Staffline Group (lon:staf)
Staffline – Expected Share Placing, But Unexpected Rises Earlier.

Staffline Group Financials

ItemCurrent PeriodPrevious Period
Adjusted Earnings£36m£36m
Adjusted EBITDA
Statutory Profit(£10m)£24m
Adjusted Profit
Total Debt
Net Debt£63m£16m

Commentary History
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Staffline Group Share Price
Grade:The Black Grade - Shares That I Think Could Collapse To Nothing Or Suffer A Massive Share Issue.
Title: Staffline – Expected Share Placing, But Unexpected Rises Earlier.
Company: STAF - Staffline Group
Share Price Then: 126p
Author: Ian Smith
Date: Thu 27 Jun 2019
Comments: As expected Staffline have just announced a share issue at 100p, although at £41m it is a bit higher than the £37m proposed about 10 days ago.

After the disastrous announcement on the 17th of June that the company had a £15m bill for unwaged wages due to underpaying the minimum wage, a poor trading year and a proposed £37m share issue the share price dropped from about 250p to 100p.

I expected it to stay at around this level or drop even further yet it rallied to nearly 150p dropping to only 120p when the share issue was announced.

I was really surprised to see retail investors buying in to a company that had such a difficult future and knowing that a share issue was about to be announced.

I get that there may be a long term price growth as for most of the last 5 years the price was around 1000p but a doubling or trippling of the number of shares was clearly on the cards. So post share issue price growth is pretty unclear

Much of the net debt increase was due to £50m being spent on acquisitions, and reducing this debt along with the unexpected £15m wage bill is the reason for the proposed share dilution.

I am not at all sure that I like to notion of incurring debt and then doing a share issue to raise funds to pay it off.

With no 2018 final dividend and none proposed for 2019 and 2020 a lot is being asked of existing and new shareholders, C Pullen’s salary has risen from £295K to £325K and M Watts’s from £180K to £220K but at least they waived a 40% of salary bonus and there is some commitment to the share offer.

Director Intended Participation
John Crabtree, Chairman £25,000
Chris Pullen, CEO £100,000
Mike Watts, CFO £18,000
Ed Barker, Non-Exec £10,000
Tracy Lewis, Non-Exec £100,000
Total £253,000

Clearly the top level management has lost control, but there is still a profitable business so I would be surprised if the share issue is not approved and taken up.
Read Count: 425/8070

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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