Staffline Regulatory News (STAF)

19 Mar 2007 07:03

Staffline Recruitment Group plc19 March 2007 Embargoed until 0700 Monday, 19 March 2007 STAFFLINE RECRUITMENT GROUP PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006 Further double-digit growth- results significantly ahead of last year Staffline Recruitment Group plc ("Staffline" or "the Group"), a leading providerof recruitment and outsourced human resource services to industry, todayannounces its preliminary results for the year ended 31 December 2006. Financial highlights: * Revenue up 37% to £84.1m (2005: £61.5m) * Operating profit up 23% to £3.8m (2005: £3.1m) * Profit before tax up 35% to £3.4m (2005: £2.5m) * Net margin increased to 2.8% (2005: 2.7%) * Basic earnings per share up 41% to 11.3p (2005: 8.0p) * Total dividend up 42% to 2.7p (2005: 1.9p) * Net debt of £6.3m (2005: £6.2m) * Gearing 31% (2005: 34%) * Cost of funding reduced by 0.8% to 1.2% over Base Rate Operational highlights: * Continued significant growth in OnSites: - a net increase of 18 since 31 December 2005 to total 71 * Industrial branch network performed extremely well since reorganisation * Average number of contractors each day increased by 25% * Senior team expanded with the appointment of a new South of England Regional Director * First major labour supplier to be awarded a Gangmaster Licence Current trading and prospects: * Trading in the first eight weeks of 2007 has been ahead of the same period last year, and in line with our expectations * 2007 will benefit from full year effect of recent OnSite and Industrial branch openings * Acquisition announced today of Onsite Partnership Limited for a cash consideration of £2 million plus potential deferred consideration dependent on the achievement of profit targets (see separate release) Commenting on the results, Andy Hogarth, Managing Director, said: "The Group has continued to make excellent progress throughout the year and weare pleased to be able to report a further set of strong results. In addition,our current pipeline of OnSite prospects is stronger than it has ever been,giving the Board confidence that the Group will continue to grow and deliver afurther year of progress in 2007. "Today also marks the Group's first acquisition since flotation in 2004. We aredelighted to welcome Onsite Partnership into the Staffline fold and look forwardto working with them to continue to grow the Group, whilst maintaining theexceptional standards of customer service for which we are known." For further information, please contact: www.staffline.co.uk --------------------- Staffline Recruitment Group plc 0115 950 0885Andy Hogarth, Managing Director 07931 175775Carole Harvey, Finance Director 07904 262132 Oriel Securities LimitedNatalie Fortescue 020 7710 7615 SmithfieldMiranda Good / Reg Hoare 020 7360 4900 About StafflineStaffline Recruitment Group plc's main business is as a specialist supplier of"blue collar" temporary and contract staff to industry. It provides a fullyoutsourced service, managing the temporary recruitment function of its clientson their premises, at 71 OnSite locations nationwide and also has a network of16 industrial branches. In addition, the Group has a smaller division calledTechsearch which specialises in temporary and permanent engineering, IT, HR andFMCG placements and operates from 4 branches. The Group, which is managed from ahead office in Nottingham, was founded in 1986 and was admitted to AIM inDecember 2004 (Ticker: STAF.L). Print resolution images are available for the media to view and download from www.vismedia.co.uk STAFFLINE RECRUITMENT GROUP PLCChairman's statementFor the year ended 31 December 2006 Introduction I am pleased to report Staffline Recruitment Group's results for the year ended31 December 2006 which are significantly ahead of last year. Staffline specialises in the matching of un-skilled and semi-skilled temporaryworkers to suitable positions within the food production, manufacturing, andlogistics sectors, with 64% of Group revenues derived from the food productionsector which is generally less cyclical. This is achieved by providing anoutsourcing service ("OnSite") which includes skills and reference checkingapplicants, health screening, training and ongoing supervision. Our Techsearch division places skilled applicants, both temporary and permanent,into the engineering, IT, HR, and fast moving consumer goods (FMCG) sectors, aservice which is complementary to many Staffline clients. The Year in Review The results for the year reflect a strong trading performance, consistingentirely of organic growth. The main driver of this growth continues to be ourOnSite division, which now represents 68% of Group turnover and has increasedthe number of OnSites it operates from 53 at the