Section Items

Clarification
The comments on this page are some of the thoughts that I had when considering this company and not a recommendation to take an action or to refrain from taking an action.

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Is This Just Pump And Dump?
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Financials
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Commentary On Staffline Group

Title: Staffline - £15million for not correctly handling minimum wage!
Company: STAF - Staffline Group
Share Price Then: 167p
Author: Ian Smith
Date: Mon 17 Jun 2019
Comments: I have been watching Staffline since the announcement that they were going to suspend publication of the 2018 accounts.

Most of the issues haven’t changed since the previous commentary except the cost of meeting minimum wage requirements the reason for delaying publication.

The amount that has to be paid to workers has gone from £4.4m to £7.9m to £15.1m, this includes £0.5m in advisor fees and £1.8m extended audit procedures. It expected that none of these costs can be recovered from the companies that the agency staff were working for.

Along with other exceptional costs this means that the total exceptional charges for 2018 will be £32.6m.

No matter how you try to arrange these numbers, the fact is the £14.5m in back wages will have to be paid in cash and reasonably quickly.

A trading update in March said that the Group expects to report net debt of c.£63m (unaudited) as at 31 December 2018. Add in the £15m in back wages and an expectation of only a small profit in 2018 and things look pretty unhealthy.

Recognising this the company is now discussing raising £37m by a share issue, £30m being a non public placing and £7m being an open offer.

The current share price 170p gives a current market cap of £47.5m, so getting close to a 1 share for every 1.2 shares held.

That it got this far is worrying, I understand that when the minimum wage came in there was confusion over whether getting changed was counted as work time.

I don’t understand how such a bill came about covering such a long time span though, it’s almost as if nobody wanted to confront the issue.

Update 18 June
The share price is now 129p so the market cap is now £36m, less than the proposed isssue amount.
Financials:
ItemCurrent PeriodPrevious Period
Year20172016
Period
Revenue£957m£882m
Earnings
Adjusted Earnings
EBITDA
Adjusted EBITDA
Statutory Profit£24m£19m
Adjusted Profit£39m£40m
Total Debt
Net Debt£17m£37m
Read Count: 89