REG - Staffline Group PLC - 2022 Audited Results
21/03/2023 07:00
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RNS Number : 5977T Staffline Group PLC 21 March 2023
21 March 2023
STAFFLINE GROUP PLC
("Staffline", the "Company" or the "Group")
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2022
- Strong performance across FY 2022 with underlying operating profit
ahead of expectations
- Strong balance sheet, with net cash of £5.0m
Staffline Group plc, the recruitment and training group, announces its audited
results for the year ended 31 December 2022 ('FY 2022').
Financial Highlights(1)
FY 2022 FY 2021 Change
Revenue £940.5m £942.7m -0.2%
Gross sales value(2) £1,031.3m £996.5m +3.5%
Gross profit £83.2m £82.8m +0.5%
Gross margin % 8.8% 8.8%
Underlying operating profit(3) £12.0m £10.3m +16.5%
Gross profit to underlying operating profit conversion % 14.4% 12.4% +2.0%pts
Profit after tax £3.8m £1.6m +£2.2m
Underlying EBITDA £17.6m £16.9m +0.7m
Net cash(4) £5.0m £6.9m -£1.9m
(1)Presented on a continuing basis.
Alternative performance measures
(2)Gross sales value represents the fair value of the consideration received
or receivable for the supply of services, including agency sales, (excluding
fees) which are subject to an IFRS 15 agency adjustment, net of value added
tax, rebates and discounts
( 3)Underlying results exclude goodwill impairment, amortisation of
intangible assets arising on business combinations, reorganisation costs and
other non-underlying charges
(4)Presented on a pre-IFRS16 basis which excludes lease liabilities and also
excludes refinancing costs
· Revenue broadly flat - strong permanent recruitment and customer wins
in temporary recruitment, offset softer demand from customers previously
benefitting from the pandemic as well as a weaker Skills division within
PeoplePlus
o Gross sales value increased by 3.5% generated from organic growth and new
business wins predominantly in the Group's managed service provision
· Gross profit from Recruitment up 4.7% offsetting reduction in
PeoplePlus, resulting in flat year-on-year gross margin of 8.8%
o Gross profit from permanent recruitment increased by 64.9% to £6.1m
(2021: £3.7m), representing 7.3% of Group gross profit compared to 2.9% in
2020
· Gross profit to underlying operating margin conversion ratio increased
strongly to 14.4% (2021: 12.4%) due to efficiencies and tight cost control
· Underlying operating profit(3) marginally ahead of market expectations
at £12.0m
· Interest rate cap purchased in October 2021 significantly limited the
increase in net finance costs, to £2.7m (2021: £2.4m)
· Net cash(4) of £5.0m (2021: £6.9m) was materially ahead of
expectations delivering a strengthened balance sheet with accretive trading
cashflow
o Repayment of c.£12m of Covid-related government support and advance
payments
· The Group's strong balance sheet continues to support growth
opportunities
Operational Highlights
· Strong financial and operational performance across the Recruitment
divisions:
o Secured new contracts with BMW and Sainsbury's/Argos, confirming Group's
market leadership in blue-collar recruitment
o Contract extensions secured with Causeway Coast and Glens Borough Council
in Northern Ireland and VINCI Construction UK supplying labour and managed
services to the London to Southampton pipeline project
o Opened new office in Limerick, Republic of Ireland and launched new
executive search service, further highlighting the Group's growth momentum in
Ireland
· PeoplePlus
o Delivered a solid performance from the Restart contracts, underpinned by
first profit since inception in July 2021 of £1.2m
o Strong demand for labour resulted in potential candidates bypassing
additional training programmes and moving straight into employment, which held
back Skills division
Current Trading and Outlook
· Staffline delivered a strong performance across FY 2022, exceeding
original expectations in terms of both profitability and cashflow, despite
facing challenging macroeconomic conditions, which management expect to
continue across FY 2023
· The Group expects to grow market share across the temporary
recruitment market, but anticipates short term market challenges within the
retail and consumer sectors subduing growth in permanent recruitment with low
unemployment trends expected to further constrain volumes within PeoplePlus'
Skills and Restart businesses
· As highlighted in the trading update in January 2023, the Board has
adopted a cautious approach to FY 2023, however, the Group's strengthened
balance sheet, experienced management team, and healthy pipeline mean the
business is well placed to capitalise on the considerable market opportunities
that lie ahead
Albert Ellis, Chief Executive Officer, commented:
"I am pleased to report such a strong trading performance across the Group in
FY 2022, with Staffline increasing its overall profits and further
strengthening its balance sheet.
In addition to these solid results, the Group secured two significant new
contracts with BMW and Sainsbury's/ Argos, and extended important existing
relationships with VINCI Construction UK and Causeway Coast and Glens Borough
Council. Our experienced management and staff continue to ensure Staffline
delivers an outstanding service in a tight labour market, further highlighting
our credentials as the UK's preferred recruitment and training provider during
this time of uncertainty.
"As we move further into 2023, we will focus our efforts on delivering on the
Group's organic growth pipeline and leveraging Staffline's leading market
position to capitalise on a number of exciting new business opportunities and
further expand our market share."
Staffline Group plc via Vigo Consulting
www.stafflinegroupplc.co.uk (http://www.stafflinegroupplc.co.uk)
Albert Ellis, Chief Executive Officer
Daniel Quint, Chief Financial Officer
Liberum Nominated Adviser and Joint Broker 020 3100 2222
www.liberum.com (http://www.liberum.com)
Richard Lindley / William Hall
Zeus Joint Broker 020 3829 5000
www.zeuscapital.co.uk
David Foreman (Investment Banking)
Nick Searle (Sales)
Vigo Consulting Investor Relations & Financial PR 020 7390 0230
www.vigoconsulting.com (http://www.vigoconsulting.com) staffline@vigoconsulting.com
Jeremy Garcia / Kate Kilgallen
About Staffline - Recruitment, Training and Support
Enabling the Future of Work™
Staffline is the UK's market leading Recruitment and Training group. It has
three divisions:
Recruitment GB
Staffline is a leading provider of flexible blue-collar workers, supplying
c.31,000 staff per day on average from around 400 sites, across a wide range
of industries including supermarkets, drinks, driving, food processing,
logistics and manufacturing.
Recruitment Ireland
The Recruitment Ireland business is a leading end to end solutions provider
operating across twenty industries, ten branch locations and ten onsite
customer locations, supplying c.4,500 staff per day on average, and offering
RPO, MSP, temporary and permanent solutions across the island of Ireland.
PeoplePlus Division
Staffline is the leading adult skills and training provider in the UK,
delivering adult education, prison education and skills-based employability
programmes across the country.
Chairman's Statement
Introduction
This is my first statement as Interim Chairman and I would like to take this
opportunity to express my passion for ensuring the Staffline Group
communicates as effectively as possible regarding our strategy, operational
progress, and crucially, the financial health of our business going forward. I
believe all shareholders should remain fully informed about the growth plans
and ambitions of the Group, so they continue to have confidence in Staffline
as an investment.
Year in Review
The Group's performance over the last 12 months has been strong. We delivered
on our promise to grow underlying operating profit to £12.0m (2021: £10.3m),
which is up 16.5% on the prior year. Equally importantly, we further
strengthened the balance sheet with tight management of working capital,
control of costs and capital expenditure, and through retaining our trading
cash flow to finance future growth.
As of 31 December 2022, the Group is operating with significant financing
headroom relative to available committed banking facilities. I have long been
a strong advocate of prudent cash management, making sure the business remains
self-financing and avoiding an over-reliance on external borrowing.
I firmly believe that Staffline has the means and expertise to both protect,
and indeed expand, its enviable market position. Management is highly in tune
with the individual workings of each of our divisions and, rest assured, will
act decisively to redeploy capital, be this to new activities, or to existing
operations with historically higher margins, to ensure continued progress
across the Group. Our investors rightly seek value, and we, as a Board and
management team, are working hard to deliver enhanced shareholder value.
Dividends & Capital Allocation
Our capital allocation policy will be guided by the macro-environment in which
we operate, we will strive first and foremost to maintain the strength of our
balance sheet and deliver long-term value for our shareholders, considering
share buybacks or dividends as and when appropriate to do so. With regard to
any acquisitions or organic investment in the business, the Board will seek to
finance these through trading cash flow alone, as opposed to assuming fixed
term debt.
Board Changes
In March 2022, Richard Thomson advised the Board that he would not stand for
re-election as Senior Independent Director, leaving in May to pursue other
opportunities after three years of exceptional service to the Company. May
2022 also saw the departure of our former Chairman Ian Lawson, who resigned
after two years spent expertly guiding the business through a period of
significant change. In addition, Ian Starkey, Senior Independent Director,
informed the Board in November 2022 that he will not stand for re-election at
the Group's AGM in 2023. Ian has been a tremendous asset to the business both
in his capacity as Chair of the Audit Committee, and more recently as a Senior
Independent Director, supporting the Group through its 2021 refinancing,
transformation, and return to growth. On behalf of the Board, I extend our
sincere thanks to each of them for the truly instrumental roles they have
played in transforming Staffline into the strong and resilient business we see
today. We wish them every success in the future.
Closing remarks
I would like to thank my extraordinary colleagues at Staffline who continue to
deliver excellent results, as well as our Managing and Executive Directors. I
believe we are privileged to have such a strong and experienced operational
team supported by top-quality talent at the senior leadership level. One of my
first priorities when I assumed the role of Interim Chairman was to ensure
that our talent was retained and locked in through a variety of incentives
both short and long term, aligning the interests of management with the
Group's shareholders and ensuring we have the bench strength to execute on our
plans.
Ultimately, we are not just a people business, we are a people-focused
business; striving to match rewarding work opportunities with those that seek
them. Our passion for helping our extraordinary clients achieve their
objectives through first-class recruitment is evidenced by both the enduring
relationships we have forged with so many of our partners, and our ability to
consistently secure top-level client wins.
In the new financial year, it is clear there are a number of external
headwinds we will have to navigate. Despite this testing macro environment, I
remain hugely encouraged by the nature of our business mix, which I believe
leaves Staffline well equipped to face these challenges head-on and take
advantage of the opportunities they present.
Tom Spain
Interim Chairman
20 March 2023
Chief Executive Officer's Review
Introduction
The Group traded strongly across 2022, and I am delighted that the increased
gross sales and client activity throughout FY 2022 has resulted in a positive
flow through to operating profit and trading cash flows. We continue to see
the benefits of the restructuring and significant strengthening of the Group's
balance sheet achieved in the previous year. As a result, the Group
delivered an excellent trading performance with increases in the Group's gross
profit, operating profit, conversion ratios and profit before tax.