end of 2005 to 71 by 31December 2006. Dividends I am pleased to announce that the Directors recommend the payment of a finaldividend for the year of 1.7p per share which, subject to approval at the AnnualGeneral Meeting, will be paid on 5 July 2007 to shareholders on the register at8th June. Together with the interim dividend of 1.0p per share paid on 17November 2006, this will make the total payment for the year 2.7p per share, anincrease of 42% on the previous year. The Directors intend to continue to pursuea progressive dividend policy. Our People All our own salaried staff who have completed in excess of six months servicewith the Company have continued to receive share options and are thereforeincentivised in line with the future success of the Group. The options issued atthe time of the flotation in December 2004 have now vested and some staff haveexercised options in early 2007 representing 20% of all outstanding optionsissued at that time. I would like to thank all staff for their continuedcommitment and performance throughout the year. Summary I am delighted with the progress of the Group during its second full year sinceadmission to AIM. In line with our stated strategy, we have established strongrelationships across a broad customer base, providing us with an excellentplatform from which to expand the Group's service offering further and todevelop our national presence more fully. Derek MappChairman19 March 2007 STAFFLINE RECRUITMENT GROUP PLCManaging Director's statementFor the year ended 31 December 2006 The Group has continued to make excellent progress throughout the year and weare pleased to be able to report a further set of strong results. Financial Results Revenue for the year rose by 37% to £84.1m in 2006 (2005: £61.5m). Gross profitmargins have continued to decrease, as expected, to 16.8% (2005: 19.2%). This isa reflection of the Group's policy to grow the OnSite business, which has alower gross profit. However, the benefits of the Onsite model which achieves ahigher net margin due to its lower operating costs and the much greater volumes,are reflected at the operating profit level. Operating profit has improved by23% during the year to £3.8m (2005: £3.1m). Finance costs have continued to decrease during the year as we have reduced theamount of term loan outstanding, benefited from the reduction in funding costsnegotiated with our bankers in 2006 and continued our push to reduce our debtordays. Profit before tax has increased by 35% to £3.4m (2005: £2.5m), whilst profitafter tax has increased by 41% to £2.3m (2005: £1.7m). Basic earnings per sharehave increased by the same proportion, to 11.3p (2005: 8.0p), giving a cover inexcess of four times on the total dividend for the year of 2.7p (2005: 1.9p). Net debt increased very slightly during the year, to £6.3m (2005: £6.2m). Thiswas due to our change of status to a large company for tax purposes, whichresulted in us having to pay the full tax charge of £0.8m for 2005 as well as£0.6m in advance for the current year's charge. However, gearing fell to 31%from 34% last year, and interest cover rose to 9.5 times (2005: 5.3), puttingthe Group in a healthy financial position to invest for growth. As reported at the interim stage, we renegotiated the length and pricing of ourterm funding with Bank of Scotland. The period of the term loan has beenextended to 2013, reducing the minimum annual repayment to £0.5m from £1.0m.This reduction will give us more flexibility in managing our working capitalrequirements as well as allowing us more discretion in pursuing a progressivedividend policy. In addition, we have moved our working capital fundingrequirements from an invoice discounting facility to an overdraft. Both tranchesof funding benefit from a lower interest rate, currently 1.2% over bank baserate (2005: 2.0%) with a ratchet which adjusts the bank's margin, dependant uponthe Group's future performance and the size of the facility. Strategy At the time of the flotation we stated that our strategy is to continue theorganic growth of the Group by expanding the number of our OnSite locations andthrough the selective opening of more high street branches, and this remains ourmain focus. As indicated at the time of the Group's Admission to AIM in 2004,selective acquisitions of complementary companies that improve our serviceoffering are also considered. Operational Review Our AIM listing has provided the Group with greater visibility and credibilityamongst its existing and potential customers, thereby supporting further growthduring the year. We have been able to increase the number of OnSites from 53 on 31 December 2005to 71 on 31 December 2006 and have further increased this number to 73 by 28February 2007. This represents a mix of both additional