Staffline Group (STAF: LSE), the UK-based staffing and employability organisation, reported revenue for the full year ended 31 December 2019 of £1.07 billion, a decrease of 3.9% compared with the previous year.
The group saw challenging trading conditions across all divisions in 2019. In Recruitment, customer confidence was impacted by the delay in the publication of the company’s 2018 full year results, together with a heightened level of uncertainty surrounding Brexit. In the second half, ‘extremely weak’ consumer confidence impacted Staffline’s end customers which fed through to demand for its services.
The group’s revenue decline was partially offset by a full year’s contribution from the acquisitions made in 2018 though the group did not disclose organic revenue results.
Notwithstanding the extended audit, the Board has continued with detailed reviews to further improve its internal controls. These reviews identified accounting errors relating to the preparation of the 2018 annual results, amounting to a reduction to the 2018 opening reserves position of £0.9 million and a reduction of £7.5 million to the 2018 reported profit after tax.
The company faced a challenging year in 2019 after it delayed the publication of its full year results. Staffline shortly thereafter launched an investigation over invoicing and payroll concerns in its recruitment division.
Results below include restated FY 2018 figures.
|(£ millions)||FY 2019||FY 2018||Change|
|Underlying Operating Profit||-0.8||32.8||–|
|Reported Operating Loss||-39.9||-14.7||–|
|Loss for the year||-44.0||-16.0||–|
Gross margin reduction is primarily a result of the lower gross profit margins which are achieved under the new PeoplePlus operating model.
Reported loss before taxation was £48.1 million in 2019 (2018 restated loss: £17.8 million). Reflecting the challenges faced in the year, underlying operating loss was £0.8 million (2018 restated profit: £32.8m).
“2019 was a challenging year for the group, with weak consumer confidence affecting the recruitment businesses and the PeoplePlus division undergoing fundamental transformation following the Work Programme wind-down,” the group stated. It added that the division’s transformation heavily impacting the trading performance.
The group is split into three divisions and will be reported as such from the current year: Recruitment GB, flexible blue-collar recruitment; Recruitment Ireland, generalist recruitment; and PeoplePlus, an adult skills and training provider.
|(£ millions)||FY 2019||FY 2018||Change|
In the Recruitment GB division customer confidence was impacted by the delay to the publication of the 2018 full year results in the first half of 2019, as well as the impact of the uncertainty around the first Brexit deadline of 31 March 2019. In the second half, ongoing uncertainty surrounding Brexit continued to impact the business with lower than anticipated demand from end consumers. It added that when striving for certainty, customers increased their permanent staff at the expense of their temporary workforce.
In Recruitment Ireland, revenue increased due to the full year contribution from Grafton Recruitment, acquired in July 2018. The political and economic uncertainty related to Brexit, and the general election referred to above, had specific impact on Recruitment Ireland in the context of the Brexit issues relating to the Irish border, which became a significant factor in the Brexit negotiations. Revenue generated from temporary recruitment accounted for 99% of total revenue compared to 1% from permanent recruitment.
In PeoplePlus, revenue fell due to the fundamental transformation of the business. The wind-down of the Work Programme reduced revenue by £27.5 million. This was partly offset by revenue growth in other sectors, principally in Justice, which saw revenue growth of £5.8 million, and in Apprenticeships, with revenue growth of £4.3 million.
In February 2020, the company announced CEO Chris Pullen had resigned. The announcement followed the company’s fourth profit warning in less than a year.
It also announced the appointment of Albert Ellis as Non-executive Director in March 2020 and as Chair of the Audit Committee in April 2020 and Richard Thomson as Senior Non-executive Director and Chair of the Remuneration Committee in April 2020. Albert Ellis was previously CEO of Harvey Nash until January 2020.
In April 2020 Staffline announced the appointment of Ian Lawson as Executive Chairman of the group. In May 2020, the company announced the appointment of Daniel Quint to the Board of Directors, with effect from today.
Ian Lawsonsaid, “2019 was a challenging year for the group during which time Staffline faced a number of significant issues. Our new management team are now ensuring that the appropriate measures of strong corporate governance and controls are being put in place. Clearly in the current year, we are operating within an unprecedented macroeconomic climate as a result of the Covid-19 pandemic, however, Staffline’s people have risen to this challenge and maintained an outstanding level of business continuity, enabling us to successfully support our blue-chip customer base.”
“Our strong operational base and leading positions in many of the markets in which we operate sit firmly at the heart of our strategy to create the most reliable, flexible and integrated workforce in the UK, delivering both opportunities and jobs, training and re-skilling, and in-turn to deliver value to all stakeholders,” Lawson said.
The group said its credit facilities have been restructured in June 2020, post period-end.
In current trading, the group said the impact of Covid-19 has been mixed across the group with surges of demand reported in key food distribution and production supply chains, offset by declines in demand from sectors where the government’s shutdown was most severe such as manufacturing, retail and classroom-based training programmes.
It added that the Recruitment divisions have experienced significant variance between customer sectors. Furthermore, PeoplePlus has continued to operate the majority of its services adhering to isolation measures. Staffline said it is anticipated that in light of the increase in unemployment as a result of Covid-19, that the government will launch a round of funding for training and retraining schemes, which PeoplePlus ‘is well-positioned to benefit from.’
Across all three divisions cost saving initiatives, begun in the second half of 2019, have been significantly expanded in light of the challenging trading environment. The Board said it remains cautiously optimistic that each of the three operating divisions will achieve a positive result in 2020 on an underlying operating profit basis.
“The ultimate impact of the Covid-19 pandemic on the economy and Staffline is uncertain, and the Board does not underestimate the operational and macroeconomic challenges that lie ahead for the company, so therefore the company is not making a forecast for 2020,” Lawson said. “However, we take assurance from having well established, market-leading businesses with a committed workforce, and we are appreciative of the efforts of all the group’s lenders who have helped deliver the refinancing and provide a platform that gives us confidence we can navigate this uncertainty.”
As of last trade, Staffline Group traded at £38.71, up 1.87% on the day and 148.86% above the 52 week low of £15.56 set on 23 March 2020. Based on its current share price the company has a market value of £26.19 million.