Following the pandemic-related volatility of the past couple of years, 2022
continued to provide eventful macroeconomic conditions. The global economy
was hit hard by geopolitical uncertainty across the world, with sharp rises in
interest rates and faster than expected inflation reducing consumers'
disposable income all contributing to a slowing macroeconomic environment.
Nevertheless, despite the challenges facing the Group, I am pleased to report
our businesses have proven highly resilient. Our commitment to delivering
excellent customer service at scale, in a tight labour market, has proven to
be a key differentiator and our management have forged even stronger
relationships with the Group's customers.
In the year ended 31 December 2022, the Group generated revenues of £940.5m
(2021: £942.7m), and a 0.5% increase in gross profit to £83.2m (2021:
£82.8m). Underlying(1) operating profit increased 16.5% to £12.0m (2021:
£10.3m), with net cash (pre-IFRS 16)(2) as at 31 December of £5.0m (2021:
net cash £6.9m).
This success could not have been achieved without the outstanding quality of
our people. During 2022 we refreshed and reorganised our management and
organisational structure, bringing exceptional talent into the Group whilst
promoting high performers from within the business. The rollout of performance
related compensation and long-term equity plans has further reduced churn and
attracted and retained the best people in preparation for the growth journey
over the next 3-5 years.
The business has moved from strength to strength in financial terms too. In
particular, our excellent Finance team has worked hard to convert our trading
profits into cash through tight control of debtors and implementing
significant cost-saving initiatives, resulting in a real term reduction in the
Group's cost base. The interest rate cap purchased in October 2021 has
delivered significant interest savings and all outstanding historic
Covid-related liabilities have been settled over the course of the year.
A year of positive momentum
I am pleased to say that 2022 can be characterised as a year of consistent,
positive growth momentum for Staffline.
Group gross profit grew by 0.5%, largely attributable to the onboarding of two
significant new recruitment customers, the first profit from our Restart
contract, and solid trading across the Christmas peak period. Our strategy of
growing higher margin, cash generative permanent recruitment contracts (up 65%
compared with 2021), continues to yield positive results; driving further
increases in revenue, as well as improvements to our cash position.
Within PeoplePlus, offsetting the weakness in the Skills business, which was
due to high employment, robust demand for labour supported a strong
performance for our employability programmes, and we were pleased to see the
division recognise its first operating profit from its Restart sub-contracts
during the second half.
As announced in H1 2022, Recruitment GB successfully secured several
substantial new contracts, including a long-term agreement with BMW Group to
supply the flexible operational workforces and a number of specialist roles
for its manufacturing sites in England.
The division's managed services arm, Datum RPO, has delivered an impressive
performance, with record results driven by consistently high levels of demand
for its services. New business wins include a five-year contract extension
with specialist construction company, VINCI Construction UK, as well as the
onboarding of new customer Argos, part of the Sainsbury's Group, which
appointed Datum RPO in early 2022 as its temporary labour Managed Service
Provider ('MSP') for its sizeable driving estate.
The senior team at Datum RPO has committed significant time and resource to
developing the business' technology platform to meet Argos' specific
requirements, seamlessly rolling out its MSP solution across 45 locations and
Argos' 70-strong supplier network. Following on from this success, Staffline
has since become a specialist supplier of driver resource for key locations
within Argos' home delivery network.
Recruitment Ireland saw strong traction in its permanent recruitment business,
including for the first time in the executive search sector, and expanded its
branch network in the Republic of Ireland where it opened a new office in
Limerick and extended its Causeway Coast and Glens Borough Council contract
for a further 5 years. Tight cost control and an increase in gross margins led
to an increase in gross profit to operating profit conversion rate to 24.8%,
up from 22.1% in the year prior.
As we move further into 2023, management will focus its efforts on delivering
additional organic growth across the Group through both increasing business
volumes in existing customers, and by leveraging Staffline's enviable market
position to capitalise on new business opportunities and further expand our
market share.
Vision and strategy
Staffline's business vision is clear: to be a market leading, world-class
recruitment and training group, known for excellent service and integrity, and
driven by digital innovation. Our strategic priorities for consistent,
sustainable growth are as follows:
· To further capitalise on the Group's market leadership in
recruitment:
Staffline's Recruitment divisions have market leading positions in the supply
of temporary workers, especially in the blue-collar warehouse and driving
sectors. Our focus now is on securing additional organic growth in new and
existing clients which are actively growing their own market share, and also
introducing permanent recruitment services to support our clients' core
headcount requirements. The Group's strong governance and compliance offer
will be increasingly important going forward.
· To broaden the portfolio of services:
The Group will continue to introduce Datum RPO's services to customers that
will benefit from a fully managed service and we believe the current push for
cost savings is a key driver in increasing client demand in this market. The
Group will support Omega's ambitions to grow its technical and engineering
niche, which will expose the Group to higher margin growth opportunities in
the white-collar recruitment sector.
· To drive ongoing profit growth within PeoplePlus:
Our strategy remains focused on further stabilising the annuity revenue and
profit streams of the business, winning new contracts and consolidating our
market share in prison education and employability.
· To grow in the Republic of Ireland:
The Republic of Ireland continues to be an attractive recruitment market with
a positive growth outlook. The Group is growing through investing in
additional branches and services, and hiring additional fee-earning headcount
including during the current downturn. We believe these initiatives will help
facilitate a step change in scale and profitability in the recovery when it
comes.
Operational review
Recruitment GB
The Group's Recruitment GB division delivered a strong performance across 2022
having successfully expanded its operational footprint during the period.
The implementation of the BMW contract, a major win in 2022, remains
ongoing, with the Group seeing further momentum from additional sectors,
including manufacturing and travel. Investment in headcount and technology
remained a key theme for the business, and despite much reported labour
shortages, the division continued to expand its branch network, reinforcing
the strong platform which will underpin future growth. The Group's managed
services business, Datum RPO, continued to perform well as customers seek to
consolidate their recruitment supply chains using an independent expert, as
evidenced by the award of a five-year contract extension with VINCI
Construction UK. Omega, the Group's technical and engineering recruiter, also
posted strong increases in its permanent recruitment fees, which across the
wider division were up c.80% over 2021, representing a c.176% increase over
the last two years. The division continued to control overhead costs tightly,
increasing its gross profit to underlying operating profit conversion rate
from 14.0% to 16.0%.
Recruitment Ireland
The Recruitment Ireland business, which is more dependent on the permanent
recruitment market and less dependent upon temporary placements than the
Recruitment GB business, produced an excellent trading performance across the
year. The division delivered a 45% increase in permanent recruitment fees, its
strongest results since 2019, which offset marginally weaker blue-collar
demand. The increase in permanent recruitment fees, coupled with a record
trading performance in the Republic of Ireland, which has been underpinned by
ongoing investment in fee-earning headcount, further demonstrates the inherent
strength of our Recruitment Ireland platform. A pivot to white-collar
recruitment in the Republic of Ireland, the opening of a new office in
Limerick, and the retention of key public sector contracts in Northern
Ireland, all contributed to record growth across 2022. The strength of
permanent recruitment, and for the first time, executive search, helped
increase gross margins. Additionally, our entry into the executive search
market alongside tight control of the cost base resulted in the gross profit
to underlying operating profit conversion rate improving to 24.8%, up from
22.1% in the prior year.
PeoplePlus
PeoplePlus reported a solid performance in 2022, but as expected was held back
by lower revenues in Skills training. Labour shortages, and the resulting
demand squeeze, resulted in potential candidates bypassing established
training programmes and moving straight into employment. Conversely, these
labour market conditions aided our Employability programmes which performed
particularly well, and we were pleased to see PeoplePlus successfully deliver
profit from the Restart sub-contracts during the year, with the division
reporting its first operating profit from those contracts in the second half
of 2022. During the year it was determined that PeoplePlus had overstated
revenues totalling £2.6m in relation to the period prior to 31 December 2021,
as PeoplePlus had not met some of its revenue related performance obligations.
Due to the legacy nature of these revenues, management have accounted for the
adjustment of these errors through reserves.
The labour market and recruitment landscape
The labour market experienced severe shortages which were exacerbated by the
Covid pandemic. Since then, we have seen a slight easing in supply but also in
demand, particularly in HGV driving. The logistics and online sector which
reported buoyant results during the Covid related lockdowns has reduced demand
for temporary labour as online volumes returned to more normalised levels and
consumers reverted to pre-pandemic behaviours. However, the labour shortage
continues as vacancies remain above 1 million and combined with the
cost-of-living crisis, this has affected the training market as candidates are
going straight into paid work without seeking additional training. The Group
has responded to these changes by reducing its cost base in Skills to align
with the forecasted lower level of demand going forward, and by reorganising
its labour delivery to leverage the Group's strengths in regional differences
in supply and demand.
Board Changes
In May 2022, Tom Spain was appointed Interim Chairman following the
announcement that Ian Lawson would step down from his role as Non-Executive
Chairman. Additionally, in April 2022, Richard Thomson stepped down from the
Board as the Senior Independent Director, a role assumed by Ian Starkey in May
2022.
In November 2022, we announced that Ian Starkey, Audit Chairman and Senior
Independent Director, had informed the Company that he would not be standing
for re-election at the 2023 AGM. Accordingly, the Board has begun the process
of searching for a replacement. The search is at an advanced stage and the
Board expects to make an announcement shortly.
Outlook
As a business, we are pleased with the excellent progress delivered by
Staffline across 2022, achieving strong growth in profitability and cash
flows, investing in the senior operational leadership, and embedding
governance at the core of our company culture to further differentiate our
customer offering in a market that is increasingly prioritising compliance.
As referenced in our January 2023 trading update, we anticipate the current
uncertainty to persist through 2023, with continuing low unemployment
constraining volumes within PeoplePlus's Skills and Restart businesses. Our
Recruitment GB and Recruitment Ireland divisions are likely to be affected by
the widely reported weakening in demand for permanent hiring.
However, we are confident in our ability to leverage our brand, geographic
scale and governance advantage to continue to expand our market share in
preparation for the economic recovery when it comes.
