Small Cap Value Report (Fri 17 May 2019) - STAF, MNZS, FUTR, CHH

Friday, May 17 2019 by

Good morning! Another short, but early report today.

EDIT - actually, it's BOGOF day! Graham and I got our wires crossed, and we've both written a brief SCVR today, with some duplication, but actually it's quite good to have 2 possibly different views. Graham's SCVR today is here. End of edit.

I have to speak at Mello at 2pm today, so am having kittens about my (still not finished) presentation slides.  NB. Don't ever ask me to organise anything important, as it will go disastrously wrong, almost guaranteed!

Early 7-8 am comments

Staffline (LON:STAF)

Trading update - this is an interesting comment re employment, which actually sounds rather good for the country (more secure, permanent jobs for people has to be for the social good), but bad for STAF;

The ongoing Brexit uncertainty is impacting the UK labour market and led to a number of customers transferring a significant volume of their temporary workforce into permanent employment to mitigate the risk of that labour market tightening. Typically, this reaction to uncertainty tends to reverse over time, but we expect it will continue to impact temporary worker demand throughout the current year. 

New contract wins slow, blamed on delay to publishing 2018 accounts. Really? That doesn't sound realistic to me. Do customers even check the accounts of a temping agency? I'd be surprised if they do;

There has also been a slowdown in new contract momentum in the current financial year, which the Company largely attributes to the impact of the delay in publication of the 2018 Full Year results.  The key outstanding matter in finalising the results relates to the Group's historical compliance with National Minimum Wage Regulations 2015. This is a complex area and management, in conjunction with HMRC and supported by an independent advisor, are assessing the significant amount of historic data and transactions, which will then be subject to audit.

So a complex problem is ongoing.

Some signs of hope, buried in this management-speak!

Notwithstanding these current headwinds, the Recruitment division is beginning to see the definitive benefits from the Company's market-leading approach to worker engagement and digitally enabled candidate attraction. Management expects this strategy to result in increasing differentiation and to support future growth.

Incidentally, I've just googled "management-speak", and I'd like to pass on this gem, to use when you…

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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 »

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John Menzies plc provides time-critical logistics and support services. The Company provides cargo and passenger ground handling services across the world. It provide services to the international airline sector and, within the United Kingdom, to the travel and parcel markets. The Company specializes in Ground handling, Cargo handling, Fuelling and Logistics. Operating under the ASIG brand, its business supports airline customers by offering into-plane fuelling services at approximately 70 locations. Its fuelling business also manages approximately 60 fuel farms. The Cargo handling business offers access to warehousing and trucking facilities, which conveys consignments to the next step in the supply chain. more »

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Future plc is a United Kingdom-based company, which is engaged in publishing of special-interest consumer magazines, applications and Websites. The Company is also engaged in the operation of events in the areas of technology, games and entertainment; photography, and creative and field sports. The Company operates through media, magazine and other segment. The media segment consists of Websites and events. The magazine segment consists of magazines. The Company's geographical segments include the United Kingdom and the United States. The technology and photography brands include T3, MacFormat, Maximum PC, Mobile Choice, Digital Camera, N-Photo and Photo Plus. The games and entertainment brands include Official PlayStation, PC Gamer, SFX and Total Film. The creative and design brands include 3D World, Computer Arts and net. The music brands include Guitarist, Rhythm, Computer Music and Acoustic Magazine. It has a portfolio of over 200 print titles, applications, Websites and events. more »

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  Is LON:STAF fundamentally strong or weak? Find out More »

7 Comments on this Article show/hide all

blondeamon 17th May 1 of 7


Maket missed this one competely and its rise is just getting started.

