Summary
StaffLine are a recruitment agency that kept publishing good looking annual reports and positive trading updates.

Then it all crashed from 1,600p to 50p as issues were discovered, a share issue was needed and then more funding was needed. This was all before COVID caused further drops.
The Company
Staffline (STAF) are a recruitment agency that has been expanding and showing continually improving profits.

The share price has been oscillating between 800p and 1,200p for the last five years or so and there was nothing really special about the business.

Then it all went horribly wrong and the company was forced to do a share issue more than doubling the number of shares in circulation.


General Principle - Turnarounds Seldom Turn
The aphorism Both our operating and investment experience cause us to conclude that turnarounds seldom turn is attributed to Warren Buffett and is meant as a general warning that if the share price is low and the company is doing badly then don't buy the shares hoping for an improvement.

Like most quotes the caveats get ignored, the big one is if the share price has tanked because of one issue that is exceptional and the underlying business is good then the company may be a bargain.

So is Staffline one of those turnarounds that will turnaround because the really big problem was 5 years of back wages that needed to be paid?


General Principle - The Need For Ongoing Research
When the first big loss appeared I spent a bit of time getting to know the company, but the announcement was quite vague.

As further announcements were made I spent more time doing further research and eventually put a note in the mental diary to look at the share price on and around the new share admittance date.

I found that by researching and waiting that everytime that I thought I had a clear view of what the problems were but the reality was Wow, another big drop, surely it can't get any worse?

I don't track time spent on research as it is tricky to do, but I suspect that I have spent close on a couple of whole day on this company.

This is a lot of hours if you have a full time job especially if you never trade the company.


The Details - Staffline
8/Jan/2019 - Trading Update - 1,045p -> 924p
A perfectly normal trading update for the period up to end of December 2018.

It wasn't a great update and it caused a smallish drop in the share price of about 10%.

30/Jan/2019 - Unexpected Announcements - 933p -> 625p (suspended)
A one paragraph RNS statement saying that the publication of the accounts has been delayed.

Later on in the day the company suspends trading in their shares.

Later another RNS announcement ..the Company can confirm that this morning concerns were brought to the attention of the Board relating to invoicing and payroll practices within the Recruitment division..

12/Mar/2019 - Trading Resumed - 625p -> 820p
Trading in shares resumed.

It was announced that £7.9 million was being put aside to cover the fact that the company had not been paying minimum wage, this was related to something like the agency workers weren't being paid for the time they spent changing for work.

Share trading was resumed and the price recovered to around 820p although this £7.9 million was bad news as it was about half of the expected profit for the year, it was a genuine one off cost.

30/Apr/2019 - Trading Update - 823p -> 820p
Trading Update issued saying some more work is being done on the minimum wage issue, but it was a reassuring update.

17/May/2019 - Trading Update - 782p -> 308p
A generally bad Trading Update, very few numbers, mostly predictions of difficult trading in 2019

17/June/2019 - Notice Of Results - 223 -> 100p
Trading Update, the minimum wage issue cost has grown to £15 million, debt has crept up, there is a £32 million exceptional charge and the company is going to do a £30 million share issue. Very roughly the share issue would double the number of shares in circulation

27/June/2019 - Final Results And Confirmation Of Share Issue- 140p -> 118p
The bad numbers were formally confirmed and the share issue was confirmed as been fully subscribed and would be admitted on the 16th of July

15/July/2019 - Confirmation Of Open Share Issue- 100p -> 85p
The smaller open share issue was confirmed as been fully subscribed and would be admitted on the 16th of July.

The General Meeting passed the resolution approving the new shares.

16/July/2019 - New Shares Admitted - 115p -> 105p
The new shares started trading and by 19/July/2019 they had risen to 130p.

Adjusting for the new shares the historic price has been in the range 360p-504p (800p to 1200p) so the post issue price is roughly a quarter of the price over the last few years.

19/July/2019 - Share Price Slowly Recovering - 105p -> 130p
The shares are showing an upward trend and we are yet to see big public dumps of the newly issued shares.

1/Aug/2019 - Share Price Slowly Recovering - 115p -> 150p
A 35p price rise as an announcement was made that HRnetGroup Ltd had acquired a significant stake in the company.

10/Aug/2019 - Share Price Static - Around 150p
Trading volumes have now dropped to an insignificant quantity and volume meaning that funds used to hold Staffline shares will not be generating any returns unless some unexpected news is released. So it may be time to note the date of the next trading update and possibly get out and then back in.

17/Sept/2019 - Poor Interim Results - Around 150p - 91p
A poor set of interim results send the price down to around 90p.

18/Dec/2019 - Trading Update - 104 -> 70p
A downbeat trading update which included an admission of a £4m misstatement of 2018 costs and underlying profits expected to be down from £39m to around £10m

31/Jan/2020 - Trading Update - Around 64p
A downbeat trading update which included an admission that operating profit for the period ending 31st December 2019 materially below our previous guidance.

20/Feb/2020 - CEO Resigns - Around 40p
Chris Pullen resigns but we are now at the start of COVID affecting share prices.

The Group's net debt position at 31 December 2019 is expected to be £60 million, which remains subject to audit. This is after the share issue that was supposed to solve the debt problem.

25/Mar/2020 - Trading Update - Around 20p
COVID affecting demand in verious sectors, some up and some down.

Year ending 2019 audit still ongoing, and VAT payments being deferred probably storing up problems for the future.

27/Apr/2020 - Trading Update - Around 20p
COVID affecting demand in verious sectors, some up and some down.

The Board expects to agree and implement a revised financing structure in respect of its main banking facilities...
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