Albert Ellis
Chief Executive Officer
20 March 2023
Alternative performance measures
(1)Underlying results exclude goodwill impairment, amortisation of intangible
assets arising on business combinations, reorganisation costs and other
non-underlying charges
(2)Presented on a pre-IFRS16 basis, which excludes lease liabilities, and also
excludes refinancing costs
Financial Review
Introduction
The Group traded strongly during 2022 and exceeded both net cash and
underlying operating profit expectations, despite the continuing economic
challenges. Gross sales for 2022 increased by 3.5% to £1,031.3m (2021:
£996.5m) driven by new managed service provider customer wins. Total revenue
for the year of £940.5m (2021: £942.7m) was lower than the previous year by
0.2%. Gross profit across the recruitment businesses increased by 4.7% to
£64.9m (2021: £62.0m), offset by a reduction in PeoplePlus' gross profit to
£18.3m (2021: £20.8m). This resulted in Group gross profit increasing to
£83.2m (2021: £82.8m), with gross profit margin stable at 8.8%. The Group
continued to control overhead costs tightly, increasing its gross profit to
underlying operating profit conversion rate from 12.4% to 14.4%, delivering a
16.5% increase in underlying operating profit to £12.0m (2021: £10.3m). The
Group's reported profit after tax increased to £3.8m (2021: £1.2m).
The Group has pursued a policy of organic growth with a focus on cost control
and working capital, conserving its cash reserves, and further strengthening
its balance sheet. The Group ended the year with pre-IFRS16 net cash of £5.0m
(2021: £6.9m), notwithstanding the two Covid-19 pandemic-related one-off
payments of the final repayment of deferred VAT of £5.8m and £6.2m advance
payments from the Ministry of Justice. This means that the Group generated an
underlying improvement in net cash of £10.1m.
The Group's purchase of a 3-year interest rate cap in October 2021, in order
to manage its debt financing costs, meant that the impact of the increase in
the Bank of England base rate from 0.25% to 3.50% during 2022 was largely
mitigated.
The Group's strengthened balance sheet and its significant financing headroom
leaves it well placed to navigate the ongoing global macroeconomic headwinds
as well as capitalise on market opportunities to further grow market share.
The Group comprises three divisions, namely, Recruitment GB, flexible
blue-collar recruitment; Recruitment Ireland, generalist recruitment; and
PeoplePlus, adult skills and training provision.
Underlying(1) divisional performance - continuing operations
Recruitment GB Recruitment Ireland PeoplePlus 2022 Group Costs 2022 Total Group Recruitment Recruitment PeoplePlus Group Costs Total Group
2022 2022 £m £m 2022 GB Ireland 2021 2021 2021
£m £m £m 2021 2021 £m £m £m
£m £m
Revenue 752.0 110.6 77.9 - 940.5 747.9 111.7 83.1 - 942.7
Year-on-year revenue increase/(decline) 0.5% (1.0)% (6.3)% - (0.2)% 2.2% (7.3)% 10.8% - 1.6%
Gross sales value(3) 842.8 110.6 77.9 1031.3 801.7 111.7 83.1 996.5
Year-on-year gross sales value increase 5.1% (1.0)% (6.3)% - 3.5% 5.6% (7.3)% (10.8)% - 2.7%
Gross profit 52.0 12.9 18.3 - 83.2 50.7 11.3 20.8 - 82.8
Year-on-year gross profit increase/(decline) 2.6% 14.2% (12.0)% - 0.5% 9.7% 7.6% 16.2% - 11.0%
Gross profit as a % of revenue 6.9% 11.7% 23.5% - 8.8% 6.8% 10.1% 25.0% - 8.8%
Underlying operating profit/(loss) before tax 8.3 3.2 3.8 (3.3) 12.0 7.1 2.5 4.1 (3.4) 10.3
Underlying operating profit as a % of revenue 1.1% 2.9% 4.9% - 1.3% 0.9% 2.2% 4.9% - 1.1%
Underlying operating profit as a % of gross profit 16.0% 24.8% 20.8% - 14.4% 14.0% 22.1% 19.7% - 12.4%
Pre-IFRS 16(2) net cash excluding unamortised refinancing costs - - - - 5.0 - - - - 6.9
Post-IFRS 16 net cash excluding unamortised refinancing costs - - - - 0.1 - - - - 2.3
Key performance indicators - continuing operations
Recruitment GB Recruitment Ireland PeoplePlus 2022 Total Recruitment GB Recruitment Ireland PeoplePlus 2021 Total Group
2022 2022 Group 2021 2021 2021
2022
Hours worked by temporary workers 44.0m 6.7m - 50.7m 51.1m 7.1m - 58.2m
Gross profit per fee earner £76.5k £102.2k - £80.6k £71.5k £111.5k - £76.5k
Revenue per employee - - £55.7k - - - £62.6k -
For management reporting purposes the Recruitment GB division presents its
'gross sales value', which includes sales under agency arrangements. The
reporting of gross sales gives an indication of the full level of activity
undertaken by the division. This value is adjusted for reporting revenue in
accordance with IFRS 15. The adjustment relative to reported revenue for the
Group is as follows:
2022 2021
£m £m
Gross sales value 1,031.3 996.5
Agency sales excluding fees (90.8) (53.8)
Revenue as reported 940.5 942.7
Alternative performance measures
1 Underlying results exclude goodwill impairment, amortisation of
intangible assets arising on business combinations, reorganisation costs and
other non-underlying charges.
2 Presented on a pre-IFRS 16 basis, which excludes lease liabilities, and
also excludes refinancing costs.
3 Gross sales value represents the fair value of consideration received or
receivable for the supply of servicess, including agency sales, (excluding
fees) net of VAT.
Recruitment GB
Revenues in the Recruitment GB division increased by £4.1m to £752.0m. The
division experienced some reduction of volumes from retail and logistics
customers that had benefited from increased workload during the Covid-19
pandemic, which was more than offset by significant new contracts, and
increased demand from some existing customers, BMW and Sainsbury's/Argos being
prominent examples.
Gross profit of £52.0m (2021: £50.7m) resulted in gross profit margin
increasing to 6.9% (2021: 6.8%), reflecting the slight shift from lower margin
sectors such as food production, toward marginally higher returns from
recovering sectors such as travel and aviation, as well as the increase in
permanent recruitment activity commented on below. Increases in general pay
rates, in many cases double-digit percentages, combined with the increase in
the National Minimum Wage in April 2022, from £8.91 to £9.50 per hour for
over 23's, does not impact absolute gross profit but does negatively impact
gross margin percentage achieved.
Gross profit generated from temporary recruitment reduced as a proportion of
the total to 92.5% (2021: 95.7%), with the remaining 7.5% (2021: 4.3%) of
gross profit generated from permanent recruitment. This represented a 77%
increase in gross profit generated from permanent recruitment to £3.9m (2021:
£2.2m). Hours worked reduced to 44.0m (2021: 51.1m) reflecting reduced
year-over-year supermarket and online retail volumes and the strategic exit
from a significant high volume, low margin contract during 2021. Revenues were
boosted in the second half by the successful implementation of the new
contract with BMW Group, whilst also generating strong organic growth with
existing customers. The division continued to control overhead costs tightly,
increasing its gross profit to underlying operating profit conversion rate
from 14.4% to 16.0%, delivering a 16.9% increase in underlying operating
profit to £8.3m (2021: £7.1m).
Recruitment Ireland
Revenues in the Recruitment Ireland division reduced by £1.1m to £110.6m,
reflecting the reduction in temporary worker hours to 6.7m (2021: 7.1m). A 45%
increase in permanent recruitment fees enabled the division to deliver its
strongest results since 2019, as well as a record trading performance in the
Republic of Ireland.
Gross profit of £12.9m (2021: £11.3m) resulted in gross profit margin
increasing to 11.7% (2021: 10.1%), reflecting the further shift toward
permanent recruitment business. Gross profit generated from temporary
recruitment accounted for 82.9% (2021: 86.7%) of the total, with the remaining
17.1% (2021: 13.3%) of gross profit generated from permanent recruitment.
Additionally, tight control of the cost base resulted in the gross profit to
underlying operating profit conversion rate improving to 24.8%, up from 22.1%
in the prior year, generating an underlying operating profit of £3.2m (2021:
£2.5m).
PeoplePlus
PeoplePlus revenues reduced by 6.3%, from £83.1m to £77.9m, primarily as a
result of reduced revenues from Skills training, which was severely impacted
by a significant reduction in the number of candidates available as a result
of the tight labour market which enabled workers to enter jobs without
workplace skills training. The division successfully delivered its first
operating profit of £1.2m from the Restart sub-contracts in the second half
of the year and the tight labour market conditions aided other Employability
programmes, which performed well.
Following the rebuild of the division's overhead base that commenced in 2021,
the division has maintained its revenue to operating profit conversion at
4.9%, resulting in underlying operating profit of £3.8m (2021: £4.1m).
During the year it was determined that PeoplePlus had overstated revenues
totalling £2.6m in relation to the period prior to 31 December 2021, as
PeoplePlus had not met some of its revenue related performance obligations.
Due to the legacy nature of these revenues, management have accounted for the
adjustment of these errors through reserves, (see note 3).
Revenue per employee was £55.7k during 2022 (2021: £62.6k), an 11% decrease,
resulting from the reduced revenues from Skills training. PeoplePlus achieved
a gross margin of 23.5% in 2022, which compares to 25.0% in 2021, largely due
to the reduced contribution from skills training.
Group costs
Group costs, which include Directors' remuneration costs, have decreased to
£3.3m (2021: £3.4m) reflecting continued close management of corporate
spend.
Group result
Underlying operating profit was £12.0m (2021: £10.3m), an increase of 16.5%,
and marginally ahead of market expectations for the year. Total non-underlying
charges on continuing activities before tax, which are described below, were
£7.4m (2021: £8.0m), which was all non-cash.
The underlying profit before taxation on continuing operations for 2022 was
£9.3m (2021: £7.9m). Underlying profit before taxation as a percentage of
revenue was 1.0% (2021: 0.8%). The underlying profit after tax on continuing
operations for the year was £9.4m (2021: £8.7m).
The Group's reported profit before taxation was £1.9m in the year (2021: loss
£(0.1)m).
Net Finance Charges
Net finance charges incurred in the year amounted to £2.7m (2021: £2.4m),
reflecting part of the increase in overnight SONIA rates during 2022 from
c.0.25% to c.3.40%. However, the Group limited its exposure to these interest
rate increases through the use of an interest rate cap, which was purchased in
October 2021. This reduces exposure to interest rate increases above 1% of
SONIA on an aggregated two-thirds of the Receivables Finance Agreement
(£26.0m at 31 December 2022) and the customer finance arrangements (£51.7m
at 31 December 2022). The instrument, which has a term of three years from 13
October 2021, is based on quarterly notional amounts varying between £39.5m
and £62.5m, with an average of £51.9m.
Taxation
The total tax credit for the year was £1.9m (2021: £1.7m), which included
the movement of deferred tax balances. The Group has an estimated current
corporation tax liability of £0.1m (2021: £nil) in respect of the year.
