Staffline Group – going for a good uplift in another recruitment business

14th June 2021

In the last month we have done very well with the 50% rise in the shares of technology staffing group Gattaca.

I consider that we can do just as well with Staffline Group (LON:STAF), which on average supplies some 40,000 staff per day to some 450 client companies.

35 years old

Set up in Nottingham way back in January 1986, the group gradually built up to its debut on AIM in 2004.

It has subsequently made several acquisitions and folded them into its main framework.

One of the leaders

Today, as one of the top names in recruitment, training and support, it has three main divisions – Staffline Recruitment GB, Staffline Recruitment Ireland and PeoplePlus.

Staffline Recruitment GB is the UK’s leading provider of flexible blue-collar workers, its clients spread across a massive range of sectors, such as government, supermarkets, driving, logistics, e-retail, agriculture, drinks, food processing and the whole manufacturing industry.

Staffline Recruitment Ireland is quite a diversified agency, with ten branches, fifteen onsite customer locations, serving its clients across some twenty different sectors.

Its PeoplePlus division is similarly well spread. It is a leading adult skills and training provider in the UK, delivering apprenticeships, adult education, and skills-based employability programmes across the country. It is also the largest independent provider of training for prisoners and ex-offenders.

Major refinancing completed and looking strong

Last Thursday the group announced that it had now completed its recent £44m fundraising @ 50p per share and £90m debt refinancing.

That really is good news and gives its management greater flexibility as it continues upon its growth strategy.

Expanded equity

After the funding there are now 165.8m shares in issue.

The Singapore-based recruitment agency HRnetGroup is the largest equity holder, while Henry Spain Investment Services control 15.17%.

Institutions in the equity include Gresham House, Hargreaves Lansdown, Interactive Investor, AJ Bell, Barclays Bank, Aberdeen Standard, HSDL Stockbrokers and UBS.

2020 finals due soon

In late April the group indicated that its results for the year to end December 2020 would show revenues of some £928m (£1.06bn) and an underlying operating profit of £4.8m.

At the same time the company gave an update on its first quarter’s trading, showing that the end 2020 momentum had been continued, with all three businesses ahead of budget.

Analyst Joe Brent, at the group’s brokers Liberum Capital, has estimated that actual pre-tax profits for 2020 will come in at £0.8m, worth 4.8p in earnings per share.

Current year and next profits

Into this year he goes for a major jump to £4.5m pre-tax on £954m of revenues. Reflecting the recent fundraising he estimates 3.7p per share for current year earnings.

Going into next year his estimates are for £978m of revenues, £7.0m of profits and 4.2p per share of earnings.

That really shows quite a profit advancement.

The good news ready to start flowing

When the 2020 results are published, possibly before the end of June, I would expect a bullish set of comments from the group upon current year trading and its prospects going forward.

Then the AGM should be held in July, which could well see another Trading Update.

The group’s shares touched 82.5p a couple of months ago, ahead of the refinancing, but significantly lower than the 1450p reached in September 2015.

My View

Just think - the finals, followed by the AGM, then the September interims, they are all potential update occasions to help get the shares moving.

Looking ahead I see the shares, now 63p, ready to recover well in price over the next few months.

I now set a 78p Target Price.

(Gattaca (LON:GATC) profile 10.05.21 @ 148p set a Target Price of 185p*)