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MrContrarian 17th May 2 of 7

My morning smallcap tweet: STAF makes rod for its own back

Immotion (LON:IMMO), Staffline (LON:STAF), Scholium (LON:SCHO), Veltyco (LON:VLTY), Maistro (LON:MAIS), FFI Holdings (LON:FFI), Hunters Property (LON:HUNT), Netcall (LON:NET) d

Immotion Group (IMMO) wins $0.5m VR and immersive content creation contract.
Staffline (STAF) guides FY adj EBIT only £23-28m. Blames customers transferring a significant volume of their temporary workforce into permanent employment to mitigate the risk of that labour market tightening. "Typically, this reaction to uncertainty tends to reverse over time, but we expect it will continue to impact temporary worker demand throughout the current year." Also slowdown in new contract momentum supposedly due to reaction to accounting probs. Blames FY results delay on complexity of minimum wage law compliance. I hold.
Scholium Group (SCHO) guides modest improvement in H2 profit and pproximately breakeven for FY.
Veltyco Group (VLTY) guides H1 rev-cont flat but make a loss due to more lower margin sales. Needs capital or may be insolvent if trading falls below current mgmt expectations.
Maistro (MAIS) proposes to delist on 28 June. No string reason given. Rev weak but "a number of large UK corporates expected to start sourcing services through the Maistro Platform in Q2 and Q3."
FFI Holdings (FFI) lowers EBIT guidance to lower end of prev range of $7.5 to $11.5m. "Other than completion contracts, which has been exposed to a number of previously disclosed headwinds in the financial year, all of the Company's divisions are expected to report trading in line with or ahead of the Board's expectations."
Hunters Property (HUNT) H1 was lightly better than the Board anticipated.

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john652 17th May 3 of 7

Staffline (LON:STAF)

‘Tight labour market, transferring contractors to perm’ , this sounds dubious to me, let’s fix our flexible resource cost because of what might happen, not come across this before. ‘Slowdown in contract market’ I agree with above comments on this, really. I posted earlier in week on Empresaria (LON:EMR) and the possible impact from the new IR35 rules which HMRC have been trying to implement for 20 years, and finally lookro have nailed it putting responsibility on employers, and I think Staffline (LON:STAF) issues might be related to this, maybe not but I think sufficiently worrying that I sold out of Empresaria (LON:EMR) this week,

For those invested in recruitment have a look here:

A beneficiary of this should be FDM (Holdings) (LON:FDM) who have a clever model picking up stem graduates who failed to get into the banks/consultancies/lawyers, training them and putting them into firmly ‘relatively’ cheaply, the firm then has an option to buy them off FDM.

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Gromley 17th May 4 of 7
People who cannot attend Mello will be able to see the (many) sessions which are being filmed online. I think David wants some payment for that, as otherwise nobody would go to the physical event!

I certainly agree that David needs to be able to cover the costs of these excellent events and replay's of the main hall presentations should be worth paying for. (I think some of the individual company presentations will be available FoC piworld ).

If, however, anyone is of the illusion that you can recreate the value of the mello event just by watching the presentations online - then really they should attend one and experience the difference. I'm feeling all the poorer for not being able to attend this week.

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xcity 17th May 5 of 7

In reply to post #476986

Employers hanging on to employees when they are worried about future recruitment has long been a factor in some circumstances; it's in most economic models. Harder to predict now because of rise in nil hours contracts, agencies, EU immigration etc. But it's still what some employers will do if they worry aboutfuture recruitment - better to sustain temporarily high costs than limit all future growth.
I've no idea whether it is at all the case with Staffline; some of their other reasoning seems dubious.

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davidjhill 17th May 6 of 7

In reply to post #476986

Staffline (LON:STAF) IR35 unlikely to be much of a difference in blue collar recruitment as it generally requires a Limited company set up and is mainly used by relatively expensive contractors. Would doubt this is much of a factor for Staffline (LON:STAF) given their demographic. Lots of large companies using contractors pay the NI, often through an outsource services company that manages the resources. Think someone like Resource Solutions in the Finance market. Companies don't generally employ contractors to avoid the NI, they do it for flexibility.

The main worry in the lower cost end of recruitment is a fear of a tightening labour market if lots of blue collar migrants decide, or have to leave/attain working visas. Therefore makes some sense that companies hire perms to secure labour ahead of any perceived hard brexit implications. The research on RT this morning alludes to the fact that this is not a new phenomena and tends to revert to mean but can take several months to unwind.

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davidjhill 17th May 7 of 7

Interestingly on Staffline (LON:STAF) there has been £4m worth of shares traded and a £130m drop in market cap !!! That's what I call illiquidity....................

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About Paul Scott

Paul Scott

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »


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