Remaining tax losses of £17.8m carried forward in all divisions have been
recognised as a deferred tax asset.
The amortisation charge relating to intangible assets arising on business
combinations is not deductible under UK corporation tax and is therefore added
back to taxable profits. A deferred tax liability is recognised in respect of
other intangible assets. This liability is reduced each year in line with the
amortisation charge, giving rise to a deferred tax credit each year.
Alternative Performance Measures
In the reporting of its financial performance, the Group uses a limited number
of alternative performance measures that are not defined under IFRS, the
Generally Accepted Accounting Principles ("GAAP") under which the Group
reports. The Directors believe that these non-GAAP measures assist with the
understanding of the performance of the business and are not given undue
prominence in these financial statements. These non-GAAP measures are not a
substitute for, or superior to, any IFRS measures of performance, but they
have been included as an additional means of comparing performance
year-on-year.
Non-underlying Items
Non-underlying items of income or expenditure are items that are either
non-recurring or of a particular size or nature such that they require
separate identification. Non-underlying items are included in total reported
results but are excluded from underlying results. Certain items can vary
significantly from year to year and therefore create volatility in reported
earnings. It should be noted that whilst the amortisation of intangible assets
arising on business combinations has been added back, the revenue from those
acquisitions has not been eliminated.
Non-underlying charges on continuing activities before tax amounted solely to
£7.4m in the year (2021: £8.0m), relating solely to amortisation of
intangible assets arising on business combinations. As stated below the
existing intangible assets on business combinations will all be fully
amortised by the end of 2023.
The charge in the year for amortisation of intangible assets arising on
business combinations relates to the following acquisitions: Vital Recruitment
(charge £3.0m: asset will be fully amortised by February 2023), Passionate
about People (charge £2.3m: asset will be fully amortised by October 2023),
Grafton (£1.3m: asset will be fully amortised by June 2023), Brightwork
(charge £0.2m: asset fully amortised during 2022), others (charge £0.6m:
asset fully amortised during 2022).
Non-underlying charges - continuing operations 2022 2021
£m £m
Amortisation of intangible assets arising on business combinations 7.4 8.0
Government Support
During the first year of the Covid-19 pandemic in 2020, the Group took
advantage of the forbearance scheme for the deferral of VAT due between March
and June 2020. The total deferral agreed with HMRC under the UK scheme
amounted to £42.4m after offset of a corporation tax refund due in relation
to the financial year 2018. Repayment of the balance commenced in June 2021
and the final instalment of £5.8m was paid in January 2022.
Earnings Per Share
Statutory basic and diluted loss per share on continuing activities in 2022
were both 2.3p (2021: both 1.3p).
For the year, the weighted average number of shares (basic) is 163,753,217
(2021: 122,178,126).
Removing the non-underlying charges, and their respective taxation impacts,
results in underlying basic earnings per share of 5.7p (2021: 7.1p) and
diluted earnings per share of 5.7p on continuing activities (2021: 7.1p).
The table below reconciles underlying EBITDA (earnings before interest,
taxation, depreciation and amortisation), on continuing operations to
operating profit.
Reconciliation of operating loss to EBITDA 2022 £m 2021
£m
Operating profit 4.6 2.3
Non-underlying costs 7.4 8.0
Underlying operating profit 12.0 10.3
Depreciation and loss on disposals 5.6 6.6
Underlying EBITDA 17.6 16.9
Lease rental payments (1.6) (1.7)
Underlying EBITDA (pre-IFRS 16) 16.0 15.2
Note: Underlying operating profit is before goodwill impairment, amortisation
of intangible assets arising on business combinations, reorganisation costs
and other non-underlying costs. EBITDA represents Earnings Before Interest,
Taxation, Depreciation and Amortisation.
Statement of Financial Position, Cash Generation and Financing
Since 2020 strong trading cash flows, alongside the equity raise in 2021 have
increased the Group's equity by £54.1m to £71.7m.
The movement in net debt is shown in the table below. Strong trading cash
flows were offset by working capital movements, which included the final
repayments of deferred VAT of £5.8m and £6.2m of Covid-19 related advance
payments from the Ministry of Justice.
Movement in net debt 2022 2021
£m £m
Opening net cash/(debt) (pre-IFRS 16) 6.9 (8.8)
Cash generated before change in working capital and share options 17.6 16.5
Principal repayment of lease liabilities (1.6) (1.7)
Change in trade and other receivables 1.5 (12.2)
Repayment of advance receipts from the MoJ (6.2) 4.2
Deferred VAT (net of corporation tax offset) (5.8) (36.6)
Change in trade, other payables and provisions (0.9) (0.7)
Taxation and interest received (2.3) 3.9
Capital investment (net of disposals) (3.6) (4.5)
Net proceeds from equity issue - 46.4
Payments from restricted funds for NMW - 0.9
Settlement of NMW liabilities from restricted funds - (0.9)
Other (0.6) 0.4
Closing net cash (pre-IFRS 16) 5.0 6.9
IFRS 16 lease liabilities (4.9) (4.6)
Closing net cash (post-IFRS 16) 0.1 2.3
Note: Underlying operating profit is before goodwill impairment, amortisation
of intangible assets arising on business combinations, reorganisation costs
and other non-underlying costs. EBITDA represents Earnings Before Interest,
Taxation, Depreciation and Amortisation.
The Group's headroom relative to available committed banking facilities as at
31 December 2022 was £75.9m (2021: £78.4m) as set out below:
2022 £m 2021
£m
Cash at bank 31.0 29.8
Undrawn receivables finance facility agreement 44.9 48.6
Banking facility headroom 75.9 78.4
Working capital financing
The Group manages its working capital requirements using a Receivables
Financing Agreement ("RFA"), and a number of separate, non-recourse, customer
financing arrangements whereby specific customers' invoices are settled in
advance of their normal settlement date via a funding intermediary.
The principal terms of the RFA are described in note 14. The RFA leverages the
Group's trade receivables with sufficient headroom and flexibility to manage
the variability and size of weekly cash outflows. The balance outstanding at
31 December 2022 was £26.0m (2021: £22.9m).
The balance funded under the customer financing arrangements at 31 December
2022 was £51.7m (2021: £42.3m).
Dividends
The Board is not proposing a final dividend payment for 2022.
Going Concern
For the period to 31 December 2024, the Group's cash flow forecasts indicate
ongoing headroom in the Receivables Finance Agreement and also full compliance
with the financial covenants contained therein. The Group has sufficient day
to day liquidity to ensure that short-term liabilities can be satisfied as and
when they fall due.
The financial statements have been prepared on a going concern basis. The
Directors have reviewed this basis and have made full disclosure in note 3,
concluding that there is a reasonable expectation that the Group and Company
have adequate resources to continue in operational existence for the
foreseeable future.
Daniel Quint
Chief Financial Officer
20 March 2023
Alternative performance measures
(1)Underlying results exclude goodwill impairment, amortisation of intangible
assets arising on business combinations, reorganisation costs and other
non-underlying charges
(2)Presented on a pre-IFRS16, which excludes lease liabilities, and also
excludes refinancing costs
Consolidated statement of comprehensive income
For the year ended 31 December 2022
Note 2022 2021
£m £m
Continuing operations
Revenue 4 940.5 942.7
Cost of sales 5 (857.3) (859.9)
Gross profit 83.2 82.8
Administrative expenses 5 (78.6) (80.5)
Operating profit 4.6 2.3
Underlying operating profit before non-underlying administrative expenses 12.0 10.3
Administrative expenses (non-underlying) 5 (7.4) (8.0)
Operating profit 4.6 2.3
Finance income 6 0.7 -
Finance charges 6 (3.4) (2.4)
Net finance charges (2.7) (2.4)
Profit/(loss) for the year before taxation 1.9 (0.1)
Tax credit 7 1.9 1.7
Profit from continuing activities 3.8 1.6
Loss from discontinued operations - (0.4)
Profit for the year 3.8 1.2
Items that will not be reclassified to profit and loss - actuarial gains, net 0.4 0.7
of tax
Items that will be reclassified to profit and loss:
- effective portion of gain on hedging instrument measured at fair value 1.5 0.2
- cumulative translation loss 0.1 (0.3)
Total comprehensive income 5.8 1.8
Earnings per ordinary share 8
Continuing operations: Basic and diluted 2.3p 1.3p
Discontinued operations: Basic and diluted - (0.3)p
Total earnings per share: Basic and diluted 2.3p 1.0p
The accompanying notes form an integral part of these financial statements.
Consolidated statement of changes in equity
For the year ended 31 December 2022
Share Own Share Share- Cash flow hedge reserve Profit Total
capital shares premium based £m and loss equity
£m £m £m payment account £m
reserve £m
£m
At 31 December 2020 (reported) 6.9 (4.8) 75.1 0.6 - (57.9) 19.9
Prior year adjustment (note 3) - - - - - (2.3) (2.3)
At 31 December 2020 (restated) 6.9 (4.8) 75.1 0.6 - (60.2) 17.6
Cancellation of JSOP shares - - - (0.4) - 0.4 -
Save As You Earn ("SAYE") share scheme - equity-settled - - - 0.1 - - 0.1
Proceeds from share issue 9.7 - 36.7 - - - 46.4
Transactions with owners 9.7 - 36.7 (0.3) - 0.4 46.5
Profit for the year - - - - - 1.2 1.2
Cash flow hedge reserve - - - - 0.2 - 0.2
Actuarial gain on pension scheme, net of taxation - - - - - 0.7 0.7
Cumulative translation adjustments - - - - - (0.3) (0.3)
Total comprehensive income for the year, net of tax - - - - 0.2 1.6 1.8
At 31 December 2021 16.6 (4.8) 111.8 0.3 0.2 (58.2) 65.9
Save As You Earn ("SAYE") share scheme - equity-settled - - - 0.3 - - 0.3
Issue of shares to management - 0.7 - - - (0.6) 0.1
Own shares purchased - (0.4) - - - - (0.4)
Transactions with owners - 0.3 - 0.3 - (0.6) -
Profit for the year - - - - - 3.8 3.8
Cash flow hedge reserve - - - - 1.5 - 1.5
Actuarial gain on pension scheme, net of taxation - - - - - 0.4 0.4
Cumulative translation adjustments - - - - - 0.1 0.1
Total comprehensive income for the year, net of tax - - - - 1.5 4.3 5.8
At 31 December 2022 16.6 (4.5) 111.8 0.6 1.7 (54.5) 71.7
The accompanying notes form an integral part of these financial statements.
