SIF Folio: Why Staffline could recruit me a profit

Tuesday, Oct 02 2018 by
6
SIF Folio Why Staffline could recruit me a profit

It’s been about three weeks since I’ve added any new shares to my SIF fund. Over that time a number of new shares have appeared in my screening results.

The company I’ve chosen to look at this week is blue collar recruitment group Staffline. This £350m AIM-listed staffing firm operates in two main areas.

The largest of these is recruitment. The group’s OnSite business plus other specialist staffing agencies supply more than 60,000 staff per day to roughly 1,500 private clients. According to the Staffline website, there’s a 70% weighting towards the food production industry, a fairly defensive business. Other important areas are more cyclical, including the automotive sector, internet retail (warehouse work) and lorry driving.

Inevitably, a significant proportion of the staff supplied by Staffline will be EU nationals from Eastern Europe. So the firm’s business model could be affected by a hard Brexit. Indeed, the group warned in July that Brexit risks and falling unemployment meant that it could become difficult to fulfil contractual staffing obligations.

The firm’s other division, PeoplePlus, runs training and employment programmes for public sector clients. The largest part of this business is the UK government’s Work Programme, which aims to help unemployed people back into employment.

However, this programme is currently being wound down. And although PeoplePlus operates a number of similar programmes, underlying operating profit from this division fell by 24% during the first half of this year. PeoplePlus generated just 44% of group underlying operating profit during H1, down from 54% during the same period in 2017.

Staffline appears to face some challenges. But its main recruitment business is continuing to grow and the firm’s shares have perked up since July, despite the uncertainty surrounding Brexit.

Regular acquisitions (including one this week) suggest that this business could expand through consolidation. Stockopedia’s algorithms also seem to like Staffline. They’ve awarded the firm a StockRank of 91 and a status of Super Stock.

Fair value

When Graham Neary covered Staffline on 4 July, he noted that the stock appeared cheap, “along with many other shares in the recruitment industry”. A confident outlook seems to have encouraged investors to buy the stock, and the share price has risen by 25% since then.

One consequence of this is that the stock’s ValueRank has fallen from 84…

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Disclaimer:  

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested. ?>


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Staffline Group plc is a holding company, which is engaged in the provision of recruitment and outsourced human resource services to industry and services in the welfare to work arena and skills training. The Company has two segments: Staffing Services, which includes the provision of temporary staff to customers, and PeoplePlus, which includes the provision of welfare to work and other training services. Its Staffing Services focuses on providing complete labor solutions in agriculture, food processing, manufacturing, e-retail, driving and the logistics sectors. Its recruitment business operates from well over 300 locations in the United Kingdom, Eire and Poland. The Staffing brands include Staffline OnSite, based on clients' premises providing both blue and white collar, out-sourced, temporary workforces. Its Employability includes work program, prime contractor in over nine regions and sub-contracts in approximately five regions in England. more »

LSE Price
1250p
Change
-0.8%
Mkt Cap (£m)
349.3
P/E (fwd)
10.1
Yield (fwd)
2.3



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About Roland Head

Roland Head

I'm a private investor and writer on stock markets, with a particular fondness for free cash flow, dividends and value. I also have a lingering interest in commodity stocks. In earlier life, I worked as an engineer in telecoms and IT. The rules-based approach required for this kind of work undoubtedly influenced my investing style. I also learned a lot from seeing the tech bubble deflate in 2000-1, when I was working for a large and now defunct Canadian firm.  My investment focus is increasingly on developing rules-based strategies such as my Stock in Focus portfolio. This reflects a significant part of my personal portfolio and is the subject of my weekly column here at Stockopedia. more »

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