Final Results

Staffline Recruitment Group plc 19 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 provider of recruitment and outsourced human resource services to industry, today announces 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 we are 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 a further year of progress in 2007. 'Today also marks the Group's first acquisition since flotation in 2004. We are delighted to welcome Onsite Partnership into the Staffline fold and look forward to working with them to continue to grow the Group, whilst maintaining the exceptional standards of customer service for which we are known.' For further information, please contact: www.staffline.co.uk --------------------- Staffline Recruitment Group plc 0115 950 0885 Andy Hogarth, Managing Director 07931 175775 Carole Harvey, Finance Director 07904 262132 Oriel Securities Limited Natalie Fortescue 020 7710 7615 Smithfield Miranda Good / Reg Hoare 020 7360 4900 About Staffline Staffline Recruitment Group plc's main business is as a specialist supplier of 'blue collar' temporary and contract staff to industry. It provides a fully outsourced service, managing the temporary recruitment function of its clients on their premises, at 71 OnSite locations nationwide and also has a network of 16 industrial branches. In addition, the Group has a smaller division called Techsearch which specialises in temporary and permanent engineering, IT, HR and FMCG placements and operates from 4 branches. The Group, which is managed from a head office in Nottingham, was founded in 1986 and was admitted to AIM in December 2004 (Ticker: STAF.L). Print resolution images are available for the media to view and download from www.vismedia.co.uk STAFFLINE RECRUITMENT GROUP PLC Chairman's statement For the year ended 31 December 2006 Introduction I am pleased to report Staffline Recruitment Group's results for the year ended 31 December 2006 which are significantly ahead of last year. Staffline specialises in the matching of un-skilled and semi-skilled temporary workers to suitable positions within the food production, manufacturing, and logistics sectors, with 64% of Group revenues derived from the food production sector which is generally less cyclical. This is achieved by providing an outsourcing service ('OnSite') which includes skills and reference checking applicants, 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, a service which is complementary to many Staffline clients. The Year in Review The results for the year reflect a strong trading performance, consisting entirely of organic growth. The main driver of this growth continues to be our OnSite division, which now represents 68% of Group turnover and has increased the number of OnSites it operates from 53 at the end of 2005 to 71 by 31 December 2006. Dividends I am pleased to announce that the Directors recommend the payment of a final dividend for the year of 1.7p per share which, subject to approval at the Annual General Meeting, will be paid on 5 July 2007 to shareholders on the register at 8th June. Together with the interim dividend of 1.0p per share paid on 17 November 2006, this will make the total payment for the year 2.7p per share, an increase of 42% on the previous year. The Directors intend to continue to pursue a progressive dividend policy. Our People All our own salaried staff who have completed in excess of six months service with the Company have continued to receive share options and are therefore incentivised in line with the future success of the Group. The options issued at the time of the flotation in December 2004 have now vested and some staff have exercised options in early 2007 representing 20% of all outstanding options issued at that time. I would like to thank all staff for their continued commitment and performance throughout the year. Summary I am delighted with the progress of the Group during its second full year since admission to AIM. In line with our stated strategy, we have established strong relationships across a broad customer base, providing us with an excellent platform from which to expand the Group's service offering further and to develop our national presence more fully. Derek Mapp Chairman 19 March 2007 STAFFLINE RECRUITMENT GROUP PLC Managing Director's statement For the year ended 31 December 2006 The Group has continued to make excellent progress throughout the year and we are 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 profit margins have continued to decrease, as expected, to 16.8% (2005: 19.2%). This is a reflection of the Group's policy to grow the OnSite business, which has a lower gross profit. However, the benefits of the Onsite model which achieves a higher net margin due to its lower operating costs and the much greater volumes, are reflected at the operating profit level. Operating profit has improved by 23% during the year to £3.8m (2005: £3.1m). Finance costs have continued to decrease during the year as we have reduced the amount of term loan outstanding, benefited from the reduction in funding costs negotiated with our bankers in 2006 and continued our push to reduce our debtor days. Profit before tax has increased by 35% to £3.4m (2005: £2.5m), whilst profit after tax has increased by 41% to £2.3m (2005: £1.7m). Basic earnings per share have increased by the same proportion, to 11.3p (2005: 8.0p), giving a cover in excess 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). This was due to our change of status to a large company for tax purposes, which resulted 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), putting the Group in a healthy financial position to invest for growth. As reported at the interim stage, we renegotiated the length and pricing of our term funding with Bank of Scotland. The period of the term loan has been extended to 