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UK - Staffline acquires Fourstar

26 April 2011

Staffline Group Plc (STAF:LSE), the recruitment and outsourced HR services provider to industry, today announces the completion of the acquisition of Fourstar Employment & Skills Ltd, one of the three preferred Work Programme providers for the Birmingham, Solihull and the Black Country contract package area.

Fourstar has been a Flexible New Deal provider in the Birmingham and Solihull area since October 2009 and following the replacement of that programme with the Work Programme, has been awarded preferred bidder status for a new five year contract from July 2011 in the same package area with additional expansion into the Black Country. Under the Department for Work and Pensions (DWP), the Work Programme is aimed at helping people who have been claiming unemployment benefits for 12 months or more or those claiming employment support allowance, to find new jobs through a combination of tailor made services like job search support, real work experiences and skills development.

Fourstar is being acquired from the Dutch company Fourstar Group Limited, a wholly owned subsidiary of Lern Holding B.V, a company registered in the Netherlands, for 3 million Pounds in cash, satisfied from the Group's existing cash resources. In the year ended 31 December 2010 Fourstar generated a net profit of 3.6 million Pounds (unaudited), this included a significant early termination payment from the DWP in relation to the ending of the Flexible New Deal programme. The acquisition is expected to generate circa 90 million Pounds of revenue over the next five years, be earnings neutral in the first full year of ownership and earnings enhancing thereafter.

Fourstar currently employs 170 people in the Birmingham and Solihull area and has three specialist Employment & Training Centres (ETCs) in Aston, King's Norton and Garretts Green, from which the programme is delivered. A new ETC will be opened soon in the Black Country ready for the start of the new contract in July.

Fourstar's ETC approach provides onsite training and employment facilities in which the work environment can be replicated as closely as possible. The ETCs are equipped with a range of resources including fully operational commercial kitchens, fully functioning manufacturing floors, woodworking, building and warehousing, together with a simulated office and retail environment. The training combines a hands-on and classroom based work-centred approach.

Under the Work Programme Fourstar will be paid on a results basis, with payments made by the DWP dependent upon having placed a person in to work and then keeping the individual in work for up to two years.

The acquisition of Fourstar provides Staffline with early stage access to the temporary workforce in the Midlands region. Fourstar will sit autonomously alongside Staffline's other core expertise of national outsourced job placement and training. The board of directors expects that Fourstar will act as a springboard for participation in other similar government initiatives and believes that many synergies can be utilised between it and the existing core Staffline businesses.

Andy Hogarth, Staffline's Chairman and Chief Executive, said "I am very pleased to announce this new acquisition, one which marks an evolution in the Staffline business model and provides good visibility in earnings for the group. Fourstar will sit well alongside our existing core services of outsourcing and training and will provide further diversification to Staffline's business."

Trading in the core Staffline business for the first quarter of 2011 has been ahead of budget, although it is too early to draw firm conclusions about the year as a whole. A further update will be given at the AGM on 19 May 2011.

N.B: The Black Country is a loosely defined area of the English West Midlands conurbation, to the north and west of Birmingham, and to the south and east of Wolverhampton.

In early trading Staffline's shares were up by +9.19% to 194.90 Pence.

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