Interim Results
Staffline Recruitment Group plc
06 September 2005
Embargoed until 0700 Tuesday, 6 September 2005
STAFFLINE RECRUITMENT GROUP PLC
INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 JUNE 2005
'In line with expectations'
Staffline Recruitment Group plc, the leading provider of recruitment and
outsourced human resource services to industry, today announces its interim
results for the six months to 30 June 2005.
Financial highlights:
• Successful flotation on AIM on 8 December 2004
• Turnover up 19% to £26.4m (2004: £22.1m)
• Operating profit up 16% to £1.0m (2004: £0.9m)
• Pre tax profit up 40% to £0.7m (2004: £0.5m)
• Maiden interim dividend of 0.7p per share in line with
stated progressive dividend policy
• Earnings per share of 2.3p
• Gross operating cash flow of £1.2m
Operational highlights:
• Significant growth in OnSites to 50 locations at 30 August 2005
(31 December 2004: 35)
o 7 additional OnSites in the first half
o 8 additional OnSites since the half year end
• New Staffline industrial branch opened in Wolverhampton, West Midlands
• Strong performance from the Techsearch division; sales up 19% and
operating profit up 325%
• Continued drive to secure Staffline's leadership in employment
legislation compliance
• Appointment of Carole Harvey as Finance Director and Company Secretary
(see separate announcement for further details)
Commenting on the results, Andy Hogarth, Managing Director, said:
'The Group has made strong progress during the first half of the year and we are
pleased to be able to report interim results in line with our expectations.
'We are confident that the Group will continue to make good progress for the
rest of the financial year, with contributions from the 15 new OnSite wins
driving incremental growth in the second half and thereafter, and our
expectations for the year remain unchanged.'
For further information, please contact: www.staffline.co.uk
Staffline Recruitment 0115 950 0885
Andy Hogarth, Managing Director
Smithfield 020 7360 4900
Katie Hunt/Reg Hoare/Sarah Richardson
Note to Editors:
Staffline Recruitment Group plc's main business is as a specialist supplier of
'blue collar' temporary and contract staff to industry through a network of 17
branches and 50 OnSite locations nationwide. The Group also has a smaller but
growing 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
CHAIRMAN'S STATEMENT
Introduction
I am pleased to report Staffline Recruitment Group's interim results for the six
months ended 30 June 2005. These represent the Group's first set of interims
following its successful admission to AIM on 8 December 2004, which raised £6.7m
net of expenses.
Staffline specialises in the matching of un-skilled and semi-skilled temporary
workers to suitable positions within the UK manufacturing industry, particularly
the food processing sector. This is achieved by providing an outsourcing service
which includes skills, eligibility and reference checking of applicants, health
screening, training and ongoing supervision.
Results
Due to the fact that the Group acquired Staffline Recruitment Limited on
flotation there are no comparative statutory Group interim results available.
However for ease of comparison with the 2005 interim results, we have provided
pro-forma results for Staffline Recruitment Limited for the period covering the
six months to 30 June 2004.
The results are prepared for the first time in accordance with International
Financial Reporting Standards (IFRS) and in order to give the greatest level of
clarity, we have prepared a full set of detailed notes which include
reconciliation to the results on a UK GAAP basis.
The results for the period are in line with expectations, with a pre tax profit
of £0.7 million, and fully diluted earnings per share of 2.3p.
Dividends
As announced at the time of the flotation, the Board is committed to a
progressive dividend policy and it gives me great pleasure to declare a maiden
interim dividend of 0.7p per share, payable on 18 November 2005 to all
shareholders on the register on 21 October 2005. In accordance with IFRS the
dividend is not provided in the interim results as it was declared after 30 June
2005.
Outlook
We are pleased with the progress the Group has made since flotation and we are
confident we have the strategy, management and business model in place for
success. Furthermore, our focus on being a valuable outsourcing partner for our
customers combined with our recent successes in winning new OnSites, positions
us well for continued strong progress in the future.
Derek Mapp
Chairman
6 September 2005
MANAGING DIRECTOR'S STATEMENT
The Group has made strong progress during the first half of the year and we are
pleased to be able to report interim results in line with our expectations. This
is despite a backdrop of subdued demand for temporary workers from certain
manufacturing sectors as a result of the current economic conditions impacting
on their markets.
Strategy
Our strategy continues to be to deliver shareholder value by achieving sustained
growth in revenue, profit and cash flow. Our focus is on increasing both the
number and scope of our OnSite client relationships, mainly but not exclusively
in the food production sector, supported by our traditional branch network which
incubates many of these relationships. In addition, we will continue to grow our
smaller Techsearch division in line with increasing demand.
The strengthened profile and customer confidence afforded by our flotation on
AIM has already helped with the execution of this strategy.
