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Company Staffline Group PLC
TIDM STAF
Headline

Preliminary Results

Released 07:00 25-Feb-2013
Number 5382Y07

RNS Number : 5382Y
Staffline Group PLC
25 February 2013
 



For Immediate Release

25 February 2013

                                                                                                                                                                                                            

 

 

STAFFLINE GROUP PLC

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2012

Staffline, the national recruitment and outsourcing organisation providing people and operational expertise to industry, today announces its preliminary results for the year ended 31 December 2012.

 

Financial highlights:

 

·     Revenues up 27% to £367.0 million (2011: £288.3 million)

·     Adjusted group operating profit up 4% to £10.7 million (2011: £10.3 million)

·     Adjusted profit before tax up 2% to £10.3 million (2011: £10.1m)

·     Reported profit before tax up 13% to £8.5 million (2011: £7.5 million)

·     Adjusted earnings per share up 2% to 35.9p (2011: 35.1p)

·     Basic earnings per share up 15% to 29.7p (2011: 25.9p)

·     Final dividend of 5.0p; total dividend of 8.1p (2011: 7.1p); increase of 14%

·     Net debt at year end of £4.6m (2011: £4.9m)

 

All adjusted figures exclude amortisation of intangible assets

 

Operational highlights:

 

·     Continued growth of the OnSite platform

Increased by 16 sites during the reporting period to 179 (2011: 163)

Represents 85% of Group sales (2011: 85%)

·     Four acquisitions completed and integrated successfully during 2012, including Select Appointments Ltd, the specialist white collar recruitment business acquired in October 2012

·     Target to expand Select to over 100 locations from current 30

·     Staffline Express branch network increased by 4 to 22 locations

·     Welfare to Work business, EOS, continues to perform ahead of the market

EOS now ranked as a top three performer nationally

EOS positioned to generate significant profits during 2013

·     Strong start to trading in 2013 underpinned by an excellent new business pipeline from new and existing customers

 

Commenting on the results and prospects for 2012, Andy Hogarth, Chief Executive, said:

 

"2012 has been another year of progress for Staffline despite being a difficult year for the recruitment industry.  Not only have we continued to see strong organic growth in our core Onsite business we have delivered very encouraging operating results from our EOS division from which we expect to see increased profits in 2013.

 

Acquisitions still remain a key growth strategy for the business and the move into white collar recruitment with the acquisition of Select Appointments is particularly exciting, allowing us to replicate the success of our blue collar recruitment in this sector.

 

We have started 2013 with continued confidence and believe our business remains very well placed to continue to drive profit growth and further enhance shareholder value.  The Board is therefore pleased to propose a 14% increase to the full year dividend of 8.1p, a sign of confidence in both our business and the markets in which we operate."

 

 

For further information, please contact:


 


Staffline Group plc

 

Andy Hogarth, Chief Executive

07931 175775

Tim Jackson, Finance Director

07720 458626

www.staffline.co.uk

 

 

Liberum Capital Limited

 

NOMAD & Broker

 

Chris Bowman / Richard Bootle

020 3100 2222

 

 

Buchanan

 

Jeremy Garcia/ Gabriella Clinkard

020 7466 5000

www.buchanan.uk.com

 

About Staffline

 

Staffline Group plc is a recruitment organisation specializing in food processing, manufacturing, e-retail, driving and logistics.  Staffline provides and manages industrial workforces and uses training and business improvement techniques to ensure increased levels of efficiency to give their clients a significant commercial advantage. Operating from over 200 locations in the UK, Staffline supplies up to 30,000 blue collar workers each day.  Brands include Staffline Express and Select Appointments, the High Street branch operations, OnSite based on clients' premises, Elpis Training a national training and consultancy organisation, OSP a specialist volume recruitment call centre and EOS, a Welfare to Work provider.

 

 

A presentation for analysts will be held at 9.30am on February 25 2013 at the offices of Buchanan, 107 Cheapside, London, EC2V 6DN

 



 

Chairman's Statement

We are delighted to report that the Group grew revenue and profits during 2012, driven by a combination of organic growth and acquisitions.  This good performance was achieved against a backdrop of a challenging macroeconomic outlook and an extremely competitive recruitment market.  Whilst this creates many challenges at an operational level, we have continued to grow our Onsite platform, increasing sites by a further 16 this year to 179.  Our move in to the Welfare to Work arena during 2011, with the acquisition of EOS, is showing early signs of success and we expect profitability from this division to grow significantly during 2013.

