Annual Report 2012
For the year ended 31 December 2012
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Annual Report 2012
For the year ended 31 December 2012
Company details
Company registration number:
05268636
Registered office:
19–20 The Triangle
NG2 Business Park
Nottingham
NG2 1AE
Directors:
Shaun Brittain (Executive Director)
John Crabtree (Non-Executive Chairman)
Bankers:
Bank of Scotland
33 Old Broad Street
London
BX2 1LB
Solicitors:
Browne Jacobson LLP
Mowbray House
Castle Meadow Road
Nottingham
NG2 1BJ
Marshall Evans (Operations Director)
Brabners Chaffe Street LLP
Andy Hogarth (Chief Executive)
Tim Jackson (Finance Director)
Nicholas Keegan (Non-Executive Director)
Diane Martyn (Managing Director)
Secretary:
Tim Jackson
Nominated adviser and broker:
Liberum Capital
Ropemaker Place
25 Ropemaker Street
London
EC2Y 9LY
Registrars:
Computershare Investor Services plc
PO Box 859
The Pavilions
Bridgewater Road
Bristol
BS99 1XZ
55 King Street
Manchester
M2 4LQ
Auditors:
Grant Thornton UK LLP
Statutory Auditor
Chartered Accountants
Colmore Plaza
20 Colmore Circus
Birmingham
B4 6AT
Financial and trade PR:
Buchanan Communications
107 Cheapside
London
EC2V 6DN
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Contents
Chairman’s statement
Chief Executive’s statement
Finance Director’s statement
Report of the Directors
Corporate governance statement
Report on remuneration
Independent auditor’s report to the members of Staffline Group plc
Consolidated statement of comprehensive income
Consolidated statement of changes in equity
Consolidated statement of financial position
Consolidated statement of cash flows
Notes to the financial statements
Company statutory financial statements (prepared under UK GAAP)
Director’s responsibility statement
Independent auditor’s report to the members of Staffline Group plc
Principal accounting policies
Company balance sheet
Notes to the UK GAAP financial statements
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Chairman’s statement
For the year ended 31 December 2012
We are delighted to report that the Group grew revenue and profits during 2012, driven by a combination of organic growth
and acquisitions. This good performance was achieved against a backdrop of a challenging macroeconomic outlook and
an extremely competitive recruitment market. Whilst this creates many challenges at an operational level, we have
continued to grow our OnSite platform, increasing sites by a further 16 this year to 179. Our move in to the Welfare to Work
arena during 2011, with the acquisition of EOS, is showing early signs of success and we expect profitability from this
division to grow significantly during 2013.
We also completed the acquisition of Select Appointments Limited, a long established specialist staffing services business
providing office and administration staff across the UK. This transaction will see Staffline expand its services into the ‘White
Collar’ arena for the first time, in a move which will see the Group seek to replicate the success of our ‘Blue Collar’
business.
Therefore, I remain confident of the Group’s ability to continue to grow. We are seeing further opportunities for both
acquisitions and organic growth due to on-going changes in the industry and the ever greater need of our clients to
increase their productivity whilst being provided reliable and efficient staffing solutions.
John Crabtree OBE
Chairman
25 February 2013
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Chief Executive’s statement
For the year ended 31 December 2012
I’m pleased to report the Group has enjoyed another successful year with sales up by 27% and profit after tax up by 15%.
We are particularly pleased with this performance given that we suffered the expected reduction in profitability (due to the
level of investment committed to supporting our Department for Works and Pensions (“DWP”) contracts) within EOS. As
a result of this upfront investment, we had expected at the start of the year that net profit for the Group would remain flat,
so it is particularly pleasing to be able to report an increase in operating profit for 2012. We are confident that profitable
growth for the Group will continue during 2013, enabling the Board to propose an increased final dividend of 5.0p, (2011:
4.2p) making the full year dividend 8.1p, (2011: 7.1p). This represents an increase of 14% to the full year dividend and we
intend to continue to grow the dividend broadly in line with earnings.
Operational Review
2012 continued in much the same vein as 2011 with the trading environment remaining difficult. Despite this, sales in our
recruitment business grew by 27% and profitability grew by 18%. Sales also grew in our Welfare to Work division, by 33%
but, as expected, operating profit before amortisation declined during the year by 48%. This anticipated reduction is due
to the structure of the Work Programme contract we operate with the DWP and the upfront investment incurred in 2012.
