Staffline Group (lon:staf)
Staffline – Already Negative Sentiment Causes Overreaction?

Staffline Group Financials

ItemCurrent PeriodPrevious Period
Adjusted Earnings
Adjusted EBITDA
Statutory Profit£24m£19m
Adjusted Profit£39m£40m
Total Debt
Net Debt£17m£37m

Commentary History
No ticker supplied in the url so commentary history can not be collected.
Staffline Group Share Price
Grade:The Black Grade - Shares That I Think Could Collapse To Nothing Or Suffer A Massive Share Issue.
Title: Staffline – Already Negative Sentiment Causes Overreaction?
Company: STAF - Staffline Group
Share Price Then: 331p
Author: Ian Smith
Date: Fri 17 May 2019
Comments: StaffLine shares were suspended on at the end of Jan 2019, something that always makes investors nervous and restored in early March.

At the time the reason wasn’t entirely clear and at the time of writing there is still some uncertainty. The key outstanding matter in finalising the results relates to the Group's historical compliance with National Minimum Wage Regulations 2015.

Given that the company is a recruitment agency it seems likely that is going to cover an area that other companies have also been found to be handling incorrectly but this could be over 3 or 4 years. The company appears to be putting aside £7.9 million to cover this, whether this is enough or like banks PPI costs it will escalate I have no way of knowing.

As the 2018 accounts due to be published at the end of Jan are still awaiting the results of this investigation so looking at the numbers is difficult.

The expected $1bn revenue for 2018 is double that of 2014 (£503 million) and more than double 2010 (£206 million) and underlying profit has roughly grown at the same rate as have dividends, reported profits are similar but slightly less at £24 million in 2017, 2014 (£10.5 million) and 2010 (£7.5 million)

So why the panic drop from 800p to 300p?

The company was reporting net debt of £63 million at the end of 2018 up from £16.5 million at the end of 2017 along with £23.5 in exceptional costs for 2018, so it seems 2018 may be a less profitable year than 2017.

Reading the trading update the Board now expects the Group to deliver adjusted EBIT in the range of £23 million to £28 million for the financial year ending 31 December 2019.

Then looking at the 2017 annual report and the difference between underlying profits and reported profits this seems to be saying that 2019 will not be a great year, there is too much uncertainty in the updates to be more specific.

So has the bubble burst for the group, has it grown to fast?
Read Count: 242/7061

Buy/No Buy In A Nutshell
NegativesToo much debt and they have already done a share issue to fix that along with a recent history of issues with financial management
PositivesAn attractive takeover target at a low enough price.
Initial Review Price26p
Last Review Price26p
Last Review Date21-Aug-2020
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