudited Unaudited
Unaudited
£'m £'m £'m £'m £'m £'m £'m £'m £'m £'m
Revenue 341.2 54.5 38.4 - 434.1 345.2 55.8 37.0 - 438.0
Period-on-period % change (1.2)% (2.3)% 3.8% - (0.9)% (2.8)% 1.1% (8.6)% - (2.8)%
Gross sales value(1) 403.5 54.5 38.4 - 496.4 382.1 55.8 37.0 - 474.9
Period-on-period % change 5.6% (2.3)% 3.8% - 4.5% 0.8% 1.1% (8.6)% - -
Gross profit 23.5 6.1 8.4 - 38.0 24.6 6.3 9.0 - 39.9
Period-on-period % change (4.5)% (3.2)% (6.7)% - (4.8)% 2.5% 12.5% (4.3)% - 2.3%
Gross margin % 6.9% 11.2% 21.9% - 8.8% 7.1% 11.3% 24.3% - 9.1%
Underlying operating profit /(loss) 1.8 0.8 1.2 (1.4) 2.4 2.3 1.5 1.6 (1.4) 4.0
Underlying operating profit as a % of revenue 0.5% 1.5% 3.1% - 0.6% 0.7% 2.7% 4.3% - 0.9%
Underlying operating profit as a % of gross profit 7.7% 13.1% 14.3% - 6.3% 9.3% 23.8% 17.8% - 10.0%
Post-IFRS16 net (debt)/cash - - - - (8.0) - - - - (13.9)
Pre-IFRS16 net (debt)/cash - - - - (3.5) - - - - (9.7)
(1) Gross sales value represents the fair value of consideration received or
receivable for the supply of services, including agency sales, (excluding
fees) net of VAT.
Key performance indicators
Six months ended 30 June 2023 Six months ended 30 June 2022
Recruitment GB Recruitment Ireland PeoplePlus Recruitment GB Recruitment Ireland Total
Unaudited Unaudited Unaudited Total Unaudited Unaudited PeoplePlus Group
Group Unaudited Unaudited
Unaudited
Hours worked by temporary workers 18.8m 3.2m - 22.0m 21.4m 3.4m - 24.8m
Gross profit per fee earner £36.3k £47.0k - £38.0k £36.6k £50.0k - £38.7k
Revenue per employee - - £26.4k - - - £27.9k -
For management reporting purposes, the Recruitment GB division presents its
'gross sales', which includes sales under agency arrangements. The reporting
of gross sales gives an indication of the full level of activity undertaken by
the division. The value is adjusted for revenue reporting in accordance with
IFRS15. The adjustment relative to reported revenue for the Group is as
follows:
H1 2023 H1 2022
Unaudited Unaudited
£'m £'m
Gross sales value 496.4 474.9
Agency sales (62.3) (36.9)
Revenue as reported 434.1 438.0
Revenues in the Recruitment GB division decreased by £4.0m, (1.2%), to
£341.2m (2022: £345.2m). The decrease is as a result of reducing
year-on-year supermarket and online retail volumes, partially offset by the
new revenues from the BMW contract that commenced during H1 2022. The decline
in retail volumes is as a direct result of the ongoing cost-of-living
challenges.
The gross profit for Recruitment GB decreased year-on-year, from £24.6m in
2022 to £23.5m, with the gross margin % decreasing from 7.1% in H1 2022 to
6.9% this year. This was significantly impacted by a 9.7% increase in the
National Living Wage from April 2023, from £9.50 to £10.42, which was the
largest increase in the last five years. This contributed to an average
increase in our temporary worker pay rates of c.8.5%. This does not impact
absolute gross profit as it is passed through to customers, but does
negatively impact the gross margin % achieved. Gross profit margin % was
further diluted by the softening in the higher margin activity of permanent
recruitment, which generated £1.8m of gross profit, down slightly from £1.9m
in H1 2022.
Revenues in the Recruitment Ireland division were broadly flat at £54.5m
(2022: £55.8m), reflecting resilience in onsite temporary recruitment
activity, offset by a 23% reduction in permanent recruitment. The gross profit
for Recruitment Ireland decreased slightly from £6.3m (11.3%) in H1 2022 to
£6.1m in H1 2023 (11.2%). Permanent recruitment generated £1.0m of gross
profit compared to £1.3m in H1 2022, reflecting cautious sentiment. Revenues
and gross profits were also reduced in the branch networks in both Northern
Ireland and the Republic of Ireland, as well as with our Northern Irish public
sector clients.
PeoplePlus revenues increased by £1.4m (3.8%), to £38.4m (2022: £37.0m),
primarily as a result of increased revenues from the Restart contracts and the
prison education contract transition from COVID-driven cost plus basis to
payment by results. These gains are partially offset by declining revenue from
Skills education, which has led to our decision to exit from that business.
The continued tight labour market along with inflationary cost pressures made
the financial model of the Skills business sub-optimal. The losses of £(0.6)m
generated in the Skills business in H1 contributed to the gross profit for
PeoplePlus decreasing from £9.0m in H1 2022 to £8.5m in H1 2023, whilst
gross margin reduced from 24.3% in H1 2022 to 21.9% in H1 2023.
