Preliminary Results
Staffline Recruitment Group plc
1 March 2005
Embargoed until 0700 Tuesday, 1 March 2005
MAIDEN PRELIMINARY RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2004
'2004 performance ahead of forecast in AIM admission document'
Staffline Recruitment Group plc, the leading provider of recruitment and
outsourced human resource services to industry, today announces its maiden
preliminary results for the full year ended 31 December 2004.
Highlights:
•Successful flotation on AIM on 8 December 2004
•Performance ahead of 2004 forecast in AIM admission document
•Turnover up 22.8% to £48.9m (2003: £39.8m)
•Adjusted operating profit* up 22.8% to £1.94m (2003: £1.57m)
•Statutory loss before tax reduced by 76% to £134,000 (2003: £561,000)
•Intention to declare an interim dividend at time of half year results
•Significant growth in OnSites to 35 locations at 31 December 2004 (2003: 18)
•John Crabtree appointed as a Non-Executive Director (see separate announcement)
*before exceptional items and goodwill amortisation. All figures stated on a
pro forma basis.
Commenting on the results, Andy Hogarth, Managing Director, said:
'Trading in the first eight weeks of 2005 has shown good growth and is in line
with our budget expectations. Also as expected, we have secured a number of new
contracts and we have already grown the number of OnSite locations by 5 in the
current year to total 40.
'We are, therefore, encouraged by the continued growth of the Group to date and
have every confidence of further progress in the year ahead.'
For further information, please contact: www.staffline.co.uk
Staffline Recruitment 0115 950 0885
Andy Hogarth, Managing Director
Smithfield 020 7360 4900
Reg Hoare/Katie Hunt
Note to Editors:
Staffline Recruitment is a specialist supplier of 'blue collar' temporary and
contract staff to industry operating from 21 high-street branches and 40 on-site
locations nationwide, managed from a head office in Nottingham. It was founded
in 1986 and admitted to AIM on 8 December 2004 at a price of 80 pence per share,
raising approximately £6.7 million net of expenses.
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 present my first report as Chairman of Staffline Recruitment
Group plc for the period ended 31 December 2004, the company having achieved a
successful quotation on the Alternative Investment Market of the London Stock
Exchange ('AIM') on 8 December 2004.
Staffline specialises in the matching of un-skilled and semi-skilled temporary
workers to suitable positions within UK manufacturing industry, particularly in
the food processing sector. This is achieved by providing an outsourcing service
which includes skills and reference checking applicants, health screening,
training and ongoing supervision.
Results
As this is our first results since the admission to AIM, in addition to
providing a statutory consolidated profit and loss account, balance sheet and
cash flow statement for the period of 23 days from the flotation to 31 December
2004 we are also providing a pro-forma profit and loss account and cash flow
statement for the full financial years to 31 December 2003 and 2004, in order to
allow comparison with the AIM admission document dated 1 December 2004
('admission document').
The pro-forma results for the year ended 31 December 2004 show a strong
performance and reflect, in particular, the growth of our OnSite division from
18 to 35 locations during the year.
Our people
As Chairman of this company it is clear to me that we make exceptional efforts
to ensure we surpass ever increasing legal and moral standards to provide our
clients with an extremely well motivated workforce. This service is supported by
181 committed staff, most of whom are now further incentivised by the ability to
share in the Company's future value through the share option scheme.
I am, therefore, confident that Staffline is well positioned to continue to
build upon its strong base, augmented by its recent admission to AIM, to achieve
a successful future.
Dividends
As indicated in the AIM admission document, the directors do not intend to
recommend a dividend for this very short period of public ownership. In the
future, however, we intend to adopt a progressive dividend policy in line with
profitability and other relevant factors as outlined within the admission
document. In light of this, it remains our intention that an interim dividend
for the period to 30 June 2005 will be declared.
Derek Mapp
Chairman
1 March 2005
Managing Director's Statement
2004 was an exciting year, for both the Company and its employees. We became a
Public Limited Company in December 2004, following a successful listing on AIM.
This has given us the prospect of greater share ownership amongst employees
enabling employees to share in the future success of the Company.
The Initial Public Offering
A fund raising through an IPO was felt the most appropriate way to allow the
Group to reduce its debt as well as restructure its balance sheet thus providing
the best platform for future growth. The funds raised were used to repay loan
notes and preference shares held by the venture capital providers. Our shares
were admitted to AIM on 8 December 2004 with a market capitalisation of £16.7
million.
In this reporting financial period we have only traded for 23 days as a quoted
company. However, to provide a meaningful comparison and understanding of the
performance of the Group, we have included a pro-forma profit and loss account
and cash flow statement based on the results of the original limited company
which is now a wholly owned subsidiary of Staffline Recruitment Group plc. The
following commentary, therefore, relates to the results of Staffline Recruitment
Limited for the full financial years to 31 December 2004 and 2003.