We also completed the acquisition of Select Appointments Limited, a long established specialist staffing services business providing office and administration staff across the UK.  This transaction will see Staffline expand its services into the 'White Collar' arena for the first time, in a move which will see the Group seek to replicate the success of our 'Blue Collar' business.

Therefore, I remain confident of the Group's ability to continue to grow.  We are seeing further opportunities for both acquisitions and organic growth due to on-going changes in the industry and the ever greater need of our clients to increase their productivity whilst being provided reliable and efficient staffing solutions.

 

John Crabtree OBE
Chairman
25 February 2013



 

Chief Executive's Report

I'm pleased to report the Group has enjoyed another successful year with sales up by 27% and profit after tax up by 15%.  We are particularly pleased with this performance given that we suffered the expected reduction in profitability (due to the level of investment committed to supporting our Department for Works and Pensions ("DWP") contracts) within EOS.  As a result of this upfront investment, we had expected at the start of the year that net profit for the Group would remain flat, so it is particularly pleasing to be able to report an increase in operating profit for 2012. We are confident that profitable growth for the Group will continue during 2013, enabling the Board to propose an increased final dividend of 5.0p, (2011: 4.2p) making the full year dividend 8.1p, (2011: 7.1p).  This represents an increase of 14% to the full year dividend and we intend to continue to grow the dividend broadly in line with earnings.

 

Operational Review

2012 continued in much the same vein as 2011 with the trading environment remaining difficult.  Despite this, sales in our recruitment business grew by 27% and profitability grew by 18%.  Sales also grew in our Welfare to Work division, by 33% but, as expected, operating profit before amortisation declined during the year by 48%.  This anticipated reduction is due to the structure of the Work Programme contract we operate with the DWP and the upfront investment incurred in 2012. We are confident that profitability will be significantly improved in 2013.  In addition we suffered losses on our two European Social Fund contracts due to a shortfall in expected referrals from Local Authorities.  The effect on the overall Group results is that our profitability has risen by 4% at the adjusted operating profit level, from £10.3m to £10.7m.More significantly after tax profit increased from £5.6m to £6.4m.  Demand for our Onsite offering continues to generate significant market interest with a good pipeline of new business, the overall trend to outsourcing remaining prevalent for many clients. 

The number of OnSites we operate from has continued to increase, from 163 in December 2011 to 179 at December 2012; this includes openings from a mixture of new and existing clients and some from acquisitions.  Our Onsite model continues to be a driving factor in our success and we anticipate further growth across the UK. 

Our branch network operation, Staffline Express, grew by 4 locations during the year and now operates from 22 branches.

Acquisitions during the period included the well-known British recruitment brand, Select Appointments Ltd ('Select'), from the Netherlands company Randstad.  Select has been established in the UK for 30 years and specialises in both temporary and permanent placements in the white collar market.  Select has for the past four years been an exclusively franchise operated business and it is our intention to continue with this model of operation which is capital light and limits the Group's business risk.  We are looking to expand the number of operating branches from 30 at the time of acquisition to over 100 in the next three years, concentrating growth in the major cities and conurbations of the UK.  We welcome an approach from individuals looking to operate their own recruitment business with the backing of a national organisation.

The acquisition of Select represents an exciting strategic step for the Group as we seek to further broaden our operational reach.  Not only is the Select brand instantly recognisable but its established franchise network will provide a stable footing for the Group as we seek to expand our services into the white collar staffing market.

We acquired EOS Works Ltd (EOS), the Welfare to Work service provider, in April 2011 and commenced activities with the Coalition Governments new Work Programme Contract in Solihull, Birmingham and the Black Country in June 2011.  In October that year, EOS was awarded two further contracts by the DWP, due to be worth £53m over three years.  Both contracts are financed by the European Social Fund (ESF), with one operating in our existing Work Programme area in the Midlands and the other based in Yorkshire and Humberside.  The nature of all of these contracts means that there is a significant tie up of working capital during the first 18 months which then gradually unwinds as profitability is achieved. At the 31st December 2012 the total additional working capital committed to Eos was £3.2m.  Despite the significant amounts of negative publicity surrounding the Work Programme we are extremely pleased with our progress so far, with EOS appearing in the top 3 (out of 40) for all the major performance measures recorded by the DWP.  To date we have helped over 8,000 long term unemployed back in to work.  Regarding the ESF contracts, whilst we are again performing well against our competition they have been significantly less busy than initially expected, incurred losses in 2012, and are expected to do little more than break even during 2013 despite a number of financial changes by the DWP.  This is a matter we continue to discuss with them.