Group underlying operating profit was £2.4m (2022: £4.0m), with gross profit
to underlying operating profit conversion reducing to 6.3% compared to 10.0%
in H1 2022. Excluding the £(0.6)m of losses in the Skills business, which
will be treated as a discontinued operation in the Group's full-year financial
statements, the underlying operating profit would have been £3.0m (see note
3). Similar to 2022, the Group expects underlying operating profit to be H2
weighted due to the main peak trading period in the lead up to Christmas and
the New Year. The Board expects full-year results to be in line with
expectations*.
Non-underlying charges
Total non-underlying charges of £4.9m for the period include new onerous
contract and exit cost provisions of £2.3m following the decision to exit the
in-person Skills training business and £2.6m (2022: £3.8m) for amortisation
of the intangible assets arising on business combinations.
Finance costs and interest rate hedge
Net finance costs were £1.8m (2022: £1.2m), which includes £0.3m (2022:
£0.2m) of non-cash charges for amortisation of debt re-financing costs and
the hedging instrument. The increased cost arises from the significant
increase in SONIA rates during the last 18 months, which has been
significantly mitigated by income from the interest rate cap product purchased
in October 2021. The Group's exposure to an increase in interest rates is
limited to SONIA up to 1.00% on two thirds of the aggregate of its bank
borrowings and customer finance arrangements.
These costs resulted in a reported loss before taxation of £(4.3)m in H1 2023
(2022: £(1.0)m).
Taxation
There is a £1.1m tax credit (2022: £0.3m) for the period due principally to
the movement on deferred tax balances.
The reported loss after tax on continuing activities for H1 2023 was £(3.2)m
(2022: £(0.7)m).
* Underlying operating profit in line with expectations
Statement of financial position, cash generation and financing
The Group ended H1 2023 with pre-IFRS16 net debt of £(3.5)m, (2022:
£(9.7)m). Post-IFRS16 net debt was £(8.0)m at H1 2023 (2022: £(13.9)m). The
movement in net debt is shown in the table below. The change in working
capital includes the Q1 VAT payment, representing VAT collections in the
Group's peak seasonal Q4 2022 trading period. This was partly offset by
continued tight working capital management. The net debt position has also
benefitted from the completion of previous capital projects leading to a
reduction in capital expenditure during H1 2023.
Movement in net debt H1 2023 H1 2022
Unaudited Unaudited
£'m £'m
Opening net cash (pre-IFRS16) 5.0 6.9
Cash generated before changes in working capital (note 13) 2.7 7.1
Movements in working capital (7.7) (20.9)
Net taxation and interest paid (1.4) (0.4)
Capital investment (net of disposals) (1.0) (1.8)
Own shares purchased (0.5) -
Principal repayment of lease liabilities (0.9) (0.8)
Employee equity settled share options 0.3 0.2
Closing net (debt) (pre-IFRS16) (3.5) (9.7)
IFRS16 lease liabilities (4.5) (4.2)
Closing net (debt) (post-IFRS16) (8.0) (13.9)
The table below reconciles underlying EBITDA (earnings before interest,
taxation, depreciation and amortisation), to operating loss.
Reconciliation of operating loss to EBITDA H1 2023 H1 2022
Unaudited Unaudited
£'m £'m
Operating (loss)/profit (2.5) 0.2
Non-underlying charges 4.9 3.8
Underlying operating profit 2.4 4.0
Depreciation 2.6 3.1
Underlying EBITDA 5.0 7.1
Lease rental payments (0.9) (0.8)
Underlying EBITDA (pre-IFRS16) 4.1 6.3
Note: Underlying operating profit is stated before provisions arising from the
closure of the Skills training business and amortisation of intangible assets
arising on business combinations.
The Group's banking facility headroom under its available committed banking
facilities is set out below:
H1 2023 H1 2022
Unaudited Unaudited
£'m £'m
Cash at bank 12.2 12.6
Available receivables finance agreement unutilised 46.5 34.1
Banking facility headroom 58.7 46.7
Banking facilities
The Group uses a Receivables Financing Agreement ("RFA") to fund its
day-to-day working capital requirements.
The key terms of the facility, which is provided jointly by RBS Invoice
Finance Limited, ABN AMRO Asset Based Finance N.V., UK Branch and Leumi UK
Group Limited, are set out below:
I. Maximum receivables financing facility of £90.0m over a
four-and-a-half-year term, with a one-year extension option;
II. An Accordion option of up to an additional £15.0m, 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 2.00%, dependent upon the Group's leverage multiple 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.
The Group also has available a number of separate, non-recourse, Customer
Financing arrangements whereby specific customer invoices are settled in
advance of their normal settlement date. At 30 June 2023, the value of
invoices funded under these arrangements was £41.3m (2022: £39.1m).
Share repurchase programme ("Share Buyback")
The Board believes the current climate presents a good opportunity to make
share purchases. The Company has delivered two years of underlying operating
profits of at least £10.0m and net debt (pre-IFRS16) has reduced to £(3.5)m
at 30 June 2023 (2022: £(9.7)m) through retained earnings and improvements in
working capital. Consequently, the Group has substantial headroom of £58.7m
(2022: £46.7m) under its available debt facilities.