Financial Results
As mentioned in the Chairman's statement, in order to provide meaningful
comparisons, comparative results for the six months to 30 June 2004 are provided
on a pro forma basis.
Turnover for the first half rose by 19% to £26.4 million (2004: £22.1 million).
Operating profit increased by 16% to £991,000 (2004: £858,000). Pre tax profit
rose by 40% to £694,000 (2004: £494,000).
The adoption of IFRS has resulted in the Group taking a charge in the income
statement for the cost of share options issued to staff members. The total cost
for the period to 30 June 2005 in respect of these options was £30,000.
Following our admission to AIM, the £6.7m net proceeds of the Placing were used
to strengthen the Group's balance sheet. As a result, net debt has fallen to
£8.1m as at 30 June 2005, giving gearing of 47%, and we anticipate that this
will be further reduced by the end of the current financial year.
Gross operating cash flow during the period was £1,168,000 which, after taking
account of interest payments of £272,000, tax payments of £282,000, capital
expenditure of £12,000, £500,000 in repayments of bank term loan and adding back
net working capital movements of £27,000, resulted in an increase in the Group's
cash reserves of £129,000.
Operational Review
OnSite Division
New OnSite wins continued to be the major growth driver for the business. The
OnSites which were added at the end of 2004 made a good contribution to the
first half performance, and during the first half we increased the number of
OnSite locations by 7, bringing the total to 42 at the half year end compared to
35 at the year end.
Buoyant trading for the first three months of the year was partially offset by
subdued usage by certain existing customers in the manufacturing sector in the
second quarter. As a provider of temporary workers, usage of our services is
particularly buoyant at times of short term increases in demand for our
customers' end products. In the latter three months, such favourable conditions
were absent due to the slowing economy. We are well placed to benefit from any
revival in usage by these customers, whilst the new business we have gained in
the last year has compensated for this weakness, thus ensuring that our
performance remains in line with expectations.
Industrial Branches
The majority of the industrial branches are performing well, with one new branch
opened in the half year at Wolverhampton in the West Midlands, in response to
increased demand in this area. We closed a satellite branch in Stoke on Trent as
labour availability in the area, which had been a problem in 2004, improved and
the branch was, therefore, no longer necessary for us to fulfill local client
requirements. Two of the new OnSite openings in the period were incubated by the
branch network.
Techsearch
Techsearch continued its strong performance with sales increasing by 19%.
Operating profit increased by 325% reflecting the operational gearing in the
business as well as improved efficiencies resulting from a reduction in the
number of branches from six to four, which took place in mid 2004.
Industry Background and Compliance
The Gangmasters (Licensing) Act 2004
We very much welcome The Gangmasters (Licensing) Act 2004 ('the Act') which
received Royal Assent in July 2004. The Act establishes the Gangmasters
Licensing Authority ('GLA') to set up and operate the licensing scheme for
labour providers operating in the agricultural, shellfish gathering and
associated processing and packing sectors. Once the licensing arrangements are
in place (anticipated in 2006) the Act will prohibit anyone without a licence
from acting as a labour provider in these specified sectors. It will also make
it an offence for a labour user to use an unlicensed provider.
We are working very closely with the GLA and have been able to help shape their
thinking on both implementation and enforcement.
The Home Office
The Home Office have greatly increased their activity in searching for and
preventing the use of illegal workers. They have carried out a large number of
audits in both ours and our clients' premises. We have passed with 100% success
on every occasion.
Temporary Labour Working Group (TLWG)
This is a consortium of major retailers, growers, suppliers, labour providers
and trade unions which was set up with Government support with the aim of
establishing a set of minimum standards for labour providers. During the period
we became members of the TLWG and were one of the earliest to pass the full
audit.
Verification Systems
We have continued to invest heavily in our IT systems during the period
introducing document scanning at each of our locations to further improve the
quality of documentation held and to ensure that our unique three stage process
of verification secures our leadership in compliance with legislation
surrounding the prevention of illegal working.
Board and Employees
In March 2005 we announced the appointment of John Crabtree as a Non-Executive
Director and today we announce the appointment to the Board of Carole Harvey as
Group Finance Director and Company Secretary. This appointment follows Andrew
Walsh agreeing to step down from both these roles and resuming his position as
Group Financial Controller, the position he held prior to the flotation.
Following these appointments, we have a full, strong and well-balanced Board
with which to continue to develop the business within the framework of our
stated strategy.
Since our admission to AIM, we have benefited from the contribution of the
employee share option scheme to a further reduction in staff turnover which
stood at 22% on an annualised basis for the first six months, compared to 39%
for the full year in 2004.