Market Overview

Gangmaster Licencing Authority (GLA)

We are convinced that the GLA has done much to improve standards and drive many sub-standard operators out of the regulated sector.  Unfortunately there is considerable evidence that many of these Gangmasters have moved into both the Construction and Hospitality sectors, both of which are unregulated.  In addition we have recently experienced an increase in the number of illegal and unlicensed people operating as labour suppliers, sometimes using indentured labour from Eastern Europe. 

Marshall Evans, who was Operations Director until the 25th February, continues to be a member of the Board of Directors of the GLA as well as being a member of the REC council and the Chairman of the Policy Committee.  I also sit on the board of the Association of Labour Providers.  These roles allow us to understand and influence future industry trends and Government policy.

PAYE and Travel and Subsistence Schemes

We have been encouraged in our long term opposition to the abusive use of travel and subsistence schemes by a more robust response from Government agencies. Whilst during the year we continued to lose a number of clients to competitors operating these schemes we also won business from customers who are realising the potential liabilities they face if they allow their supplier to use these schemes unscrupulously. 

Health & Safety

Our health and safety management system continues to develop using the HSE HSG65 - "Successful Health and Safety Management" guidance as the framework.  2012 saw yet another reduction in the Accident Frequency Rate, to 0.16, which is a further reduction of 16% on the previous year.  Staffline continues to develop its positive culture through its Safety Committee and Safety Champions. 

ISO 9001 and Investors in People (IIP)

In November 2012 Staffline have successfully passed an official ISO external audit confirming continued accreditation, reaffirming our systems and processes are fully compliant with the ISO 9001 standards.  As part of our continuous development culture, Staffline remains proud of our Investors in People status.

 

People

With the continued expansion of the Group, we have seen an increase to 428 employees in our recruitment business and Shared Services this year, giving average sales per employee of £827,000 compared to £763,000 in 2011.  In addition a further 224 people are employed by EOS, bringing the Group's total workforce to 652.

In 2012, continuing on the great success of development  in operations we enjoyed in 2011, 16 employees passed their REC Certificate in Recruitment Practice, 24 passed the Real Account Management course, 12 achieved Delight the Customer, 10 passed the external business writing course and 4 achieved the Chartered Institute of Environmental Health  Level 4 exam in Food Hygiene.

In addition , within our Shares Services staff, 3 attended Advanced Certificate in Payroll Techniques, 3 First Aid at Work, 1 Professional CIMA Qualification Dip.MA, with many others attending courses in tax, credit control and other relevant subjects.  We congratulate them all on their achievements. 

2012 saw the introduction of our residential Leadership Development Course, attended by 20 potential senior managers of the future, which was a great success and continues with a further 20 delegates in 2013.

Compliance

We take compliance with legislation and industry standards extremely seriously, offering a total commitment to all of our clients to ensure that all of our workers, whether or not covered by the legislation, are recruited and supplied to the standards required by the Gangmaster Licencing Authority.  This total commitment gives our clients the assurance that all UK ethical and legal standards are fully met.  We operate a confidential helpline for our workers to report any concerns and conduct regular surveys to ensure we are achieving our own high standards. 

Investing for Growth

To help us achieve the highest compliance standards we are continuing to develop our new bespoke management information system, Infinity+, which will further improve our operating efficiency.  All of the Group's locations are now live with Infinity+ and we are already deriving a wide range of benefits from it. The new system will provide the platform for further development that will deliver greater efficiencies in the business processes. 

 

Agency Workers Regulations

These regulations, introduced in October 2011, require recruitment businesses to ensure that temporary contractors working alongside comparable client employed staff are, amongst other things, paid the same amount and enjoy the same holidays.  The initial concern amongst some industry commentators that these regulations might cause disruption has not materialised.