Accordingly, the Company today announces the launch of a share buyback, to
repurchase ordinary shares in the capital of the Company (the "Ordinary
Shares") up to an aggregate value of £4.0 million. The Ordinary Shares
purchased pursuant to the Share Buyback will be cancelled.
Dividend policy
No interim dividend for 2023 is proposed (2022: £nil).
Going concern
The Directors have formed a judgement, at the time of approving the unaudited
condensed interim Group 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 unaudited condensed interim
Group financial statements are authorised for issue. For this reason, the
Directors continue to adopt the going concern basis in preparing the financial
statements.
Post balance sheet event
At the Company's Annual General Meeting held on 12 June 2023, the shareholders
approved a special resolution to cancel the entire amount standing to the
credit of the Company's share premium account, subject to the approval of the
High Court of England and Wales. Approval was granted by the Court on 18 July
2023 and as a result the Company has distributable reserves of £85.8m with
effect from 20 July 2023, being the date that the Court's decision was
registered at Companies House.
International Financial Reporting Standards
There have been no new accounting standards or interpretations in the first
half of 2023 which materially impact the Group's reported performance or
financial position.
Daniel Quint
Chief Financial Officer
1 August 2023
Consolidated statement of comprehensive income
For the six months ended 30 June 2023
Six-month period ended 30 June 2023 Six-month period ended 30 June 2022 Unaudited Year ended
Unaudited 31 December 2022
Audited
Note £'m £'m £'m
Continuing operations
Revenue 2 434.1 438.0 940.5
Cost of sales (396.1) (398.1) (857.3)
Gross profit 38.0 39.9 83.2
Administrative expenses (40.5) (39.7) (78.6)
Operating (loss)/profit (2.5) 0.2 4.6
Underlying operating profit before non-underlying administrative expenses 2.4 4.0 12.0
Administrative expenses (non-underlying) 3 (4.9) (3.8) (7.4)
Operating (loss)/profit 2 (2.5) 0.2 4.6
Finance income 0.7 - 0.7
Finance charges (2.5) (1.2) (3.4)
(Loss)/profit for the period before taxation (4.3) (1.0) 1.9
Tax credit 1.1 0.3 1.9
(Loss)/profit for the period (3.2) (0.7) 3.8
Items that will not be reclassified to the statement of comprehensive income - 0.1 1.3 0.4
actuarial gains and losses, net of deferred tax
Items that may be reclassified to the statement of comprehensive income:
- cumulative translation adjustment - - 0.1
- movement on cash flow hedge, net of deferred tax 0.3 1.0 1.5
Total comprehensive income for the period (2.8) 1.6 5.8
Earnings per ordinary share 4
Continuing operations: Basic and diluted (2.0)p (0.4)p 2.3p
The accompanying notes form an integral part of these unaudited condensed
interim Group financial statements.
Consolidated statement of changes in equity
For the six months ended 30 June 2023
Unaudited Share capital Own shares Share premium Share-based payment reserve Profit and loss account Total equity
Cash flow hedge reserve
£'m £'m £'m £'m £'m £'m £'m
At 1 January 2023 16.6 (4.5) 111.8 0.6 1.7 (54.5) 71.7
Issue of shares to management - 0.3 - - - (0.3) -
Long term incentive scheme - - - 0.2 - - 0.2
Save As You Earn (SAYE) share scheme - - - 0.1 - - 0.1
Own shares purchased - (0.5) - - - - (0.5)
Transactions with owners - (0.2) - 0.3 - (0.3) (0.2)
Loss for the period - - - - - (3.2) (3.2)
Cash flow hedge reserve, net of taxation - - - - 0.3 - 0.3
Actuarial gain, net of taxation - - - - - 0.1 0.1
Total comprehensive income for the period, net of tax - - - - 0.3 (3.1) (2.8)
At 30 June 2023 16.6 (4.7) 111.8 0.9 2.0 (57.9) 68.7
Consolidated statement of changes in equity
For the six months ended 30 June 2022
Unaudited Share capital Own shares Share premium Share-based payment reserve Profit and loss account Total equity
Cash flow hedge reserve
£'m £'m £'m £'m £'m £'m £'m
At 1 January 2022 16.6 (4.8) 111.8 0.3 0.2 (55.9) 68.2
Issue of shares to management - 0.7 - - - (0.6) 0.1
Long term incentive scheme - - - 0.1 - - 0.1
Save As You Earn (SAYE) share scheme - - - 0.1 - - 0.1
Transactions with owners - 0.7 - 0.2 - (0.6) 0.3
Loss for the period - - - - - (0.7) (0.7)
Cash flow hedge reserve, net of taxation - - - - 1.0 - 1.0
Actuarial gain, net of taxation - - - - - 1.3 1.3
Total comprehensive income for the period, net of tax - - - - 1.0 0.6 1.6
At 30 June 2022 16.6 (4.1) 111.8 0.5 1.2 (55.9) 70.1
The accompanying notes form an integral part of these unaudited condensed
interim Group financial statements.