Current Trading and Prospects
We are pleased to be able to announce further OnSite contract wins since 30 June
2005, including a number of major customers in the food processing industry. We
have converted a further 8 sites in the past 2 months, a total of 15 new sites
for the year, bringing the total number of OnSite locations at 30 August to 50.
We continue to see momentum in our pipeline of OnSite prospects, providing
encouragement for 2006.
We are confident that the Group will continue to make good progress for the rest
of the financial year, with contributions from the 15 new OnSite wins driving
incremental growth in the second half and thereafter, and our expectations for
the year remain unchanged.
Andy Hogarth
Managing Director
6th September 2005
Consolidated income statement
Six months ended 30 June 2005
Pro forma
Note Period 6 months 25 October
ended ended to 31
30 June 30 June December
2005 2004 2004
Unaudited Unaudited Audited
£'000 £'000 £'000
Continuing operations
Sales revenue 26,364 22,137 4,927
Cost of sales (21,092) (17,307) (3,966)
Gross profit 5,272 4,830 961
Administrative expenses (4,281) (3,972) (746)
Operating result 991 858 215
Finance costs 5 (297) (364) (112)
Result for the
period before taxation 694 494 103
Tax(expense)/income 7 (208) - 21
Net result for
the period 486 494 124
Earnings per
ordinary share 8
Basic 2.3p 9.4p
Diluted 2.3p 9.4p
Consolidated statement of changes in equity
Six months ended 30 June 2005
Share Profit
based and
Share Payment Share Loss
capital reserve premium account Total
£'000 £'000 £'000 £'000 £'000
At 25 October 2004 - - - - -
On acquisition of
Staffline Recruitment 1,000 - 7,004 - 8,004
Limited
Issue of new shares 1,082 - 7,573 - 8,655
Cost of issue
of new shares - - (320) - (320)
Net result for
the period - - - 124 124
Employee share
based compensation - 5 - - 5
At 31 December 2004 2,082 5 14,257 124 16,468
Net result for
the period - - - 486 486
Employee share
based compensation - 30 - - 30
At 30 June 2005 2,082 35 14,257 610 16,984
Consolidated balance sheet
At 30 June 2005
At 31
At 30 June December
2005 2004
Unaudited Audited
Note £'000 £'000
Assets
Non current
Goodwill 9 22,326 22,326
Property, plant and equipment 10 150 285
22,476 22,611
Current
Trade debtors and
other receivables 11 7,481 7,901
Cash and cash equivalents 500 371
7,981 8,272
Total assets 30,457 30,883
Liabilities
Current
Trade and other payables 12 (8,736) (9,133)
Bank loans 13 (950) (950)
Current tax liabilities (208) (282)
(9,894) (10,365)
Non current
Bank loans 13 (3,579) (4,050)
Total liabilities (13,473) (14,415)
Equity
Share capital 15 (2,082) (2,082)
Share premium (14,257) (14,257)
Share based payment reserve (35) (5)
Profit and loss account (610) (124)
Total equity (16,984) (16,468)
Total equity and liabilities (30,457) (30,883)
Consolidated cash flow statement
For the six months ended 30 June 2005
Period
ended
6 months 31
ended 30 December
June 2005 2004
Unaudited Audited
£'000 £'000
Operating activities
Operating result 991 215
Interest paid (272) (35)
Employee equity settled share options 30 5
Depreciation of property, plant and equipment 147 33
Change in trade and other receivables 420 424
Change in trade and other payables (393) 739
Taxes paid (282) -
Net cash inflow from operating activities 641 1,381
Investing activities
Purchases of property, plant and equipment (12) -
Acquisition of subsidiary undertaking - (3,709)
Overdraft acquired on acquisition - (176)
Net cash used in investing activities (12) (3,885)
Financing activities
Issue of shares - 8,655
Repayment of loans (500) (5,460)
Share issue costs - (320)
Net cash (used in)/from financing activities (500) 2,875
Net increase in cash and cash equivalents 129 371
Cash and cash equivalents at beginning of period 371 -
Cash and cash equivalents at end of period 500 371
Notes to the interim results
Six months ended 30 June 2005
1. GENERAL INFORMATION
The information for the period ended 31 December 2004 does not constitute
statutory accounts as defined in Section 240 of the Companies Act 1985. A copy
of the statutory accounts for that year has been delivered to the Registrar of
Companies. The auditors' report on those accounts was unqualified.
As the acquisition of Staffline Recruitment Limited was completed on 26 October
2004, for illustrative purposes only a consolidated pro forma income statement
for the six months ended 30 June 2004 has been provided in this interim report.
This pro forma information comprises the results of Staffline Recruitment
Limited only.
2. ACCOUNTING POLICIES
Basis of preparation
The interim financial report has been prepared under the historical cost
convention and in accordance with International Accounting Standard 34 Interim
Financial Reporting and the requirements of International Financial Reporting
Standard 1 First Time Adoption of International Reporting Standards relevant to
interim reports.