OnSites being taken onby existing customers and setting up OnSites for new customers. Although our new business wins have continued to be predominantly in the foodproduction sector, it now represents a lower proportion of our turnover than ithas historically, having fallen from 75% of turnover in 2005 to 64% at the closeof 2006. Conversely, strong demand from both existing and new clients in the logisticssector has seen this proportion of our business increase to 24% from 14% duringthe year. Sales in manufacturing, increased slightly as a proportion of turnoverby 1%, to 12%. We are confident that this growth in our OnSite proposition reflects theincreased demand for our service, which offers many advantages for our clientsin terms of operational efficiency and workforce management. During the year, we reduced the number of high street Industrial branches by oneto 16 following the amalgamation of our Liverpool and Skelmersdale operations.This resulted in a reduction in operating expenses with no loss of revenue. Wehave opened two new branches in the early part of 2007, in Milton Keynes andWrexham, as part of our strategy of organic geographical expansion. Techsearch, our skilled brand, had a mixed year. Permanent placements held upwell compared to 2005 but the loss of a contract for the supply of skilledtemporary staff and a considerable reduction in demand from one customer,negatively impacted the results for the full year. Demand for temporary andpermanent staff has however been very strong in the first quarter of 2007. Thenumber of consultants employed has continued to be increased. We intend tocontinue to expand this division, although at present it accounts for less than10% of Group turnover. In total, over the course of the year 27,537 people were employed through us,some for a few days, others for the whole year. During the second half of theyear the proportion of this number who originated from the new EU accessionstates rose from 37% to 52%. Industry Background Staffline aims to continue to be at the forefront of maintaining the veryhighest standards of ethics within its sector. Many of the issues facing usremain the same as last year, whilst further developments have continued thefocus on employment practices. Gangmaster Licensing The Gangmaster (Licensing) Act 2004 established the Gangmasters LicensingAuthority to set up and operate the licensing scheme for labour providersoperating in the agricultural, shellfish gathering and associated processing andpacking sectors. We applied for a licence and were the first major supplier tobe awarded one. The new legislation has had a direct and positive impact on ourbusiness, with a number of new contracts having been won as a result of theclients' previously incumbent agencies failing to comply with the licensingrequirements. EU Accession State Workers The flow of workers arriving in the UK has continued to increase during the yearand we estimate that at present 52% of our workers are citizens of one of thenew EU accession states. Due to the high numbers of people already in the UK andavailable for work, we have been able to scale down our recruitment team workingin Poland and now recruit largely by word of mouth benefiting from ourreputation as a good labour provider. Verification Systems A large number of illegal workers continue to attempt to register with us, inline with the experience of similar agencies across the temporary unskilledworker industry. To maintain our high standards in ensuring the legality of ourworkers, we have increased our investment in IT to ensure we remain fullycompliant with the law, whilst also strengthening our relationships withrelevant government agencies in order to remain fully conversant with the latestexamples of forged documentation. Union Recognition During the year we signed a recognition agreement with the Union of Shop,Distributive and Allied Workers. They work with a number of our existing clientsand their permanent staff. Health & Safety We fully recognise our responsibility to ensure that we only allow our workersto work in as safe a working environment as possible and implement a system ofchecks to ensure our clients comply with Health and Safety legislation. Employees The number of our own salaried employees grew from an average of 188 during 2005to an average of 213 during 2006, with a total of 47 employees who were promotedduring the year. We continue to have a strong staff retention record, with staffturnover during the year having increased slightly to 29%, but stillsignificantly below the industry average of 50%. Our employees consistently strive to increase customer service, and theirsuccess in this field is underlined by the response to our surveys whichindicate very high levels of customer satisfaction. Yet again I continue to be enormously impressed at the hard work and dedicationto customer service that our staff show and I thank them for all theirenthusiasm. They continue to make Staffline a great place to work. Current Trading and Prospects Trading in the first eight weeks of 2007 has been ahead of the same period lastyear, and in line with our expectations. 