 

Board Changes

 

As indicated in the announcement made on 21 February 2013, Marshall Evans has decided to retire from the Board and assume a part-time role with the Group going forward.  I would like to personally thank Marshall for providing excellent help and support over the past 10 years and for playing a central role in the growth and success of Staffline.  His continued availability, albeit on a part-time basis, and his decision to remain a member of the Board of the REC and the GLA, will be greatly appreciated.

I am also pleased to acknowledge the promotion of Shaun Brittain to Joint Managing Director of Staffline Recruitment Ltd.  Shaun will be resigning from the Group Board following this promotion to focus on his broader day to day operational duties.  Andrew Coop, currently Operations Director at Staffline, will also hold the title of Joint Managing Director of Staffline Recruitment Ltd, and will be responsible for Logistics and Distribution services.

 

Diane Martyn has agreed to become Group Managing Director having joined Staffline as Non-Executive Director last year.  Diane will become a full time Executive Director and remain on the Group Board.

Finally I would once again thank all our employees for their dedication in ensuring we always offer the best and most innovative service to our clients.

 

Current Trading

 

The first 7 weeks of trading have started strongly and we have developed an excellent pipeline from new and existing customers for the first half of 2013.  We have opened a specialised Driving division in Great Britain and in addition have committed to our existing business in Ireland with the appointment of a Divisional Director and team with responsibility for the Group's growth in that country. We have also recruited the new senior team to manage Select Appointments. 

Despite the on-going threat arising from the abusive use by some competitors of Travel and Subsistence schemes , the majority of our clients appreciate the reassurance that we offer as a financially stable, ethical and fully compliant public company.  Our new business pipeline continues to grow as clients increasingly search for best in class staffing solutions both from a regulatory and business perspective.

I am therefore confident that the Group will enjoy another year of substantial and profitable growth in 2013.

 

Andy Hogarth

Chief Executive

25 February 2013


 

Finance Director's Report

Financial Highlights

The total revenues for the year increased by 27% to £367.0m (2011: £288.3m) reflecting the impact of strong demand for our services from existing customers, new business wins in 2011 and 2012 and also the impact of the acquisitions made during last year and this year.  The successful growth of our OnSite business has continued albeit with increased competitive pressure on operating margins. This has resulted in a reduction in overall gross margin to 9.5% (2011: 10.8%).  However, adjusted profit from operations has increased by 4% to £10.7m (2011: £10.3m). The charge for amortisation has reduced by £0.8m to £1.8m as historic acquisitions become fully amortised. The charge for employee share options has increased by £0.2m to £0.4m largely due to the share price increasing significantly during the closing months of 2012.

The investment in acquisitions, the Welfare to Work business and the growth in working capital offset by continued strong cash flow generation, has led to finance charges increasing to £0.4m (2011: £0.1m) and this has reduced interest cover to a still comfortable 24 times (2011: 60 times).  The interest rates on our overdraft facility remain unchanged during the year, at 2.25% (2011: 2.0%) over bank base rate, while the rate for term borrowings remained at 1.0% (2011: 1.0%) over bank base rate and the Revolving Credit Facility at 2.25% to 2.5% over LIBOR.

Profit before tax for the year increased to £8.5m (2011: £7.5m) and profit after tax increased to £6.4m (2011: £5.6m).

Earnings per Share

The basic earnings per share increased by 15% to 29.7p (2011: 25.9p) and the diluted earnings per share increased by 14% to 28.7p (2011: 25.0p).

Dividends

The Directors propose a final dividend of 5.0p per share against 4.2p per share last year. This gives a total dividend for the year of 8.1p per share which is 14% ahead of the 7.1p per share paid in respect of 2011.

Subject to shareholder approval at the AGM, the final dividend will be paid on 3 July 2013 to shareholders on the register on 31 May 2013.

Acquisitions

During the year we completed four acquisitions for a total consideration of £5.0m. This amount is comprised of £2.8m cash paid at completion, and further potential consideration of £2.2m, £1.0m of which is dependent on future profitability. The acquisitions will add around £18.9m to turnover in a full year, and have resulted in the recognition in the Group balance sheet of additions to goodwill of £0.9m and additions to intangible assets of £0.9m. The intangible assets will be amortised over a period ranging from 1 to 2 years. The acquisitions have been funded from existing bank facilities together with an additional Revolving Credit Facility of £2.5m.

