Share Name Share Symbol Market Type Share ISIN Share Description
Staffline Group LSE:STAF London Ordinary Share GB00B040L800 ORD 10P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  +66.50p +7.11% 1,002.00p 1,003.00p 1,009.00p 1,002.00p 925.00p 928.00p 139,720.00 12:41:24
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Support Services 702.2 5.5 9.5 105.5 278.05

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Date Time Title Posts
16/1/201712:46Staffline Recruitment1,639.00
19/7/201615:05Staffline Results next week real undervaled stock11.00

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Staffline Daily Update: Staffline Group is listed in the Support Services sector of the London Stock Exchange with ticker STAF. The last closing price for Staffline was 935.50p.
Staffline Group has a 4 week average price of 859.12p and a 12 week average price of 860.07p.
The 1 year high share price is 1,400p while the 1 year low share price is currently 725p.
There are currently 27,749,389 shares in issue and the average daily traded volume is 164,053 shares. The market capitalisation of Staffline Group is £278,048,877.78.
flagon: Motley Fool comment A dirt cheap cyclical stock Also reporting today was recruitment company Staffline (LSE: STAF). It expects to deliver results for the full year which are in line with market expectations. Demand within the staffing business has remained robust throughout the second half of the year, while the PeoplePlus division has also delivered impressive results. Clearly, the outlook for the UK and European economy is challenging and this is reflected in Staffline’s forecasts. It’s expected to grow its bottom line by just 3% in 2017, which is around half the wider market growth rate. However, its uncertain outlook appears to be adequately priced-in, with the company having a price-to-earnings (P/E) ratio of 7.5. As such, a 25% rise in its share price would leave it with a P/E ratio of 9.4. This would still represent good value for money. As well as growth potential, Staffline also offers a yield of 3.1%. Dividends are covered 4.3 times by profit, which shows that they could move significantly higher over the medium term and still leave the company in a sound financial position. Link -> hTTp://
themaker: Very good. Though it seems a strange time for a trading update (just days before full year results), surely a TU around the mid point between the full year and the interim results would steady the share price?
ihatemms: The most impressive comment from the results is ' We expect to be in a net cash position by the end of 2017' compared to £43m debt now. WOW! - The share price isn't reflecting that news.
hutch_pod: Impressive. (Also see the share based payment charge has flipped to a credit of 2.6, I guess due to the recent share price decline. Classified as non underlying - perhaps this helps demonstrates why best to exclude?)
davebowler: Finncap; Staffline’s share price has already been hit hard by fears that the pool of blue collar temporary labour it manages in the UK will become scarcer or more expensive. The benefit to customers of Staffline’s service, however, is the flexibility of temporary labour not the hourly cost. With uncertainty now at the fore, demand for temporary labour could strengthen further making Staffline a very interesting investment against a low valuation.
hutch_pod: Hi Shanklin Yes I think I read your original post(s). So with the substantial share price decline, wouldn't this limit the SBPCs for the interims? I had this idea there would be a stack of old and new SBPCs, the old ones revalued for say 1150 vs the 1400 at year end, generating a 'profit', vs the new ones generating a cost - and not sure if the employees have to pay an exercise price? HP
thomasthetank1: Read Stockdale Securities's note on STAFFLINE GROUP, out this morning, by visiting hxxps:// "Staffline FY2015 results were announced in late January with all matrices in the P&L showing significant growth. Group revenue rose 39.6% to £702m (16.6% organic), underlying operating profit rose by 56.5% to £30.3m and underlying pre-tax profit increased by 52% to £28.3m. The final dividend was increased by 47% to 12.5p, making a total dividend of 20.0p. The share price at flotation in 2004 was 80p, compared to a dividend payout of 20p alone for FY 2015...."
eno nedlog: There seems to have been positive news over the last few months, with takeovers and growth prospects so I expect the share price to start to recover soon. johnv - Maybe they are short ? Eno
simon42: Also, I always find a large increase in net debt always takes the wind out of the sails of a company's share price. But they have already indicated that they intend to pay it down fast. This mornings presentations to analysts will be upbeat and positive which will help. Profit taking today is only to be expected.
