1st Mar 2005 07:01
Staffline Recruitment Group plc1 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 andoutsourced human resource services to industry, today announces its maidenpreliminary 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 apro 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 thecurrent year to total 40. "We are, therefore, encouraged by the continued growth of the Group to date andhave every confidence of further progress in the year ahead." For further information, please contact: www.staffline.co.uk Staffline Recruitment 0115 950 0885Andy Hogarth, Managing Director Smithfield 020 7360 4900Reg Hoare/Katie Hunt Note to Editors:Staffline Recruitment is a specialist supplier of "blue collar" temporary andcontract staff to industry operating from 21 high-street branches and 40 on-sitelocations nationwide, managed from a head office in Nottingham. It was foundedin 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 IntroductionI am pleased to present my first report as Chairman of Staffline RecruitmentGroup plc for the period ended 31 December 2004, the company having achieved asuccessful quotation on the Alternative Investment Market of the London StockExchange ("AIM") on 8 December 2004. Staffline specialises in the matching of un-skilled and semi-skilled temporaryworkers to suitable positions within UK manufacturing industry, particularly inthe food processing sector. This is achieved by providing an outsourcing servicewhich includes skills and reference checking applicants, health screening,training and ongoing supervision. ResultsAs this is our first results since the admission to AIM, in addition toproviding a statutory consolidated profit and loss account, balance sheet andcash flow statement for the period of 23 days from the flotation to 31 December2004 we are also providing a pro-forma profit and loss account and cash flowstatement for the full financial years to 31 December 2003 and 2004, in order toallow 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 strongperformance and reflect, in particular, the growth of our OnSite division from18 to 35 locations during the year. Our peopleAs Chairman of this company it is clear to me that we make exceptional effortsto ensure we surpass ever increasing legal and moral standards to provide ourclients with an extremely well motivated workforce. This service is supported by181 committed staff, most of whom are now further incentivised by the ability toshare in the Company's future value through the share option scheme. I am, therefore, confident that Staffline is well positioned to continue tobuild upon its strong base, augmented by its recent admission to AIM, to achievea successful future. DividendsAs indicated in the AIM admission document, the directors do not intend torecommend a dividend for this very short period of public ownership. In thefuture, however, we intend to adopt a progressive dividend policy in line withprofitability and other relevant factors as outlined within the admissiondocument. In light of this, it remains our intention that an interim dividendfor the period to 30 June 2005 will be declared. Derek MappChairman1 March 2005 Managing Director's Statement 2004 was an exciting year, for both the Company and its employees. We became aPublic Limited Company in December 2004, following a successful listing on AIM.This has given us the prospect of greater share ownership amongst employeesenabling employees to share in the future success of the Company. The Initial Public OfferingA fund raising through an IPO was felt the most appropriate way to allow theGroup to reduce its debt as well as restructure its balance sheet thus providingthe best platform for future growth. The funds raised were used to repay loannotes and preference shares held by the venture capital providers. Our shareswere admitted to AIM on 8 December 2004 with a market capitalisation of £16.7million. In this reporting financial period we have only traded for 23 days as a quotedcompany. However, to provide a meaningful comparison and understanding of theperformance of the Group, we have included a pro-forma profit and loss accountand cash flow statement based on the results of the original limited companywhich is now a wholly owned subsidiary of Staffline Recruitment Group plc. Thefollowing commentary, therefore, relates to the results of Staffline RecruitmentLimited for the full financial years to 31 December 2004 and 2003. Financial ResultsTurnover 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 financialstructure of the Company, interest and amortisation charges were historicallyparticularly high, leading to a loss before tax in 2004 of £134,000. However,this was a considerable improvement when compared with the loss of £561,000reported in the previous year. Interest charges in the current year andthereafter will be considerably lower and now only relate to the term loanprovided by The Bank of Scotland together with the invoice discounting facilityfor working capital requirements. During the year, there was an exceptional charge of £316,000 relating to thecost of writing off various fixed assets, as it was felt they no longer had aneconomic value to the Group. Our admission document contained a profit forecast for Staffline RecruitmentLimited for the year ended 31 December 2004 and I am pleased to report that, asdetailed 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 yearending 31 December 2005. StrategyOur strategy remains the same, to achieve sustained growth in revenue, profitand cashflow