Balance Sheet

The Group balance sheet has strengthened during the year, with net current assets rising by £6.6m to £11.7m (2011: £5.1m) and a strengthened ratio of current assets to current liabilities of 1.23 (2011: 1.11).  It is also pleasing to report that despite the significant growth in the business and investment in acquisitions gearing has reduced to 12% (2011: 15%). The Group continues to be focused on cash generation and ensuring a robust balance sheet to support the growth of the business.

Financing

The Group's current bank facilities include a term loan of £0.6m, repayable in quarterly instalments up to June 2013, a revolving credit facility of up to £7.5m and an overdraft of up to £15.0m.  At 31 December 2012 the Group was in a net cash position (excluding the revolving credit facility and term loans).  The overdraft facility is renewable annually and was renewed in February 2013 on similar terms to last year.  The Board believes that these facilities will ensure that the Group has sufficient headroom to manage the current operations as well as supporting the continued growth of the business. 

Post tax cash generation during the year has been strong and the relentless focus on debtor management has succeeded in limiting our working capital increase to £2.4m despite the 27% increase in sales. The growth and investment in the business offset by strong operational cash generation have resulted in net debt falling slightly to £4.6m (2011: £4.9m). The investment included £4.1m in acquisitions during the year covering Select Appointments Limited, Go New Recruitment Limited and 2 other businesses, and a further £0.4m investment in our systems development.

 

Tim Jackson
Finance Director
25 February 2013

 


Consolidated statement of comprehensive income

For the year ended 31 December 2012

 

 

2012 Before amortisation

2012 Amortisation

2012 Total

2011 
Total

 

 

£'000

£'000

£'000

£'000

Continuing operations

 

 

 

 

 

Sales revenue

 

366,980

-

366,980

288,303

Cost of sales

 

(332,268)

-

(332,268)

(257,161)

Gross profit

 

34,712

-

34,712

31,142

Administrative expenses

 5

(23,600)

-

(23,600)

(20,667)

Operating profit before amortisation of intangibles and share based charge

 

11,112

-

11,112

10,475

Administrative expenses - Share based payment charge

 

(426)

-

(426)

(209)

Administrative expenses - Amortisation of intangibles

 

-

(1,802)

(1,802)

(2,606)

Profit from operations

 

10,686

(1,802)

8,884

7,660

Finance costs

 

(363)

-

(363)

(126)

Profit for the period before taxation

 

10,323

(1,802)

8,521

7,534

Tax expense

 

(2,559)

448

(2,111)

(1,976)

Net profit and total comprehensive income for the period

 

7,764

(1,354)

6,410

5,558

Total comprehensive income attributable to:

 

 

 

 

 

Non-controlling interest

 

 

 

(11)

(69)

Owners of the parent

 

 

 

6,421

5,627

 

 

 

 

 

 

Earnings per ordinary share

 

 

 

 

 

Basic

 

 

 

29.7p

25.9p

Diluted

 

 

 

28.7p

25.0p

 

 

Consolidated statement of changes in equity

For the year ended 31 December 2012

 

 

Share capital

Own shares JSOP

Share premium

Share based payment reserve

Profit and loss account

Total attributable to owners of parent

Non-controlling interest

Total equity

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 1 January 2012 (audited)

2,284

(1,157)

15,928

229

17,702

34,986

(87)

34,899

Dividends

 -

 -

 -

 -

(1,578)

 (1,578)

 -

 (1,578)

Share options issued in equity settled share based payments

-

-

-

32

-

32

 -

32

Share options exercised

5

-

41

(186)

186

46

 -

46

Acquisition of non-controlling interest

 -

-

-

-

(58)

(58)

58

-

Transactions with owners

5

 -

41

(154)

(1,450)

(1,558)

58

(1,500)

Profit for the period

-

-

-

-

6,421

6,421

(11)

6,410

Total comprehensive income for the period

-

 -

-

6,421

(11)

6,410

 

 

 

 

 

 

 

 

 

At 31 December 2012

2,289

(1,157)

15,969

75

22,673

39,849

(40)

39,809

 



 

Consolidated statement of changes in equity (continued)

For the year ended 31 December 2012

 

 


 

Share

capital

Own

shares

JSOP

Share

premium

Share

based

payment

reserve

Profit

and loss

account

Total

attribut-able to

owners of

parent

Non-

controlling

interest

Total

Equity


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 1 January 2011

2,264

(1,157)

