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UK – Staffline announces H1 growth and contract win

23 July 2014

Nottingham-based recruitment firm Staffline (STAF: LSE) reported revenue for the six months ending 30 June 2014 of £208.1 million, an increase of +11.1% compared with £187.2 million during the same period last year.

Gross profit for the period rose by +23.8% to £23.7 million, up from £19.2 million a year ago. Operating profit declined by -42% to £2.1 million, down from £3.6 million last year, as a result of increased costs associated with the acquisition of welfare to work services provider Avanta, in May 2014.

Andy Hogarth, Chief Executive of Staffline, commented: “We have made a good start to 2014, buoyed by the continued traction in our core recruitment business and the recent acquisition of Avanta, our largest transaction to date. With Staffline continuing to outperform the broader recruitment sector as regulatory and budgetary constraints create added pressure for UK businesses, demand for our services remains strong.”

“Our new business pipeline continues to develop and our newer divisions are beginning to gain market traction. The integration of Avanta is also progressing well and we remain strongly optimistic that we can make further gains in the welfare to work and training arena,” he added.

Revenue from Staffline’s recruitment services increased by +7% to £189.5 million, up from £177 million last year. During H1 2014, the company’s recruitment services accounted for 91% of total company revenue, compared with 95% in H1 2013.

Gross profit derived from recruitment services increased by +7% to £16.9 million, up from £15.8 million a year ago. Operating profit, however, declined by -69% to £1 million, down from £3.2 million last year, primarily as a result of a share based payment charge of £2.9 million during H1 2014.

The company’s welfare to work division reported revenue growth of +82% to £18.6 million, compared with £10.2 million a year ago.

Staffline also announced that its welfare to work division secured one of the three Northern Irish ‘Steps to Success’ contracts. The ‘Step to Success’ initiative is Northern Ireland’s main adult employment programme, operated by the Department of Employment and Learning (DEL).Financial details of the contract were not disclosed. The four year contract includes the additional possibility of a two-year extension.

Earlier this month, Staffline announced the acquisition of Softmist, a Leicester-based training and procurement consultancy, which trades as Skillspoint. The acquisition further enhances Staffline’s position in the training sector, which also forms part of Staffline’s longer term strategy of expanding its activities in the welfare to work arena.  

Looking forward, Mr Hogarth added: “We have started the second half of the year well, buoyed by the recent hot weather, which has seen a significant increase in seasonal demand for contractor from many of our clients and is also reflected in the strong retail figures for recent months. In particular, we have also seen strong levels of demand in our driving businesses, highlighting the systemic shortage of available HGV drivers in the UK.”

“The integration of Avanta with our existing welfare to work division (Eos) is progressing well and we expect Avanta to have a significant impact financially and operationally in the second half of the year. We continue to look for further bolt-on acquisitions within our core recruitment business and remain in discussions with a number of companies. Our new business pipeline in both our recruitment services business and our welfare to work division remains promising with a significant number of opportunities being seen by the Group. The board therefore remains confident that the Group will meet current market expectations for the full year,” he concluded.

In trading today, the company’s share price rose by +2% to £9.80, an increase of +121.4% compared with a year ago. Based on its current share price, the company has a market value of £274.3 million.