Small Cap Value Report (Wed 3 Jan 2018) - STAF, CLLN, NXT,

Wednesday, Jan 03 2018 by
93

Good morning, and happy new year! It's Paul here.

It's another quiet day for results/trading updates.

Many thanks for the continued input from readers, in the comments sections after these articles. It's very useful & worthwhile, often adding information that Graham & I may not be aware of. I'm keen to see this develop more, as feedback I'm getting places a lot of importance on the quality of reader comments here. I think that here at Stockopedia we've already got a reputation for having the highest quality reader comments of any mainstream UK investing site. So it would be great to see that lead grow in 2018 to become unassailable!

On to today's news.




Staffline (LON:STAF)

Share price: 989p (down 2.1% today, at 08:30)
No. shares: 27.8m
Market cap: £274.9m

Trading update

Staffline, the Staffing and Employability organisation, today issues a trading update for its financial year ended 31 December 2017.


It's an in line result for the year;

The Board is pleased to report that the Group expects to deliver full year results in line with market expectations.


Other points;

Revenue of c.£962m for 2017, up 9% on 2016 (slightly short of £1bn long-term target, which doesn't really matter). Note that much revenue is pass-through - i.e. wages of contractors.

Staffing division is doing well.

Other activities sounds a bit mixed;

PeoplePlus, the Employability, Skills and Justice Division, has also made good progress, continuing to win new contracts as well as benefiting from its focus on improved margins, helping to offset reduced activity from the run off of the Work Programme.


I'm a bit concerned about the last point - I thought that the Work Programme (A govt scheme to get unemployed people back to work) was going to be extended with new contracts. So there's a question mark over that.

Results for 2017 are due out on 24 Jan 2018 - that's a superbly quick reporting schedule - why can't all companies produce their preliminary results this quickly? In my experience, rapid reporting is nearly always a sign of a well-managed business, with strong financial controls. The opposite is also usually true - slow reporting means that a company probably isn't very well managed.

Private investor presentation - Staffline also impresses for treating its private shareholders with equal…

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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
1074p
Change
-0.6%
Mkt Cap (£m)
301.8
P/E (fwd)
9.2
Yield (fwd)
2.7

NEXT plc is a United Kingdom-based retailer offering clothing, footwear, accessories and home products. The Company's segments include NEXT Retail, a chain of over 500 stores in the United Kingdom and Eire; NEXT Directory, an online and catalogue shopping business with over four million active customers and international Websites serving approximately 70 countries; NEXT International Retail, with approximately 200 mainly franchised stores; NEXT Sourcing, which designs and sources NEXT branded products; Lipsy, which designs and sells Lipsy branded younger women's fashion products, and Property Management, which holds properties and property leases which are sub-let to other segments and external parties. Lipsy also sells directly through its own stores and Website, to wholesale customers and to franchise partners. The Company's franchise partners operate approximately 180 stores in over 30 countries. more »

LSE Price
5994p
Change
-0.9%
Mkt Cap (£m)
8,461
P/E (fwd)
13.8
Yield (fwd)
2.7

Carillion plc is an integrated support services company. The Company operates through four business segments: Support services, Public Private Partnership projects, Middle East construction services and Construction services (excluding the Middle East). The Support Services segment includes its facilities management, facilities services, energy services, rail services, road maintenance services, utilities services, remote site accommodation services and consultancy businesses in the United Kingdom, Canada and the Middle East. The Public Private Partnership projects segment invests in Public Private Partnership projects in the United Kingdom and Canada. The Middle East construction services segment includes its building and civil engineering activities in the Middle East and North Africa. The Construction services segment includes its the United Kingdom building, civil engineering and developments businesses, together with those of its construction activities in Canada. more »

LSE Price
14.2p
Change
 
Mkt Cap (£m)
n/a
P/E (fwd)
n/a
Yield (fwd)
n/a



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


31 Comments on this Article show/hide all

leoleo73 3rd Jan 12 of 31
3

In reply to post #291958

Why has £LON:BON gone down while other retailers have went up in sympathy with £LON:NXT ?

Possibly because Bonmarche Holdings (LON:BON) has been weak on online sales and that's where Next (LON:NXT) made up their numbers. Boohoo.Com (LON:BOO) is up I see.

Also BON's share price was much stronger over the previous past few days than NXT's.

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Graham Ford 3rd Jan 13 of 31
3

With regard to Next (LON:NXT), although the news is good I remain cautious. Some things that come to mind....

1. There’s always going to be some natural variability in sales figures from one year to the next even with everything else being pretty much equal. So although we can breathe a sigh of relief that results are better than expected, it is only a narrow beat and so could be natural variation rather than any indicator of having turned a corner.