15,735

198

13,512

30,552

(18)

30,534

Dividends

-

-

-

-

(1,437)

(1,437)

-

(1,437)

Share options issued in equity settled share based payments

-

-

-

31

-

31

-

31

Share options exercised

20

-

193

-

-

213

-

213

Transactions with owners

20

-

193

31

(1,437)

(1,193)

-

(1,193)

Profit for the period

-

-

-

-

5,627

5,627

(69)

5,558

Total comprehensive income for the period

-

-

-

-

5,627

5,627

(69)

5,558

Balance at 31 December 2011

2,284

(1,157)

15,928

229

17,702

34,986

(87)

34,899


Consolidated statement of financial position

As at 31 December 2012

 

 

31 December 2012

31 December 2011

 

 

£'000

£'000

Assets

 

 

 

Non-current assets

 

 

 

Goodwill

 

30,971

30,032

Other intangible assets

 

3,031

3,898

Property, plant & equipment

 

2,343

2,811

Deferred tax asset

 

140

-

 

 

36,485

36,741

Current

 

 

 

Trade & other receivables

 

59,598

46,744

Cash and cash equivalents

 

3,650

3,687

 

 

63,248

50,431

Total assets

 

99,733

87,172

Liabilities

 

 

 

Current

 

 

 

Trade and other payables

 

46,678

38,463

Borrowings

 

678

2,984

Other current liabilities

 

2,928

2,345

Current tax liabilities

 

1,325

1,519

 

 

51,609

45,311

Non-current

 

 

 

Borrowings

 

7,556

5,624

Other non-current liabilities

 

70

392

Deferred tax liabilities

 

689

946

Total liabilities

 

59,924

52,273

Equity

 

 

 

Share capital

 

2,289

2,284

Own shares

 

(1,157)

(1,157)

Share premium 

 

15,969

15,928

Share based payment reserve

 

75

229

Profit & loss account

 

22,673

17,702

 

 

39,849

34,986

Non-controlling interest

 

(40)

(87)

Total equity

 

39,809

34,899

Total equity & liabilities

 

99,733

87,172

 

Consolidated statement of cash flows

For the year ended 31 December 2012

 

 

Year ended 31 December 2012

Year ended 31 December 2011

 

 

£'000

£'000

Net cash inflow from operating activities (note 4)

 

6,843

402

Cash flows from investing activities

 

 

 

Purchases of property, plant and equipment

 

(543)

(1,115)

Sale of property, plant and equipment

 

24

 -

Acquisition of businesses - deferred consideration for prior acquisitions

 

(1,454)

(1,528)

Acquisition of businesses - deferred consideration for current acquisitions

 

(168)

(351)

Acquisition of businesses - cash acquired

 

315

8,896

Acquisition of businesses - cash paid

 

(2,810)

(7,701)

Net cash used in investing activities

 

(4,636)

(1,799)

Cash flows from financing activities:

 

 

 

New loans

 

2,500

5,000

Loan repayments

 

(1,060)

(809)

Interest paid

 

(338)

(126)

Dividends paid

 

(1,578)

(1,437)

Proceeds from the issue of share capital

 

46

213

Net cash flows from financing activities

 

(430)

2,841

 

 

 

 

Net change in cash and cash equivalents

 

1,777

1,444

Cash and cash equivalents at beginning of period

 

1,841

397

Cash and cash equivalents at end of period

 

3,618

1,841

 

 

 

Net debt at beginning of year

 

(4,921)

(2,264)

Net change in cash and cash equivalents

 

1,777

1,444

Decrease in loans

 

1,060

899

Increase in RCF

 

(2,500)

(5,000)

Net debt at end of period

 

(4,584)

(4,921)


1.         Accounting policies

The principal accounting policies adopted by the Group, which have been applied consistently, are set out in the statutory financial statements for the year ended 31 December 2012.

Basis of preparation

The consolidated financial statements of Staffline Group plc and its subsidiaries ('the Group') have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. 

2              Segmental reporting

Management currently identifies two operating segments: the provision of recruitment and outsourced human resource services to industry and the provision of welfare to work services. These operating segments are monitored by the Group's Board and strategic decisions made on the basis of segment operating results.

