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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