2. They say cold weather drove sales. This is a bit worrying for two reasons. Firstly it was something outside their control that caused the improvement, so not repeatable unless the weather by chance has the same pattern in the future. Secondly, presumably in previous winters they have sold this winter clothing more in January than in December on the basis of December being warmer and January colder. So have this December’s good winter clothing sales simply been pulling forward sales that would otherwise have occurred in January so this growth is not real it is just timing?

3. High growth in online sales. That’s great, but we know that there is a higher level of returns with online sales. The phenomenon of people buying two or three different sizes of the same item and returning the ones that don’t fit. Presumably they make a provision for that based on historical data, but reporting this soon will mean there is less visibility of the returns rate from Yuletide internet sales. It might be better or worse than provided for but has to be a potential risk that could come back to bite if the returns rate has drifted up.

I take on board the strong points that this is a very effective cash cow so why not milk it as a share holder. However, that is affected by market sentiment and Mr Market is pretty skittish at present so I am staying out of this one for now.

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sharmvr 3rd Jan 14 of 31
4

In reply to post #291958

I dare say profit taking - up 30% in a month - (a YAY ME moment) and was tempted to get out and wait to get back in (a BOO ME moment), but still pretty cheap.

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IanChurchward 3rd Jan 15 of 31
1

Paul any comments on SEEing machines Fundraising for January 10th 2018.
Ian.

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Housemartin2 3rd Jan 16 of 31
4

In reply to post #291973

Ooo PJ8 looks to me that you have strong issues here that may not be entirely Staffline (LON:STAF) related. You also seem to have access to surveys of which I have not seen.

If I may follow your little wander off topic though, of course Brexit will reduce economic activity. If you make trading harder with your biggest and nearest trading partners, as well as reducing your 'clout' on the world stage that will be the case. Brexit was never about short term economics which were always going to be pretty tricky. It was never about that surely. It was about 'going off on our own'

(Sold Staffline (LON:STAF) last July over concerns about the general outlook)

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peterg 3rd Jan 17 of 31
10

In reply to post #291973

Pretty anecdotal, but I knew a Pole who had lived in the UK for around 11 years - his brother remains settled here with kids house etc. My friend is an HGV/crane driver and he and his wife decided just after the referendum to return to Poland. They returned last summer and I had a text from him at Christmas, saying he found a similar job in Poland without any problem, and that he finds the working environment less stressful and his general quality of life higher in Poland than the UK. He certainly would not have said that 11 years ago when he moved over here.

The reality is that the world has changed. The E European economies have outperformed the UK over the past 10 years. The advantages of moving to the UK from E Europe just are not as marked as they were 10 -15 years ago. Brexit, growth in racist abuse, impact on the economy etc is just speeding that process along. So in the context of STAF and worries about the impact of reduction in numbers of E European workers I would say those worries are soundly based.

Peter

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sjw 3rd Jan 18 of 31
2

Hey Paul. John Lewis figures can be found here I think:
http://www.johnlewispartnership.co.uk/financials/weekly-figures/archive.html

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Graham Ford 3rd Jan 19 of 31
14

I don’t like it when these discussions diverge onto political points that have less and less to do with discussion about stocks as the thread goes on. But I will just interject with data to clarify what has been said about migration.

Relying on anecdotes is not a good way to assess what is happening with migration. The official figures may not be especially accurate but they are better than anecdotes. EU net migration to the UK in the year to June 2017 (latest figures) was 107,000.

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timarr 3rd Jan 20 of 31
12

In reply to post #292068

True but it's a bit more complicated than that, in the context of the ongoing discussion. 

The breakdown of net immigration from across the EU is:

  • EU2 (Romania and Bulgaria): 41,000, down 21,000 from 62,000
  • EU8 (Eastern Europe): 5,000: 8,000, down 34,000 from 42,000
  • EU15 (Western Europe): 55,000, down 29,000 from 84,000.

(ONS Migration Statistics).

Clearly the most startling reduction is in the EU8 figures covering Poland, Estonia, Hungary, Lativia, Lithuania, Slovakia , Czech Republic and Slovenia, which were near zero, although the EU 15 figure is also statistically significant.

It's a bit too simplistic to just blame Brexit - improving economic conditions in most of those countries is having an effect as well. However, the main difference is that the numbers of people coming here looking for work have dropped, people coming to the UK with a definite job have remained more or less unchanged.

On a tangential note about our misunderstanding of statistics I was amused today to see that the average Brit believes that 47% of the UK is densely built on. The actual figure is 0.1%.

timarr

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sharmvr 3rd Jan 21 of 31
17

In reply to post #292018

Peter,

Perhaps I am misinterpreting your comment but I moved to this country as an Indian immigrant (barely able to speak English) at the age of 7 and have lived in 4 cities and two countries within the UK
Brexit or no Brexit, I refuse to entertain the idea that the UK is a racist country, certainly not one with anywhere close to 17m racists.