2013, reducing the minimum annual repayment to £0.5m from £1.0m. This reduction will give us more flexibility in managing our working capital requirements as well as allowing us more discretion in pursuing a progressive dividend policy. In addition, we have moved our working capital funding requirements from an invoice discounting facility to an overdraft. Both tranches of funding benefit from a lower interest rate, currently 1.2% over bank base rate (2005: 2.0%) with a ratchet which adjusts the bank's margin, dependant upon the 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 the organic growth of the Group by expanding the number of our OnSite locations and through the selective opening of more high street branches, and this remains our main focus. As indicated at the time of the Group's Admission to AIM in 2004, selective acquisitions of complementary companies that improve our service offering are also considered. Operational Review Our AIM listing has provided the Group with greater visibility and credibility amongst its existing and potential customers, thereby supporting further growth during the year. We have been able to increase the number of OnSites from 53 on 31 December 2005 to 71 on 31 December 2006 and have further increased this number to 73 by 28 February 2007. This represents a mix of both additional OnSites being taken on by existing customers and setting up OnSites for new customers. Although our new business wins have continued to be predominantly in the food production sector, it now represents a lower proportion of our turnover than it has historically, having fallen from 75% of turnover in 2005 to 64% at the close of 2006. Conversely, strong demand from both existing and new clients in the logistics sector has seen this proportion of our business increase to 24% from 14% during the year. Sales in manufacturing, increased slightly as a proportion of turnover by 1%, to 12%. We are confident that this growth in our OnSite proposition reflects the increased demand for our service, which offers many advantages for our clients in terms of operational efficiency and workforce management. During the year, we reduced the number of high street Industrial branches by one to 16 following the amalgamation of our Liverpool and Skelmersdale operations. This resulted in a reduction in operating expenses with no loss of revenue. We have opened two new branches in the early part of 2007, in Milton Keynes and Wrexham, as part of our strategy of organic geographical expansion. Techsearch, our skilled brand, had a mixed year. Permanent placements held up well compared to 2005 but the loss of a contract for the supply of skilled temporary staff and a considerable reduction in demand from one customer, negatively impacted the results for the full year. Demand for temporary and permanent staff has however been very strong in the first quarter of 2007. The number of consultants employed has continued to be increased. We intend to continue to expand this division, although at present it accounts for less than 10% 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 the year the proportion of this number who originated from the new EU accession states rose from 37% to 52%. Industry Background Staffline aims to continue to be at the forefront of maintaining the very highest standards of ethics within its sector. Many of the issues facing us remain the same as last year, whilst further developments have continued the focus on employment practices. Gangmaster Licensing The Gangmaster (Licensing) Act 2004 established the Gangmasters Licensing Authority to set up and operate the licensing scheme for labour providers operating in the agricultural, shellfish gathering and associated processing and packing sectors. We applied for a licence and were the first major supplier to be awarded one. The new legislation has had a direct and positive impact on our business, with a number of new contracts having been won as a result of the clients' previously incumbent agencies failing to comply with the licensing requirements. EU Accession State Workers The flow of workers arriving in the UK has continued to increase during the year and we estimate that at present 52% of our workers are citizens of one of the new EU accession states. Due to the high numbers of people already in the UK and available for work, we have been able to scale down our recruitment team working in Poland and now recruit largely by word of mouth benefiting from our reputation as a good labour provider. Verification Systems A large number of illegal workers continue to attempt to register with us, in line with the experience of similar agencies across the temporary unskilled worker industry. To maintain our high standards in ensuring the legality of our workers, we have increased our investment in IT to ensure we remain fully compliant with the law, whilst also strengthening our relationships with relevant government agencies in order to remain fully conversant with the latest examples 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 clients and their permanent staff. Health & Safety We fully recognise our responsibility to ensure that we only allow our workers to work in as safe a working environment as possible and implement a system of checks 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 2005 to an average of 213 during 2006, with a total of 47 employees who were promoted during the year. We continue to have a strong staff retention record, with staff turnover during the year having increased slightly to 29%, but still significantly below the industry average of 50%. Our employees consistently strive to increase customer service, and their success in this field is underlined by the response to our surveys which indicate very high levels of customer satisfaction. Yet again I continue to be enormously impressed at the hard work and dedication to customer service that our staff show and I thank them for all their enthusiasm. 