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FY20 EPS reduced 60% due to the dilution from the placing and open offer
The placing and the open offer add 41m shares (including the 7m open offer), which represents 60% dilution to FY20. Given the share dealings are expected to commence on the 16th July, we assume only 5.5 months of the enlarged share capital in FY19. We note that the share placing will not impact the interims given that the placing takes place in H2. FY20 will be the first full year to show the full impact of the share placing on the share count. We reduce our FY19 and FY20 FD EPS from 65.6p and 106.1p to 37.9p and 42.6p. We do not expect a dividend payment in FY19.
A reminder of the long term attractions of the business
Staffline has leadership positions in the provision of Blue Collar workers in the temporary worker market and in apprenticeships. The benefits of the acquisitions made in FY18 should come through in H2 2019 and FY20, as the acquisitions are integrated. The recapitalisation of the business should help Staffline to reverse the insourcing trend at existing customers and win new customers. Employee engagement continues to improve and there is a strong pipeline in skills and training at PeoplePlus.
Revised CY20 P/E of 2.5x, TP 330p from U/R based on a SoTP
We introduce our new TP of 330p (from U/R), based on a SoTP. This equates to a CY20 P/E of 8x. Staffline trades on a revised CY20 P/E of 2.5x.
FY20 EPS reduced 60% due to the dilution from the placing and open offer
The placing and the open offer add 41m shares (including the 7m open offer), which represents 60% dilution to FY20. Given the share dealings are expected to commence on the 16th July, we assume only 5.5 months of the enlarged share capital in FY19. We note that the share placing will not impact the interims given that the placing takes place in H2. FY20 will be the first full year to show the full impact of the share placing on the share count. We reduce our FY19 and FY20 FD EPS from 65.6p and 106.1p to 37.9p and 42.6p. We do not expect a dividend payment in FY19.
A reminder of the long term attractions of the business
Staffline has leadership positions in the provision of Blue Collar workers in the temporary worker market and in apprenticeships. The benefits of the acquisitions made in FY18 should come through in H2 2019 and FY20, as the acquisitions are integrated. The recapitalisation of the business should help Staffline to reverse the insourcing trend at existing customers and win new customers. Employee engagement continues to improve and there is a strong pipeline in skills and training at PeoplePlus.
Revised CY20 P/E of 2.5x, TP 330p from U/R based on a SoTP
We introduce our new TP of 330p (from U/R), based on a SoTP. This equates to a CY20 P/E of 8x. Staffline trades on a revised CY20 P/E of 2.5x.
FY20 EPS reduced 60% due to the dilution from the placing and open offer
The placing and the open offer add 41m shares (including the 7m open offer), which represents 60% dilution to FY20. Given the share dealings are expected to commence on the 16th July, we assume only 5.5 months of the enlarged share capital in FY19. We note that the share placing will not impact the interims given that the placing takes place in H2. FY20 will be the first full year to show the full impact of the share placing on the share count. We reduce our FY19 and FY20 FD EPS from 65.6p and 106.1p to 37.9p and 42.6p. We do not expect a dividend payment in FY19.
A reminder of the long term attractions of the business
Staffline has leadership positions in the provision of Blue Collar workers in the temporary worker market and in apprenticeships. The benefits of the acquisitions made in FY18 should come through in H2 2019 and FY20, as the acquisitions are integrated. The recapitalisation of the business should help Staffline to reverse the insourcing trend at existing customers and win new customers. Employee engagement continues to improve and there is a strong pipeline in skills and training at PeoplePlus.
Revised CY20 P/E of 2.5x, TP 330p from U/R based on a SoTP
We introduce our new TP of 330p (from U/R), based on a SoTP. This equates to a CY20 P/E of 8x. Staffline trades on a revised CY20 P/E of 2.5x.