Consolidated and Company statements of financial position
As at 31 December 2022
Consolidated Company
Note 2022 2021 1 January 2021 2022 2021
£m Restated Restated £m £m
£m £m
Assets
Non-current
Goodwill 9 59.6 59.6 59.6 - -
Other intangible assets 9.4 16.5 24.3 - -
Investments - - - 59.6 67.8
Property, plant and equipment 10 7.6 8.0 9.6 - -
Deferred tax asset 5.0 4.9 4.7 0.4 0.8
Retirement benefit net asset 0.2 - - - -
81.8 89.0 98.2 60.0 68.6
Current
Trade and other receivables 119.8 113.6 102.2 3.2 3.0
Current tax asset 0.3 0.6 1.7 - -
Derivative financial instruments 12 3.0 0.5 - 3.0 0.5
Cash and cash equivalents 13 31.0 29.8 24.5 0.1 -
Restricted cash - - 0.9 - -
154.1 144.5 129.3 6.3 3.5
Debtors: amounts falling due after more than one year - - - 32.2 30.8
Total assets 235.9 233.5 227.5 98.5 102.9
Liabilities
Current
Trade and other payables 130.3 134.3 155.6 1.0 3.4
Borrowings 14 26.0 22.9 13.0 - -
Provisions 0.9 1.4 3.8 - -
Lease liabilities 11 1.5 1.3 1.6 - -
158.7 159.9 174.0 1.0 3.4
Non-current
Borrowings 14 - - 20.0 - -
Other liabilities - 0.3 7.3 - -
Provisions 0.6 1.4 1.2 - -
Lease liabilities 11 3.4 3.3 3.9 - -
Deferred tax liabilities 1.5 2.7 3.5 0.6 -
5.5 7.7 35.9 0.6 -
Total liabilities 164.2 167.6 209.9 1.6 3.4
Equity
Share capital 15 16.6 16.6 6.9 16.6 16.6
Own shares (4.5) (4.8) (4.8) (4.5) (4.8)
Share premium 111.8 111.8 75.1 111.8 111.8
Share-based payment reserve 0.6 0.3 0.6 - -
Cash flow hedge reserve 1.7 0.2 - - 0.2
Profit and loss account (54.5) (58.2) (60.2) (27.0) (24.3)
Total equity 71.7 65.9 17.6 96.9 99.5
Total equity and liabilities 235.9 233.5 227.5 98.5 102.9
The accompanying notes form an integral part of these financial statements.
Consolidated statement of cash flows
For the year ended 31 December 2022
Note 2022 2021
£m £m
Cash flows from operating activities 16 5.5 (28.7)
Taxation received 0.4 5.8
Net cash inflow/(outflow) from operating activities 5.9 (22.9)
Cash flows from investing activities - trading
Purchases of property, plant and equipment 10 (1.0) (2.4)
Sale of property, plant and equipment - -
Purchase of intangible assets - software (2.3) (2.1)
Total cash flows arising from investing activities (3.3) (4.5)
Total cash flows arising from operating and investing activities 2.6 (27.4)
Cash flows from financing activities
Net movements on Receivables Finance Agreement 14 3.1 9.9
Loan repayments 14 - (20.0)
Principal repayment of lease liabilities 11 (1.6) (1.7)
Net interest paid (2.5) (1.9)
Payment from restricted fund - 0.9
Settlement of NMW liabilities from restricted fund - (0.9)
Own shares purchased (0.4) -
Gross proceeds from the issue of share capital 15 - 48.4
Costs relating to the issue of share capital 15 - (2.0)
Net cash flows from financing activities (1.4) 32.7
Net change in cash and cash equivalents 1.2 5.3
Cash and cash equivalents at beginning of year 29.8 24.5
Cash and cash equivalents at end of year 14 31.0 29.8
The accompanying notes form an integral part of these financial statements.
Notes to the financial information
For the year ended 31 December 2022
1 Nature of operations
The principal activities of Staffline Group plc and its subsidiaries ("the
Group") include the provision of recruitment and outsourced human resource
services to industry and the provision of skills and employment training and
support.
2 General information and statement of compliance
Staffline Group plc, a Public Limited Company limited by shares listed on AIM
("the Company"), is incorporated and domiciled in England, United Kingdom. The
Company acts as the holding company of the Group. The Company's registration
number is 05268636.
The financial information set out in this document does not constitute the
Group's statutory accounts for the years ended 31 December 2022 or 2021 but is
derived from those accounts. Statutory accounts for 2021 have been delivered
to the registrar of companies. The auditors have reported on those accounts;
their reports were (i) unqualified, and (ii) did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006. Statutory accounts for 2022
will be delivered to the registrar of companies in due course. The auditors
have reported on those accounts; their reports were (i) unqualified, and (ii)
did not contain a statement under section 498 (2) or (3) of the Companies Act
2006.
The financial statements for the year ended 31 December 2022 (including the
comparatives for the year ended 31 December 2021) were approved and authorised
for issue by the Board of Directors on 20 March 2023. This results
announcement for the year ended 31 December 2022 was also approved by the
Board on 20 March 2023.
3 Accounting policies
Basis of preparation
The Consolidated financial statements are prepared for the year ended 31
December 2022. The Consolidated financial statements of the Group have been
prepared on a going concern basis using the significant accounting policies
and measurement bases summarised below, and in accordance UK adopted
International Accounting Standards. The financial statements are prepared
under the historical cost convention except for equity-settled share options,
derivative financial instruments and the retirement benefit net asset, which
are measured at fair value.
There are no new accounting pronouncements which have become effective in the
year.
Going concern
The Group's business activities, together with the factors likely to affect
its future development, performance and position are set out in the Chief
Executive Officer's Review. The financial position of the Group, its cash
flows, liquidity position and borrowing facilities are described in the
Financial Review.
As described in the Chief Executive Officer's Review, despite the challenging
trading conditions experienced across all divisions in the Group during 2022,
the Group reported an underlying operating profit for the year on continuing
activities. In the recruitment divisions, the recovery from Covid-19 pandemic
in early 2022 was mixed following the gradual return to work for most sectors,
which was accompanied by unexpected high levels of labour shortages,
especially in logistics-based sectors. The Group's PeoplePlus division
continued to be impacted by the disruption to its skills training as a result
of the tight labour market with workers being able to go straight into jobs
without pre-job training.
The Directors maintained tight cost control throughout with overheads at
reduced levels, additionally benefiting from previous restructuring
programmes. These initiatives resulted in improved performance in the second
half of the year generating increased underlying profit and positive cash
generation.
The Directors have prepared updated forecasts and cash flow projections to 31
December 2024, which is considered to be a reasonable period over which a
reasonable view can be formed. These forecasts have been used to assess going
concern and have been stress-tested by applying basic sensitivity analysis,
involving a reduction to revenues across all three divisions, over the
forecast period.
In forming their opinion, the Directors have performed a robust assessment of
the principal risks and uncertainties facing the Group. Consequently, the
Directors believe that the Group is well placed to manage its business risks
successfully.
At 31 December 2022, the Group had net cash of £5.0m (2021: net cash of
£6.9m), on a pre-IFRS 16 basis, and has committed debt facilities until 1
December 2025. For the period to 31 December 2024, the Group's cash flow
forecasts indicate ongoing headroom in the Receivables Finance Agreement and
also full compliance with the financial covenants contained therein. The Group
has sufficient day to day liquidity to ensure that short-term liabilities can
be satisfied as and when they fall due. Further details of the financial
position of the Group, its cash flows, liquidity position and borrowing
facilities are described in the Financial Review.
As a result, the Directors have formed a judgement, at the time of approving
the financial statements, that there is a reasonable expectation that the
Group has adequate resources to continue in operational existence and meet its
liabilities as they fall due over the assessment period. The Directors have
not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the Group's
ability to continue as a going concern for a period of at least 18 months from
when the financial statements are authorised for issue. For this reason, the
Directors continue to adopt the going concern basis in preparing the financial
statements.
Prior year restatement
Prior year restatements
During the year it was determined that PeoplePlus had overstated revenues
totalling £2.6m in relation to the period prior to 31 December 2021, as
PeoplePlus had not met some of its revenue related performance obligations.
As with any prior year adjustment, management have applied their judgement
based on relevant information now available which management should have had
access to at the time. The £2.6m error is based on management's best estimate
of the amount of the revenue reversal but this remains subject to final
agreement between the respective parties.
Due to the legacy nature of these revenues, management have accounted for the
adjustment of these errors through reserves.
The required adjustment is set out in the table below; trade receivables, as
included in current assets, is overstated by £2.6m and deferred tax assets,
as included in non-current assets, is understated by £0.3m.
Restatement of Consolidated statement of financial position
As at 1 January 2021 and at 31 December 2021
2020 Revenue overstated 2020 2021 Revenue overstated 2021
Reported £m Restated Reported £m Restated
£m £m £m £m
Assets
Non-current 97.9 0.3 98.2 88.7 0.3 89.0
Current 131.9 (2.6) 129.3 147.1 (2.6) 144.5
Total assets 229.8 (2.3) 227.5 235.8 (2.3) 233.5
Liabilities
Current 174.0 - 174.0 159.9 - 159.9
Non-current 35.9 - 35.9 7.7 - 7.7
Total liabilities 209.9 - 209.9 167.6 - 167.6
Equity
Total equity 19.9 (2.3) 17.6 68.2 (2.3) 65.9
Total equity and liabilities 229.8 (2.3) 227.5 235.8 (2.3) 233.5
Consolidation of subsidiaries
The Group financial statements consolidate those of the parent Company and all
of its subsidiaries as at 31 December 2022 in accordance with IFRS 10.
Subsidiaries are all entities to which the Group is exposed to or has rights
to variable returns and the ability to affect those returns through control
over the subsidiary. The results of subsidiaries whose accounts are prepared
in a currency other than sterling; are translated at the average rates of
exchange during the period and their year-end balances at the year-end rate of
exchange. Translation adjustments are taken to the profit and loss reserves.
Material intra-group balances and transactions, and any unrealised gains or
losses arising from intra-group transactions, are eliminated in preparing
these financial statements.
Underlying profit - non-GAAP measures of performance
In the reporting of its financial performance, the Group uses certain measures
that are not defined under IFRS, the Generally Accepted Accounting Principles
("GAAP") under which the Group reports. The Directors believe that these
non-GAAP measures assist with the understanding of the performance of the
business. These non-GAAP measures are not a substitute, or superior to, any
IFRS measures of performance but they have been included as the Directors
consider them to be an important means of comparing performance year-on-year
and they include key measures used within the business for assessing
performance.