Staffline Recruitment Group plc will adopt IFRS for the first time in its
consolidated financial statements for the year ending 31 December 2005. The
transition to IFRS reporting has resulted in a number of changes in the reported
financial statements, notes thereto and accounting principals compared to the
previous annual report. Note 3 provides further details on the transition from
UK GAAP to IFRS.
The principal accounting policies of the Group are set out below.
Consolidation and investments in subsidiaries
Subsidiaries are all entities over which the Group has the power to control the
financial and operating policies. The Group obtains and exercises control
through voting rights. The consolidated financial statements of the Group
incorporate the financial statements of the parent company as well as those
entities controlled by the Group by full consolidation.
In addition, acquired subsidiaries are subject to application of the purchase
method. This involves the revaluation at fair value of all identifiable assets
and liabilities, including contingent liabilities of the subsidiary, at the
acquisition date, regardless of whether or not they were recorded in the
financial statements of the subsidiary prior to acquisition. On initial
recognition, the assets and liabilities of the subsidiary are included in the
consolidated balance sheet at their revalued amounts, which are also used as the
bases for subsequent measurement in accordance with the Group accounting
policies. Goodwill represents the excess of acquisition cost over the fair value
of the Group's share of the identifiable net assets of the acquired subsidiary
at the date of acquisition.
Material intra-group balances and transactions, and any unrealised gains or
losses arising from intra-group transactions, are eliminated in preparing the
consolidated financial statements.
Income recognition
Income for temporary contractors is recognised on receipt of contractor
timesheets, which are signed by the customer authorising invoices to be raised.
Income from permanent placements is recognised when the candidates start work.
Turnover represents sales to outside customers at invoiced amounts less value
added tax.
Goodwill
Goodwill is tested annually for impairment and carried at cost less accumulated
impairment losses.
Impairment
The Group's goodwill and property, plant and equipment are subject to impairment
testing.
For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows (cash-generating
units). As a result, some assets are tested individually for impairment and some
are tested at cash-generating unit level. Goodwill is allocated to those
cash-generating units that are expected to benefit from synergies of the related
business combination and represent the lowest level within the Group at which
management controls the related cash flows.
Individual intangible assets or cash-generating units that include goodwill with
an indefinite useful life are tested for impairment at least annually. All other
individual assets or cash-generating units are tested for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be
recoverable.
An impairment loss is recognised for the amount by which the asset's or
cash-generating unit's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of fair value, reflecting market conditions
less costs to sell and value in use, based on an internal discounted cash flow
evaluation. Impairment losses recognised for cash-generating units, to which
goodwill has been allocated, are credited initially to the carrying amount of
goodwill. Any remaining impairment loss is charged pro rata to the other assets
in the cash generating unit. With the exception of goodwill, all assets are
subsequently reassessed for indications that an impairment loss previously
recognised may no longer exist.
Property, plant and equipment
Computer equipment and fixtures and fittings are carried at acquisition cost
less subsequent depreciation and impairment losses. Depreciation is charged on
these assets on a straight line basis over the estimated useful economic life of
each asset.
The useful lives of property, plant and equipment can be summarised as follows:
Computer equipment 3 years
Fixtures and fittings 3 years
Leases
In accordance with IAS 17 (revised 2003), the economic ownership of a leased
asset is transferred to the lessee if the lessee bears substantially all the
risks and rewards related to the ownership of the leased asset. The related
asset is recognised at the time of inception of the lease at the fair value of
the leased asset or, if lower, the present value of the lease payments plus
incidental payments, if any, to be borne by the lessee. A corresponding amount
is recognised as a finance leasing liability, irrespective of whether some of
these lease payments are payable up-front at the date of inception of the lease.
Subsequent accounting for assets held under finance lease agreements, ie
depreciation methods and useful lives, correspond to those applied to comparable
acquired assets. The corresponding finance leasing liability is reduced by lease
payments less finance charges, which are expensed to finance costs. Finance
charges represent a constant periodic rate of interest on the outstanding
balance of the finance lease liability.
All other leases are treated as operating leases. Payments on operating lease
agreements are recognised as an expense on a straight-line basis. Associated
costs, such as maintenance and insurance, are expensed as incurred. The Group
does not act as a lessor.
Taxation
Current income tax assets and/or liabilities comprise those obligations to, or
claims from, fiscal authorities relating to the current or prior reporting
period, that are unpaid at the balance sheet date. They are calculated according
to the tax rates and tax laws applicable to the fiscal periods to which they
relate, based on the taxable profit for the year. All changes to current tax
assets or liabilities are recognised as a component of tax expense in the income
statement.
