Pre 8 a.m. comments

I met the Directors of Staffline (LON:STAF) at a results presentation meeting on 3 Sep 2012, and was impressed with both them and the company, and I explained why the shares looked a bargain at 226p here. They have since shot up 48% to 335p, although it's really been a sector re-rating with most small recruitment companies seeing similar gains.

STAF issues results for year ended 31 Dec 2012, making it one of the first smaller caps to report. This is a positive thing, as prompt reporting of figures is usually indicative of good financial systems & controls, which is essential in a highly competitive, low margin sector such as recruitment.

STAF is really an out-sourcing company, providing mainly blue collar workers (e.g. staff to food processing factories) to large cllients, mainly through basing a member of its own staff on the client premises to manage recruitment at the front line. A clever model which cuts out fixed costs as it doesn't need a separate office funded by STAF, just a desk, computer & a phone at the client's premises.

Their results this morning show fairly pedestrian growth in adjusted (excluding goodwill amortisation) EPS up 2% to 35.9p (35.1p in 2011). However, that puts the shares on a still reasonable rating of 9.3.

The all important outlook statement sounds pretty upbeat, saying;

 

"The first 7 weeks of trading have started strongly and we have developed an excellent pipeline from new and existing customers for the first half of 2013 ...

... I am therefore confident that the Group will enjoy another year of substantial and profitable growth in 2013."

 

Sounds pretty good to me!

They have also increased the total dividends for the year by 14% to 8.1p, giving a reasonable yield of 2.4%.

I like this company, and the other interesting thing is that their EOS subsidiary is doing very well on the Government's Welfare To Work scheme, which is expected to deliver significant profits for the group over the longer term, although it requires some up-front costs.

I like STAF, but probably won't be chasing the shares up in the short term. I sold mine at 300p a little while ago, but will certainly be looking to buy back if there is a market correction which brings them back down…

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