Consolidated statement of changes in equity
For the year ended 31 December 2022
Audited Share Own Share Share- Cash flow hedge reserve Profit Total
capital shares premium based £'m and loss equity
£'m £'m £'m payment account £'m
reserve £'m
£'m
At 1 January 2022 16.6 (4.8) 111.8 0.3 0.2 (58.2) 65.9
Save As You Earn ("SAYE") share scheme - cash-settled - - - 0.3 - - 0.3
Issues of shares to management - 0.7 - - - (0.6) 0.1
Own shares purchased - (0.4) - - - - (0.4)
Transactions with owners - 0.3 - 0.3 - (0.6) -
Profit for the year - - - - - 3.8 3.8
Cash flow hedge reserve - - - - 1.5 - 1.5
Actuarial gain on pension scheme, net of taxation - - - - - 0.4 0.4
Cumulative translation adjustments - - - - - 0.1 0.1
Total comprehensive income for the year, net of tax - - - - 1.5 4.3 5.8
At 31 December 2022 16.6 (4.5) 111.8 0.6 1.7 (54.5) 71.7
The accompanying notes form an integral part of these unaudited condensed
interim Group financial statements.
Consolidated statement of financial position
As at 30 June 2023
30 June 2023 30 June 2022 Unaudited 31 December 2022
Unaudited Audited
Note £'m £'m £'m
Assets
Non-current assets
Goodwill 5 59.6 59.6 59.6
Other intangible assets 6.6 12.3 9.4
Property, plant and equipment 6.7 7.8 7.6
Retirement benefit net asset 0.3 1.4 0.2
Deferred tax asset 5.4 3.6 5.0
78.6 84.7 81.8
Current assets
Trade and other receivables 6 122.7 116.8 119.8
Current tax asset 0.3 - 0.3
Derivative financial instruments 7 3.1 1.8 3.0
Cash and cash equivalents 8 12.2 12.6 31.0
138.3 131.2 154.1
Total assets 216.9 215.9 235.9
Liabilities
Current
Trade and other payables 9 123.5 114.7 130.3
Borrowings 10 15.7 22.3 26.0
Provisions 11 3.1 1.0 0.9
Lease liabilities 10 1.5 1.3 1.5
143.8 139.3 158.7
Non-current
Provisions 11 0.5 1.6 0.6
Lease liabilities 10 3.0 2.9 3.4
Deferred tax liabilities 0.9 2.0 1.5
4.4 6.5 5.5
Total liabilities 148.2 145.8 164.2
Equity
Share capital 12 16.6 16.6 16.6
Own shares (4.7) (4.1) (4.5)
Share premium 111.8 111.8 111.8
Share-based payment reserve 0.9 0.5 0.6
Cash flow hedge reserve 2.0 1.2 1.7
Profit and loss account (57.9) (55.9) (54.5)
Total equity 68.7 70.1 71.7
Total equity and liabilities 216.9 215.9 235.9
The accompanying notes form an integral part of these unaudited condensed
interim Group financial statements.
Consolidated statement of cash flows
For the six months ended 30 June 2023
Six months ended 30 June Six months ended 30 June Year ended
2023 2022 31 December
Unaudited Unaudited 2022
Audited
Note £'m £'m £'m
Cash flows from operating activities 13 (4.7) (13.6) 5.5
Taxation received 0.1 0.6 0.4
Net cash outflow from operating activities (4.6) (13.0) 5.9
Cash flows from investing activities - trading
Purchase of intangible assets - software (0.8) (1.2) (2.3)
Purchases of property, plant and equipment (0.2) (0.6) (1.0)
Total cash flows arising from investing activities (1.0) (1.8) (3.3)
Total cash flows arising from operating and investing activities (5.6) (14.8) (2.6)
Cash flows from financing activities
Net movements on Receivables Finance Agreement (10.3) (0.6) 3.1
Finance lease principal repayments (0.9) (0.8) (1.6)
Net interest paid (1.5) (1.0) (2.5)
Own shares purchased (0.5) - (0.4)
Net cash flows from financing activities (13.2) (2.4) (1.4)
Net change in cash and cash equivalents (18.8) (17.2) 1.2
Cash and cash equivalents at beginning of period 31.0 29.8 29.8
Cash and cash equivalents at end of period 8 12.2 12.6 31.0
The accompanying notes form an integral part of these unaudited condensed
interim Group financial statements.
Notes to the summary financial statements
For the six months ended 30 June 2023
1 Interim accounts and accounting policies
Staffline Group plc, a Public Limited Company, is incorporated and domiciled
in the United Kingdom.
The unaudited condensed interim Group financial statements for the six-month
period ended 30 June 2023 (including the comparatives for the six-month period
ended 30 June 2022 and the year ended 31 December 2022) were approved and
authorised for issue by the Board of Directors on 31 July 2023.
It should be noted that accounting estimates and assumptions are used in the
preparation of the interim financial information. Although these estimates are
based on management's best knowledge and judgement of current events, actual
results may ultimately differ from those estimates. The unaudited condensed
interim Group financial statements have been prepared using the accounting
policies as described in the December 2022 audited year-end Annual Report and
have been consistently applied.
The interim Group financial information contained within this report does not
constitute statutory accounts as defined in the Companies Act 2006, section
434. The full accounts for the year ended 31 December 2022 received an
unqualified report from the auditors and did not contain a statement under
Section 498(2) or (3) of the Companies Act 2006. A copy of the statutory
accounts for that year has been delivered to the Registrar of Companies.