We are confident that profitability will be significantly improved in 2013. In addition we suffered losses on our two European
Social Fund contracts due to a shortfall in expected referrals from Local Authorities. The effect on the overall Group results
is that our profitability has risen by 4% at the adjusted operating profit level, from £10.3m to £10.7m but more significantly
after tax and a reduced charge for amortisation of intangibles from £5.6m to £6.4m. Demand for our OnSite offering
continues to generate significant market interest with a good pipeline of new business, the overall trend to outsourcing
remaining prevalent for many clients.
The number of OnSites we operate from has continued to increase, from 163 in December 2011 to 179 at December 2012;
this includes openings from a mixture of new and existing clients and some from acquisitions. Our OnSite model continues
to be a driving factor in our success and we anticipate further growth across the UK.
Our branch network operation, Staffline Express, grew by 4 locations during the year and now operates from 22 branches.
Acquisitions during the period included the well-known British recruitment brand, Select Appointments Ltd (‘Select’), from
the Netherlands company Randstad. Select has been established in the UK for 30 years and specialises in both temporary
and permanent placements in the white collar market. Select has for the past four years been an exclusively franchise
operated business and it is our intention to continue with this model of operation which is capital light and limits the Group’s
business risk. We are looking to expand the number of operating branches from 30 at the time of acquisition to over 100
in the next three years, concentrating growth in the major cities and conurbations of the UK. We welcome an approach
from individuals looking to operate their own recruitment business with the backing of a national organisation.
The acquisition of Select represents an exciting strategic step for the Group as we seek to further broaden our operational
reach. Not only is the Select brand instantly recognisable but its established franchise network will provide a stable footing
for the Group as we seek to expand our services into the white collar staffing market.
We acquired EOS Works Ltd (EOS), the Welfare to Work service provider, in April 2011 and commenced activities with the
Coalition Governments new Work Programme Contract in Solihull, Birmingham and the Black Country in June 2011. In
October that year, EOS was awarded two further contracts by the DWP, due to be worth £53m over three years. Both
contracts are financed by the European Social Fund (ESF), with one operating in our existing Work Programme area in the
Midlands and the other based in Yorkshire and Humberside. The nature of all of these contracts means that there is a
significant tie up of working capital during the first 18 months which then gradually unwinds as profitability is achieved. At
the 31st December 2012 the total additional working capital committed to Eos was £3.2m. Despite the significant amounts
of negative publicity surrounding the Work Programme we are extremely pleased with our progress so far, with EOS
appearing in the top 3 (out of 40) for all the major performance measures recorded by the DWP. To date we have helped
over 8,000 long term unemployed back in to work. Regarding the ESF contracts, whilst we are again performing well
against our competition they have been significantly less busy than initially expected, incurred losses in 2012, and are
expected to do little more than break even during 2013 despite a number of financial changes by the DWP. This is a matter
we continue to discuss with them.
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Chief Executive’s statement (continued)
For the year ended 31 December 2012
Market Overview
Gangmaster Licensing Authority (GLA)
We are convinced that the GLA has done much to improve standards and drive many sub-standard operators out of the
regulated sector. Unfortunately there is considerable evidence that many of these Gangmasters have moved into both the
Construction and Hospitality sectors, both of which are unregulated. In addition we have recently experienced an increase
in the number of illegal and unlicensed people operating as labour suppliers, sometimes using indentured labour from
Eastern Europe.
Marshall Evans, Operations Director, continues to be a member of the Board of Directors of the GLA as well as being a
member of the REC council and the Chairman of the Policy Committee. I also sit on the board of the Association of Labour
Providers. These roles allow us to understand and influence future industry trends and Government policy.
PAYE and Travel and Subsistence Schemes
We have been encouraged in our long term opposition to the abusive use of travel and subsistence schemes by a more
robust response from Government agencies. Whilst during the year we continued to lose a number of clients to competitors
operating these schemes we also won business from customers who are realising the potential liabilities they face if they
allow their supplier to use these schemes unscrupulously.
Health & Safety
Our health and safety management system continues to develop using the HSE HSG65 – “Successful Health and Safety
Management” guidance as the framework. 2012 saw yet another reduction in the Accident Frequency Rate reporting 0.16
which is a further reduction of 16% on the previous year. Staffline continues to develop its positive culture through its Safety
Committee and Safety Champions.