Financial Results
Turnover for the year rose by 22.8%, from £39.8m in 2003 to £48.9m in 2004.
Operating profit, before exceptional items and amortisation, increased by 22.8%,
from £1.57m in 2003 to £1.94m in 2004. As a result of the previous financial
structure of the Company, interest and amortisation charges were historically
particularly high, leading to a loss before tax in 2004 of £134,000. However,
this was a considerable improvement when compared with the loss of £561,000
reported in the previous year. Interest charges in the current year and
thereafter will be considerably lower and now only relate to the term loan
provided by The Bank of Scotland together with the invoice discounting facility
for working capital requirements.
During the year, there was an exceptional charge of £316,000 relating to the
cost of writing off various fixed assets, as it was felt they no longer had an
economic value to the Group.
Our admission document contained a profit forecast for Staffline Recruitment
Limited for the year ended 31 December 2004 and I am pleased to report that, as
detailed below, the Group performed ahead of those forecasts:
Forecast Actual
£'000 £'000
Turnover 48,000 48,952
Operating profit before exceptional items and
amortisation of goodwill 1,827 1,936
Loss before taxation (136) (134)
The Group has decided to adopt International Accounting Standards for the year
ending 31 December 2005.
Strategy
Our strategy remains the same, to achieve sustained growth in revenue, profit
and cashflow mainly through increasing the number of OnSite locations and the
selective opening of new industrial branches in strategically important
locations. We believe that the higher profile and additional customer confidence
achieved through our flotation on AIM will greatly support the execution of this
strategy.
Operational Review
During the 2004 financial year, we grew our OnSite Staffline locations
considerably; having started the year with 18, the number of locations at the
end of 2004 totalled 35. The majority of these were opened in the second half of
last year, so we have yet to see the full annualised effect of this new
business. All of our OnSite locations made a positive contribution and our
traditional high street branch network performed marginally ahead of budget,
whilst also continuing to incubate OnSite relationships.
Our second division, Techsearch, achieved a greatly improved performance during
the year with sales and operating profit increasing by 38% and 187%
respectively. As a result, we intend to grow this division in line with the
increasing level of demand.
Industry Background
Staffline continually strives to maintain high operational standards and to
address the challenges facing the blue-collar sector of the recruitment industry
in order to provide greater benefits to our clients. The key challenges are set
out below.
Transport
In line with industry practice, we provide transport to enable some of our
contractors to reach work and to allow us to widen the pool of available
contractors for placement. This is either sub-contracted to third party
suppliers who are rigorously audited for full compliance with statutory
requirements or, where we are unable to find reliable suppliers, we provide good
quality transport with appropriately qualified drivers ourselves for which
reasonable charges are made to our workforce of contractors. Our drivers are all
PSV qualified and each minibus is covered by the Company's (PSV) operator's
licence.
Illegal Workers
There has been a great deal of publicity during 2004 and early 2005 about
illegal workers and the various abuses they suffer in the hands of unscrupulous
employers or 'gang masters'. We have comprehensive systems in place to ensure
that we do not offer any work to illegal contractors and now offer a guarantee
to our clients that we will not supply an illegal worker to them. Furthermore,
we not only pay at least statutory minimum pay but also offer benefits such as
statutory sick and maternity pay, holiday pay and access to both a stakeholder
pension scheme and a sickness benefit scheme.
We feel that we are at the vanguard of ethical treatment of our contractors and
have signed up to our own ethical policy as well as that of the Recruitment and
Employment Confederation, the recognised trade association which we joined
during February 2005.
Foreign Workers
Since the accession of ten of the former Eastern Block countries to the EU we
have helped a considerable number of people with finding work in the UK,
particularly by direct recruiting in Poland and the Czech Republic. Having found
suitable contractors we fly them to Britain, obtain good quality accommodation
on their behalf, give them sufficient food and toiletries for their first few
days until they are paid, arrange for them to register with a local GP, obtain
bank accounts and make the transition to living in the UK as easy as possible by
having a 'buddy' system of support. We do not profit from the provision of these
services, but this investment ensures that our contractor workforce has very
high morale, whilst our clients benefit from well-motivated and trained people
and we strengthen our relationships with those clients.
Contractor Training
We opened a dedicated training academy for our contractors in the West Midlands
at the beginning of the year, specialising in training for the food processing
industries. As requirements from our clients continue to increase we will extend
the range of courses offered.
Board Appointments
Prior to the admission to AIM, two Non-Executive appointments were made. Derek
Mapp joined as Chairman of the Company in September 2004 to initially help guide
us through the flotation process and then to provide strategic help in
implementing the growth strategy. Derek brings a wealth of both private and
public company experience. Nicholas Keegan joined as Non-Executive Director and
Chairman of the Audit Committee in November 2004.