Gross sales value
Gross sales value represents the fair value of the consideration received or
receivable for the supply of services, including agency sales, (excluding
fees), which are subject to an IFRS 15 agency adjustment, net of value added
tax, rebates and discounts and after eliminating sales within the Group.
Non-underlying items of income and expenditure
These non-underlying charges are regarded as recurring or non-recurring items
of income or expenditure of a particular size and/or nature relating to the
operations of the business that in the Directors' opinion require separate
identification. These items are included in "total" reported results but are
excluded from "underlying" results. These items can vary significantly from
year to year and therefore create volatility in reported earnings which does
not reflect the Group's underlying performance.
Underlying EBITDA
Underlying operating profit before the deduction of underlying depreciation
and amortisation charges. This is considered a useful measure because it
approximates the underlying cash flow by eliminating depreciation and
amortisation charges.
Net debt
Net debt is the amount of bank debt less available cash balances excluding
escrow funds. This is a key measure as it is one on which the terms of the
banking facilities are based and shows the level of external debt utilised by
the Group to fund operations. Net debt is also presented on a pre-IFRS 16
basis which excludes lease liabilities.
The Directors acknowledge that the adjustments made to arrive at underlying
profit may not be comparable to those made by other companies and it should
be noted that whilst the amortisation of acquisition-related intangible assets
has been added back, the revenue from those acquisitions has not been
eliminated.
These alternative performance measures are utilised by the Board to monitor
performance and financial position. They show a comparable level of
performance excluding one-off items, with which underlying performance and
ability to service debt can be judged.
Business combinations
The Group applies the acquisition method in accounting for business
combinations. The consideration transferred by the Group to obtain control of
a subsidiary is calculated as the sum of the acquisition-date fair value of
assets transferred, liabilities incurred and the equity interests of the
Group, which includes the fair value of any asset or liability arising from a
contingent consideration arrangement. Acquisition costs are expensed as
incurred.
Goodwill is stated after separate recognition of identifiable intangible
assets. It is calculated as the sum of a) fair value of consideration
transferred, b) the recognised amount of any non-controlling interest in the
acquiree and c) acquisition-date fair value of any existing equity interest in
the acquiree, over the acquisition-date fair values of identifiable net
assets. If the fair values of identifiable net assets exceed the sum
calculated above, the excess amount (i.e. gain on a bargain purchase) is
recognised in the statement of comprehensive income immediately.
Segment reporting
The Group has three material operating segments: the provision of recruitment
and outsourced human resource services to industry, in Great Britain
(Recruitment GB) an also in Ireland (Recruitment Ireland), plus the provision
of skills training and probationary services, together "PeoplePlus". Each of
these operating segments is managed separately as each requires different
technologies, marketing approaches and other resources. For management
purposes, the Group uses the same measurement policies as those used in its
financial statements.
4 Segment reporting
Management currently identifies three operating segments: Recruitment GB, the
provision of workforce recruitment and management to industry, Recruitment
Ireland, the provision of generalist recruitment services and PeoplePlus, the
provision of skills and employment training and support. The Group's reporting
segments are determined based on the Group's internal reporting to the Chief
Operating Decision Maker (CODM). The CODM has been determined to be the Group
Chief Executive, with support from the Board.
Whilst there are individual legal entities within the three operating
segments, they are operated and reviewed as single units by the Board of
Directors. Each legal entity within an operating segment has the same
management team, head office and have similar economic characteristics. The
Group's strategy, historically and going forward, has been to integrate new
acquisitions into the main trading entities within each operating segment.
Segment information for the reporting year is as follows:
Recruitment Recruitment Ireland PeoplePlus Group Total Recruitment Recruitment PeoplePlus Group Total
GB 2022 2022 Costs Group GB Ireland 2021 Costs Group
2022 £m £m 2022 2022 2021 2021 £m 2021 2021
£m £m £m £m £m £m £m
Sales revenue from external customers 752.0 110.6 77.9 - 940.5 747.9 111.7 83.1 942.7
-
Cost of sales (700.0) (97.7) (59.6) - (857.3) (697.2) (100.4) (62.3) - (859.9)
Segment gross profit 52.0 12.9 18.3 - 83.2 50.7 11.3 20.8 - 82.8
Administrative expenses (40.5) (9.3) (12.5) (3.3) (65.6) (40.4) (8.4) (14.0) (3.4) (66.2)
Depreciation, software & lease amortisation (3.2) (0.4) (2.0) - (5.6) (3.2) (0.4) (2.7) - (6.3)
Segment underlying operating profit* 8.3 3.2 3.8 (3.3) 12.0 7.1 2.5 4.1 (3.4) 10.3
Amortisation of intangibles arising on business combinations (5.9) (1.3) (0.2) - (7.4) (6.4) (1.4) (0.2) - (8.0)
Segment profit from operations 2.4 1.9 3.6 (3.3) 4.6 0.7 1.1 3.9 (3.4) 2.3
Finance (costs)/income (3.1) (0.1) - 0.5 (2.7) (2.0) (0.3) - (0.1) (2.4)
Segment profit/(loss) before taxation (0.7) 1.8 3.6 (2.8) 1.9 (1.3) 0.8 3.9 (3.5) (0.1)
Tax credit 1.8 - (0.2) 0.3 1.9 0.3 (0.1) - 1.5 1.7
Segment profit/(loss) from continuing operations 1.1 1.8 3.4 (2.5) 3.8 (1.0) 0.7 3.9 (2.0) 1.6
* Segment underlying operating profit before goodwill impairment,
amortisation of intangible assets arising on business combinations,
reorganisation costs and other non-underlying costs.
Recruitment Recruitment Ireland PeoplePlus Staffline Group Total Recruitment Recruitment PeoplePlus Staffline Group Total Group
GB 2022 2022 2022 Group GB Ireland 2021 2021 Restated
2022 £m £m £m 2022 2021 2021 Restated £m 2021
£m £m £m £m £m £m
Total non-current assets 28.4 12.2 36.2 - 76.8 36.0 11.6 36.5 - 84.1
Total current assets 117.6 19.9 13.3 3.3 154.1 106.6 20.1 17.3 0.5 144.5
Total assets (consolidated) 146.0 32.1 49.5 3.3 230.9 142.6 31.7 53.8 0.5 228.6
Total liabilities (consolidated) 135.1 11.0 17.5 0.6 164.2 128.0 13.2 26.3 0.1 167.6
Cash capital expenditure inc software 2.0 0.5 0.8 - 3.3 2.8 - 1.7 - 4.5
The analysis above excludes deferred tax assets as required by IFRS 8
Operating segments.
Revenues can be analysed by country as follows (96.7% of revenues arising
within the UK in 2022, 97.0% in 2021):
Recruitment Recruitment Ireland PeoplePlus Total Recruitment Recruitment PeoplePlus Total Group
GB 2022 2022 Group GB Ireland 2021 2021
2022 £m £m 2022 2021 2021 £m £m
£m £m £m £m
UK 751.8 80.0 77.9 909.7 747.8 83.9 83.1 914.8
Republic of Ireland - 30.6 - 30.6 - 27.8 - 27.8
Portugal 0.2 - - 0.2 0.1 - - 0.1
752.0 110.6 77.9 940.5 747.9 111.7 83.1 942.7
No customer contributed more than 10% of the Group's revenue during either
2021 or 2020.
5 Expenses by nature
Expenses by nature are as follows:
Underlying expenses
2022 2021
£m £m
Employee benefits expenses - cost of sales 836.2 834.1
Other cost of sales 21.1 25.7
Employee benefits expenses - administrative expenses 47.3 46.1
Depreciation and software amortisation 5.6 6.3
Operating lease expenses 1.2 1.5
Other administrative expenses 17.1 18.7
928.5 932.4
Disclosed as:
Cost of sales 857.3 859.9
Administrative expenses - excluding non-underlying expenses 71.2 72.5
928.5 932.4
Auditors' remuneration
2022 2021
£'000 £'000
Fees payable to the Company's auditor for the audit of the Company's annual 17 15
accounts
Fees payable to the Company's auditor and its associates for other services:
- Audit of the accounts of subsidiaries 682 620
- Audit of the pension scheme 18 16
- Audit-related assurance services 15 15
- Audit fee expenses 13 20
Total 745 686
Non-underlying expenses - continuing operations
2022 2021
£m £m
Amortisation of intangible assets arising on business combinations (licences, 7.4 8.0
customer contracts)
Tax credit on above non-underlying expenses (1.8) (0.9)
Post taxation effect on above non-underlying expenses 5.6 7.1
The charge for amortisation of intangible assets arising on business
combinations relates principally to the acquisitions of the Endeavour Group,
Passionate About People, Grafton Recruitment, Milestone and Brightwork.
6 Finance income and charges
Finance income
2022 2021
£m £m
Receipts from derivative 0.3 -
Derivative ineffectiveness 0.4 -
Total 0.7 -
Finance charges
2022 2021
£m £m
Interest payable on bank and other funding 2.9 1.8
Interest on lease liabilities 0.1 0.1
Amortisation of refinancing costs 0.3 0.5
Amortisation of derivative cost 0.1 -
Total 3.4 2.4
Net finance charges 2.7 2.4
7 Tax expense
The tax credit on the loss for the year consists of:
Continuing activities 2022 2021
£m £m
Corporation tax
UK corporation tax at 19.00% (2021: 19.00%) 0.1 -
Adjustments in respect of prior years - (0.5)
UK current tax charge/(credit) 0.1 (0.5)
Deferred tax
Timing differences arising in the year (0.6) (0.6)
Adjustments in respect of prior years (1.4) (0.6)
UK deferred tax credit (2.0) (1.2)
Total UK tax credit for the year (1.9) (1.7)
The tax credit for the year, as recognised in the statement of comprehensive
income, is lower than the standard rate of corporation tax in the UK of 19.00%
(2021: lower than the 19.00% standard rate). The differences are explained
below:
2022 2021
£m £m
Total Total
Profit/(loss) for the year before taxation 1.9 (0.1)
Tax rate 19% 19%
Tax on profit/(loss) for the year at the standard rate 0.4 -
Effect of:
Remeasurement of deferred tax for changes in tax rates (0.4) (0.7)
Expenses not allowable - -
Income not taxable - (0.1)
Adjustments in respect of prior years (1.0) (1.1)
Tax losses available (0.7) (0.8)
Deferred tax not recognised 0.2 1.0
Actual tax credit (1.9) (1.7)
On underlying profit (0.1) (0.8)
On non-underlying loss (1.8) (0.9)
Actual tax credit (1.9) (1.7)
The total tax credit for the year of £1.9m (2021: £1.7m) arises principally
from the movement of deferred tax balances. The Group has an estimated current
corporation tax liability of £0.1m (2021: £nil) for the current year and is
anticipating a refund relating to Research & Development tax relief
claims. Corporation tax losses of £17.8m carried forward in all divisions and
the Company have been recognised as a deferred tax asset. This includes tax
losses, amounting to £4.3m (2021: £6.6m) whose short-term recoverability was
previously less certain, which have now been recognised as a deferred tax
asset.