ISO 9001 and Investors in People (IIP)
In November 2012 Staffline have successfully passed an official ISO external audit confirming continued accreditation,
reaffirming our systems and processes are fully compliant with the ISO 9001 standards. As part of our continuous
development culture Staffline remain the proud achievers of Investors in People status.
People
With the continued expansion of the Group, we have seen an increase to 428 employees in our recruitment business and
Shared Services this year, giving average sales per employee of £827,000 compared to £763,000 in 2011. In addition a
further 224 people are employed by EOS, bringing the Group’s total workforce to 652.
In 2012, continuing on the great success of development in operations we enjoyed in 2011, 16 employees passed their REC
Certificate in Recruitment Practice, 24 passed the Real Account Management course, 12 achieved Delight the Customer,
10 passed the external business writing course and 4 achieved the Chartered Institute of Environmental Health Level 4
exam in Food Hygiene.
In addition, within our Shared Services staff, 3 attended Advanced Certificate in Payroll Techniques, 3 First Aid at Work,
1 Professional CIMA Qualification Dip.MA, with many others attending courses in tax, credit control and other relevant
subjects. We congratulate them all on their achievements.
2012 saw the introduction of our residential Leadership Development Course, attended by 20 potential senior managers of
the future, which was a great success and continues with a further 20 delegates in 2013.
Compliance
We take compliance with legislation and industry standards extremely seriously, offering a total commitment to all of our
clients to ensure that all of our workers, whether or not covered by the legislation, are recruited and supplied to the
standards required by the Gangmaster Licencing Act. This total commitment gives our clients the assurance that all UK
ethical and legal standards are fully met. We operate a confidential helpline for our workers to report any concerns and
conduct regular surveys to ensure we are achieving our own high standards.
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Investing for Growth
To help us achieve the highest compliance standards we are continuing to develop our new bespoke management
information system, Infinity+, which will further improve our operating efficiency. All of the Group’s locations are now live
with Infinity+ and we are already deriving a wide range of benefits from it. The new system will provide the platform for
further development that will deliver greater efficiencies in the business processes.
Agency Workers Regulations
These regulations, introduced in October 2011, require recruitment businesses to ensure that temporary contractors
working alongside comparable client employed staff are, amongst other things, paid the same amount and enjoy the same
holidays. The initial concern amongst some industry commentators that these regulations might cause disruption has not
materialised.
Board Changes
As indicated in the announcement made on 21 February 2013, Marshall Evans has decided to retire from the Board and
assume a part-time role with the Group going forward. I would like to personally thank Marshall for providing excellent help
and support over the past 10 years and for playing a central role in the growth and success of Staffline. His continued
availability, albeit on a part-time basis, and his decision to remain a member of the Board of the REC and the GLA, will be
greatly appreciated.
I am also pleased to acknowledge the promotion of Shaun Brittain to Joint Managing Director of Staffline Recruitment Ltd.
Shaun will be resigning from the Group Board following this promotion to focus on his broader day to day operational
duties. Andrew Coop, currently Operations Director at Staffline, will also hold the title of Joint Managing Director of Staffline
Recruitment Ltd, and will be responsible for Logistics and Distribution services.
Diane Martyn has agreed to become Group Managing Director having joined Staffline as Non-Executive Director last year.
Diane will become a full time Executive Director and remain on the Group Board.
Finally I would once again thank all our employees for their dedication in ensuring we always offer the best and most
innovative service to our clients.
Current Trading
The first 7 weeks of trading have started strongly and we have developed an excellent pipeline from new and existing
customers for the first half of 2013. We have opened a specialised Driving division in Great Britain and in addition have
committed to our existing business in Ireland with the appointment of a Divisional Director and team with responsibility for
the Group’s growth in that country. We have also recruited the new senior team to manage Select Appointments.
Despite the on-going threat arising from the abusive use by some competitors of Travel and Subsistence schemes , the
majority of our clients appreciate the reassurance that we offer as a financially stable, ethical and fully compliant public
company. Our new business pipeline continues to grow as clients increasingly search for best in class staffing solutions
both from a regulatory and business perspective.
I am therefore confident that the Group will enjoy another year of substantial growth in 2013.