Deferred income taxes are calculated using the liability method on temporary
differences. This involves the comparison of the carrying amounts of assets and
liabilities in the consolidated financial statements with their respective tax
bases. However, in accordance with the rules set out in IAS 12, no deferred
taxes are recognised in conjunction with goodwill. This applies also to
temporary differences associated with shares in subsidiaries if reversal of
these temporary differences can be controlled by the Group and it is probable
that reversal will not occur in the foreseeable future. In addition, tax losses
available to be carried forward as well as other income tax credits to the Group
are assessed for recognition as deferred tax assets.
Deferred tax liabilities are always provided for in full. Deferred tax assets
are recognised to the extent that it is probable that they will be able to be
offset against future taxable income. Deferred tax assets and liabilities are
calculated, without discounting, at tax rates that are expected to apply to
their respective period of realisation, provided they are enacted or
substantively enacted at the balance sheet date.
Most changes in deferred tax assets or liabilities are recognised as a component
of tax expense in the income statement. Only changes in deferred tax assets or
liabilities that relate to a change in value of assets or liabilities that is
charged directly to equity are charged or credited directly to equity.
Pensions
Pensions to employees are provided through contributions to individual personal
pension plans. A defined contribution plan is a pension plan under which the
Group pays fixed contributions into an independent entity. The Group has no
legal or constructive obligations to pay further contributions after payment of
the fixed contribution.
The contributions recognised in respect of personal pension plans are expensed
as they fall due. Liabilities and assets may be recognised if underpayment or
prepayment has occurred and are included in current liabilities or current
assets as they are normally of a short term nature.
Financial assets
The Group's financial assets include cash and trade receivables.
All financial assets are recognised on their settlement date. All financial
assets are initially recognised at fair value, plus transaction costs.
Non-compounding interest and other cash flows resulting from holding financial
assets are recognised in profit or loss when received, regardless of how the
related carrying amount of financial assets is measured.
Trade receivables are provided against when objective evidence is received that
the Group will not be able to collect all amounts due to it in accordance with
the original terms of the receivables. The amount of the write-down is
determined as the difference between the asset's carrying amount and the present
value of estimated future cash flows.
Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand as well as short term
highly liquid investments such as money market instruments and bank deposits.
Money market instruments are financial assets carried at fair value through
profit or loss.
Equity
Share capital is determined using the nominal value of shares that have been
issued.
The share premium account represents premiums received on the initial issuing of
the share capital. Any transaction costs associated with the issuing of shares
are deducted from share premium, net of any related income tax benefits.
Retained earnings include all current and prior period results as disclosed in
the income statement.
Share based employee remuneration
All share-based payment arrangements are recognised in the consolidated
financial statements. The Group operates equity-settled share-based remuneration
plans for remuneration of its employees.
All employee services received in exchange for the grant of any share-based
remuneration are measured at their fair values. These are indirectly determined
by reference to the fair value of the share options awarded. Their value is
appraised at the grant date and excludes the impact of any non-market vesting
conditions (for example, profitability and sales growth targets).
All share-based remuneration is ultimately recognised as an expense in profit or
loss with a corresponding credit to the share based payment reserve, net of
deferred tax where applicable. If vesting periods or other vesting conditions
apply, the expense is allocated over the vesting period, based on the best
available estimate of the number of share options expected to vest. Non-market
vesting conditions are included in assumptions about the number of options that
are expected to become exercisable. Estimates are subsequently revised, if there
is any indication that the number of share options expected to vest differs from
previous estimates. No adjustment is made to the expense recognised in prior
periods if fewer share options ultimately are exercised than originally
estimated.
Upon exercise of share options, the proceeds received net of any directly
attributable transaction costs up to the nominal value of the shares issued are
allocated to share capital with any excess being recorded as share premium.
Financial liabilities
The Group's financial liabilities include bank loans, an invoice discounting
loan and trade and other payables.
Financial liabilities are recognised when the Group becomes a party to the
contractual agreements of the instrument. All interest related charges are
recognised as an expense in 'finance cost' in the income statement.
Bank loans are raised for support of long term funding of the Group's
operations. They are recognised as proceeds received, net of direct issue costs.
Finance charges, including premiums payable on settlement or redemption and
direct issue costs, are charged to profit or loss on an accruals basis using the
effective interest method and are added to the carrying amount of the instrument
to the extent that they are not settled in the period in which they arise.
Trade payables are recognised initially at their nominal value and subsequently
measured at amortised cost less settlement payments.
Dividend distributions to shareholders are included in 'other short term
financial liabilities' when the dividends are approved by the shareholders'
meeting.
