REG - Staffline Group PLC - Trading Update & Notice of Results

StafflineAnnouncement

24/01/2023 07:00

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RNS Number : 6151N  Staffline Group PLC  24 January 2023

24 January 2023

 

STAFFLINE GROUP PLC

 

("Staffline", the "Company", or the "Group")

 

Trading Update

&

Notice of Results

 

-      Full Year Results marginally ahead of market expectations

-      Net cash position at the year-end highlights ongoing balance sheet
strength

 

Staffline, the recruitment and training group, provides the following trading
update for the year ended 31 December 2022 ('FY 2022'), as well as the outlook
for 2023 ('FY 2023').

 

Financial Highlights(1)

 

                                                FY  2022   FY 2021   Change
 Revenue                                        £946.8m    £942.7m   +0.4%
 Gross profit                                   £83.2m     £82.8m    +0.5%
 Gross profit %                                 8.8%       8.8%      -
 Underlying operating profit(2)                 £11.6m     £10.3m    +12.6%
 Gross profit to operating profit conversion %  13.9%      12.4%     +1.5pts
 Net cash (pre IFRS 16)                         £5.0m      £6.9m     -£1.9m
 Net cash (post IFRS 16)                        £0.1m      £2.3m     -£2.2m

 

(1)Presented on a continuing basis. The figures are unaudited and provisional.

(2)Underlying results exclude goodwill impairment, amortisation of intangible
assets arising on business combinations, reorganisation costs and other
non-underlying charges

 

 

·   Revenue increase of 0.4% driven by new client wins, including BMW,
during the year and also a full year contribution from Restart, offset by
softening demand from customers who had benefited from COVID

·    Gross profit from Recruitment businesses up 4.7% offsetting reduction
in PeoplePlus

·    Tight cost control contributed to the 1.5ppts improvement in gross
profit to operating profit conversion

·   Strengthened balance sheet with strong trading cashflow, despite
repayment of c.£12m of COVID related government support and advance payments

·    Net cash ahead of expectations

 

Staffline is pleased to report that trading across FY 2022 remained solid,
particularly in the second half, with underlying operating profit marginally
ahead, and cash flows substantially ahead of market expectations.

 

This positive performance has been supported by further operational progress
across the Group, as highlighted by two significant recruitment customer wins,
the first profit recognised from the Restart contract, and robust trading
during the peak pre-Christmas period boosted by the FIFA World Cup.

 

The Group has pursued a policy of organic growth with a focus on cost control
and working capital, conserving its cash reserves, and further strengthening
its balance sheet. The post-IFRS16 net cash of £0.1m at 31 December 2022
(2021: £2.3m) is stated after repayments of the final £5.8m tranche of HMRC
Deferred VAT Relief and £6.2m of COVID related advance payments to the
Ministry of Justice. The substantial progress was achieved through strong
trading cash generation in line with the operating profit performance,
combined with tight control of working capital. At 31 December 2022, the Group
continued to have significant financing headroom relative to available
committed banking facilities of c.£75m. The Group is benefitting from a
three-year interest rate cap taken out in Q4 2021.

 

Operational Update

 

The challenging macro-economic climate worsened as the year progressed, with
higher wage inflation fuelled by tight labour markets and increasing interest
rates, which were above market expectations at the start of the year.
Nevertheless, all three of the Group's divisions reported operating profits.

 

Recruitment GB

The Group's Recruitment GB division successfully implemented a major customer
win, BMW Group, whilst also generating strong organic growth in two existing
customers. In addition, the division began recruiting for the travel sector as
it recovered from the pandemic, although security clearance and constrained
customer capacity to onboard new employees delayed any additional contribution
to the FY 2022 results.  Investment in headcount and technology improved
customer fulfilment, despite widespread labour shortages, and expansion of the
Group's branch network has helped to create a solid platform for future
growth. Record results reported by Datum RPO, the Group's managed services
business, underscored the trend for customers to consolidate their recruitment
supply chains using an independent expert. Omega, the Group's technical and
engineering recruiter, also posted strong increases in its permanent
recruitment fees, which across the division were up c.80% on FY 2021,
representing a c.179% increase over the last two years. The division continued
to control overhead costs tightly, increasing its gross profit to operating
profit conversion rate from 14.0% to 16.0%.

 

Recruitment Ireland

The Recruitment Ireland business is more dependent on the permanent
recruitment market and less dependent upon temporary placements than our
Recruitment GB business. A 45% increase in permanent recruitment fees drove
Staffline's Ireland recruitment business to deliver the division's strongest
results since 2019, as well as a record trading performance in the Republic of
Ireland. A pivot to white-collar recruitment in the Republic of Ireland, the
opening of a new office in Limerick, and the retention of key public sector
contracts in Northern Ireland, all contributed to growth across 2022. The
strength of permanent recruitment, and for the first time, executive search,
helped increase gross margins. Additionally, tight control of the cost base
resulted in the gross profit to operating profit conversion rate improving to
24.8%, up from 22.1% in the prior year.