Andy Hogarth
Chief Executive
25 February 2013
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Finance Director’s statement
For the year ended 31 December 2012
Financial Highlights
The total revenues for the year increased by 27% to £367.0m (2011: £288.3m) reflecting the impact of strong demand for
our services from existing customers, new business wins in 2011 and 2012 and also the impact of the acquisitions made
during last year and this year. The successful growth of our OnSite business has continued albeit with increased competitive
pressure on operating margins. This has resulted in a reduction in overall gross margin to 9.5% (2011: 10.8%). However,
adjusted profit from operations has increased by 4% to £10.7m (2011: £10.3m). The charge for amortisation has reduced
by £0.8m to £1.8m as historic acquisitions become fully amortised. The charge for employee share options has increased
by £0.2m to £0.4m largely due to the share price increasing significantly during the closing months of 2012.
The investment in acquisitions, the Welfare to Work business and the growth in working capital offset by continued strong
cash flow generation, has led to finance charges increasing to £0.4m (2011: £0.1m) and this has reduced interest cover to
a still comfortable 24 times (2011: 60 times). The interest rates on our overdraft facility remain unchanged during the year,
at 2.25% (2011: 2.0%) over bank base rate, while the rate for term borrowings remained at 1.0% (2011: 1.0%) over bank
base rate and the Revolving Credit Facility at 2.25% to 2.5% over LIBOR.
Profit before tax for the year increased to £8.5m (2011: £7.5m) and profit after tax increased to £6.4m (2011: £5.6m).
Earnings per Share
The basic earnings per share increased by 15% to 29.7p (2011: 25.9p) and the diluted earnings per share increased by 14%
to 28.7p (2011: 25.0p).
Dividends
The Directors propose a final dividend of 5.0p per share against 4.2p per share last year. This gives a total dividend for the
year of 8.1p per share which is 14% ahead of the 7.1p per share paid in respect of 2011.
Subject to shareholder approval at the AGM, the final dividend will be paid on 3 July 2013 to shareholders on the register
on 31 May 2013.
Acquisitions
During the year we completed four acquisitions for a total consideration of £5.0m. This amount is comprised of £2.8m cash
paid at completion, and further potential consideration of £2.2m, £1.0m of which is dependent on future profitability. The
acquisitions will add around £18.9m to turnover in a full year, and have resulted in the recognition in the Group balance sheet
of additions to goodwill of £0.9m and additions to intangible assets of £0.9m. The intangible assets will be amortised over a
period ranging from 1 to 2 years. The acquisitions have been funded from existing bank facilities together with an additional
Revolving Credit Facility of £2.5m.
Balance Sheet
The Group balance sheet has strengthened during the year, with net current assets rising by £6.7m to £11.8m (2011: £5.1m) and a
strengthened ratio of current assets to current liabilities of 1.23 (2011: 1.11). It is also pleasing to report that despite the significant
growth in the business and investment in acquisitions the gearing has reduced to 12% (2011: 15%). The Group continues to be
focused on cash generation and ensuring a robust balance sheet to support the growth of the business.
Financing
The Group’s current bank facilities include a term loan of £0.6m, repayable in quarterly instalments up to June 2013, a
revolving credit facility of up to £7.5m and an overdraft of up to £15.0m. At 31 December 2012 the Group was in a net cash
position (excluding the revolving credit facility and term loans). The overdraft facility is renewable annually and was
renewed in February 2013 on similar terms to last year. The Board believes that these facilities will ensure that the Group
has sufficient headroom to manage the current operations as well as supporting the continued growth of the business.
Post tax cash generation during the year has been strong and the relentless focus on debtor management has succeeded
in limiting our working capital increase to £2.6m despite the 27% increase in sales. The growth and investment in the
business offset by strong operational cash generation have resulted in net debt falling slightly to £4.6m (2011: £4.9m). The
investment included £4.1m in acquisitions during the year covering Select Appointments Limited, Go New Recruitment
Limited and 2 other businesses, and a further £0.4m investment in our systems development.
Tim Jackson
Finance Director
25 February 2013
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Report of the Directors
For the year ended 31 December 2012
The Directors present their annual report together with the audited financial statements for the year ended 31 December
2012.
Principal activity and business review
The principal activity of the Group is the provision of recruitment and outsourced human resource services to industry.
A detailed review of the activities of the Group, including financial and non-financial key performance indicators, can be
found in the Chairman, Chief Executive and Finance Director’s statements.
An interim dividend of £670,120 (3.1p per share) was paid during the year (2011: £623,853, 2.9p per share). The Directors
have proposed a final dividend of £1,081,566 (5.0p per share) (2011: £908,027, 4.2p per share) to be paid on
3 July 2013, to shareholders registered on 31 May 2013. This has not been included within creditors as it was not formally
approved before the year end.