Other provisions, contingent liabilities and contingent assets
Other provisions are recognised when present obligations will probably lead to
an outflow of economic resources from the Group and they can be estimated
reliably. Timing or amount of the outflow may still be uncertain. A present
obligation arises from the presence of a legal or constructive commitment that
has resulted from past events, for example, legal disputes or onerous contracts.
Provisions are measured at the estimated expenditure required to settle the
present obligation, based on the most reliable evidence available at the balance
sheet date, including the risks and uncertainties associated with the present
obligation. Any reimbursement expected to be received in the course of
settlement of the present obligation is recognised, if virtually certain as a
separate asset, not exceeding the amount of the related provision. Where there
are a number of similar obligations, the likelihood that an outflow will be
required in settlement is determined by considering the class of obligations as
a whole. In addition, long term provisions are discounted to their present
values, where time value of money is material.
All provisions are reviewed at each balance sheet date and adjusted to reflect
the current best estimate.
In those cases where the possible outflow of economic resource as a result of
present obligations is considered improbable or remote, or the amount to be
provided for cannot be measured reliably, no liability is recognised in the
consolidated balance sheet.
Probable inflows of economic benefits to the Group that do not yet meet the
recognition criteria of an asset are considered contingent assets.
3. TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS
The transition from previous UK GAAP to IFRS has been made in accordance with
IFRS 1, First-time Adoption of International Financial Reporting Standards. The
Group's financial statements for the six months ended 30 June 2005 and the
comparatives presented for the period ended 31 December 2004 comply with all
presentation recognition and measurement requirements of IFRS applicable for
accounting periods commencing on or after 1 January 2005.
The following reconciliations and explanatory notes thereto describe the effects
of the transition for the financial year 2004. All explanations should be read
in conjunction with the IFRS accounting policies of Staffline Recruitment Group
plc.
Since Staffline Recruitment Group plc was incorporated on 25 October 2004 that
is the transition date to IFRS. As that was the date of incorporation of the
company no reconciliation of equity is required at that date.
The re-measurement of balance sheet items as at 31 December 2004 may be
summarised as follows:
Reconciliation as at 31 December 2004 Effect of
UK GAAP transition IFRS
£'000 £'000 £'000
Goodwill 22,256 70 22,326
Profit and loss account 129 (5) 124
Share options to be issued - 5 5
Total adjustment to assets and equity 22,385 70 22,455
The reconciliation of the Group's equity reported under previous GAAP to its
equity under IFRS as at 31 December 2004 may be summarised as follows:
Reconciliation as at 31 December 2004 £'000
Retained earnings - UK GAAP 59
Reversal of goodwill amortisation 70
Employee share based compensation (5)
Retained earnings - IFRS 124
Share options to be issued - UK GAAP -
Employee share based compensation 5
Share options to be issued - IFRS 5
Total adjustment to equity 70
Profit and loss reported under UK GAAP for the period ended 31 December 2004 is
reconciled to IFRS as follows:
Reconciliation for the period 25 October to Effect of
31 December 2004 UK GAAP transition IFRS
£'000 £'000 £'000
Sales revenue 4,927 - 4,927
Cost of sales (3,966) - (3,966)
Gross profit 961 - 961
Administrative expenses (741) (5) (746)
Operating result 220 (5) 215
Amortisation of goodwill (70) 70 -
Finance costs (112) - (112)
Result for the period before taxation 38 65 103
Tax income 21 - 21
Net result for the period 59 65 124
The Group has modified its former balance sheet and income statement structure
on transition to IFRS. The main changes may be summarised as follows:
• to eliminate the amortisation of goodwill
• to provide for the estimated fair value of the share based employee
remuneration.
4. SEGMENTAL REPORTING
(a) By business segment (primary segment):
As defined under International Accounting Standard 14 (IAS14), 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.
(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.
5. FINANCE COSTS
Period
6 months ended
ended 30 31
June December
2005 2004
£'000 £'000
Interest payable on bank loans and overdraft 297 110
Interest payable on loan notes - 2
297 112
6. EMPLOYEES REMUNERATION
Employee benefits expense
Expense recognised for employee benefits is analysed below:
Period
6 months ended
ended 31
30 June December
2005 2004
£'000 £'000
Wages and salaries 2,616 503
Social security costs 279 46
Other pension costs - defined contribution plans 31 4
2,926 553
Number Number
The average number of persons (including
directors) employed by the Group
during the period was: 189 181
Share-based employee remuneration
As at 30 June 2005 the Group operated a share based payment scheme for employee
remuneration.
The share option scheme is available to all full time members of staff, except
for two of the executive directors, Mr A Hogarth and Mr M Evans, subject to the
rules of the scheme, the key points of which are as follows:
• only staff with in excess of six months service are eligible;
• the number of options granted are a factor of length of service and current
salary;
• options are exercisable between two and seven years of being granted;
• except in certain limited circumstances all options lapse if an employee
leaves the Group; and
• exercise of options is not subject to any specific performance criteria.