A deferred tax liability is recognised in respect of intangible assets arising
on acquired businesses. This liability is reduced each year in line with the
amortisation charge, giving rise to a deferred tax credit each year.
The deferred tax assets and liabilities at 31 December 2022 and at 31 December
2021 have been calculated based on 25%, reflecting the expected timing of
reversal of the related timing differences.
No material tax charges arise on overseas profits or losses and accordingly no
disclosures relating to overseas tax are included within the financial
statements.
8 Earnings per share and dividends
The calculation of basic earnings per share is based on the earnings
attributable to ordinary shareholders divided by the weighted average number
of shares in issue during the year, after deducting the "own shares" held in
the Group's Employee Benefit Trust of 2,014,511 shares (2021: 1,140,400
shares). The calculation of the diluted earnings per share is based on the
basic earnings per share as adjusted to further take into account the
potential issue of Ordinary Shares resulting from share options granted to
certain Directors and senior staff under long-term incentive schemes and share
options granted to employees under the SAYE scheme.
Details of the earnings and weighted average number of shares used in the
calculations are set out below:
Basic Basic Diluted Diluted
2022 2021 2022 2021
Profit from continuing operations (£m) 3.8 1.6 3.8 1.6
Weighted average number of shares 163,753,217 122,178,126 165,163,334 122,682,511
Earnings per share from continuing operations (p) 2.3p 1.3p 2.3p 1.3p
Underlying earnings (post tax) from continuing operations (£m) 9.4 8.7 9.4 8.7
Underlying earnings per share (p)* 5.7p 7.1p 5.7p 7.1p
Loss from discontinued operations (£m) - (0.4) - (0.4)
Weighted average number of shares - 122,178,126 - 122,682,511
Loss per share from discontinued operations (p) - (0.3)p - (0.3)p
Underlying loss from discontinued operations (£m) - - - -
Underlying loss per share from discontinued operations (p)* - - - -
Profit/(loss) for the year (£m) 3.8 1.2 3.8 1.2
Weighted average number of shares 163,753,217 122,178,126 165,163,334 122,682,511
Total earnings/(loss)per share (p) 2.3p 1.0p 2.3p 1.0p
* Underlying earnings before goodwill impairment, amortisation of
intangible assets arising on business combinations, reorganisation costs and
other non-underlying costs.
For the year ended 31 December 2021, the weighted average number of shares was
increased by 54,388,040 shares to take account of the effect of the Placing,
Subscription and Open Offer in June 2021 whereby 96,837,242 new Ordinary
Shares were issued.
The total number of dilutive share options held in LTIP and SAYE schemes is
1,410,117 (2021: 504,384).
Dividends
The Board is not proposing a final dividend payment for 2022 (2021: £nil).
9 Goodwill
Gross carrying amount by operating segment
Gross carrying amount Recruitment GB Recruitment Ireland PeoplePlus Total
£m £m £m £m
At 1 January 2022 and 31 December 2022 54.5 5.7 57.0 117.2
Impairment adjustment
At 1 January 2022 and 31 December 2022 33.1 - 24.5 57.6
Net book amount at 31 December 2022 21.4 5.7 32.5 59.6
Net book amount at 31 December 2021 21.4 5.7 32.5 59.6
Impairment - Goodwill
Management considers there to be three cash-generating units ("CGUs"), being
Recruitment GB, Recruitment Ireland and PeoplePlus, in line with the operating
segments defined in note 4. These three cash-generating units have been tested
for impairment.
An impairment review was conducted as at 31 December 2022. The recoverable
amount of goodwill was determined based on a value-in-use calculation, using
forecasts for 2023-25, followed by an extrapolation of expected cash flows
over the next two years with a long-term growth rate of 2% for each
cash-generating unit. The forecasts are prepared by the individual operating
segments of the Group, which are considered to be the same as the determined
CGU's. The cash flow forecasts are based on current levels of trading for each
CGU, with income and cost increases generally in line with inflation at 2% and
no significant contract wins or losses.
Pre-tax discount rates of 17.3% for Recruitment GB, 16.5% for Recruitment
Ireland and 14.2% for PeoplePlus (2021: 14.4% for Recruitment GB, 12.0% for
Recruitment Ireland and 11.7% for PeoplePlus) were used based on the weighted
average costs of capital for each operating segment. The recoverable amounts
of the CGUs, having considered the higher of value-in-use and fair value less
costs to sell, were £58.8m for Recruitment GB, £24.1m for Recruitment
Ireland and £42.2m for PeoplePlus, all being value-in-use. The discount rates
used are based on appropriate, current long-term market rate indicators to
give a long-term forward view, whilst also acknowledging historical
information.
The results of the impairment review showed headroom in all cash-generating
units and accordingly no impairment was noted. The same calculations indicated
that an impairment adjustment of £8.2m is required to the Company's carrying
value of its investment in PeoplePlus, but that no other impairment
adjustments were indicated.
In making the assessment of the recoverability of assets within each CGU a
number of judgements and assumptions were required.
The critical judgement relates to the determination of the CGUs. Whilst there
are individual legal entities within the three operating segments, they are
operated and reviewed as single units by the Board of Directors. Each
operating segment has its own management team and head office. The Group's
strategy, historically and going forward, has been to integrate new
acquisitions into the main trading entities within each operating segment.
The key estimates in determining the value of each CGU are:
1. The discount rate. In the calculations we have utilised a pre-tax
discount rate of 17.3% for Recruitment GB, 16.5% for Recruitment Ireland and
14.2% for PeoplePlus and a terminal growth value of 2%. These rates are based
on the latest weighted average costs of capital for each operating segment.
These rates have increased this year primarily due to a movement in the
risk-free rate. The calculations highlighted headroom of £29.5m for
Recruitment GB, headroom of £13.0m for Recruitment Ireland and headroom of
£6.3m for PeoplePlus. A 1% increase in the discount rates reduces the
headroom to £25.8m for Recruitment GB, reduces headroom to £11.3m for
Recruitment Ireland and reduces headroom to £3.0m for PeoplePlus.
2. The achievability of the forecasted future cash flows. There is an
inherent uncertainty regarding the achievability of forecasts, as there are
macro-economic factors outside of the Group's control. A sustained
underperformance of 10% reduces the headroom to £23.7m for Recruitment GB,
reduces headroom to £10.6m for Recruitment Ireland and reduces headroom to
£2.1m for PeoplePlus. A sustained underperformance of 17% would be required
before any impairment was necessary to the goodwill.
As at 31 December 2022, the Company had no goodwill (2021: £nil).
10 Property, plant and equipment
Gross carrying amount Land and Computer equipment Fixtures and fittings Motor Total
buildings £m £m vehicles £m
£m £m
At 1 January 2021 14.7 11.3 1.3 0.2 27.5
Additions 1.4 1.8 0.3 0.3 3.8
Disposals (1.4) (0.8) (0.4) - (2.6)
At 31 December 2021 14.7 12.3 1.2 0.5 28.7
Additions 2.3 0.6 0.3 - 3.2
Disposals (1.7) (1.5) (0.1) (0.1) (3.4)
Transfer 0.4 (0.4) - - -
At 31 December 2022 15.7 11.0 1.4 0.4 28.5
Depreciation
At 1 January 2021 7.9 8.6 1.2 0.2 17.9
Charged in the year - operating 1.7 1.8 0.2 0.1 3.8
Charged in the year - impairment 0.7 - - - 0.7
Disposals (0.7) (0.7) (0.3) - (1.7)
At 31 December 2021 9.6 9.7 1.1 0.3 20.7
Charged in the year - operating 1.7 1.5 0.2 0.2 3.6
Charged in the year - impairment (0.6) - - - (0.6)
Disposals (1.3) (1.4) - (0.1) (2.8)
Transfer 0.2 (0.2) - - -
At 31 December 2022 9.6 9.6 1.3 0.4 20.9
Net book value
At 31 December 2022 6.1 1.4 0.1 - 7.6
At 31 December 2021 5.1 2.6 0.1 0.2 8.0
Land and buildings and computer equipment includes the following right-of-use
assets:
At 31 December 2022
Carrying amount Depreciation expense Impairment
Office buildings 4.7 (1.5) 0.6
Computer equipment - - -
4.7 (1.5) 0.6
At 31 December 2021
Carrying amount Depreciation expense Impairment
Office buildings 3.6 (1.6) (0.7)
Computer equipment 0.2 - -
3.8 (1.6) (0.7)
As at 31 December 2022, the Company had no property, plant and equipment
assets (2021: £nil).
11 Leases
Lease liabilities are presented in the statement of financial position as
follows:
2022 2021
£m £m
Current 1.5 1.3
Non-current 3.4 3.3
4.9 4.6
The Group has leases for its operational and administrative offices. With the
exception of short-term leases and leases of low-value underlying assets, each
lease is reflected on the balance sheet as a right-of-use asset and a lease
liability. The Group classifies its right-of-use assets in a consistent manner
to its property, plant and equipment (see note 10).
Unless there is a contractual right for the Group to sublet the asset to
another party, the right-of-use asset can typically only be used by the Group.
Leases are either non-cancellable or may only be cancelled by incurring a
substantive termination fee. Some leases contain an option to extend the lease
for a further term. The Group is prohibited from selling or pledging the
underlying leased assets as security. For leases over office buildings the
Group must keep those properties in a good state of repair and return the
properties in their original condition at the end of the lease. Further, the
Group must insure items of property, plant and equipment and incur maintenance
costs on such items in accordance with the lease contracts.
The table below describes the nature of the Group's leasing activities by type
of right-of-use asset recognised on the balance sheet:
Right-of-use asset No of right-of-use assets leased Range of remaining term (years) Average remaining lease term No of leases with extension options
Office building 51 0.1-12.2 2.8 -
The lease liabilities are secured by the related underlying assets. Future
minimum lease payments at 31 December 2022 were as follows:
Minimum lease payments due
Within one year 1-2 years 2-3 years 3-4 years After 5 years Total
31 December 2022
Lease payments 1.6 1.2 0.8 0.6 1.0 5.2
Finance charges (0.1) (0.1) (0.1) - - (0.3)
Net present value 1.5 1.1 0.7 0.6 1.0 4.9
31 December 2021
Lease payments 1.4 1.2 0.8 0.5 0.9 4.8
Finance charges (0.1) (0.1) - - - (0.2)
Net present value 1.3 1.1 0.8 0.5 0.9 4.6
Lease payments not recognised as a liability
The Group has elected not to recognise a lease liability for short-term leases
(leases with an expected term of 12 months or less) or for leases of low-value
assets. Payments made under such leases are expensed on a straight-line basis.