With respect to Poland, I dare say there was a rather large march that indicates the country is not that open and welcoming - Sad that the 60k people get coverage as opposed to the 37.3m people who did not

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Ramridge 3rd Jan 22 of 31
1

In reply to post #292128

Hi timarr

" I was amused today to see that the average Brit believes that 47% of the UK is densely built on. The actual figure is 0.1%. "

Around 35% of the UK population lives in major and large cities (ONS classification and data).  So if you take a UK wide poll, your statistics do not surprise me. 

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handy 3rd Jan 23 of 31

STAFF Private Eye (No 1459, 15/12/17) has an article about a Staffline subsidiary, PeoplePlus, which recently bought EOS Works. EOS controls (their word) Warwichshire & West Mercia Community Rehabilitation Company, which PE says is being 'looked at' by the Chief Probation Inspector. Is this related to the 'run off of the Work Programme'? The article gives some detailed criticism of Staffline's management of its probation services. A question here for the Investor Presentation?

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timarr 3rd Jan 24 of 31
2

In reply to post #292148

Around 35% of the UK population lives in major and large cities (ONS classification and data). So if you take a UK wide poll, your statistics do not surprise me.

City dwellers estimated 48%, country dwellers 45%. Greater Londoners 46% and South Westerners 48%. 

timarr

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peterg 3rd Jan 25 of 31
2

In reply to post #292138

Sharmvr,

I think perhaps you are somewhat misunderstanding what I was saying. I did not suggest that everyone who voted for Brexit is racist. However, it is well documented that there was an increase in abuse, including physical and some fatal, aimed particularly at E European immigrants after the referendum. It is also well documented that the economies of most E European countries have developed over the past 10-15 years (which is really no surprise) and that the economic drive for people to come to the UK for jobs is no longer as strong as it was a decade ago.

I would agree that Poland is not a country I would currently think was one I would want to move to politically, but that is probably a side issue for most migrants - for whom the ease of finding a well paid job is the key.

While the example I gave is, as I stated, anecdotal, the underlying trends I wrote about are well documents and not political views. What struck me about the anecdote, and why I thought it worth repeating, was that while I understood the underlying issues beforehand it bought it home to me in a very immediate way how the underlying economic issues that have driven EU migration to the UK have been changing, and are continuing to change.

Peter

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sharmvr 3rd Jan 26 of 31
9

In reply to post #292253

You make fair points and apologies if I mis-interpreted - not personal at all.

The reports of increased racism are certainly in the news.
Personally, I think part of the increase is driven by media coverage (where it becomes a self fulfilling prophecy and the idiotic minority are emboldened by a perception that everyone is as idiotic as they are)

Re job opportunities and development - it is the natural way and wholly agree with you.
Its a lot easier to have principles if you are not on the street starving after all!

I dare say one of the crowning achievements of the EU has been the development of Eastern Europe and in particular the development of human rights/democracy/capitalism in the region.

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clarea 3rd Jan 27 of 31
2

In reply to post #291893

No worries Paul your take on avoiding this type of dross has helped me massively, i've followed you since you used to be on Mike Walters bulletin board and same as many my early path was to buy story stocks that would change the world and oil companies in the Congo you get an early win and think your a god and then in double quick time 99% of these types of company fail.

These days stick to mainly 250 stuff having a good run in Numis, Xlm, Softcat and good to see Somero coming back last few days, only stock on a red card is Pets at Home.

Have a top 2018

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dodge1664 3rd Jan 28 of 31
2

In reply to post #292128

timarr,

you're comparing against a year in which immigration was sky high! I'm happy to see that its now returning to a sensible sustainable level.

Dodge

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timarr 4th Jan 29 of 31
5

In reply to post #292323

Dodge

I was merely pointing out the detail behind the numbers already presented which, if you trace back, were about Paul's comment that Staffline (LON:STAF) may be affected by lower numbers of Eastern European workers arriving in future. As that's a here and now factor the historical changes in levels of migration aren't immediately relevant, although I suppose it might be possible to see if previous changes in those levels had impacted profits.

As to whether immigration is, or was, sustainable I'd hope that was off-topic for these boards.

timarr

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davidhowman 5th Jan 30 of 31

I know someone who works with the local job centre. Part of his business is to take referrals form the Job Centre where the person is more skilled i,e, mostly 'white collar' workers, with the idea of mentoring them, allowing them to meet like minded people, and exploring possible self-employment. He relies on referrals from the Job Centre but despite repeated 'lobbying' they do not refer people. The staff in the Job Centre are often changing and they seem to have no incentive to refer people so I'm not surprised that Staffline are having no success. The Job Centre staff are disillusioned and looking for short terms fixes 'to get bums off seats'. The government get some nice PR with these schemes but the reality is that the Job Centres are not interested in delivering.

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dewigo 30th Jan 31 of 31
1

30th Jan. Big sale of STAF shares announcement by NED at "no one is watching o'clock".

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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 Stockopedia.com on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »

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