All share based employee remuneration will be settled in equity. The Group has
no legal or constructive obligation to repurchase or settle the options.
Share options and weighted average exercise price are as follows for the
reporting periods presented:
30 June 2005 31 December 2004
Weighted average Weighted average
exercise price exercise price
Number (pence) Number (pence)
Outstanding at start of period 499,205 80 - -
Granted 104,184 107.5 499,205 80
Lapsed (47,637) 80 - -
Outstanding at end of period 555,752 85.2 499,205 80
The Group has the following outstanding share options and exercise prices:
30 June 2005 31 December 2004
Weighted Weighted Weighted Weighted
average average average average
exercise contractual exercise contractual
price life price life
Number (pence) (months) Number (pence) (months)
Exercise date:
2006 451,568 80 17 499,205 80 23
2007 104,184 107.5 23 - - -
The fair value of options granted was determined using the Black-Scholes
valuation model. Significant inputs into the calculations were:
• weighted average share price of 107.5 pence
• exercise prices as detailed above
• 10% volatility based on expected share price
• a risk free interest rate of 5%.
In total £30,000 of employee remuneration expense has been included in the
consolidated income statement for 30 June 2005 (31 December 2004 : £5,000) which
gave rise to share based payment reserve. No liabilities were recognised due to
share based payment transactions.
7. TAX (EXPENSE)/INCOME
The relationship between the expected tax expense at 30% and the tax expense
actually recognised in the income statement can be reconciled as follows:
Period
6 months ended
ended 30 31
June December
2005 2004
£'000 £'000
Result for the period before tax 694 108
Tax rate 30% 30%
Expected tax expense 208 32
Adjustment for non-deductible expenses relating - (55)
to short term timing differences
Other non-deductible expenses - 2
Actual tax expense/(income) 208 (21)
Comprising:
Current tax expense 208 -
Deferred tax income, resulting from the - (21)
origination and reversal of temporary differences
208 (21)
8. 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 period. 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
Period Period
6 months ended 6 months ended
ended 31 ended 31
30 June December 30 June December
2005 2004 2005 2004
Earnings (£'000) 486 124 486 124
Weighted average number of 20,824,463 1,312,226 20,939,980 1,318,517
shares
Earnings per share (pence) 2.3p 9.4p 2.3p 9.4p
The earnings per share for the period ended 31 December 2004 relates to a 23 day
trading period only and, therefore, gives a distorted picture of an annualised
earnings per share.
9. GOODWILL
Goodwill
£'000
Gross carrying amount
At 1 January 2005 22,326
Additions in the period -
At 30 June 2005 22,326
Accumulated impairment losses
At 1 January 2005 -
Impairment loss recognised -
At 30 June 2005 -
Net book amount at 30 June 2005 22,326
Goodwill above relates to the following cash generating units:
Date of Original
acquisition cost
£'000
Staffline Recruitment Limited 8 December 2004 22,326
The recoverable amounts for Staffline Recruitment Limited was determined based
on a value-in-use calculation, covering a detailed three year forecast, followed
by an extrapolation of expected cash flow at a growth rate of 5%. The growth
rate reflects the long term average growth rate for that cash generating unit.
Management's key assumptions for Staffline Recruitment Limited include
assumptions that there will be no significant changes in the business and that
turnover growth will not exceed historic growth levels.
Apart from the considerations described in determining the value-in-use of the
cash generating unit above, the Group management is not currently aware of any
other probable changes that would necessitate changes in its key estimates.
10. PROPERTY, PLANT AND EQUIPMENT
Group Fixtures
Computer and
equipment fittings Total
£'000 £'000 £'000
Gross carrying amount
At 1 January 2005 1,213 95 1,308
Additions 12 - 12
At 30 June 2005 1,225 95 1,320
Depreciation and impairment
At 1 January 2005 928 95 1,023
Provided in the year 147 - 147
At 30 June 2005 1,075 95 1,170
Net book amount at 30
June 2005 150 - 150
Net book amount at 31
December 2004 285 - 285
11. TRADE AND OTHER RECEIVABLES
At 30 At 31
June December
2005 2004
£'000 £'000
Trade and other receivables, gross 7,490 7,905
Impairment of trade and other receivables (9) (4)
Trade and other receivables, net 7,481 7,901
Trade and other receivables are usually due within 30 - 60 days and do not bear
any effective interest rate. All trade receivables are subject to credit risk
exposure. However, the Group does not identify specific concentrations of credit
risk with regards to trade and other receivables as the amounts recognised
resemble a large number of receivables from various customers.
The fair value of these short term financial assets is not individually
determined as the carrying amount is a reasonable approximation of fair value.
