Staffline Regulatory News (STAF)

25 March 2020

STAFFLINE GROUP PLC

("Staffline" or the "Company")

Business Update

Staffline, the recruitment and training group, provides the following update on both trading and the impact of the COVID-19 pandemic.

Market and COVID-19 update

As a result of the very early development of the COVID-19 pandemic, the Company's Recruitment business is experiencing significant variance between customer segments. There is a marked increase in demand in the food sector, including food processing, logistics and supermarkets. While this increase in demand may be temporary, Staffline is well-placed to respond to this sudden and unpredicted surge in consumer demand given the size of the Company's database, geographic reach and technology-enabled operating platform. Furthermore, the Company has launched a new web-based platform to act as a coordination point between displaced workers from the travel and hospitality sectors, providing live opportunities in the food supply chain. Through Staffline's dedicated site, www.feedthenation.co.uk, the Company has been able to connect displaced workers immediately with the vital roles required in the food supply chain.

Conversely, demand from other sectors such as retail, automotive and manufacturing has diminished considerably with the Group's limited exposure to white collar and permanent recruitment also impacted. It is too early to assess the net impact of these changes in demand mix. The Company is in the process of conducting a bottom up reforecasting exercise incorporating these considerations.

Within PeoplePlus, well-developed business continuity and resilience plans mean that the business can continue to operate the majority of the division's services despite recent 'isolation measures', according to customer requirements, including through digital delivery models. The Company's predominately central, local and devolved Government funding streams mean that the Group is having positive discussions in how these will be sustained through this exceptional period. Whilst not all discussions are yet concluded, some funders have already confirmed they intend to maintain funding levels. This gives PeoplePlus considerable reassurance on its core revenue levels and ability to navigate this period. Mitigating the impact on PeoplePlus' apprenticeship levy market is a key area of focus for PeoplePlus, as management is anticipating a reduction in new apprenticeship starts due to reduced private sector activity despite the division's digital delivery model. As a leading provider of skills support to the unemployed, PeoplePlus is also well-positioned to support the wider challenges of the UK economy at this time.

HMRC measures

On Friday, 20 March 2020, the Government announced that no VAT payments due from businesses between 20 March 2020 and the end of June 2020 would be required to be made, with payment being deferred until the end of the tax year. HMRC has not yet issued detailed guidance on how the tax year will be defined - the tax year for VAT typically runs to the end of 31 March, 30 April or 31 May (depending on the VAT return periods of an individual business). Therefore, the Company's working assumption is that VAT payments for the period from 20 March 2020 to 30 June 2020 will be deferred until March 2021. This payment delay provides the Company with an immediate and significant short-term liquidity improvement. The Company is in ongoing discussions with HMRC regarding other supportive measures.

Liquidity and financing

The VAT deferral noted above provides the Company with an immediate and significant short-term liquidity improvement and improved working capital profile to support the Company as it responds to near-term demand from the food sector.

As reported previously, the Company remains in regular and constructive dialogue with its lending banks who remain supportive in these unprecedented times. The Board expects to reach agreement with its lending banks on revised terms that will mitigate the risk of any potential covenant issues.

Audit

The audit in relation to the year ended 2019 is progressing with the Company's new auditors Grant Thornton UK LLP, and the Board is confident that this will be completed within the statutory reporting timeframe.

Outlook

The Company welcomes HMRC's measures with respect to VAT, which will improve the Company's short-term liquidity and working capital profile as it responds to near-term demand from the food sector and the Company remains encouraged that the Government has indicated that funding for training will be maintained.

However, given the evolving nature of the COVID-19 pandemic, it is too early to assess its medium-term impact on the Company and therefore trading for the current financial year. While the implications of the COVID-19 pandemic are difficult to determine, the Board is confident in the long-term structural growth drivers of the markets in which the business operates.

The Board will continue to monitor the situation closely and will update the market further as appropriate.

Staffline's priority remains the health and wellbeing of the Company's customers, partners and employees and Staffline are continuing to ensure that the appropriate measures and precautions are in place for their safety.

For further information, please contact:

Market Abuse Regulation

This announcement is released by Staffline Group plc and contains inside information for the purposes of the Market Abuse Regulation (EU) 596/2014 ("MAR") and is disclosed in accordance with the Company's obligations under Article 17 of MAR. The person who arranged for the release of this announcement on behalf of Staffline Group plc was Chris Pullen, Group Chief Executive Officer.

About Staffline - Recruitment, Training and Support

Enabling the Future of Work™

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

Recruitment Division

Staffline is the UK's leading provider of flexible blue-collar workers, supplying over 60,000 staff per day to c. 1,600 private sector clients, across a wide range of industries including agriculture, drinks, driving, food processing, logistics and manufacturing. It operates from over c460 locations in UK, Republic of Ireland and Poland. Its world leading Customer Experience platform provides optimised customer-based staffing management solutions whilst providing market-leading levels of job satisfaction for workers.

PeoplePlus Division

Staffline is the leading adult skills and training provider in the UK, delivering apprenticeships, adult education, prison education and skills-based employability programmes across the country.

Skills and Training - market leading provider of Apprenticeships (both Levy and non-Levy), learning and development, adult education and health and well-being programmes to the Private and Public sector.

Justice and Community - largest independent provider of education and training services for prisoners and ex-offenders, as well as individual support services for carers and people with disabilities, both at home and in the work place.

Employability - market leading provider of programmes providing back-to-work education, skills support services to the unemployed and enterprise advice to individuals wanting to start their own business.