Segment information for the reporting period is as follows:

 

Recruitment services  2012

Welfare to work  2012

Total Group 2012

Recruitment services 2011

Welfare to work 2011

Total Group 2011

 

 

 

 

 

 

 

 

£'000

£'000

£'000

£'000

£'000

£'000

Segment continuing operations:

 

 

 

 

 

 

Sales revenue from external customers

354,121

12,859

366,980

278,631

9,672

288,303

Cost of sales

(322,201)

(10,067)

(332,268)

(251,698)

(5,463)

(257,161)

Segment gross profit

31,920

2,792

34,712

26,933

4,209

31,142

Administrative expenses

(21,256)

(1,422)

(22,678)

(17,751)

(2,219)

(19,970)

Depreciation

(360)

(562)

(922)

(251)

(446)

(697)

Segment operating profit before amortisation of intangibles and share based payment charge

10,304

808

11,112

8,931

1,544

10,475

Administrative expenses - share based payment charge

(426)

-

(426)

(209)

-

(209)

Amortisation of intangibles

(1,349)

(453)

(1,802)

(1,568)

(1,038)

(2,606)

Segment profit from operations

8,529

355

8,884

7,154

506

7,660

 

 

 

 

 

 

 

Segment assets

91,779

7,954

99,733

77,633

9,539

87,172

 

 

 

 

 

 

 


2              Segmental reporting (continued)

The Group purchased Eos Works Group Limited (Eos), a welfare to work provider, on 21 April 2011 thus creating two segments during the year ended 31 December 2011. 

During 2012, two customers in the recruitment services segment contributed greater than 10% of that segment's revenues being 17.4% and 10.8% of that segment's revenues (2011: one customer greater than 10%). The welfare to work segment revenues relate solely to one customer.

The Group's revenues from external customers and its non-current assets all arise in the United Kingdom.

3              Tax expense

The relationship between the expected tax expense and the tax expense actually recognised in the statement of comprehensive income can be reconciled as follows:


2012

£'000

2012

%

2011

£'000

2011

%

Result for the year before tax

8,521


7,534


Tax rate


24.5%


26.5%

Expected tax expense

2,088


1,997


Adjustment for non-deductible expenses relating to short term temporary differences       


13



20


Other non-deductible expenses      

168


390


Adjustment in respect of prior year

-


124


Deferred tax credit

(158)


(555)


Actual tax expense

2,111

24.8%

1,976

26.2%






Tax expense comprises:





Current tax expense

2,269


2,531


Deferred tax expense





Origination and reversal of temporary differences

(158)


(555)


Tax expense

2,111


1,976


 


4              Cash flows from operating activities

 

 

Year ended 31 December 2012

Year ended 31 December 2011

Profit before taxation

 

8,521

7,534

Adjustments for:

 

 

 

Finance costs

 

363

126

Depreciation, loss on disposal and amortisation

 

2,853

3,137

Operating profit before changes in working capital and provisions

 

11,737

10,797

Change in trade and other receivables

 

(6,482)

(10,324)

Change in trade and other payables

 

4,044

1,506

Cash generated from operations*

 

9,299

1,979

Employee cash settled share options

 

394

178

Employee equity settled share options

 

32

31

Taxes paid

 

(2,882)

(1,786)

Net cash inflow from operating activities

 

6,843

402

 

* The cash generated from operations in 2011 was lowered by £7,141,000 as a result of creditors acquired through acquisitions but paid after acquisition.

 

5              Business combinations

The Company made a total of 4 acquisitions during the year. An adjustment was required to the book values of the assets and liabilities of the businesses acquired in order to present the net assets at fair values in accordance with group accounting policies. The purchases were accounted for as acquisitions. Goodwill is primarily related to growth expectations, expected future profitability, the skill and expertise of the acquired workforce, and expected cost synergies. The goodwill that arose from these business combinations is not expected to be deductible for tax purposes.

The following acquisitions were made during the year to enhance the Group's recruitment services segment:

·   On 10 August 2012 a Group undertaking  acquired the trade and assets of DKM Driving Limited and DKM Energy Limited, based in Nottingham;

·   On 14 September 2012 a Group undertaking acquired Go New Recruitment Limited, based in Swindon and Go New Recruitment (Gloucester) Limited based in Gloucester and assumed control by acquiring 100% of the voting rights;

·   On 23 October 2012 a Group undertaking acquired Select Appointments Limited and assumed control by acquiring 100% of the voting rights; and

·   On 11 December 2012 a Group undertaking acquired the trade and assets of GB Resourcing Limited, based in Birmingham.