4 new OnSites were opened in the last three months of 2006, the full annualisedeffect of which will benefit the current year. The 2 new OnSites which haveopened in the first two months of 2007 also underpin our plans for the yearahead. Our new Industrial branches will also begin to contribute this year. In addition, our current pipeline of OnSite prospects is stronger than it hasever been, giving the Board confidence that the Group will continue to grow anddeliver a further year of progress in 2007. Andy HogarthManaging Director19 March 2007 STAFFLINE RECRUITMENT GROUP PLCSummarised consolidated income statementFor the year ended 31 December 2006 Note 2006 2005 £'000 £'000 Continuing operations Sales revenue 84,111 61,479Cost of sales (69,975) (49,665) --------- -------- Gross profit 14,136 11,814 Administrative expenses (10,383) (8,759) --------- -------- Operating profit 3,753 3,055 Finance costs (395) (573) --------- -------- Profit before taxation 3,358 2,482 Tax expense 3 (1,014) (824) --------- -------- Net profit for the year 2,344 1,658 ========= ======== Earnings per ordinary share 4Basic 11.3p 8.0p ========= ========Diluted 10.9p 7.8p --------- -------- STAFFLINE RECRUITMENT GROUP PLCConsolidated statement of changes in equityFor the year ended 31 December 2006 Share based Profit Share payment Share and loss Total capital reserve premium account £'000 £'000 £'000 £'000 £'000 At 1 January2005 2,082 5 14,257 124 16,468Net profitfor - - - 1,658 1,658the yearEmployeeshare based - 63 - - 63compensationDividends - - - (146) (146)paid ------- ------- ------- ------- -------At 31 December 2,082 68 14,257 1,636 18,0432005 Net profitfor - - - 2,344 2,344the yearEmployeesharebased - 39 - - 39compensationDividends - - - (458) (458)paid ------- ------- ------- ------- -------At 31December 2,082 107 14,257 3,522 19,9682006 ======= ======= ======= ======= ======= STAFFLINE RECRUITMENT GROUP PLCSummarised consolidated balance sheet at 31 December 2006 2006 2005 £'000 £'000 AssetsNon currentGoodwill 22,326 22,326Plant and equipment 204 88 -------- -------- 22,530 22,414 -------- -------- CurrentTrade and other receivables 13,189 8,663Cash and cash equivalents 823 552 -------- -------- 14,012 9,215 -------- --------Total assets 36,542 31,629 ======== ======== LiabilitiesCurrentTrade and other payables (9,139) (8,720)Borrowings (3,807) (950)Current tax liabilities (478) (816) -------- -------- (13,424) (10,486) Non currentBorrowings (3,150) (3,100) -------- --------Total liabilities (16,574) (13,586) EquityShare capital (2,082) (2,082)Share premium (14,257) (14,257)Share based payment reserve (107) (68)Profit and loss account (3,522) (1,636) -------- --------Total equity (19,968) (18,043) ======== ======== Total equity and liabilities (36,542) (31,629) ======== ======== STAFFLINE RECRUITMENT GROUP PLCSummarised consolidated cash flow statementFor the year ended 31 December 2006 2006 2005 £'000 £'000 Cash flows from operating activitiesProfit before taxation 3,358 2,482Adjustments for:Depreciation of plant and equipment 93 305 -------- --------Operating profit before changes in working capital andprovisions 3,451 2,787 Change in trade and other receivables (4,526) (762)Change in trade and other payables 2,877 726 -------- --------Cash generated from operations 1,802 2,751 Adjustment for debt issue costs 50 50Employee equity settled share options 39 63Taxes paid (1,352) (290) -------- --------Net cash inflow from operating activities 539 2,574 Cash flows from investing activitiesPurchases of plant and equipment (209) (108) -------- --------Net cash used in investing activities (209) (108) ======== ======== Cash flows from financing activitiesRepayment of bank loans (375) (1,000)Movement in invoice discounting facility (2,458) (1,139)Dividends paid (458) (146) -------- --------Net cash from financing activities (3,291) (2,285) Net (decrease)/increase in cash and cash equivalents (2,961) 181 Cash and cash equivalents at beginning of period 552 371 -------- -------- Cash and cash equivalents at end of period (2,409) 552 ======== ======== £2,458,000 of the decrease in cash and cash equivalents in the year ended 31December 2006 reflects the change by the Group of the use of an invoicediscounting facility to an overdraft. This change was made to achieve greaterworking capital flexibility and cost effectiveness. Prior to this change theGroup experienced an increase in