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Staffline shares tumble as it scraps dividend, plans capital raising

By Michele Maatouk

Date: Monday 17 Jun 2019

(Sharecast News) - Recruiter Staffline saw its shares tumble on Monday as it scrapped its dividend and announced plans to raise £37m to reduce debt.
The company said it now expects costs associated with a breach of UK wage rules from 2013 to 2018 to be £15.1m, up from a previous estimate of £7.9m. Additional exceptional costs included in the 2018 results relating to extended audit procedures will be £1.8m, taking total non-recurring exceptional charges for the year to £32.6m.

Staffline's non-compliance was initially identified by a self-review process as part of HMRC's compliance review. The company said it related to a "limited" number of food production facilities and the payment for preparation time, which is generally the time spent donning workwear.

In these cases, it was following its end customers' operational procedures for clocking in and out, it said.

"These procedures have now been rectified so that all work related time is paid in accordance with current legislation. Any additional time paid is charged to the customer in the same way as all other hours supplied.

"However, the additional costs incurred in relation to historical non-compliance are not recoverable from customers."

The company, which will not be recommending a final dividend for 2018, also said that "constructive" discussions with its lenders are ongoing and it has begun talks with investors about a placing to raise about £30m aimed at slashing debt. It is also considering an open offer for an additional £7m.

Staffline reiterated guidance for its underlying performance for the year ended 31 December 2018 to be in line with expectations. It continues to expect to report underlying EBIT for the year to the end of December 2019 of between £23m and £28m. Before proceeds of any equity capital raising, net debt at year-end is anticipated to be in line with current market expectations.

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

Results for the year to the end of December 2019 are due to be released on 27 June.

At 1100 BST, the shares were down 35% at 154.20p.

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