Staffline Regulatory News (STAF)

27 April 2020

STAFFLINE GROUP PLC

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

Company Update

Staffline, the recruitment and training group, provides the following management and operational update:

Board Changes and Corporate Governance

Further to the Company's Directorate Changes announcement on 24 April 2020, Staffline is pleased to announce the appointment of Ian Lawson as Executive Chairman of the Group with immediate effect. This appointment follows a six-week period during which Ian has been acting as an independent board adviser to the Company.

Ian brings over 15 years' public company board-level experience across both the support services and engineering sectors. He retired from Severfield PLC in January 2018 after serving over four years as Chief Executive, and prior to this he was a main board director of Kier Group PLC from 2005 to 2013, with responsibilities for the Services, Property and Residential Divisions.

As Executive Chairman, Ian will oversee both the operational and strategic running of the business, alongside his board responsibilities as a member of the Audit and Remuneration Committees and Chair of the Nominations Committee.

Following Chris Pullen's resignation on 19 February 2020, Chris has continued in his role, while an orderly succession has been arranged, in order to maintain business continuity. Following Ian's appointment, Chris will no longer be a member of the board of directors.

Richard Thomson, who joined the board as Non-Executive Director on 17 September 2019, will become Senior Independent Director with immediate effect and will also Chair the Remuneration Committee.

Albert Ellis, who recently joined the board as Non-Executive Director after over 21 years at Harvey Nash, the technology recruitment and IT solutions group, has taken the position of Chair of the Audit Committee of the Board. Albert is a qualified Chartered Accountant.

Daniel Quint remains in his role as Interim Chief Financial Officer with a focus on completing the Company's 2019 audit, which the Board remains confident will be completed within the statutory reporting timeframe.

Together, the Board believes these changes significantly improve the corporate governance structure of the Group.

Current Trading and Covid-19 update

Recruitment

As announced on 25 March 2020, the Company's Recruitment division is experiencing significant variance in levels of demand between customer segments as a result of the COVID-19 pandemic. As previously disclosed, Staffline has responded well to the sudden and unpredicted surge in demand within the food sector given the size of the Company's database, geographic reach and investment in digital worker engagement. The Company's web-based platform continues to successfully connect displaced workers with the vital roles required in the food supply chain. A record 87,000 digital applications were submitted through the www.staffline.co.uk and www.feedthenation.co.uk gateways in the month of March, over 2.5 times that of February.

While demand within the food sector, including food processing, food logistics and supermarkets, has been strong to date, demand from other sectors, such as manufacturing, retail and automotive, has diminished considerably. On a net basis, despite food sector customers representing approximately 60% of Staffline's client base, this growth in demand is not currently large enough to offset the temporary shutdown of the majority of other clients in non-food sectors. Accordingly, the Company has been taking contingency steps, which have included utilising the Government's Furlough scheme where possible, noting this has been applied to certain temporary workers in addition to certain of the Company's permanent employees.

PeoplePlus

Well-developed business continuity and resilience plans, together with digital operating models, have meant that the business can continue to operate the majority of its services adhering to recent 'isolation measures'. However, loss of classroom delivery, and funder positions moving towards providing cost support only will impact certain areas. The in-year new business intake which had been forecast to be strong in 2020 has also weakened. Mitigating actions have been put in place to support management's continued drive to clear profitability notwithstanding the wider market disruption.

Liquidity and financing

The Company is benefitting from HMRC's measures designed to support businesses in light of COVID-19, particularly with respect to VAT deferral, which has significantly improved the Company's liquidity through the end of 2020. This is despite a smaller offsetting working capital impact relating to timing of payments to furloughed staff.

The Board expects to agree and implement a revised financing structure in respect of its main banking facilities ahead of the publication of the Company's annual results for the year ended 31 December 2019 as good progress has been made.

2019 Audit

The Company continues to progress with its 2019 audit and expects to publish its annual results for the year ended 31 December 2019 during June 2020.

Outlook

The Company has now completed its reforecasting exercise, and while the Board is not in a position to provide explicit guidance on the out-turn for the year ending 31 December 2020 due to the current uncertainty surrounding the impact of COVID-19, the board is reassured that each of the two divisions are cautiously optimistic about achieving a positive result on an underlying EBITA basis. Considering the impact of COVID-19 on volumes in certain sectors across our business, the Board would see this as a strong result and a demonstration of the resilience of the business.

This reforecasting exercise will form part of a wider strengthening of the Group's financial controls and reporting framework designed to improve the quality and timeliness of financial information, which is an ongoing priority for the newly comprised Board. In turn the Board will look to provide clearer information to the market on its financial position and in particular its 2021 outlook, which should substantially benefit from the positive structural changes underway in the business.

Richard Thomson, Senior Independent Director of Staffline, commented:

"We are delighted to welcome Ian to the board. Ian is an extremely experienced PLC executive and we are pleased to announce an appointment of such calibre. Having acted as an independent adviser to Staffline's Board over the last six weeks, Ian understands the challenges that we face and is well-placed to lead the business.

"The Board would also like to thank Chris for his contribution to Staffline over the last five years, initially as CFO and latterly as CEO and for his recent work in ensuring an orderly hand over.

"Whilst it is clearly a challenging time, we now believe we have a Board in-place with the depth and breadth of experience to navigate the business through the current period of uncertainty."

Ian Lawson, Executive Chairman of Staffline, also commented:

"I am delighted to be joining Staffline and firmly believe that despite facing a number of challenges in the medium term, I've seen first-hand over the last six weeks that it has a strong and supportive collective in-place capable of meeting the needs of our blue-chip customer base."

The following information is disclosed pursuant to Schedule Two, paragraph (g) of the AIM Rules for Companies in relation to Ian Lawson's appointment as Chairman of the Board:

Ian has no interests in the shares of Staffline Group plc. There is no other information that is required to be disclosed pursuant to Schedule Two, paragraph (g) of the AIM Rules for Companies.

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 Phil Gormley, Company Secretary.

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 c.460 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.