Directors
The Directors who held office during the year were as follows:
A Hogarth
M Evans
N Keegan
J Crabtree OBE
T Jackson
S Brittain
D Martyn (appointed non-executive 13 February 2012)
Substantial shareholdings
The interests in excess of 3% of the issued ordinary share capital of the Company which have been notified as at
24 January 2013 were as follows:
Octopus Investments
Legal and General Investment
A J Hogarth
ISIS Equity Partners
Cazenove Capital Management
Investec Asset Management
Generali Portfolio Management
Hargreave Hale - Stockbrokers
Ennismore Fund Management
Ordinary
shares of
Percentage
10p each
of ordinary
Number
3,241,269
2,465,009
2,068,629
1,917,584
1,600,000
1,555,000
1,091,350
982,716
885,994
shares %
14.16
10.77
9.04
8.38
6.99
6.79
4.77
4.29
3.87
The shareholding for A J Hogarth excludes shares held under the Company’s Joint Share Ownership Plan (JSOP) in which
the he is a beneficial co-owner of shares. Details of such shareholdings are given in the Report on Directors’ remuneration.
Payment to suppliers
It is the Group’s policy to agree appropriate terms and conditions for its transactions with suppliers by means ranging from
standard terms and conditions to individually negotiated contracts and to pay suppliers according to agreed terms and
conditions, provided that the supplier meets those terms and conditions. The Group does not have a standard or code
which deals specifically with the payment of suppliers.
Group trade creditors at the year-end amounted to 25 days (2011: 12 days) of average supplies for the year.
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Report of the Directors (continued)
For the year ended 31 December 2012
Financial risk management objectives and policies
The Group is exposed to a variety of financial risks which result from both its operating and investing activities. The Group’s
risk management is coordinated at its headquarters, in close co-operation with the Board of Directors, and focuses on
actively securing the Group’s short to medium term cash flows.
The Group does not actively engage in the trading of financial assets for speculative purposes. The most significant
financial risks to which, in the opinion of the Directors, the Group is exposed are described below.
Credit risk
Generally, the maximum credit risk exposure of financial assets is the carrying amount of the financial assets as shown on
the face of the balance sheet (or in the detailed analysis provided in the notes to the financial statements). Credit risk,
therefore, is only disclosed in circumstances where the maximum potential loss differs significantly from the financial
asset’s carrying amount.
The Group’s trade and other receivables are actively monitored to avoid significant concentrations of credit risk.
The Group has adopted a policy of carefully monitoring all customers, in particular those who lack an appropriate
credit history.
Liquidity risk
The Group seeks to manage financial risks to ensure sufficient liquidity is available to meet foreseeable needs and to invest
cash assets safely and profitably. The Group had net cash of £3,618,000 at 31 December 2012 (2011: £1,841,000) but there
are substantial fluctuations within the year. Short term flexibility is achieved by means of a bank overdraft facility of up to
£15,000,000 and a revolving credit facility (RCF) of up to £7,500,000. These facilities have been renewed on similar terms
in February 2013.
Interest rate risk
All financial liabilities of the Group owed to the Group’s bankers are subject to floating interest rates. Competitive rates
have been negotiated with the Group’s bankers and the rate paid on term bank loans has been set at 1% above base rate
(2011: 1% above base rate). The rates paid on the RCFs taken out in 2011 and 2012 is between 2.2% and 2.5% above LIBOR
plus a non-utilisation fee of between 0.88% and 1.0%.
Details of the key risks impacting on the Group are included in the Corporate Governance statement.
Employee Involvement
Employees are kept aware of developments within the Group by regular briefings. These include presentations by subsidiary
management covering their future budgets. Employee involvement with the financial performance of the Group is further
encouraged by the share option scheme. However, as the number of employees now exceeds 250 the qualification criteria
for an EMI scheme are no longer met so no further options can be issued under this scheme.
Disabled persons
It is the Group’s policy to give full and fair consideration to suitable applications for employment from disabled persons.
Once employed, disabled persons receive equal opportunities for training, career development and promotion. Opportunities
exist for employees of the Group who become disabled to continue their employment or to be trained for other positions
within the Group.