Basis of preparation
The unaudited interim Group financial statements, which should be read in
conjunction with the audited Annual Report for the year ended 31 December
2022, have been prepared in accordance with AIM Rules for Companies - Part
One, Section 18 "Half-yearly reports".
The unaudited condensed interim Group financial statements consolidate those
of the parent company and all its subsidiaries as at 30 June 2023.
Subsidiaries are all entities to which the Group is exposed, or has rights, to
variable returns and has the ability to affect those returns through power
over the subsidiary.
The unaudited condensed interim Group financial statements have been prepared
on a going concern basis using the significant accounting policies and
measurement bases summarised in the December 2022 audited year-end Annual
Report, and in accordance with International Financial Reporting Standards
(IFRS) as adopted by the EU and with the Companies Act 2006, as applicable to
companies reporting under IFRS. The financial statements are prepared under
the historical cost convention except for contingent consideration and cash
settled share options which are measured at fair value. The consolidated
financial statements are presented in sterling, which is also the functional
currency of the parent company.
Going concern
The Directors have formed a judgement, at the time of approving the unaudited
condensed interim Group 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 18 months from when the unaudited condensed interim Group
financial statements are authorised for issue. For this reason, the Directors
continue to adopt the going concern basis in preparing the unaudited condensed
interim Group financial statements .
Notes to the summary financial statements (continued)
For the six months ended 30 June 2023
2 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 employability services. The Group's
reportable 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.
Historically and going forward, practice has been to integrate new
acquisitions into the main trading entities within each reportable segment.
Segment information for the reporting half-year is as follows:
Six months ended 30 June 2023 Six months ended 30 June 2022
Segment continuing operations Recruitment GB Recruitment Ireland PeoplePlus Group costs Recruitment GB Recruitment Ireland PeoplePlus Group costs
Unaudited Unaudited Unaudited Unaudited Total Unaudited Unaudited Unaudited Unaudited Total
£'m £'m £'m £'m Group £'m £'m £'m £'m Group
Unaudited Unaudited
£'m £'m
Revenue from external customers 341.2 54.5 38.4 - 434.1 345.2 55.8 37.0 - 438.0
Cost of sales (317.7) (48.4) (30.0) - (396.1) (320.6) (49.5) (28.0) - (398.1)
Segment gross profit 23.5 6.1 8.4 - 38.0 24.6 6.3 9.0 - 39.9
Administrative expenses (20.4) (5.0) (6.2) (1.4) (33.0) (20.4) (4.6) (6.4) (1.4) (32.8)
(underlying)
Depreciation and software amortisation (underlying) (1.3) (0.3) (1.0) - (2.6) (1.9) (0.2) (1.0) - (3.1)
Segment underlying operating profit/(loss)* 1.8 0.8 1.2 (1.4) 2.4 2.3 1.5 1.6 (1.4) 4.0
Amortisation of intangible assets arising on business combinations (2.5) - (0.1) - (2.6) (3.7) - (0.1) - (3.8)
Skills closure provisions - - (2.3) - (2.3) - - - - -
Segment operating profit/(loss) (0.6) 0.8 (1.3) (1.4) (2.5) (1.4) 1.5 1.5 (1.4) 0.2
Finance (costs)/income (2.4) (0.1) - 0.7 (1.8) (1.1) (0.1) - - (1.2)
(Loss)/profit for the period before taxation (3.0) 0.7 (1.3) (0.7) (4.3) (2.5) 1.4 1.5 (1.4) (1.0)
Tax credit/(charge) 0.8 (0.2) 0.3 0.2 1.1 0.7 (0.3) (0.4) 0.3 0.3
Net (loss)/profit for the period (2.2) 0.5 (1.0) (0.5) (3.2) (1.8) 1.1 1.1) (1.1) (0.7)
* Segment underlying operating profit before amortisation of intangible assets
arising on business combinations
Notes to the summary financial statements (continued)
For the six months ended 30 June 2023
2 Segmental reporting (continued)
Six months ended 30 June 2023 Six months ended 30 June 2022
Segment continuing operations Recruitment GB Recruitment Ireland PeoplePlus Group costs Recruitment GB Recruitment Ireland PeoplePlus Group costs
Unaudited Unaudited Unaudited Unaudited Total Unaudited Unaudited Unaudited Unaudited Total
£'m £'m £'m £'m Group £'m £'m £'m £'m Group
Unaudited Unaudited
£'m £'m
Total non-current assets 27.8 12.9 37.5 0.4 78.6 32.2 12.0 39.7 0.8 84.7
Total current assets 107.2 18.2 9.2 3.7 138.3 96.1 21.8 11.5 1.8 131.2
Total assets 135.0 31.1 46.7 4.1 216.9 128.3 33.8 51.2 2.6 215.9
Total liabilities 117.9 10.5 19.3 0.5 148.2 114.4 12.5 18.6 0.3 145.8
Capital expenditure inc software 0.6 0.2 0.2 - 1.0 1.0 0.2 0.6 - 1.8
Segment information for the year ended 31 December 2022 is as follows:
Segment continuing operations Recruitment GB Recruitment Ireland PeoplePlus Total Group
2022 2022 2022 Group Costs 2022
£'m £'m £'m 2022 £'m
£'m
Sales revenue from external customers 752.0 110.6 77.9 - 940.5
Cost of sales (700.0) (97.7) (59.6) - (857.3)
Segment gross profit 52.0 12.9 18.3 - 83.2
Administrative expenses (40.5) (9.3) (12.5) (3.3) (65.6)
Depreciation, software & lease amortisation (3.2) (0.4) (2.0) - (5.6)
Segment underlying operating profit/(loss)* 8.3 3.2 3.8 (3.3) 12.0
Amortisation of intangibles arising on business combinations (5.9) (1.3) (0.2) - (7.4)
Segment profit from operations 2.4 1.9 3.6 (3.3) 4.6
Net finance costs (3.1) (0.1) - 0.5 (2.7)
Segment loss before taxation (0.7) 1.8 3.6 (2.8) 1.9
Tax credit 1.8 - (0.2) 0.3 1.9
Segment loss from continuing operations 1.1 1.8 3.4 (2.5) 3.8
Total non-current assets 28.4 12.2 36.2 - 76.8
Total current assets 117.6 19.9 13.3 3.3 154.1
Total assets (consolidated) 146.0 32.1 49.5 3.3 230.9
Total liabilities (consolidated) 135.1 11.0 17.5 0.6 164.2
Capital expenditure inc software 2.0 0.5 0.8 - 3.3
* Segment underlying operating profit before amortisation of intangible assets
arising on business combinations
No customer contributed more than 10% of the Group's revenue in either of the
six months ended 2023 or 2022.