rivaldo: FYI here's the full SCSW tip for STAF in this month's issue - enough time has elapsed now for this to probably be OK imo, though I might just reduce it to a few highlights after it's been up for a while: "Staffline - OnSite recruiter looks dirt cheap 216p Epic code: STAF (Sharewatch) Staffline Recruitment has the look of a company that seems well placed to string together several years of consecutive growth. The group is an expanding industrial recruitment business engaged mainly in the supply of temporary blue collar workers and it therefore competes directly with the Blue Arrow business of Impellam (IPEL; 338p), a company Sharewatch featured in March. At the time that we 'Buy' rated Impellam, we had highlighted that the presence of controversial Tory donor Lord Ashcroft on the share register (with a 57% stake) was one of the reasons why the shares were sitting on a miserly prospective PE of just 4.5. Impellam has risen by almost £1 since our tip as investors have gradually appreciated that its prospects are not as bad as the share price was suggesting. We think Staffline will do just as well - perhaps even better. Although we don't have Ashcroft to depress the price this time, what was holding back the shares recently was an overhang - perceived or otherwise - from a former VC backer that held almost one third of the equity. The bulk of their stake was finally placed last month but the shares have still to re-rate upwards and look cheap on a prospective PE of 7.8. Unlike Impellam there is a useful dividend yield of 3.5% adding to the attractions. To triple in size in three years During the month we met chief executive Andrew Hogarth who has a plan of ballooning sales and pretax profit for his recruitment business to £360m and £12m respectively within three years. If he goes anywhere towards achieving this goal then we think the shares will stand substantially higher. Anyone can make punchy projections like that but there are sound reasons for believing Hogarth in this case. Between 2005 and 2010 the business lifted profits from £2.5m to £7m on turnover up from £61.5m to £206m. Meanwhile, earnings per share have grown from 8p in 2005 to 23.7p in 2010, a compound growth rate of 24%. It hasn't been all plain sailing. There was, of course, a blip in 2009 when the business was affected by the collapse of Lehman Brothers and the subsequent recession. At the time, Staffline was significantly exposed to clients in the motor sector such as Landrover, which sharply reduced output of vehicles and consequently their staffing requirements. But more recently the unmistakable signs are that the rate of growth is accelerating because of acquisitions (nine in the past 20 months), which are adding a second dimension to profit growth. If the steady diet of small agencies bought for cash on ridiculously low multiples continues, we think the company could double or treble in size over the next three years. VC Backers sell down position Staffline was set up 25 years ago when it opened its first recruitment agency unit in Nottingham and the business origins were as a traditional employment agency with a branch network located principally within the Leeds, Liverpool and Northampton triangle. From the start, the group's focus has been on blue collar, semi-skilled and unskilled recruitment. The transformation in the group's fortunes however began in early 2000 when there was a management buyout backed by venture capital firm ISIS and the arrival of Hogarth, initially as finance director, before moving to the chief executive's role shortly afterwards. As we describe below, he subsequently turned the recruitment operations on its head by introducing an outsourced model. ISIS had sold down part of its stake at the time of the float but until last month still retained 26.9% of the equity in three tranches. But last month's move to place the largest element (18.4%) and leave 8.5% in their two VCT funds, Baronsmead VCT and Baronsmead VCT2, has removed the overhang and is the trigger we think that is going to re-rate the shares. Hogarth still retains 13.5% and is strongly incentivised to keep Staffline performing. OnSite model Nowadays, says Hogarth, Staffline still retains its branch network of 14 units in secondary high street locations but is no longer seeking to expand these. Instead, the real attraction as an investment is the fact that the group is expanding its presence under the outsourced "OnSite model" and almost nine-tenths of last year's £206m sales came from these site-based term contracts, compared to 43% of £49m revenues at the time of the IPO in 2004 . Under the OnSite model, Staffline has employees installed on the customer's premises and will undertake the whole of their temporary recruitment process, which is a continuous process essential to keeping a plant open and running efficiently. A total change of culture was required to bring the employees much closer to the customer in this way but as Hogarth notes, the advantage of having someone in situ on a client site is that they inevitably become more in tune with the client's facility and can better identify client requirements. For instance, he says staff at an abbatoir will have first hand experience of the environment and can weed out unsuitable employees enabling Staffline to provide better service delivery. OnSite contracts are typically on a two year rolling basis but Hogarth says that as Staffline becomes increasingly integrated into a customer's operations there have been only a handful of instances where it will be replaced by a competitor. Consolidation amongst clients or a few bankruptcies are the only reason it has ever lost a client and most new customers therefore become almost permanent additions to revenue. Having added 16 OnSite contracts in 2010, Staffline now operates 135 of these in total. Conversion to profit higher But as we are learning, the benefit to the OnSite model is that both the opening and running costs are lower compared to a traditional branch agency and there are opportunities to generate higher margins. By way of illustration, Hogarth says that the OnSite model only needs to employ one contract manager whereas a branch might, for instance, typically have four members of staff. These lower overheads enable Staffline to price contracts at a lower gross margin than if it was a traditional branch. The degree to which this gross profit is also converted to operating profit is higher with the OnSite model. A typical markup on a temp from a branch might be 20% giving rise to an operating margin of 7-8% after paying property and office costs. With an Onsite contract, some of the cost savings will be handed back to the client so it will typically have a lower markup of 12-15% but the margin still works out at 9-12%. As Staffline has moved away from the low margin branch model to which the group has a shrinking exposure, operating margins have continued to decline and last year the average margin for the group was 11%. The tradeoff to lower margin, of course, is better visibility to income and the chance