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Directors’ Responsibilities Statement
The Directors are responsible for preparing the Directors’ Report and the consolidated financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors
have to prepare the financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted
by the European Union. Under company law the Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs and profit or loss of the Group for that period. In preparing
these financial statements, the Directors are required to:
●● select suitable accounting policies and then apply them consistently;
●● make judgments and accounting estimates that are reasonable and prudent;
●● state whether applicable IFRSs have been followed, subject to any material departures disclosed and explained in the
financial statements;
●● prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will
continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s
transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to
ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the
assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors confirm that:
●● so far as each Director is aware, there is no relevant audit information of which the Company’s auditors are unaware;
and
●● the Directors have taken all steps that they ought to have taken as Directors in order to make themselves aware of any
relevant audit information and to establish that the auditors are aware of that information.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Auditors
Grant Thornton UK LLP offer themselves for reappointment as auditors in accordance with section 489 of the Companies
Act 2006.
BY ORDER OF THE BOARD
Tim Jackson
Company Secretary
25 February 2013
05268636
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Corporate governance statement
For the year ended 31 December 2012
Statement by the Directors on compliance with the provisions of the UK Corporate Governance Code (the Code)
As a company listed on the Alternative Investment Market of the London Stock Exchange, Staffline Group plc is not
required to comply with the Code. However, the Board of Directors has considered the effects of the Code and taken steps
to comply with the Code insofar as it can be applied practically, given the size of Staffline and the nature of its operations.
Due to the size of the Group the number of non executive directors is currently less than the number of executive directors.
The Group supports the concept of an effective Board leading and controlling the Group and a brief outline of the role of
the Board and its committees, together with the Group’s systems of internal financial control which the Board will continue
to keep under review, is given below.
The Board
The Board currently comprises the Non-Executive Chairman, the Chief Executive, the Group Managing Director, the
Finance Director, one Executive Director and one Non-Executive Director. Biographies of the Directors appear below
including who sits on which committee (A = Audit Committee, R = Remuneration Committee, N = Nominations Committee).
The Non-Executive Directors, although having small shareholdings in the Company, are considered by the Board to be
independent.
Shaun Brittain — Executive Director
Shaun Brittain joined the Group in August 2000 and the Board in February 2009. He was one of the Group’s divisional
Directors, with responsibility for the largest region. He has made a significant contribution to the growth of Staffline’s Onsite
model and helped to shape the outsourcing development by introducing additional outsourcing services. Prior to that he
spent 11 years at Blue Arrow, where he held senior roles, both operational and strategic.
John Crabtree OBE — Non-Executive Chairman (A, R, N)
John Crabtree joined the Board on 1 March 2005 as a Non-Executive Director and Chairman of the Remuneration
Committee. He was appointed Chairman in 2011. John was the senior partner of Wragge & Co, the Birmingham based
corporate law firm and whilst in this role John was responsible for the firm’s evolution into a practice with 100 partners and
a turnover of £75m. John has a number of business interests, including being Non-Executive Chairman of Real Estate
Investors plc, SLR Holdings Limited, Birmingham Hippodrome Theatre Trust, TruckEast Ltd and the charity Sense.
Marshall Evans — Executive Director
Having gained broad experience with P&O, NFC and Freightliners, Marshall spent six years as Operations Director of TIP
Trailer Rental (“TIP”), joining GE Capital when that company acquired TIP in 1993. He then spent four years as part of the
acquisition team which purchased and integrated ten further companies, including TLS Vehicle Rental, into GE Capital and
became an Executive Director of TLS. He joined Staffline and the Board in July 2002. Marshall is a board member of both
the Gangmaster Licensing Authority (GLA) and the Recruitment & Employment Confederation (REC) (the main UK trade
body for recruitment agencies).
Andy Hogarth — Chief Executive (N)
Andy has held senior roles in a wide range of businesses including retail, support services, healthcare, hospitality and
construction. As Finance Director he led the MBO and subsequent trade sale in 2002 of Pipeline Constructors Group, a
£100m utility services business. He is currently CEO of Staffline Group plc, sits on the board of an elderly care charity and
is a Director of Hogarths Hotel, a boutique hotel in Solihull. He is a Fellow of the Association of Chartered Certified
Accountants (FCCA) as well as a Master Practitioner of Neuro-Linguistic Programming (NLP) and a Certified NLP coach.
He joined Staffline in 2002 as Finance Director, becoming Managing Director in 2005 and was Chief Executive in 2009.
