Already on edge following May’s disclosure of challenges in both the training and recruitment divisions, Staffline (STAF) dealt a further blow to shareholders as it warned of drastic measures to address soaring debt.
Management is anticipating requiring a waiver of possible future breaches to the leverage covenant in its lending agreements and is also considering a share placing and open offer to raise a combined £37m to reduce the ratio of FY2019 net debt to underlying cash profits to a multiple of below two. In the absence of a share placing, house broker Liberum forecasts net debt would increase to three times adjusted cash profits in 2020.
The group continues to operate under the shadow of an ongoing HMRC investigation into historical non-compliance with national minimum wage regulations. Following an extensive independent legal and specialist review, the recruiter has revised its provision for liabilities upwards once again, almost doubling from £7.9m to £15.1m. Total exceptional charges for FY2018 now stand at £32.6m.
Excluding any potential share placing, Liberum expects adjusted pre-tax profit of £36.6m and EPS of 113.1p for the as-yet-undeclared 2018 financial year, falling to £21.7m and 65.6p in 2019. Net debt is expected to surge from £62.6m to £85m.