Notes to the summary financial statements (continued)
For the six months ended 30 June 2023
3 Non-underlying expenses
Administrative expenses Six months ended Year ended 31 December 2022
Six months ended 30 June 2022 Unaudited Audited
30 June 2023 Unaudited £'m £'m
£'m
Amortisation of intangible assets arising on business combinations (licences 2.6 3.8 7.4
and customer contracts)
Skills business closure provision 2.3 - -
Tax credit on non-underlying costs (1.1) (1.0) (1.8)
Post taxation effect on non-underlying costs 3.8 2.8 5.6
Closure of the Skills business within PeoplePlus
During the period a substantial contract operated by the Skills business
within the PeoplePlus division concluded and was not renewed. Further
contracts are due to conclude during the second half of 2023. The Board has
decided that in view of the recent unsatisfactory performance and the
impending completion of a number of contracts, that the Skills business should
be closed. The business has obligations to provide classroom learning up to
August 2023 and consequently is classed as a continuing operation for this
reporting period.
The results of the Skills business for the period ended 30 June 2023 are set
out below.
Proforma Statement of Comprehensive Income - Skills business
Six months ended 30 June 2022 Unaudited Year ended 31 December 2022
Six months ended £'m Audited
30 June 2023 Unaudited £'m
£'m
Revenue 4.1 5.6 12.2
Cost of sales (4.2) (5.2) (11.2)
Gross (loss)/profit (0.1) 0.4 1.0
Administrative expenses* (0.5) (0.5) (1.0)
Operating loss (0.6) (0.1) -
*Administrative expenses comprise an allocation of central overheads, relating
principally to administrative staff, of the PeoplePlus Division, which has
been consistently applied to each period, to represent the element of costs
utilised by the Skills business.
Notes to the summary financial statements (continued)
For the six months ended 30 June 2023
3 Non-underlying expenses (continued)
Closure costs from, staff redundancies, property exits and other commitments,
will be incurred after completion of contractual obligations in August 2023.
Furthermore, the contracts remaining to be completed after 30 June 2023 are
considered onerous. The decision to close the business had been formally noted
by the Board in May 2023 and provisions for closure and the onerous contracts
have been recognised at 30 June 2023, as set out below.
Skills business closure provisions
Six months ended
30 June 2023 Unaudited
£'m
Onerous contracts 1.0
Closure costs 1.3
Total 2.3
Additional information is provided below to show the Group's performance for
the period, with comparatives, that exclude the Skills business as if it had
been discontinued with effect from 30 June 2023.
Six months ended Year ended 31 December 2022
Six months ended 30 June 2022 Unaudited Audited
30 June 2023 Unaudited £'m £'m
£'m
Revenue 430.0 432.4 928.3
Cost of sales (391.9) (392.9) (846.1)
Gross profit 38.1 39.5 82.2
Administrative expenses (37.7) (39.2) (77.6)
Underlying operating profit* 0.4 0.3 4.6
Add: Amortisation of intangible assets 2.6 3.8 7.4
Underlying operating profit before non-underlying administrative expenses 3.0 4.1 12.0
*Underlying operating profit before Skills onerous contract (£1.0m) and exit
costs provisions (£1.3m) and amortisation of intangible assets arising on
business combinations (£2.6m)
Notes to the summary financial statements (continued)
For the six months ended 30 June 2023
4 Earnings per share and dividends
The calculation of basic earnings per share is based on the earnings
attributable to ordinary shareholders divided by the weighted average number
of shares in issue during the period, after deducting any shares held by the
Employee Benefit Trust ("EBT") - "own shares" (3,316,391 shares at 30 June
2023, 2,014,511 shares at 31 December 2022 and 964,511 shares at 30 June
2022). The calculation of the diluted earnings per share is based on the basic
earnings per share as adjusted to further take into account the expected issue
of ordinary shares resulting from any share options granted to Executive
Directors and certain senior employees, and share options granted to employees
under the SAYE scheme.