 


5              Business combinations (continued)

These acquisitions were individually immaterial to the Group and have therefore been disclosed in aggregate. The aggregate amounts in respect of the above are detailed below:

 

 

 

Book Value

 

Provisional

 

at Acquisition

Fair Value Adjustment

FV to group

 

£'000

£'000

£'000

Intangible Assets - customer lists

-

935

935

Fixtures and fittings

16

-

16

Trade and other receivables

6,372

-

6,372

Cash at bank

315

-

315

Deferred tax asset

246

(211)

35

Deferred tax liability

-

(185)

(185)

Trade and other payables

(3,426)

-

(3,426)

Net assets at acquisition

3,523

539

4,062

Goodwill

 

 

939

 

 

 

5,001

 

 

 

 

Satisfied by:

 

 

 

Cash

 

 

2,810

Contingent consideration

 

 

1,033

Deferred consideration

 

 

1,158

 

 

 

5,001

Acquisition costs recognised as expenses (included within administrative expenses) in the year amounted to £82,597 (2011: £57,000).

Consideration transferred

The acquisitions were settled in cash amounting to £2,810,000 with future consideration payable of £1,158,000. The purchase agreements included an additional contingent consideration of £1,033,000 payable only if the profits met the target level agreed by both parties. The additional consideration will be paid in accordance with the specific agreements for each acquisition. The fair value of the contingent consideration liability initially recognised also reflects management's estimate as at 31 December 2012 based on current results and forecasts.

Identifiable net assets

The fair value of trade and other receivables acquired as part of the business combination amounted to £6,372,000 which equated to the gross contractual amount.

Contribution to the Group results

The above acquisitions contributed post acquisition revenues of £3,597,000 and profits totalling £129,000. If the acquisitions had been made on 1 January 2012 revenues of £18,390,000 and an operating profit before amortisation of intangible assets of £502,000 would have been included.


5              Business combinations (continued)

Goodwill

The goodwill recognised relates to expected synergies to be achieved as a result of combining the operations of the businesses.

Acquisition of non controlling interest

On 26 July 2012 the company acquired the balance of shares that it did not already own in House of Logistics Limited for nil consideration. Following the transaction the company owns 100% of the share capital and the subsidiary became a dormant company.

 

6              Earnings per share

The calculation of basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year, after deducting any own shares (JSOP). The calculation of the diluted earnings per share is based on the basic earnings per share adjusted to allow for all dilutive potential ordinary shares.

Details of the earnings and weighted average number of shares used in the calculations are set out below:

 

Basic

Basic

Diluted

Diluted

 

2012

2011

2012

2011

Earnings (£'000)

6,410

5,558

6,410

5,558

Weighted average number of shares

21,614,114

21,446,973

22,343,159

22,223,142

Earnings per share (pence)

29.7p

25.9p

28.7p

25.0p

Earnings per share (pence) before amortisation

35.9p

35.1p

34.8p

33.9p

 

The weighted average number of shares has been increased by 729,045 (2011: 776,169) shares to take account of all dilutive potential ordinary shares that could be issued under the share option scheme and all shares issued during the year excluding own shares.

 

7              Dividends

During the year, Staffline Group plc paid interim dividends of £670,210 (2011: £623,853) to its equity shareholders. This represents a payment of 3.1p (2011: 2.9p) per share. A final dividend of £1,081,566 has been proposed (2011: £908,027) but has not been accrued within these financial statements. This represents a payment of 5.0p (2011: 4.2p) per share. The final dividend for 2011 was declared and paid in 2012.

8              Publication of non-statutory accounts

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 434 of the Companies Act 2006.

 

The consolidated summarised income statement, the consolidated summarised statement of changes in equity, the consolidated summarised balance sheet and the consolidated summarised cash flow statement and associated notes have been extracted from the Group's 2012 statutory financial statements upon which the auditor's opinion is unqualified and does not include any statement under Section 498 of the Companies Act 2006.

 

Those financial statements have not yet been delivered to the registrar of companies.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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Preliminary Results - RNS