12. TRADE AND OTHER PAYABLES
At 30 At 31
June December
2005 2004
£'000 £'000
Trade and other payables 4,663 5,536
Invoice discounting liability 4,073 3,597
8,736 9,133
The invoice discounting facility included above is secured on the trade debtors
of the Group and bears interest at commercial rates.
The fair value of trade and other payables has not been disclosed as, due to
their short duration, management considers the carrying amounts recognised in
the balance sheet to be a reasonable approximation of their fair value.
13. BANK LOANS
Bank loans are repayable as follows:
At 30 At 31
June December
2005 2004
£'000 £'000
Within one year 1,000 1,000
After one and within two years 1,000 1,000
After two and within five years 2,750 3,000
After more than five years - 250
4,750 5,250
Debt issue costs (221) (250)
4,529 5,000
Less: current liabilities (950) (950)
Non current liabilities 3,579 4,050
Bank loans are secured by a debenture over all the assets of the Group.
The bank loan is repayable in equal quarterly instalments of £250,000. Interest
accrues on the loan at 2% above base rate.
The fair value of the bank loan is £3,853,000 at 30 June 2005 (31 December 2004
£4,214,000). Fair values of the bank loans have been determined by calculating
the present values at the balance sheet date of the future cash flows, using
fixed effective market interest rates available to the Group. No fair value
charges have been included in the income statement for the period as financial
liabilities are carried at amortised cost in the balance sheet.
14. DEFERRED TAX ASSETS AND LIABILITIES
There are no deferred taxes arising from temporary differences at 30 June 2005
or 31 December 2004.
15. SHARE CAPITAL
At 30 At 31
June December
2005 2004
£'000 £'000
Authorised
30,000,000 ordinary 10p shares 3,000 3,000
50,000 redeemable £1 shares 50 50
3,050 3,050
Allotted, issued and fully paid
20,824,463 ordinary 10p shares 2,082 2,082
16. RELATED PARTY TRANSACTIONS
The only related parties are the Groups' directors and others as described
below.
Transactions with Group directors
The Group directors' personal remuneration includes the following expenses:
Period
6 months ended 31
ended 30 December
June 2005 2004
£'000 £'000
Short-term employee benefits:
Salaries 167 26
Social security costs 18 3
Past employment benefits relating to
defined contribution schemes 12 -
Share based payments - -
197 29
Other transactions
The Group provides pension benefits for some of its employees under a defined
contribution pension plan.
In the six months ended 30 June 2005 the Group contributed £31,000 (period ended
31 December 2004: £4,000) to this plan. At 30 June 2005 there were contributions
due by the Group of £1,000 (31 December 2004: £nil).
17. OPERATING LEASES
The Group's minimum operating lease payments are as follows:
Period
6 months ended 31
ended 30 December
June 2005 2004
Land and buildings Land and buildings
£'000 £'000
In one year or less 41 11
Between one and five years 209 225
In five years or more 52 52
302 288
Lease payments recognised as an expense during the six months ended 30 June 2005
amount to £200,000 (period ended 31 December 2004 : £24,000).
Operating lease agreements do not contain any contingent rent clauses. None of
the operating lease agreements contain renewal or purchase options or escalation
clauses or any restrictions regarding dividends, future leasing or additional
debt.
18. RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group is exposed to a variety of financial risks which result from both its
operating and investing activities. The Group's risk management is coordinated
at its headquarters, in close co-operation with the board of directors, and
focuses on actively securing the Group's short to medium term cash flows by
minimising the exposure to financial markets. Long term financial investments
are managed to generate lasting returns.
Staffline Recruitment Group plc does not actively engage in the trading of
financial assets for speculative purposes nor does it write options. The most
significant financial risks to which the Group is exposed to are described
below:
Credit risk
Generally, the maximum credit risk exposure of financial assets is the carrying
amount of the financial assets as shown on the face of the balance sheet (or in
the detailed analysis provided in the notes to the financial statements). Credit
risk, therefore, is only disclosed in circumstances where the maximum potential
loss differs significantly from the financial asset's carrying amount.
The Group's trade and other receivables are actively monitored to avoid
significant concentrations of credit risk.
The Group has adopted a no-business policy with customers lacking an appropriate
credit history where credit records are available.
Cash flow and fair value interest rate risks
The Group seeks to manage financial risks to ensure sufficient liquidity is
available to meet foreseeable needs and to invest cash assets safely and
profitably. Short term flexibility is achieved by the use of an invoice
discounting facility, which provides 85% of eligible debtors up to a maximum of
£6,000,000. This facility is due for review in March 2006.
All financial liabilities of the Group are subject to floating interest rates.
This information is provided by RNS
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Friday, 10th January 2025
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