Tim Jackson — Finance Director
Having qualified as a Chartered Accountant with Grant Thornton, Tim spent nine years in various financial and commercial
roles at Salvesen Logistics Plc. He then spent 7 years at Redbridge Holdings Limited culminating in the position of Finance
Director of its food service division, Redbridge Fresh Services. As Finance Director of SG Maintenance Services Limited he
was instrumental in the operational and finance side of the business and its eventual disposal, before joining Applied
Language Solutions Limited, a fast growing translation business, as Finance Director. He joined Staffline as Finance Director
in December 2008. He remained a non-executive Director of Applied Language Solutions Limited until its acquisition by
Capita plc in December 2011.
Nicholas Keegan — Non-Executive Director (A, R, N)
Nicholas is a qualified Chartered Accountant, who after spending 10 years in investment banking was Finance Director of
a number of quoted and unquoted West Midlands companies, including Newman Tonks Group plc and Frederick Cooper
plc. He was from 2005 until 2009 Chief Financial Officer of CompAir Holdings Limited, a venture capital backed international
manufacturing business. He was a Non-Executive Director of Interserve plc from 2003 until 2009. He joined Staffline in
November 2004 and is Chairman of the Audit Committee.
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11
Corporate governance statement (continued)
For the year ended 31 December 2012
Diane Martyn – Group Managing Director
Diane Martyn was until 2011 CEO of Randstad Staffing in the UK, part of one of the leading human resources services
providers in the world, where she was responsible for the merger of Select Appointments plc and Randstad in 2008. She
has over 20 years of experience in the staffing industry where she has held senior management roles, including Chief
Executive Officer of Select Appointments plc and Managing Director of Blue Arrow. Diane joined the Board of Staffline on
13 February 2012 as a Non-Executive Director and was appointed Group Managing Director on 25 February 2013.
Relations with shareholders
The Company values the views of its shareholders and recognises their interest in the Group’s strategy and performance.
The Annual General Meeting is used to communicate with all investors and they are encouraged to participate. The
Directors are available to answer questions. Separate resolutions are proposed on each issue so that they can be given
proper consideration and there is a formal resolution to approve the Annual Report and Accounts.
Internal control
The Board is responsible for maintaining a strong system of internal control to safeguard shareholders’ interests and the
Group’s assets and for reviewing its effectiveness. The system of internal financial control is designed to provide reasonable,
but not absolute, assurance against material misstatement or loss.
The Remuneration Committee, chaired by John Crabtree has met three times during the year. It is responsible for
determining the level of remuneration to be paid to the Executive Directors. A separate report on remuneration follows.
The Nominations Committee, chaired by John Crabtree has met twice during the year. It is responsible for ensuring that
the balance of the board is appropriate to control and direct the business.
The Audit Committee, chaired by Nicholas Keegan, has met three times during the year and is responsible for ensuring that
the financial performance of the Group is properly monitored and reported on, as well as meeting the auditors and reviewing
any reports from the auditors regarding accounts and internal control systems. Auditor independence is maintained
through regular meetings with the Audit Committee with management excluded. The Audit Committee is responsible for
identifying and commissioning specific internal control reviews as required.
The Group has several mechanisms for ensuring internal controls are operating effectively. There is an independent
compliance audit team responsible for checking legality to work and compliance with relevant standards (e.g. GLA and
REC). Within the payroll team a compliance officer role has been created during the year to ensure payroll team compliance
with relevant legislation and procedures. From a financial point of view authority levels are in place and there is regular
review of financial information at all management levels right up to the Board.
The Group tailors its approach to ensuring internal controls are operating effectively over new acquisitions – in the majority
of cases the acquired business is integrated into Staffline systems from the outset. Operational responsibility is assigned
from day one and the results form part of the usual regular management reporting. In special circumstances acquisitions
continue to be run on separate systems.
The Board has considered the need for an internal audit function but has decided that, given the size and complexity of the
Group does not justify it at present, although it does have the independent compliance audit team referred to above.
However, it will keep this decision under annual review.
The Directors keep a register of risks faced by the business, rating these risks on a scale of 1 to 5 for both probability and
impact. These risks have been mitigated to the extent considered practical and are reviewed annually. The Directors have
identified the following principal risks and uncertainties facing the Group:
Principal risks
●● Because of the industries in which the Group specialises, principally food processing, the Directors consider the Group
to be relatively less affected than others in the sector during a general economic downturn. However, this sector is
subject to great change and consolidation as the buying power of major retailers continues to drive the need for
rationalisation and greater economies of scale. We are at risk if our clients lose business in this process. We continue
to counter this risk by expanding our client base and can expect to gain as much business as we lose if we have a wide
enough spread of clients.