mainly through increasing the number of OnSite locations and theselective opening of new industrial branches in strategically importantlocations. We believe that the higher profile and additional customer confidenceachieved through our flotation on AIM will greatly support the execution of thisstrategy. Operational ReviewDuring the 2004 financial year, we grew our OnSite Staffline locationsconsiderably; having started the year with 18, the number of locations at theend of 2004 totalled 35. The majority of these were opened in the second half oflast year, so we have yet to see the full annualised effect of this newbusiness. All of our OnSite locations made a positive contribution and ourtraditional 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 duringthe year with sales and operating profit increasing by 38% and 187%respectively. As a result, we intend to grow this division in line with theincreasing level of demand. Industry BackgroundStaffline continually strives to maintain high operational standards and toaddress the challenges facing the blue-collar sector of the recruitment industryin order to provide greater benefits to our clients. The key challenges are setout below. TransportIn line with industry practice, we provide transport to enable some of ourcontractors to reach work and to allow us to widen the pool of availablecontractors for placement. This is either sub-contracted to third partysuppliers who are rigorously audited for full compliance with statutoryrequirements or, where we are unable to find reliable suppliers, we provide goodquality transport with appropriately qualified drivers ourselves for whichreasonable charges are made to our workforce of contractors. Our drivers are allPSV qualified and each minibus is covered by the Company's (PSV) operator'slicence. Illegal WorkersThere has been a great deal of publicity during 2004 and early 2005 aboutillegal workers and the various abuses they suffer in the hands of unscrupulousemployers or "gang masters". We have comprehensive systems in place to ensurethat we do not offer any work to illegal contractors and now offer a guaranteeto 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 asstatutory sick and maternity pay, holiday pay and access to both a stakeholderpension scheme and a sickness benefit scheme. We feel that we are at the vanguard of ethical treatment of our contractors andhave signed up to our own ethical policy as well as that of the Recruitment andEmployment Confederation, the recognised trade association which we joinedduring February 2005. Foreign WorkersSince the accession of ten of the former Eastern Block countries to the EU wehave helped a considerable number of people with finding work in the UK,particularly by direct recruiting in Poland and the Czech Republic. Having foundsuitable contractors we fly them to Britain, obtain good quality accommodationon their behalf, give them sufficient food and toiletries for their first fewdays until they are paid, arrange for them to register with a local GP, obtainbank accounts and make the transition to living in the UK as easy as possible byhaving a 'buddy' system of support. We do not profit from the provision of theseservices, but this investment ensures that our contractor workforce has veryhigh morale, whilst our clients benefit from well-motivated and trained peopleand we strengthen our relationships with those clients. Contractor TrainingWe opened a dedicated training academy for our contractors in the West Midlandsat the beginning of the year, specialising in training for the food processingindustries. As requirements from our clients continue to increase we will extendthe range of courses offered. Board AppointmentsPrior to the admission to AIM, two Non-Executive appointments were made. DerekMapp joined as Chairman of the Company in September 2004 to initially help guideus through the flotation process and then to provide strategic help inimplementing the growth strategy. Derek brings a wealth of both private andpublic company experience. Nicholas Keegan joined as Non-Executive Director andChairman of the Audit Committee in November 2004. We have announced separately today that John Crabtree has been appointed as aNon-Executive Director and as Chairman of the Remuneration Committee withimmediate effect. EmployeesOur staff headcount grew from 154 to an average of 181 during the year and wecontinued to promote from within whenever possible. A total of 44 employeesprogressed in this way during 2004. Staff turnover, which is of particularimportance to such a people based business, was further reduced during the yearto 30% compared to an industry average estimated to be about 50%. We continue toidentify and adopt policies which aim to reduce this level further in thefuture. Having first been awarded Investor in People status in 1999 we were successfullyre-assessed during the year under the new standards and have receivedaccreditation for three years. I would like to thank all the employees of the Group for their enthusiasm anddedication to our clients. Without them these strong results would not have beenpossible. Current Trading and ProspectsTrading in the first eight weeks of 2005 has shown good growth and is in linewith our budget expectations. Also as expected, we have secured a number of newcontracts and we have already grown the number of OnSite locations by 5 in thecurrent year to total 40. We are, therefore, encouraged by the continued growth of the Group to date andhave every confidence of further progress in the year ahead. Andy