FY20 EPS reduced 60% due to the dilution from the placing and open offer
The placing and the open offer add 41m shares (including the 7m open offer), which represents 60% dilution to FY20. Given the share dealings are expected to commence on the 16th July, we assume only 5.5 months of the enlarged share capital in FY19. We note that the share placing will not impact the interims given that the placing takes place in H2. FY20 will be the first full year to show the full impact of the share placing on the share count. We reduce our FY19 and FY20 FD EPS from 65.6p and 106.1p to 37.9p and 42.6p. We do not expect a dividend payment in FY19.
A reminder of the long term attractions of the business
Staffline has leadership positions in the provision of Blue Collar workers in the temporary worker market and in apprenticeships. The benefits of the acquisitions made in FY18 should come through in H2 2019 and FY20, as the acquisitions are integrated. The recapitalisation of the business should help Staffline to reverse the insourcing trend at existing customers and win new customers. Employee engagement continues to improve and there is a strong pipeline in skills and training at PeoplePlus.
Revised CY20 P/E of 2.5x, TP 330p from U/R based on a SoTP
We introduce our new TP of 330p (from U/R), based on a SoTP. This equates to a CY20 P/E of 8x. Staffline trades on a revised CY20 P/E of 2.5x.
FY20 EPS reduced 60% due to the dilution from the placing and open offer
The placing and the open offer add 41m shares (including the 7m open offer), which represents 60% dilution to FY20. Given the share dealings are expected to commence on the 16th July, we assume only 5.5 months of the enlarged share capital in FY19. We note that the share placing will not impact the interims given that the placing takes place in H2. FY20 will be the first full year to show the full impact of the share placing on the share count. We reduce our FY19 and FY20 FD EPS from 65.6p and 106.1p to 37.9p and 42.6p. We do not expect a dividend payment in FY19.
A reminder of the long term attractions of the business
Staffline has leadership positions in the provision of Blue Collar workers in the temporary worker market and in apprenticeships. The benefits of the acquisitions made in FY18 should come through in H2 2019 and FY20, as the acquisitions are integrated. The recapitalisation of the business should help Staffline to reverse the insourcing trend at existing customers and win new customers. Employee engagement continues to improve and there is a strong pipeline in skills and training at PeoplePlus.
Revised CY20 P/E of 2.5x, TP 330p from U/R based on a SoTP
We introduce our new TP of 330p (from U/R), based on a SoTP. This equates to a CY20 P/E of 8x. Staffline trades on a revised CY20 P/E of 2.5x.
We reduce our spot net debt estimate from £85m to £48m, or 1.7x EBITDA, following the raise
For FY19, we reduce our spot net debt estimate from £85m (pre-raise) to £48m, following the successful raise. We expect that the £41m raise will reduce net debt/EBITDA from 3.0x to 1.7x, after adjusting for fees. In FY19 we continue to expect £15.1m of cash costs in respect of NMW (National Minimum Wage) and £7.3m of cash exceptionals in respect of advisor fees and PeoplePlus restructuring. The banks have agreed to waive June covenants and to reset the following two
quarters, as covenants are tested on an LTM basis. Staffline should be within the covenant of 2.5x net debt/EBITDA following the raise. This should reduce in FY20 as the business de-levers. We expect FY20 spot net debt of £29m post-raise, or 0.7x net debt/EBITDA. There are £120m of committed facilities which suggests significant headroom.
Changing responsibility for IR35 will impose costs on the industry but Staffline
intends to take a leadership position IR35 is tax legislation that is designed to combat tax avoidance by workers supplying their services to clients via an intermediary, such as a limited company, but who would be an employee if the intermediary was not used. Such workers are called 'disguised employees' by Her Majesty's Revenue and Customs (HMRC). New rules are set to take effect from FY20. There is no change as such to IR35 tax legislation, what is changing is who is accountable for determining if IR35 applies to a contractor or not and the tax liability in the event of an HMRC investigation. With the current law the onus is on the Personal Service Company (PSC) or Limited Liability Company (LLC) meaning that an individual may choose to take the risk and consider themselves to be a genuine PSC or LLC in order to benefit from the tax advance. Assuming the company isn’t deemed to be a Managed Service
Provider (MSP) under the current rules there is no upstream obligation on either the labour provider or the end hirer in the event of HMRC determining that the PSC or LLC is in fact not a bona fide company and wages should be subject to PAYE. Under the current rules the unpaid PAYE would fall on the PSC/LLC and HMRC will pursue the entity and/or individual but are usually unable to recover this from either the company or the individual. The change passes the responsibility for determining if IR35 applies (an employment status test based on Supervision Direction and Control of working practises) to now rest with the end hirer. Management expects that it will take the leadership position in the industry on the subject and will aim to pass on any additional cost to the end consumer, although this may not happen overnight.