In addition, certain variable lease payments are not permitted to be
recognised as lease liabilities and are expensed as incurred.
The expense relating to payments not included in the measurement of the lease
liability is as follows:
2022 2021
£m £m
Short-term leases 0.5 0.8
Leases of low-value assets 0.6 0.7
1.1 1.5
The Group had not committed to any leases that had not yet commenced.
Total cash outflow for leases for the year ended 31 December 2022 was £2.8m
(2021: £3.2m).
12 Derivative financial instruments
2022 2022 2021 2021
Group Company Group Company
£m £m £m £m
Cash flow hedge - interest rate cap 3.0 3.0 0.5 0.5
During 2021 the Group entered into an amortising interest rate cap instrument,
which reduces exposure to interest rate increases above 1% of SONIA on an
aggregated two-thirds of the Receivables Finance Agreement and the customer
finance arrangements. The instrument, which has a term of three years from 13
October 2021, is based on quarterly notional amounts varying between £39.5m
and £62.5m, with an average of £51.9m.
The Group has designated the interest rate cap contract as a hedged instrument
in a cash flow hedge relationship. All derivative financial instruments used
for hedge accounting are recognised initially at fair value and reported
subsequently at fair value in the statement of financial position. To the
extent that the hedge is effective, changes in the fair value of derivatives
designated as hedging instruments in cash flow hedges are recognised in other
comprehensive income and included within the cash flow hedge reserve in
equity. Any ineffectiveness in the hedge relationship is recognised
immediately in profit or loss.
The fair value of the derivative is based on market data to calculate the
present value of all estimated flows associated with it at the balance sheet
date. The interest rate cap is classed as a level 2 financial instrument in
accordance with IFRS 13 classification hierarchy. Level 2 financial
instruments are not traded in an active market, but the fair value is based on
quoted market prices, broker/dealer quotations, or alternative pricing sources
with reasonable levels of price transparency.
The movements on the fair value of the derivative financial asset and on the
cash flow hedge reserve are as follows:
Cash flow hedge reserve Derivative financial asset
£m £m
Initial cost - 0.4
Movement through comprehensive income - (0.1)
Movement through cash flow hedge reserve 0.2 0.2
At 31 December 2021 0.2 0.5
Movement through comprehensive income - hedge ineffectiveness - 0.4
Movement through cash flow hedge reserve 2.1 2.1
Deferred taxation (0.6) -
At 31 December 2022 1.7 3.0
13 Cash
2022 2022 2021 2021
Group Company Group Company
£m £m £m £m
Cash and cash equivalents 31.0 0.1 29.8 -
Cash and cash equivalents consist of cash on hand and balances with banks
only. The majority of cash on hand and balances with banks are held by
subsidiary undertakings; however, the balances are available for use by the
Group.
Long-term credit ratings for the Group's banks are currently as follows:
Fitch Standard Moody's
& Poor's
Royal Bank of Scotland plc A+ A A1*/A1
National Westminster Bank plc A+ A A1*/A1
The Group's headroom versus available committed bank facilities is as follows:
2022 2021
£m £m
Cash at bank (as above) 31.0 29.8
Undrawn receivable finance facility agreement 44.9 48.6
Banking facility headroom 75.9 78.4
14 Borrowings
Borrowings are repayable as follows:
2022 2022 2021 2021
Group Company Group Company
£m £m £m £m
In one year or less or on demand* 27.5 - 24.2 -
In more than one year but not more than two years* 1.1 - 1.1 -
In more than two years but not more than five years* 1.3 - 1.3 -
In more than five years 1.0 - 0.9 -
Total borrowings 30.9 - 27.5 -
* Ageing of balances above is shown excluding unamortised refinancing
costs.
2022 2022 2021 2021
Group Company Group Company
£m £m £m £m
Split:
Current liabilities:
Receivables finance agreement 26.0 - 22.9 -
Lease liabilities 1.5 - 1.3 -
27.5 - 24.2 -
Non-current liabilities:
Lease liabilities 3.4 - 3.3 -
Total borrowings 30.9 - 27.5 -
Less: Cash (note 13) (31.0) (0.1) (29.8) -
Net cash (0.1) (0.1) (2.3) -
On 10 June 2021, the Group entered into a Receivables Financing Agreement
("RFA") to replace the existing Group funding arrangements. The RFA contained
certain requirements to be met before completion, the most significant of
which was that the Company raise new equity capital of at least £40.0m. This
condition was satisfied and the RFA became effective on 10 June 2021.
The key terms of the facility, which is provided jointly by RBS Invoice
Finance Limited, ABN AMRO Asset Based Finance N.V., UK Branch and Leumi ABL
Limited, are set out below:
i) Maximum receivables financing facility of £90.0m over a
four-and-a-half-year term, with a one-year extension option;
ii) An Accordion option of up to an additional £15.0m, subject to
lender approval;
iii) Security on all of the assets and undertakings of the Company and
certain subsidiary undertakings;
iv) Interest accruing at 2.75% over SONIA, with a margin ratchet downward
to 2.0%, dependent upon the Group's leverage reducing to 3.00x;
v) A non-utilisation fee of 35% of the margin;
vi) Maximum net debt (averaged over a rolling three months) to EBITDA
leverage covenant commencing at 5.95x followed by a gradual reduction to 4.0x
by October 2023;
vii) Minimum interest cover covenant of 2.25x the last 12 months EBITDA to
finance charges; and
EBITDA is defined as earnings before interest, taxation, depreciation and
amortisation.
On entering into the RFA, the Group's existing facilities, which comprised a
Revolving Credit Facility of £20.0m, a Receivables Finance Facility of
£68.2m and a non-recourse Receivables Purchase Facility of £25.0m, were
cancelled. The Group retained its Customer Financing arrangements whereby
specific customer invoices are settled in advance of their normal settlement
date. The value of invoices funded under the Customer Financing arrangements
was £51.7m at 31 December 2022 (2021: £42.3m). Costs incurred in relation to
these arrangements are charged to profit and loss as finance charges when
incurred.
For the period to 31 December 2024, the Group's cash flow forecasts indicate
ongoing headroom in the Receivables Finance Agreement and also full compliance
with the financial covenants described above.
15 Share capital
2022 2021
£m £m
Allotted and issued
165,767,728 ordinary 10p shares 16.6 16.6
2022 2021
Number Number
Shares issued and fully paid at the beginning of the year 165,767,728 68,930,486
Shares issued during the year - 96,837,242
Shares issued and fully paid at the end of the year 165,767,728 165,767,728
All Ordinary Shares have the same rights and there are no restrictions on the
distribution of dividends or repayment of capital with the exception of the
2,014,511 shares held at 31 December 2022 (2021: 1,140,400 shares) by the
Employee Benefit Trust where the right to dividends has been waived.
On 21 May 2021 the Group announced a proposed Placing, Subscription and Open
Offer (the "Fundraise") following conditional agreement of a debt refinancing
the previous day. The Fundraise comprised the following elements:
· A total of 87,249,500 new ordinary shares of 10 pence each placed at
a price of 50 pence per share (the "Issue Price") to certain existing
shareholders and new institutional investors;
· A total of 750,500 new ordinary shares of 10 pence each to certain
Directors and employees of the Group at the issue price; and
· An open offer to existing shareholders for 10 shares for every 78
ordinary shares held, for a total of 8,837,242 new ordinary shares of 10 pence
each at the issue price.
The total proceeds of the Fundraise, which was approved by the shareholders in
a General Meeting on 9 June 2021, was £48.4m and the new ordinary shares were
admitted by the London Stock Exchange for trading on AIM on the following day.
16 Cash flows from operating activities - consolidated
Reconciliation of loss before taxation to net cash inflow/(outflow) from
operating activities
2022 2021
£m £m
Profit/(loss) before taxation from:
Continuing operations 1.9 (0.1)
Discontinued operations - (0.4)
1.9 (0.5)
Adjustments for:
Finance income (0.7) -
Finance charges 3.4 2.4
Depreciation and amortisation - underlying 5.6 6.3
Amortisation - non-underlying 7.4 8.0
Loss on disposal of property, plant and equipment 0.1 0.3
Cash generated before changes in working capital and share options 17.7 16.5
Change in trade and other receivables (3.8) (12.2)
Change in trade, other payables and provisions (8.7) (33.1)
Cash generated from/(used by) operations 5.2 (28.8)
Employee cash-settled share options 0.3 0.1
Net cash inflow/(outflow) from operating activities 5.5 (28.7)
Movement in net debt
2022 2021
£m £m
Net cash/(debt) at 1 January 2.3 (14.3)
Loan repayments - 20.0
Net drawdowns from Receivables Finance Agreement (3.1) (9.6)
Lease payments, additions, disposals and interest (0.3) 0.9
Change in cash and cash equivalents 1.2 5.3
Net cash at 31 December 0.1 2.3
Represented by:
Cash and cash equivalents (note 13) 31.0 29.8
Current borrowings (note 14) (26.0) (22.9)
Lease liabilities (note 11) (4.9) (4.6)
Net cash at 31 December 0.1 2.3
The movements in net debt, excluding refinancing costs, can be further
summarised as follows:
Lease Revolving credit facility Receivables Finance Agreement Movements from financing activities Cash Total
Liabilities £m £m £m £m £m
£m
Net debt as at 1 January 2021 (5.5) (20.0) (13.3) (38.8) 24.5 (14.3)
Cash flows during the year 1.7 20.0 (9.6) 12.2 5.3 17.5
Non-cash movements in leases (0.8) - - (0.9) - (0.9)
Net cash/(debt) at 31 December 2021 (4.6) - (22.9) (27.5) 29.8 2.3
Cash flows during the year 1.6 - (3.1) (1.5) 1.2 (0.3)
Non-cash movements in leases (1.9) - - (1.9) - (1.9)
Net cash/(debt) at 31 December 2022 (4.9) - (26.0) (30.9) 31.0 0.1
17 Changes in accounting policies
There were no new accounting pronouncements requiring adoption in the year.
18 Post balance sheet events
There were no events between the balance sheet date of 31 December 2022 and
the approval of these accounts on 20 March 2023, that are required to be
brought to the attention of shareholders.
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