 

PeoplePlus

PeoplePlus reported a solid performance in FY 2022 but was held back by lower
revenues in Skills training. Strong demand for labour resulted in potential
candidates bypassing additional training programmes and moving straight into
employment. Conversely, these labour market conditions aided our Employability
programmes which performed particularly well, and we were pleased to see
PeoplePlus successfully deliver profit from the Restart sub-contracts during
the year, with the division reporting its first operating profit from those
contracts in the second half of 2022. Certain funding claims made by
PeoplePlus for services delivered in 2020 and earlier years are now the
subject of a dispute. While we are vigorously defending our position and the
final outcome is uncertain, we have decided to provide £2.5m which, based on
the legacy nature of the item, has been recorded through reserves.

 

Outlook

 

The Group has delivered a strong performance across FY 2022, exceeding
expectations in terms of both profitability and cashflow, all the while
remaining resilient despite facing a number of macroeconomic headwinds.
PeoplePlus was adversely impacted by the skills and training markets, offset
by a solid performance across the Group's recruitment activities, reflecting a
relatively buoyant market through most of 2022 for permanent recruitment and
new business.

 

Looking ahead, we expect the macroeconomic headwinds to persist. Low
unemployment will continue to constrain volumes in PeoplePlus' Skills and
Restart businesses.  While we expect to grow market share in the competitive
temporary labour market, the Recruitment divisions will not be immune to the
broader short term market challenges, where data is showing that demand for
permanent recruitment is weakening.

 

In the context of current expectations for the UK economy, the Board has
adopted a cautious approach to FY 2023.  However, the strengthened balance
sheet, experienced management team and healthy pipeline, mean the Group is
well placed to capitalise on the considerable market opportunities which lie
ahead.

 

Albert Ellis, Chief Executive Officer of Staffline, commented:

 

"We are pleased to report a solid trading performance across the Group in FY
2022, which is a testament to the outstanding dedication and commitment from
all our employees and partners. These results not only reinforce Staffline's
position as a market leader in terms of organic growth, but underscore the
clear benefits of its highly cash generative business model.

 

As the UK cost of living crisis deepens and the much-publicised global macro
headwinds continue to swirl, there is no question that our core markets have
become more challenging. Whilst we are mindful of the challenges ahead, we
firmly believe Staffline, supported by our sizable market footprint, sector
diversity, and unrivalled track record in service delivery and innovation,
remains well placed to capitalise on considerable market opportunities and
further grow our market share."

 

Notice of Results

 

The Group expects to report its results for FY 2022 on Tuesday, 21 March 2023.

 

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulation
(EU) No. 596/2014 as amended by The Market Abuse (Amendment) (EU Exit)
Regulations 2019. Upon the publication of this announcement via the Regulatory
Information Service, this inside information is now considered to be in the
public domain.

 

For further information, please contact:

 

 Staffline Group plc                                                via Vigo Consulting

 www.stafflinegroupplc.co.uk (http://www.stafflinegroupplc.co.uk)

 Albert Ellis, Chief Executive Officer

 Daniel Quint, Chief Financial Officer

 Liberum (Nominated Adviser and Broker)                             020 3100 2222

 www.liberum.com (http://www.liberum.com/)

 Richard Lindley / William Hall

 Zeus (Joint Broker)                                                020 3829 5000

 www.zeuscapital.co.uk (http://www.zeuscapital.co.uk)

 David Foreman (Investment Banking)

 Nick Searle (Sales)

 Vigo Consulting (Financial PR)                                     020 7390 0230

 www.vigoconsulting.com (http://www.vigoconsulting.com)             Staffline@vigoconsulting.com

 Jeremy Garcia / Kate Kilgallen

 

Market Abuse Regulation:

 

For the purposes of MAR, Article 2 of Commission Implementing Regulation (EU)
2016/1055 and the UK version of such implementing regulation, the person
responsible for arranging for the release of this Announcement on behalf of
the Company is Daniel Quint, Chief Financial Officer.

 

About Staffline

 

Providing workforce solutions

Staffline is the UK's market leading Recruitment and Training group. It has
three divisions:

 

Recruitment GB

Staffline is a leading provider of flexible blue-collar workers, supplying
c.37,000 staff per day on average to around 450 client sites, across a wide
range of industries including agriculture, supermarkets, drinks, driving, food
processing, logistics and manufacturing.

 

Recruitment Ireland

The Recruitment Ireland business is a leading end to end solutions provider
operating across twenty industries, ten branch locations, fifteen onsite
customer locations, supplying c.5,000 staff per day on average, and offering
RPO, MSP, temporary and permanent solutions across the island of Ireland.

 

PeoplePlus Division

PeoplePlus is leading skills and employability business with a clear purpose
to help people transform their lives, get jobs and keep jobs, and develop
their careers. The division works with employers to develop workforces of the
future, and with central, local and devolved governments to support their
economic and social policy agendas.

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