HogarthManaging Director1 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 8,748Other 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 exceptionalitems and amortisation of goodwill 220 1,936 1,576Loss 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 ordinaryactivities before taxation 38 (134) (561) Taxation 2 21 (261) 60 Profit/(loss) on ordinaryactivities for the financial period 4 59 (395) (501) Earnings per ordinary share 3Basic 4.5pDiluted 4.4p There were no recognised gains or losses other than the profit/(loss) for thefinancial periods. All of the activities of the Group during the period are classed asacquisitions. Note As at 31 December 2004 £'000 Fixed assetsIntangible assets 22,256Tangible assets 285 22,541 Current assetsDebtors 7,901Cash 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 reservesCalled up share capital 2,082Share premium 14,257Profit and loss account 59Equity 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 operatingactivities 5 1,416 5,956 1,766 Returns on investments and servicingof financeInterest paid (35) (901) (627)Hire purchase interest paid - (17) (26)Net cash outflow from returns oninvestments and service of finance (35) (918) (653) Taxation - - - Capital expenditure and financialinvestmentPayments to acquire tangible assets - (50) (63)Net cash outflow from capitalexpenditure and financial investment - (50) (63) AcquisitionsPurchase of subsidiary undertakings (3,709) - -Overdraft acquired with subsidiaryundertaking (176) - -Net cash outflow from acquisitions (3,885) - - Net cash (outflow)/inflow beforefinancing (2,504) 4,988 1,050 FinancingIssue of shares 8,655 - -Repayment of loans (5,460) (5,068) (136)Share issue costs (320) - -Capital element of hire purchasecontracts - (195) (234) Net cash inflow/(outflow) fromfinancing 2,875 (5,263) (370) Increase/(decrease) in cash 6 371 (275) 680 In the pro-forma cash inflow from operating activities (which relates toStaffline Recruitment Limited only) for the year ended 31 December 2004 is anamount of £4,620,000 relating to an inter group loan received from the shareplacing, which has subsequently been used to settle outstanding loans asincluded in financing. BASIS OF PREPARATION The preliminary announcement has been prepared under the historical costconvention and in accordance with applicable accounting standards. The principal accounting policies of the Group are set out in the Group's 2004annual 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 2004have been provided in this preliminary announcement. The pro- forma informationfor the year ended 31 December 2004 comprises of the results and cashflows ofStaffline Recruitment Group plc for the period from incorporation to 31 December2004 together with the pro-forma results and cashflows of Staffline RecruitmentLimited for the year ended 31 December 2004. The pro-forma information for theyear ended 31 December 2003 comprises the results and cashflows of StafflineRecruitment 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 provisionReversal of timing differences (21) (21) (60)Taxation on profit/(loss) onordinary activities (21) 261 (60) The tax assessed for the period differs from the standard rate of corporationtax 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 ordinaryactivities before tax 38 (134) (561)Profit/(loss) on ordinaryactivities multiplied bystandard rate of corporationtax in the UK of 30% 11 (40) (168) Effect ofGoodwill amortisation notdeductible for tax purposes 21 203 200Other expenses notdeductible for tax purposes 2 21 27Depreciation in excess ofcapital allowances (10) 142 49Short term timing differences (24) (3) (5)Deductible costs taken tothe 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 earningsattributable to ordinary shareholders divided by the weighted average number ofshares in issue during the period. The calculation of the diluted earnings pershare is based on the basic earnings per share adjusted to allow for alldilutive potential ordinary shares. Details of the earnings and weighted average number of shares used in thecalculations 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 59Issue of ordinary share capital 16,339Net increase in shareholders' funds 16,398Equity 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 616Depreciation 33 422 379Movement in provisions - (30) (186)Amortisation of goodwill 70 676 667Loss on disposal of fixed assets - 281 42Decrease/(increase) in debtors 424 (2,053) 7Increase in creditors 739 5,716 241Net 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) 680Cashflow from debt and lease financing 5,460 5,263 370Change in net debt resulting from cashflows 5,831 4,988 1,050Net debt acquired with subsidiary undertaking (14,307) - -Other non-cash items 250 (827) 1,832Movement in net debt in period (8,226) 4,161 2,882Net 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 - - 371and in hand - 371 - - 371Bank loan - - (5,250) 250 (5,000)Invoice discountingloan - 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) - 371Bank 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 notconstitute statutory accounts as defined in Section 240 of the Companies Act1985. The consolidated balance sheet at 31 December 2004 and the profit and lossaccounts, cash flow statements and associated notes for the period then endedhave been extracted from the Group's 2004 statutory financial statements uponwhich the auditors opinion is unqualified and does not include any statementunder Section 237 of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Staffline