Details of the earnings and weighted average number of shares used in the
calculations are set out below:
Basic six months ended 30 June 2023 Basic six months ended 30 June 2022 Basic Diluted six months ended 30 June 2023 Diluted six months ended 30 June 2022 Diluted
Year ended 31 December 2022 Year ended 31 December 2022
Unaudited Unaudited Audited Unaudited Unaudited Audited
(Loss)/profit from continuing operations (£'m) (3.2) (0.7) 3.8 (3.2) (0.7) 3.8
Weighted daily average number of shares 162,451,337 164,716,595 163,753,217 163,961,869 168,682,279 165,163,334
(Loss)/profit per share from continuing operations (p) (2.0)p (0.4)p 2.3p (2.0)p (0.4)p 2.3p
Underlying earnings from continuing operations (£'m)* 0.5 2.1 9.4 0.5 2.1 9.4
Underlying earnings per share (p)* 0.3p 1.3p 5.7p 0.3p 1.2p 5.7p
*Underlying earnings after adjusting for Skills onerous contract and exit
costs provisions and amortisation of intangible assets arising on business
combinations.
Dividends
No interim dividend for 2023 is proposed (2022: £nil).
Notes to the summary financial statements (continued)
For the six months ended 30 June 2023
5 Goodwill
The breakdown of Goodwill carrying value by division is listed
below:
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£'m £'m £'m
Recruitment GB 21.4 21.4 21.4
Recruitment Ireland 5.7 5.7 5.7
PeoplePlus 32.5 32.5 32.5
59.6 59.6 59.6
6 Trade and other receivables
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£'m £'m £'m
Trade and other receivables 97.0 102.7 109.2
Accrued income 25.7 14.1 10.6
122.7 116.8 119.8
7 Derivative financial instruments
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£'m £'m £'m
Fair value hedge - interest rate cap 3.1 1.8 3.0
In October 2021 the Group entered into an amortising interest rate cap
instrument, which reduces exposure to interest rate increases above 1% of
SONIA on an aggregated two-thirds of the Receivables Finance Agreement and the
customer finance arrangements. The instrument, which expires on 13 October
2024, is based on quarterly notional amounts varying between £39.5m and
£62.5m, with an average of £51.9m.
The fair values of derivatives are based on market data to calculate the
present value of all estimated flows associated with the derivatives at the
balance sheet date. The interest rate cap is classed as a level 2 financial
instrument in accordance with IFRS 13 classification hierarchy. Level 2
financial instruments are not traded in an active marked, but the fair value
is based on quoted market prices, broker/dealer quotations, or alternative
pricing sources with reasonable levels of price transparency.
Notes to the summary financial statements (continued)
For the six months ended 30 June 2023
8 Cash and cash equivalents
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£'m £'m £'m
Cash and cash equivalents 12.2 12.6 31.0
Cash and cash equivalents consist of cash on hand and balances with banks
only. All cash on hand and balances with banks are held by subsidiary
undertakings but these balances are available for use by the Group.
Long term credit ratings for the banks used by the Group are currently as
follows:
Fitch Standard Moody's
& Poors
National Westminster Bank plc A+ A+ A1*
Royal Bank of Scotland plc A+ A+ A1*
The Group's banking facility headroom is as follows:
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£'m £'m £'m
Cash and cash equivalents 12.2 12.6 31.0
Available receivables finance agreement balance 46.5 34.1 44.9
Banking facility headroom 58.7 46.7 75.9
9 Trade and other payables
30 June 2022 31 December 2022
30 June 2023 Unaudited Audited
Unaudited Restated £'m
£'m £'m
Trade and other payables 25.3 30.0 30.5
Accruals and deferred income 53.8 40.9 52.6
Other taxation and social security 44.4 43.8 47.2
123.5 114.7 130.3
Notes to the summary financial statements (continued)
For the six months ended 30 June 2023
10 Borrowings
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£'m £'m £'m
Current liabilities:
Receivables finance agreement (15.7) (22.3) (26.0)
Lease liabilities (1.5) (1.3) (1.5)
(17.2) (23.6) (27.5)
Non-current liabilities:
Lease liabilities (3.0) (2.9) (3.4)
(3.0) (2.9) (3.4)
Total borrowings (20.2) (26.5) (30.9)
Less: Cash and cash equivalents (note 8) 12.2 12.6 31.0
Net cash/(debt) as disclosed in consolidated statement of cash flows (note 13) (8.0) (13.9) 0.1
Credit facilities
The Group uses a Receivables Financing Agreement ("RFA") to fund its
day-to-day working capital requirements.
The key terms of the facility, which is provided jointly by RBS Invoice
Finance Limited, ABN AMRO Asset Based Finance N.V., UK Branch and Leumi UK
Group Limited, are set out below:
i) Maximum receivables financing facility of £90.0m over a
four-and-a-half-year term, with a one-year extension option;
ii) An Accordion option of up to an additional £15.0m, 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.
The Group also has available a number of separate, non-recourse, Customer
Financing arrangements whereby specific customer invoices are settled in
advance of their normal settlement date. At 30 June 2023, the value of
invoices funded under these arrangements was £41.3m (2022: £39.1m).
