Things just keep getting worse for Staffline (STAF). Swinging to a pre-tax loss in the first half of 2019, the recruitment and training group has been unable to escape the shadow of its delayed 2018 full-year results. The extended audit to investigate historical minimum wage compliance damaged customer perception, slowing new contract momentum and compounding the effects of “unprecedented” Brexit uncertainty.
Staffline specialises in providing flexible workers, but tightening labour markets have prompted customers to convert large proportions of their temporary workforce into permanent employment. With this trend expected to continue throughout 2019, the group has revised its guidance for full-year adjusted operating profit down from £23m-£28m to around £20m, having made £39.1m last year.
Revenue may have gone up, but growth was driven by acquisitions made last year. Excluding this impact, organic revenue declined by 12.4 per cent. Deferred payments on these acquisitions contributed to net debt more than doubling to £89.2m. But having gone cap in hand to investors in July, £37m in net proceeds from issuing new shares is expected to reduce the ratio of net debt to cash profits to TWO times by the year-end.
Berenberg anticipates adjusted cash profits of £23m and EPS of 22.1p for the full year, rising to £30m and 25.2p in 2020.
| STAFFLINE (STAF) | ||||
| ORD PRICE: | 123p | MARKET VALUE: | £85m | |
| TOUCH: | 122-125p | 12-MONTH HIGH: | 1,269p | LOW: 84p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 122p* | NET DEBT: | 106%** | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 481 | 10.5 | 14.3 | 11.3 |
| 2019 | 535 | -7.7 | -22.4 | nil |
| % change | +11 | - | - | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £155m or 224p a share **Excludes lease liabilities of £9.2m | ||||