to pick up almost all of a client's blue collar employment work. The OnSite model has also enabled Staffline to expand beyond the historic Leeds-Liverpool- Northampton triangle. In addition, Hogarth says that in terms of service lines, there are four key sectors including meat and poultry; ready-to-eat food; manufacturing (automotive, aerospace and general manufacturing); and distribution. It is, however, hard to categorise the areas of business discretely in this way as new areas of staffing are constantly being added. Recently, for example, Staffline bought one business where it was also recruiting HGV drivers and this has been consolidated into the distribution sector. That said, Staffline looks better placed than most to weather any recessionary influences given its defensive end market exposure, with 90% of revenues from the food (60%) and distribution (30%) sectors. Hogarth notes that temporary workers have always been used in these sectors to satisfy the need for seasonal workers, for instance during Christmas but increasingly customers are routinely turning to temporary workers throughout the year. For instance, he notes that food manufacturers are regularly being called upon to support supermarkets with buy-one-get-one-free type offers and this creates regular sharp spikes in requirements for workers. On-off-on-off work of this nature is ideally suited to Staffline, which can supply workers for one or perhaps two days at a time (average duration of employment within the group runs at 17 weeks). As Staffline has grown it has also become less exposed to any one customer. Hogarth says that Tesco is currently the largest at c.10% of sales (down from 12% last year) whilst the top eight are c.50% of sales. Its bigger size also means it can transfer staff between firms - or even between industries - to diversify risk. Available pool from Eastern Europe Hogarth notes that one other key factor helping the trend towards temporary staff is that the quality of labour is better than it might have been a decade ago. This is not only because the recession has increased the size of the available pool of staff but because many of its workers are migrants from Eastern Europe. Although the majority of Staffline's workers stem from the EU, and in particular Poland, they are typically already based in the UK. Nowadays most workers are sourced not through newspaper advertising, which was the traditional method but by word of mouth. That said, Staffline does have a small team to recruit workers with niche skills (e.g. butchers, glass blowers) directly from Poland. 8 acquisitions add second dimension The Staffline story has recently been given an extra twist because of the acquisitions. In total, there have been nine deals in the past 20 months. In terms of exactly what is happening Hogarth gives the example of the first acquisition, Hardcastle Associates, a small family run recruitment business that was barely profitable (£30,000) on sales of £4.5m in family ownership. Staffline bought the business for £400,000 of which £90,000 was paid upfront and the rest deferred for one year based on future profits. Hogarth says that stripping out duplicated costs and absorbing the sales into the existing overhead structure meant that virtually all of Hardcastle's gross margin went to the bottom line. In the first year the business ended up making £300,000 - making it a ridiculously cheap acquisition and one that virtually paid for itself. By all accounts this wasn't a one off spectacular example. By way of a second example, Hogarth talks about DKM, which was bought from the receivers for nothing. DKM had sales of £12m and overzealous cash extraction by its owners meant it had fallen into disarray after not being able to pay its NIC/PAYE liabilities. Adding the additional sales to Staffline's existing infrastructure meant that the business made a £0.5m operating profit contribution in its first year. In fact, a presentation from the company shows that the latest eight acquisitions were an outstanding success in Staffline's hands with an average exit multiple of just 1.4x operating profit. In total, the first eight acquisitions have added annualised sales of £56m and £4.2m operating profit contribution. But Hogarth says that stripping out duplicated costs and improving utilisation of existing administrative staff is only part of the story. In fact, results are also being boosted by cross-selling. This is particularly true of one of the acquired businesses, Peter Rowley, a training provider that provides vocational qualifications (such as NVQs) in the area of business improvement techniques. Bringing it into Staffline's fold has already enabled some customers to map their in-house training programmes in areas such as food handling. Hogarth quips that it helps workers make sandwiches faster and more efficiently whilst customers can also reclaim the cost of the courses from the government. Peter Rowley is also involved in the Government's Welfare to Work programmes, which is proposing to make changes to jobseekers allowances and incapacity benefits. Although controversial, benefit cuts will be good for Staffline as Hogarth says it will add impetus for the long-term unemployed to return to work. Ninth acquisition -giveaway price! Earlier this month, Hogarth put Staffline squarely into this space when it paid £3m cash for the ninth acquisition, Fourstar Employment, a Work Programme (welfare to work) provider in the Midlands. By all accounts this looks a giveaway price as the business came with £3m cash although there is a need for some investment in the future. After this acquisition, group net debt will be unchanged at c.£2m against recently renegotiated bank facilities of £10m. Under the government's Work Programme, Fourstar is paid for finding work for those claiming Job Seeker Allowance and Incapacity Benefit and then keeping them in work. It could potentially be a massive money spinner as Staffline will be able to place unemployed workers into vacancies in the existing staffing business, thereby generating a margin twice - once from the customer and once from the government. The catch is that the government element is going to be results based (with most of the money being paid for keeping people in work for 18 months) and this will mean profits are back-end weighted - but clearly the business could pleasantly surprise with analysts expecting it to deliver a £10-£11m operating profit over the five year life of the programme. Dirt cheap Despite the recent progress it is therefore odd then to see some analysts (eg. Liberum and Altium) remaining nonchalant and leaving forecasts unchanged, although both highlight scope for upgrades. Altium's forecast is presently £8.8m pretax for 2011 with £9.7m next year. Corresponding eps is 27.8p and 31p, respectively. Trading is going well and we expect upgrades, possibly after the AGM on 19 May when a further update is expected. D-I-R-T cheap; buy."
Staffline share price data is direct from the London Stock Exchange
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