We have announced separately today that John Crabtree has been appointed as a
Non-Executive Director and as Chairman of the Remuneration Committee with
immediate effect.
Employees
Our staff headcount grew from 154 to an average of 181 during the year and we
continued to promote from within whenever possible. A total of 44 employees
progressed in this way during 2004. Staff turnover, which is of particular
importance to such a people based business, was further reduced during the year
to 30% compared to an industry average estimated to be about 50%. We continue to
identify and adopt policies which aim to reduce this level further in the
future.
Having first been awarded Investor in People status in 1999 we were successfully
re-assessed during the year under the new standards and have received
accreditation for three years.
I would like to thank all the employees of the Group for their enthusiasm and
dedication to our clients. Without them these strong results would not have been
possible.
Current Trading and Prospects
Trading in the first eight weeks of 2005 has shown good growth and is in line
with our budget expectations. Also as expected, we have secured a number of new
contracts and we have already grown the number of OnSite locations by 5 in the
current year to total 40.
We are, therefore, encouraged by the continued growth of the Group to date and
have every confidence of further progress in the year ahead.
Andy Hogarth
Managing Director
1 March 2005
Note Statutory
period Pro-forma Pro-forma
ended year ended year ended
31.12.04 31.12.04 31.12.03
£'000 £'000 £'000
Turnover 4,927 48,952 39,872
Cost of sales (3,966) (38,579) (31,124)
Gross profit 961 10,373 8,748
Other administrative expenses (741) (8,437) (7,172)
Loss on write off of fixed assets - (316) -
Restructuring costs - - (293)
Amortisation of goodwill (70) (676) (667)
Administrative expenses (811) (9,429) 8,132
Operating profit before exceptional
items and amortisation of goodwill 220 1,936 1,576
Loss on write off of fixed assets - (316) -
Restructuring costs - - (293)
Amortisation of goodwill (70) (676) (667)
Operating profit 150 944 616
Interest payable and similar charges (112) (1,078) (1,177)
Profit/(loss) on ordinary
activities before taxation 38 (134) (561)
Taxation 2 21 (261) 60
Profit/(loss) on ordinary
activities for the financial period 4 59 (395) (501)
Earnings per ordinary share 3
Basic 4.5p
Diluted 4.4p
There were no recognised gains or losses other than the profit/(loss) for the
financial periods.
All of the activities of the Group during the period are classed as
acquisitions.
Note As at
31
December
2004
£'000
Fixed assets
Intangible assets 22,256
Tangible assets 285
22,541
Current assets
Debtors 7,901
Cash in bank and in hand 371
8,272
Creditors:
Amounts falling due within one year (10,365)
Net current liabilities (2,093)
Total assets less current liabilities 20,448
Creditors:
Amounts falling due after more than one year (4,050)
Net assets 16,398
Capital and reserves
Called up share capital 2,082
Share premium 14,257
Profit and loss account 59
Equity shareholders' funds 4 16,398
Note Statutory Pro-forma Pro-forma
period year year
ended ended ended
31.12.04 31.12.04 31.12.03
£'000 £'000 £'000
Net cash inflow from operating
activities 5 1,416 5,956 1,766
Returns on investments and servicing
of finance
Interest paid (35) (901) (627)
Hire purchase interest paid - (17) (26)
Net cash outflow from returns on
investments and service of finance (35) (918) (653)
Taxation - - -
Capital expenditure and financial
investment
Payments to acquire tangible assets - (50) (63)
Net cash outflow from capital
expenditure and financial investment - (50) (63)
Acquisitions
Purchase of subsidiary undertakings (3,709) - -
Overdraft acquired with subsidiary
undertaking (176) - -
Net cash outflow from acquisitions (3,885) - -
Net cash (outflow)/inflow before
financing (2,504) 4,988 1,050
Financing
Issue of shares 8,655 - -
Repayment of loans (5,460) (5,068) (136)
Share issue costs (320) - -
Capital element of hire purchase
contracts - (195) (234)
Net cash inflow/(outflow) from
financing 2,875 (5,263) (370)
Increase/(decrease) in cash 6 371 (275) 680
In the pro-forma cash inflow from operating activities (which relates to
Staffline Recruitment Limited only) for the year ended 31 December 2004 is an
amount of £4,620,000 relating to an inter group loan received from the share
placing, which has subsequently been used to settle outstanding loans as
included in financing.
BASIS OF PREPARATION
The preliminary announcement has been prepared under the historical cost
convention and in accordance with applicable accounting standards.
The principal accounting policies of the Group are set out in the Group's 2004
annual report.