Notes to the summary financial statements (continued)
For the six months ended 30 June 2023
11 Provisions
Group Skills 2023 2022
Staff Property business Employee Group Group
costs costs closure claim Total Total
£'m £'m £'m £'m £'m £'m
At 1 January 2023 0.3 1.0 - 0.2 1.5 2.8
Amounts charged to the income statement - 0.1 2.3 0.1 2.5 0.5
Amounts utilised - (0.1) - (0.3) (0.4) (0.2)
Unused amounts reversed to the income statement - - - - - (0.5)
At 30 June 2023 0.3 1.0 2.3 - 3.6 2.6
Due within one year (current) 0.3 0.5 2.3 - 3.1 1.3
Due after more than one year (non-current) - 0.5 - 0.5 1.3
At 30 June 2023 0.3 1.0 2.3 - 3.6 2.6
The Group makes provision for staff and property costs relating to
reorganisation programmes. The staff costs relate to redundancies and the
property costs relate to lease dilapidations.
Provision is made for "wear and tear" dilapidation costs at the Group's leased
properties. Where possible, dilapidations provisions are determined based on
an independent valuation of the estimated total cost payable on expiry of the
respective leases. The timing and value of the costs are uncertain due to
potential changes to exit dates and the final liability which may be subject
to negotiation with the landlord.
As described in note 3, provision has been made for the exit from the Skills
training business within the PeoplePlus division. Closure costs arise from,
staff redundancies, property exits and other commitments, which will be
incurred after completion of contractual obligations in August 2023. An
onerous contracts provision has been recognised for the cost of completing
contracts after 30 June 2023.
The Company has no provisions (2022: £nil).
12 Share capital
30 June 2023 Unaudited 30 June 2022 31 December 2022
£'m Unaudited Audited
£'m £'m
Allotted and issued
165,767,728 ordinary 10p shares 16.6 16.6 16.6
30 June 2023 30 June 2022 31 December 2022
'000 '000 '000
Shares issued and fully paid
At beginning and end of the period 165,768 165,768 165,768
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
3,316,391 shares held at 30 June 2023 (2022: 964,511 shares) by the Employee
Benefit Trust where the right to dividends has been waived.
Notes to the summary financial statements (continued)
For the six months ended 30 June 2023
13 Cash flows from operating activities
Reconciliation of loss before taxation to net cash inflow from operating
activities
Six months ended Six months ended Year ended
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£'m £'m £'m
(Loss)/profit before taxation from continuing operations (4.3) (1.0) 1.9
Adjustments for:
Finance income (0.7) - (0.7)
Finance costs 2.5 1.2 3.4
Depreciation and amortisation - underlying 2.6 3.1 5.5
Depreciation and amortisation - non-underlying 2.6 3.8 7.4
Loss on disposal of property, plant and equipment - - 0.1
Cash generated before changes in working capital and share options 2.7 7.1 17.6
Change in trade and other receivables (3.2) (0.8) (3.8)
Change in trade, other payables and provisions (4.5) (20.1) (8.6)
Cash (utilised in)/generated from operations (5.0) (13.8) 5.2
Employee equity and cash settled share options 0.3 0.2 0.3
Net cash (outflow)/inflow from operating activities (4.7) (13.6) 5.5
Movement in net debt
Six months ended Six months ended Year ended
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£'m £'m £'m
Net cash at beginning of the period 0.1 2.3 2.3
Lease payments, additions, disposals and interest 0.4 0.4 (0.3)
Net repayments to/(drawn from) Receivables Finance Agreement 10.3 0.6 (3.1)
Change in cash and cash equivalents (18.8) (17.2) 1.2
Net (debt)/cash at end of period (8.0) (13.9) 0.1
Represented by:
Cash and cash equivalents (note 8) 12.2 12.6 31.0
Current borrowings (note 10) (15.7) (22.3) (26.0)
Lease liabilities (note 10) (4.5) (4.2) (4.9)
Net (debt)/cash at end of period (8.0) (13.9) 0.1
Notes to the summary financial statements (continued)
For the six months ended 30 June 2023
14 Related party transactions
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note. There were no material transactions with Directors of the Company during
the period, except for those relating to remuneration.
On 31 March 2023, Albert Ellis, Chief Executive Officer, and Daniel Quint,
Chief Financial Officer, were awarded ordinary shares of 10p each in the
Company ("Ordinary Shares") in relation to the proportion of their respective
annual bonuses for the financial year ended 31 December 2022 payable in
Ordinary Shares. Accordingly, the Employee Benefit Trust ("EBT") transferred
to Albert Ellis and Daniel Quint 72,884 and 35,837 Ordinary Shares
respectively.
The directors holding office at 30 June 2023 have the following beneficial
interests in the Company's share capital:
Number
Albert Ellis 645,291
Daniel Quint 484,914
Tom Spain 1,300,000
Catherine Lynch 10,000
2,440,205
Albert Ellis and Daniel Quint have interests in
2,389,141 and 1,890,057 respectively for options for ordinary shares,
awarded under the Company's 2021 long term incentive plan in July 2021, May
2022, and February 2023 and SAYE scheme 2022. The other directors have no
current interests in share options or the SAYE scheme.
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