cash and cash equivalents for the year of£503,000. STAFFLINE RECRUITMENT GROUP PLCNotes to the preliminary announcementFor the year ended 31 December 2006 1 Basis of preparation The consolidated financial statements of Staffline Recruitment Group plc and itssubsidiary ('the Group') have been prepared under the historical cost conventionand in accordance with International Financial Reporting Standards as adopted bythe EU and the International Financial Reporting Standards as issued by theInternational Accounting Standards Board. Staffline Recruitment Group plcadopted IFRS for the first time in its consolidated financial statements for theyear ended 31 December 2005. The accounting policies of the Group are included in the 2006 financialstatements. 2 Segmental reporting (a) By business segment (primary segment): As defined under International Accounting Standard 14 (IAS 14), the only material business segment the Group has is that of providing temporary staff to customers as the placement of permanent staff to customers contributes less than 10% of Group total revenue. The sales revenue is from the rendering of services. (b) By geographical segment (secondary segment): Under the definitions contained in IAS 14, the only material geographic segment that the Group operates in is the United Kingdom 3 Tax expense The relationship between the expected tax expense at 30% and the tax expenseactually recognised in the income statement can be reconciled as follows: Year ended Year ended 31 December 31 December 2006 2005 £'000 £'000 Result for the year before tax 3,358 2,482 Tax rate 30% 30% ========== ========= Expected tax expense 1,007 744 Adjustment for non-deductible expenses relating toshort term temporary differences (24) 48Other non-deductible expenses 25 24Adjustments in respect of prior periods 6 8 ---------- ---------Actual tax expense 1,014 824 ========== ========= Tax expense comprises:Current tax expense 1,014 824 ========== ========= There is no tax expense or credit in relation to the share based payment reservecredited to equity. 4 Earnings per share The calculation of the basic earnings per share is based on the earningsattributable to ordinary shareholders divided by the weighted average number ofshares in issue during the year. The calculation of the diluted earnings pershare is based on the basic earnings per share adjusted to allow for alldilutive potential ordinary shares. Details of the earnings and weighted average number of shares used in thecalculations are set out below: Basic Diluted Year ended Year ended Year ended Year ended 31 December 31 December 31 December 31 December 2006 2005 2006 2005 Earnings (£'000) 2,344 1,658 2,344 1,658 =========== =========== ========== ========== Weighted averagenumber of shares 20,824,463 20,824,463 21,511,163 21,311,781 =========== =========== ========== ========== Earnings per share(pence) 11.3p 8.0p 10.9p 7.8p =========== =========== ========== ========== The weighted average number of shares has been increased by 686,700 (2005:487,318) shares to take account of all dilutive potential ordinary shares thatcould be issued under the share option scheme. Dividends During the year, Staffline Recruitment Group plc paid interim dividends of£208,245 (2005: £146,000) to its equity shareholders. This represents a paymentof 1.0p (2005: 0.7p) per share. A final dividend of £354,016 has been proposed(2005: £250,000) but has not been accrued within these financial statements.This represents a payment of 1.7p (2005: 1.2p) per share. The final dividend for2005 was declared and paid in 2006. 5 Post balance sheet event On the 19 March 2007 the Company acquired the entire issued share capital ofOnsite Partnership Limited for a cash consideration of £2 million plus potentialdeferred consideration dependent on the achievement of profit targets. It is impractical to give further information on the acquisition of OnsitePartnership Limited as the acquisition was only completed on today's date. 6 Publication of non-statutory accounts The financial information set out in this preliminary announcement does notconstitute statutory accounts as defined in section 240 of the Companies Act1985. The summarised consolidated profit and loss account, the summarised consolidatedstatement of changes in equity, the summarised consolidated balance sheet andthe summarised consolidated cash flow statement and associated notes have beenextracted from the Group's 2006 statutory financial statements upon which theauditors opinion is unqualified and does not include any statement under Section237 of the Companies Act 1985. Those financial statements have not yet been delivered to the registrar ofcompanies. This information is provided by RNS The company news service from the London Stock Exchange