For illustrative purposes only a consolidated pro-forma profit and loss account,
cashflow statement and related notes for the two years ended 31 December 2004
have been provided in this preliminary announcement. The pro- forma information
for the year ended 31 December 2004 comprises of the results and cashflows of
Staffline Recruitment Group plc for the period from incorporation to 31 December
2004 together with the pro-forma results and cashflows of Staffline Recruitment
Limited for the year ended 31 December 2004. The pro-forma information for the
year ended 31 December 2003 comprises the results and cashflows of Staffline
Recruitment Limited only.
TAXATION ON PROFIT/(LOSS) ON ORDINARY ACTIVITIES
The tax charge represents:
Statutory Pro-forma Pro-forma
period ended year ended year ended
31.12.04 31.12.04 31.12.03
£'000 £'000 £'000
UK corporation tax at 30% - 282 -
Total current tax - 282 -
Deferred taxation provision
Reversal of timing differences (21) (21) (60)
Taxation on profit/(loss) on
ordinary activities (21) 261 (60)
The tax assessed for the period differs from the standard rate of corporation
tax in the UK as follows:
Statutory Pro-forma Pro-forma
period ended year ended year ended
31.12.04 31.12.04 31.12.03
£'000 £'000 £'000
Profit/(loss) on ordinary
activities before tax 38 (134) (561)
Profit/(loss) on ordinary
activities multiplied by
standard rate of corporation
tax in the UK of 30% 11 (40) (168)
Effect of
Goodwill amortisation not
deductible for tax purposes 21 203 200
Other expenses not
deductible for tax purposes 2 21 27
Depreciation in excess of
capital allowances (10) 142 49
Short term timing differences (24) (3) (5)
Deductible costs taken to
the profit and loss reserves - (41) -
Tax losses utilised in the period - - (103)
Current tax charge for period - 282 -
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:
Statutory Statutory
period ended period ended
31.12.04 31.12.04
Basic Diluted
Earnings (£'000) 59 59
Weighted average number of shares 1,312,226 1,343,683
Earnings per share (pence) 4.5p 4.4p
The earnings per share relates to a 23 day trading period only and, therefore,
gives a distorted picture of an annualised earnings per share.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Period
ended
31.12.04
£'000
Profit for financial period 59
Issue of ordinary share capital 16,339
Net increase in shareholders' funds 16,398
Equity shareholders' funds brought forward -
Equity shareholders' funds carried forward 16,398
RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES
Statutory Pro-forma Pro-forma
period ended year ended year ended
31.12.04 31.12.04 31.12.03
£'000 £'000 £'000
Operating profit 150 944 616
Depreciation 33 422 379
Movement in provisions - (30) (186)
Amortisation of goodwill 70 676 667
Loss on disposal of fixed assets - 281 42
Decrease/(increase) in debtors 424 (2,053) 7
Increase in creditors 739 5,716 241
Net cash inflow from
operating activities 1,416 5,956 1,766
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
Statutory Pro-forma Pro-forma
period ended year ended year ended
31.12.04 31.12.04 31.12.03
£'000 £'000 £'000
Increase/(decrease) in cash in period 371 (275) 680
Cashflow from debt and lease financing 5,460 5,263 370
Change in net debt resulting from cashflows 5,831 4,988 1,050
Net debt acquired with subsidiary
undertaking (14,307) - -
Other non-cash items 250 (827) 1,832
Movement in net debt in period (8,226) 4,161 2,882
Net debt brought forward - (12,387) (15,269)
Net debt carried forward (8,226) (8,226) (12,387)
ANALYSIS OF CHANGES IN NET FUNDS/(DEBT)
Statutory On Cash Acquisition Non-cash 31.12.04
incorporation flow items
£'000 £'000 £'000 £'000 £'000
Cash at bank - 371 - - 371
and in hand
- 371 - - 371
Bank loan - - (5,250) 250 (5,000)
Invoice discounting
loan - 732 (4,329) - (3,597)
Loan notes - 4,728 (4,728) - -
Net debt - 5,831 (14,307) 250 (8,226)
Pro-forma At 1.1.04 Cash flow Non-cash items 31.12.04
£'000 £'000 £'000 £'000
Cash at bank and in hand 646 (275) - 371
646 (275) - 371
Bank loan (6,150) 900 250 (5,000)
Invoice discounting loan (3,390) (207) - (3,597)
Loan notes (3,298) 4,375 (1,077) -
Finance leases (195) 195 -
Net debt (12,387) 4,988 (827) (8,226)
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 consolidated balance sheet at 31 December 2004 and the profit and loss
accounts, cash flow statements and associated notes for the period then ended
have been extracted from the Group's 2004 statutory financial statements upon
which the auditors opinion is unqualified and does not include any statement
under Section 237 of the Companies Act 1985.
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Friday, 10th January 2025
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