Staffline Group “traded strongly in 2021, delivering multiple upgrades in both profitability and cashflows” says Zeus Capital

Staffline Group plc (LON:STAF) has released a positive FY21 trading update with underlying operating profit expected to double versus the prior year and net cash of £6.9m at the period end (vs. net debt of £8.8m in FY20). We see Staffline as a unique platform that has improving quality of earnings and a transformed balance sheet. The business has strong defensive qualities but with attractive growth opportunities in structural growth markets. We believe the shares are undervalued and see an intrinsic value per share of 99p based on the current profile of the business, which does not include future potential M&A that could enhance this valuation. We see good reasons to suggest strong trading momentum will continue through 2022 and beyond.

  • Unique platform: Staffline Group has a unique business model with both recruitment and outsourcing revenue streams. Through its Recruitment GB and Recruitment Ireland businesses, Staffline has strong market positions. Management intends to increase the permanent mix in this business over time to improve margins and cash generation across the Group. People Plus has evolved into a training and skills business with long term revenue streams delivering attractive organic growth of +13.7% in H1 2020. We believe the Restart contracts recently secured are testament to this, with training being critical to address the clear need to re-skill the labour force and clear shortages across the economy.
  • Forecasts: Our forecasts for FY21 are in line with the provisional figures in today’s trading update. In FY22, we expect 5.0% revenue growth and 14.0% growth in underlying EBIT to £11.4m, which will be a 13.3% conversion from gross profit. Over time, we forecast top line growth and operating margin improvements as Staffline deepens customer relationships, wins more contracts, and achieves a greater mix of higher-margin permanent recruitment income. This growth will likely require some working capital investment, but we forecast a continuation of balance sheet strength and lending facility headroom.
  • Outlook: Staffline Group has traded strongly in 2021, delivering multiple upgrades in both profitability and cashflows despite macroeconomic headwinds. Management expect this positive momentum to continue into FY22, with a strong pipeline of new business and a post-Covid bounce back in some of Staffline’s key sectors (automotive, manufacturing, aerospace and travel). We think this underpins our forecasts for FY22.
  • Valuation: Taking the valuation techniques used in this note (DCF, risk-adjusted blue-sky earnings, SOTP), we arrive at an average value 99p per share, a 78% upside from current levels. We have not taken account of any potential M&A activity and/or capital allocation events (e.g. share buybacks) that could take place following the working capital investment we expect in FY22. This has the potential to generate further long-term shareholder returns in addition to the Group’s organic growth plans.
Click to view all articles for the EPIC: ,
Or click to view the full company profile:
    Share on facebook
    Facebook
    Share on twitter
    Twitter
    Share on linkedin
    LinkedIn
    Staffline Group plc

    More articles like this

    Redde Northgate buy back own shares

    Redde Northgate plc (LON:REDD) have today announced that on the 5th May 2022 it purchased the following number of its own shares to be held in treasury: Class of shares :  Ordinary shares of 50p (“shares”) Number of shares

    Inchcape

    Inchcape continues to see robust consumer demand says Zeus

    Inchcape plc (LON:INCH) Q1 trading update last week showed a strong start to the year, with revenue up 13% organically vs. Q1 2021. We upgrade our FY22 underlying PBT forecast by 2.4% to £300.3m, reflecting Management’s guidance of

    boohoo Plc

    boohoo group total group sales +61% since FY2020

    boohoo group plc (LON:BOO) have today published final results for the year ended 28th February 2022. Investing for the future ·    Significantly increased market share in the UK and US since FY2020. Total group sales +61% since FY2020 ·    Extended target addressable

    Fintel plc

    Fintel Plc appoint Phil Smith as Non-Executive Director

    Fintel plc (LON: FNTL), the leading provider of Fintech and support services to the UK retail financial services sector, has announced the appointment of Phil Smith as Independent Non-Executive Director with immediate effect. Following a robust process led by independent

    STRIX GROUP PLC ORD 1P

    Strix Group confirm final dividend, annual report and notice of AGM

    Strix Group Plc (LON:KETL), the AIM quoted global leader in the design, manufacture and supply of kettle safety controls and other complementary water temperature management components, has announced a reconfirmation of its final dividend, and in addition, has made available

    Inchcape

    Inchcape expanding into the Caribbean with ITC and Simpson Motors

    Inchcape plc, (LON:INCH), the leading global automotive distributor, has announced that it has completed the acquisition of the ITC Group, owner of Interamericana Trading Corporation (ITC) and Simpson Motors from the Simpson Group. The acquisition expands Inchcape’s global

    Pendragon plc

    Pendragon underlying Profit before Tax of £18.7m, up 73.1%

    Pendragon plc (LON:PDG) has announced its interim management statement. This Interim Management Statement covers the period from 1 January 2022 to 31 March 2022.  Unless otherwise stated, figures quoted in this statement are for the three months ended

    SpaceandPeople returns to profit

    SpaceandPeople plc (LON:SAL) secures, sells, and manages flexible space for brand experiences, short term promotions and retailing in high footfall venues for its customers, including in shopping centres and travel hubs. The Group has issued full year results

    Tatton Asset Management Plc

    Tatton Asset Management Directors increase shares in company

    Tatton Asset Management PLC (LON:TAM), the investment management and IFA support services group, has announced that it has been notified that Paul Hogarth and Paul Edwards, each of whom are directors of the Company have purchased, in aggregate, 32,808

    SpaceandPeople back into profit and positive earnings per share

    SpaceandPeople plc (LON:SAL) the retail, promotional and brand experience specialist, has announced its final results for the year ended 31 December 2021.   Financial Highlights ·       Revenue of £4.0 million (2020: £2.8 million and 2019: £7.7 million) ·       Operating profit of £0.2 million

    Oncimmune awarded Queen’s Award for Enterprise in Innovation 2022

    Oncimmune Holdings plc (LON:ONC), the leading global immunodiagnostics group, has announced that it has been awarded the Queen’s Award for Enterprise 2022 in the innovation category, endorsing Oncimmune as a leading developer of applied immunodiagnostics for the early

    No more posts to show