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 last year, and in line with our expectations. 4 new OnSites were opened in the last three months of 2006, the full annualised effect of which will benefit the current year. The 2 new OnSites which have opened in the first two months of 2007 also underpin our plans for the year ahead. Our new Industrial branches will also begin to contribute this year. 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 a further year of progress in 2007. Andy Hogarth Managing Director 19 March 2007 STAFFLINE RECRUITMENT GROUP PLC Summarised consolidated income statement For the year ended 31 December 2006 Note 2006 2005 £'000 £'000 Continuing operations Sales revenue 84,111 61,479 Cost 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 4 Basic 11.3p 8.0p ========= ======== Diluted 10.9p 7.8p --------- -------- STAFFLINE RECRUITMENT GROUP PLC Consolidated statement of changes in equity For 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 January 2005 2,082 5 14,257 124 16,468 Net profit for - - - 1,658 1,658 the year Employee share based - 63 - - 63 compensation Dividends - - - (146) (146) paid ------- ------- ------- ------- ------- At 31 December 2,082 68 14,257 1,636 18,043 2005 Net profit for - - - 2,344 2,344 the year Employee share based - 39 - - 39 compensation Dividends - - - (458) (458) paid ------- ------- ------- ------- ------- At 31 December 2,082 107 14,257 3,522 19,968 2006 ======= ======= ======= ======= ======= STAFFLINE RECRUITMENT GROUP PLC Summarised consolidated balance sheet at 31 December 2006 2006 2005 £'000 £'000 Assets Non current Goodwill 22,326 22,326 Plant and equipment 204 88 -------- -------- 22,530 22,414 -------- -------- Current Trade and other receivables 13,189 8,663 Cash and cash equivalents 823 552 -------- -------- 14,012 9,215 -------- -------- Total assets 36,542 31,629 ======== ======== Liabilities Current Trade and other payables (9,139) (8,720) Borrowings (3,807) (950) Current tax liabilities (478) (816) -------- -------- (13,424) (10,486) Non current Borrowings (3,150) (3,100) -------- -------- Total liabilities (16,574) (13,586) Equity Share 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 PLC Summarised consolidated cash flow statement For the year ended 31 December 2006 2006 2005 £'000 £'000 Cash flows from operating activities Profit before taxation 3,358 2,482 Adjustments for: Depreciation of plant and equipment 93 305 -------- -------- Operating profit before changes in working capital and provisions 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 50 Employee equity settled share options 39 63 Taxes paid (1,352) (290) -------- -------- Net cash inflow from operating activities 539 2,574 Cash flows from investing activities Purchases of plant and equipment (209) (108) -------- -------- Net cash used in investing activities (209) (108) ======== ======== Cash flows from financing activities Repayment 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 31 December 2006 reflects the change by the Group of the use of an invoice discounting facility to an overdraft. This change was made to achieve greater working capital flexibility and cost effectiveness. Prior to this change the Group experienced an increase in cash and cash equivalents for the year of £503,000. STAFFLINE RECRUITMENT GROUP PLC Notes to the preliminary announcement For the year ended 31 December 2006 1 Basis of preparation The consolidated financial statements of Staffline Recruitment Group plc and its subsidiary ('the Group') have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards as adopted by the EU and the International Financial Reporting Standards as issued by the International Accounting Standards Board. Staffline Recruitment Group plc adopted IFRS for the first time in its consolidated financial statements for the year ended 31 December 2005. The accounting policies of the Group are included in the 2006 financial statements. 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 expense actually 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 to short term temporary differences (24) 48 Other non-deductible expenses 25 24 Adjustments 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 reserve credited to equity. 4 Earnings per share The calculation of the 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. 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 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 average number 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 that could 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 payment of 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 for 2005 was declared and paid in 2006. 5 Post balance sheet event On the 19 March 2007 the Company acquired the entire issued share capital of Onsite Partnership Limited for a cash consideration of £2 million plus potential deferred consideration dependent on the achievement of profit targets. It is impractical to give further information on the acquisition of Onsite Partnership 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 not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The summarised consolidated profit and loss account, the summarised consolidated statement of changes in equity, the summarised consolidated balance sheet and the summarised consolidated cash flow statement and associated notes have been extracted from the Group's 2006 statutory financial statements upon which the auditors opinion is unqualified and does not include any statement under Section 237 of the Companies Act 1985. 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

Companies

Staffline Group (STAF)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today