We expect an H1 FD EPS weighting of 27%, vs 43% in FY18
In the proposed placing statement on 27th June, management said that it ‘expects a greater weighting toward the second half of the year than normal due to the transformation in PeoplePlus and the difficulties the Recruitment business has faced in the first half.’ We therefore now expect an H1 EBIT weighting of c.20% vs 42% in FY18. We also introduce our FD EPS estimates for H1 19. Given the difficult trading conditions in the first half of the year we expect H1 19 FD EPS of 10.2p, which
represents an H1 FD EPS weighting of 27% vs. 43% in FY18.
The significant H2 weighting leaves a lot of work to do in a difficult trading environment
The H1 19 FD EPS weighting of 27% leaves a significant amount of work to do in the second half of the year in a difficult trading environment, particularly given the dilution to EPS in H2. We do have concerns over the degree of the weighting to H2, the difficult macro and the impact of the financial concerns on the business. Weak GDP data has not alleviated these concerns. The economy contracted 0.4% in April, and although it rebounded 0.3% in May, June's growth figures will have to be strong to avoid a contraction in Q2 (read here). Growth in the services sector was only 0.1% in April and was flat in May, continuing the longer term slowdown in the services sector that started in mid2018. A difficult market backdrop and the potential departure from the EU in October also add to the uncertainty.
We expect that PeoplePlus returns to profit and that Recruitment sees an uplift from new business, growth of existing customers and cost reductions in H2
We continue to expect EBIT of £25.2m for the FY. We expect PeoplePlus to return £3m of EBIT in H2 as the work programmes end in H1, as restructuring benefits come through and as the new contracts start to contribute. At Recruitment, we assume that H2 19 profits reduce 40% vs H2 18 to £9m, which is consistent with the H1 18 to H1 19 reduction. However, we also assume an uplift in H2 vs H1 atRecruitment, due to a combination of new business, growth of existing customers and cost reduction measures.
Haven’t received from Barclays yet either
liberum were their bookrunner and helped them raise the funds. But as a house I rate them.
Have you guys received your open offer shares? I haven't yet. I am with II.co.uk
Interesting timing of Liberum report, the sceptic in me thinks they are helping someone who wants to flip, seen it happen before on another share
disclaimer wtfdik
Nice 330p target. Multi bagger
Easy double your money here imo
Hey 42trader do you have a link to full report pls?
STAFLINE were making profits but got screwed by HMRC... Now all behind us plus money in bank we are in stronger position... Can not but any on Halifax but can SELL at 107... could we get around 130 today...
BUY from U/R
Target Price 330p from U/R | Published price 105p | *Corporate client of Liberum
We expect an H1 FD EPS weighting of 27%, vs 43% in FY18. The significant H2 weighting leaves a lot of work to do in a difficult trading environment. We expect that PeoplePlus returns to profit and that Recruitment sees an uplift from new business, growth of existing customers and cost reductions in H2. We reduce our spot net debt estimate from £85m to £48m, or 1.7x EBITDA, following the raise. Changing responsibility for IR35 will impose costs on the industry but Staffline intends to take a leadership position. FY20 EPS reduced 60% due to the dilution from the placing and open offer. We provide a reminder of the long term attractions of the business. Revised CY20 P/E of 2.5x, TP 330p from U/R based on a SoTP.