Trading Update

18 December 2019

STAFFLINE GROUP PLC

("Staffline", "Company" or the "Group")

Trading Update

Staffline, the recruitment and training group, provides the following update on Group trading and outlook.

Recruitment

In the Recruitment division, trading performance in Q4 has been below the Board's expectations, with lower than anticipated demand from end customers. During November, customer demand was down approximately 16% from the prior year which the Board believes reflects high levels of consumer uncertainty across the UK. Whilst trading in December has improved, trading performance for the month is also anticipated to be below the Board's expectations. Despite this, Staffline continues to make strong operational progress in the development of the Recruitment division:

•     Industry leading candidate attraction platform means that Staffline now has access to c. 1m live candidates on its database compared to 230,000 this time last year;

•     Worker engagement is at record levels leading to significantly reduced attrition;

•     Further automation of the recruitment process in 2020 is planned, resulting in further improvements to customer service and a significant reduction in operating costs.

Notwithstanding current market headwinds, the Board believes the Company's market-leading approach to worker engagement, its digitally enabled candidate attraction and its scale within the industry will result in increasing differentiation and underpins the Company's future growth.

Furthermore, Staffline looks forward to a levelling of the competitive playing field anticipated through the introduction of a single labour market enforcement body. In particular, the Board expects the unethical use of umbrella companies to be better regulated. The use of umbrella companies is widespread across our industry and generally disadvantages workers by exploiting legislative loopholes.

PeoplePlus

In PeoplePlus, the transition from a Work Programme provider to the UK's leading skills and training company is complete. Despite significant growth within the year, Q4 performance is expected to be below the Board's expectations, principally due to the impact of the general election purdah on short term procurement opportunities.

However, following a first half of transition and multiple new contract implementations, the second half has evidenced the potential of the business with operating profit in each of October and November reaching £1 million. PeoplePlus has built a significant platform for future growth and with the majority of 2020 revenues already contracted, the Company maintains a positive outlook for PeoplePlus in 2020 under its new operating model.

Prior Year Restatement

Following the accounting review completed in the first half of the year, the Board has continued projects to improve Staffline's internal controls. This has included a rigorous internal review process which has identified accounting errors relating to the preparation of the Company's 2018 annual results. These errors primarily relate to costs which were not correctly booked. The Board currently believes the associated impact was an overstatement of 2018 profit of approximately £4 million. The potential for restatement is expected to be limited to the year ending 31 December 2018. The precise impact remains subject to audit.  

Directorate change

The Company has made a separate announcement today regarding the appointment of Daniel Quint as Interim Chief Financial Officer, replacing Mike Watts who has left the Group with immediate effect.

Group Outlook

Given the challenges to trading in Q4, the Board now expects the Group to deliver full year adjusted operating profit (being profits before interest, tax and non-underlying charges) for the period ending 31st December 2019 of approximately £10 to 12 million.

The Board expects year end net debt to be approximately £50 to £55 million, in line with current market expectations. Staffline maintains a constructive relationship with its lenders and consequently the Board does not anticipate any covenant issues over the year end. Furthermore, the Company is considering certain strategic options which may significantly reduce net debt during H1 2020.

Notwithstanding the current short-term trading challenges, Staffline remains a cash generative business, is one of the most financially robust operators within its immediate peer group and continues to benefit from considerable liquidity headroom. 

Chris Pullen, Chief Executive of Staffline commented:

"It has been a most challenging year for Staffline. Despite this we have developed two robust market leading businesses which are well set as platforms for future growth. We remain optimistic about future potential of the group with the challenges of 2019 behind us."

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Market Abuse Regulation

This announcement is released by Staffline Group plc and contains inside information for the purposes of the Market Abuse Regulation (EU) 596/2014 ("MAR") and is disclosed in accordance with the Company's obligations under Article 17 of MAR. The person who arranged for the release of this announcement on behalf of Staffline Group plc was Chris Pullen, Group Chief Executive Officer.

About Staffline - Recruitment, Training and Support

Enabling the Future of Work™

Staffline is the UK's market leading Recruitment and Training group. It has two divisions:

Recruitment Division

Staffline is the UK's leading provider of flexible blue-collar workers, supplying over 60,000 staff per day to c. 1,600 private sector clients, across a wide range of industries including agriculture, drinks, driving, food processing, logistics and manufacturing. It operates from over c.460 locations in UK, Republic of Ireland and Poland. Its world leading Customer Experience platform provides optimised customer-based staffing management solutions whilst providing market-leading levels of job satisfaction for workers.

PeoplePlus Division

Staffline is the leading adult skills and training provider in the UK, delivering apprenticeships, adult education, prison education and skills-based employability programmes across the country.

Skills and Training - market leading provider of Apprenticeships (both Levy and non-Levy), learning and development, adult education and health and well-being programmes to the Private and Public sector.

Justice and Community - largest independent provider of education and training services for prisoners and ex-offenders, as well as individual support services for carers and people with disabilities, both at home and in the work place.

Employability - market leading provider of programmes providing back-to-work education, skills support services to the unemployed and enterprise advice to individuals wanting to start their own business.