Staffline : Notice of Results & Group Update

RNS Number : 3919C

Staffline Group PLC

17 June 2019

17 June 2019

STAFFLINE GROUP PLC

("Staffline," the "Company" or the "Group")

Notice of Results and Group Update

Staffline, the recruitment and training group, provides the following business update.

The Group intends to announce its audited results for the year ended 31 December 2018 on 27 June 2019.

The most significant and me consuming area in finalising the financial results has related to the Group's historical compliance with Na onal Minimum Wage Regula ons 2015 ("NMW"). Liabili es in rela on to this have been booked as excep onal, non-underlying charges on the basis of their nature, magnitude and the fact that they relate to a period of 6 years from 2013 to 2018. On 12 March 2019 the Group announced that the Board had received the key findings of an independent legal inves ga on and deemed it prudent to increase a provision in respect of addi onal costs from £4.4m to £7.9m. Since then, and with the benefit of addi onal independent specialist advice and following discussions with HMRC, the Group has further reviewed its obliga ons and liabili es in respect of this ma er. As a result of comple ng this further review, the Board has made a final update to the provision for liabili es associated with historical NMW compliance, increasing this from £7.9m to £15.1m, which includes £0.5m of adviser costs, all of which it expects to be a cash cost in 2019. Additional exceptional costs included in the 2018 result relating to extended audit procedures will be £1.8m, taking total non-recurring exceptional charges for 2018 to £32.6m.

In recent years, NMW compliance has emerged as a highly complex area which has affected a significant number of UK businesses across industry and retail, in par cular. The Group's non-compliance was ini ally iden fied by a self- review process as part of HMRC's compliance review. It relatesto a limited number of food produc on facili es and the payment for prepara on me, which is generally the me spent donning workwear. In these cases, the Group was following its end customers' opera onal procedures for clocking in and out. These procedures have now been rec fied so that all work related me is paid in accordance with current legisla on. Any addi onal me paid is charged to the customer in the same way as all other hours supplied. However, the addi onal costs incurred in rela on to historical non-compliance are not recoverable from customers. The nature, complexity and volume of data that has been analysed as part of the addi onal independent specialist review, and the subsequent audit of this informa on has been a very significant undertaking which took several months to complete. Furthermore, the calcula on of underpayments is a difficult and complex ma er requiring judgement and the applica on of assumptions, all of which have been subject to discussions with HMRC.

On 17 May 2019 the Group issued a trading update referencing headwinds faced in both of its training and recruitment divisions. As a consequence, the Board expects the Group to require a waiver of possible future breaches to the leverage covenant in its lending agreements. The Group con nues to operate within its facili es and is expected to do so into the foreseeable future. Construc ve discussions with the Group's lenders are ongoing and, in conjunc on, the Company has commenced discussions with investors regarding a Placing of ordinary shares to raise approximately £30m for the Company with the target of reducing 2019 year end leverage, being net debt/underlying EBITDA, to below 2x. In the event that the Company does pursue an equity capital raise the Board an cipates also launching an Open Offer for an addi onal £7m to enable wider shareholder par cipa on. In light of these discussions the Board will not recommend a final dividend for the 2018 financial year. The Board reiterates its guidance that the Group will report an underlying performance for the year ended 31 December 2018 in line with expecta ons. The Board also con nues to expect the Group to report underlying EBIT for the year ending 31 December 2019 in the range of £23-28m and, before proceeds of any equity capital raise, net debt at year end to be in line with current market expectations.

Chris Pullen, Chief Executive of Staffline, commented:

"Whilst the time taken to announce our 2018 financial results is frustrating, we look forward to posting these results at the end of June at which point we expect the business to return to normalised trading. Staffline continues to enjoy a unique position in its markets and once this episode is behind us we are confident of a return to future growth."

Market Abuse Regulation

This announcement is released by Staffline Group plc and contains inside information for the purposes of the Market Abuse Regulation (EU) 596/2014 ("MAR") and is disclosed in accordance with the Company's obligations under Article 17 of MAR. The person who arranged for the release of this announcement on behalf of Staffline Group plc was Michael Watts, Group Chief Financial Officer.

For further information, please contact:
Staffline Group plc	via Vigo Communications
www.stafflinegroupplc.co.uk
Chris Pullen, Chief Executive Officer
Michael Watts, Group Chief Financial Officer
Liberum NOMAD and Joint Broker	020 3100 2222
www.liberum.com
Steve Pearce / Joshua Hughes
Berenberg Joint Broker	020 3207 7800
www.berenberg.com
Chris Bowman / Toby Flaux
Vigo Communications Financial PR	020 7390 0230
www.vigocomms.com	[e-mail]
Jeremy Garcia / Antonia Pollock / Charlie Neish

Note for Editors

About Staffline - Recruitment, Training and Support

Enabling the Future of Work™

Staffline is the UK's market leading Recruitment and Training group. It has two divisions:

Recruitment Division

The UK's leading provider of flexible blue-collar workers, supplying over 60,000 staff per day to c. 1,500 private sector clients, across a wide range of industries including agriculture, drinks, driving, food processing, logis cs and manufacturing. It operates from over 400 locations in UK, Eire and Poland.

Its world leading Customer Experience pla orm provides op mised customer-based staffing management solu ons whilst providing market-leading levels of job satisfaction for workers.

PeoplePlus Division

The leading adult skills and training provider in the UK, delivering appren ceships, adult educa on, prison educa on and skills-based employability programmes across the country.

Education and Training - market leading provider of training courses for private sector Appren ceships (both Levy and non-Levy) and Government funded Adult Skills programmes.

Employability - top quar le performer, suppor ng Government programmes providing back-to-work educa on and support services to the unemployed.

Jus ce and Community - educa on and training services for prisoners and ex-offenders, as well as individual support services for carers and people with disabilities, both at home and in the work place.

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