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●● Because we allow credit to our clients we are at risk if one of them runs into financial difficulties and is unable to pay
their outstanding debt. To minimise the risks we monitor client payment patterns, subscribe to a monitoring service and
employ pro-active credit control systems. To date these actions have been successful and the total bad debt charge
to the Group in the last three years, excluding VAT, has been £85,000 on sales of £861,000,000, equating to 0.01% of
sales.
●● In terms of our welfare to work segment (Eos) our key risk is that we will be unable to find jobs for jobseekers and /or
having found jobs we are unable to keep those workers in place. Given our other business segment, recruitment
services we are ideally placed to find suitable jobs. This, coupled with Eos’s unique tailored approach to help unemployed
people back into sustainable employment, through a combination of intensive job search support, comprehensive
vacancy matching services, real work experience, skills development and in-work support should mitigate the risk of
failing to keep jobseekers in work. The fact that Eos has only one customer, the Government, is also a risk. However,
this is somewhat mitigated by the fact that Eos now have a number of different Government contracts. In addition,
experience shows that a change in Government policy (and therefore contract terms) would not necessarily have an
adverse impact and there are only a limited number of providers who meet the criteria to secure these contracts.
●● We face the risk that one of our members of staff may deliberately by-pass the procedures set up which ensure we
fully comply with all legislative requirements. Although we have put robust checks and audit procedures in place that
should detect such acts there is a reputational and financial risk to the business should someone deliberately choose
to do this.
●● Major failure of IT systems. The Group has a robust Disaster Recovery plan in place in the event of a major internal
failure of our IT systems. However as our business grows we become ever more reliant on third party telecommunication
and other providers, including BT, BACS and Weston Telecom. We have put back up and alternative solutions in place
but there is still a risk a major failure by any of these suppliers would prove very disruptive.
●● Competition. The group operates in the recruitment services sector where there are a significant number of competitors
and barriers to entry are relatively low. To counter the threat of competitors seeking to win business from us the Group
aims to build strong long term relationships with its customers through excellent service levels and through its rigorous
selection and checking procedures which ensure that all contractors provided by the Group are fully compliant with the
legal requirements.
●● Acquisitions. The Group has made a number of acquisitions over the past four years. Significant legal, commercial and
financial due diligence is undertaken on each acquisition before completion in line with its size and complexity. Post
acquisition the integration into the Staffline procedures and systems is managed by the acquisition team. There is a risk
post acquisition that an issue with a customers, contract or staff member may impact the value of the acquisition.
Uncertainties
●● The recovery of the UK from recession may impact the Group in both positive and negative ways. The core business
model, with its emphasis on the food-production sector is considered relatively defensive as food consumption in the
home should not be significantly impacted. The recovery may provide some opportunities if clients seek to use
temporary staff in lieu of replacing permanent employees. The exposure to permanent recruitment is minimal as
permanent appointments represent less than 1% of Group sales.
●● Onerous changes in the regulatory framework, driven by potential European or UK legislation, could lead to greatly
increased employment costs which might lead to a reduction in demand for our temporary workers.
Going concern
In considering the on-going funding requirements of the Group, the Directors have prepared detailed cash flow forecasts
extending to December 2014 and these indicate that the Group expects to be able to continue to operate within its existing
bank facilities for the foreseeable future. The Group enjoys a strong working relationship with its bank and had undrawn
overdraft facilities of £12.3m at 31 December 2012. Coupled with a strong financial performance for the year ended 31
December 2012 and a strong start to 2013 the Directors are of the view that it remains appropriate for the financial
statements to be prepared on a going concern basis.
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13
Report on remuneration
For the year ended 31 December 2012
Remuneration Committee
The Company has a Remuneration Committee comprised of John Crabtree, who is the Chairman, Diane Martyn and
Nicholas Keegan. Except as shareholders and Directors none of the members has any personal financial interest in the
Group. The Group’s current remuneration policies are set out below.
Policy on Executive Directors’ remuneration
The Executive Directors’ remuneration packages are designed to attract, motivate and retain Directors of the high calibre
needed to help the Group successfully compete in its market place. The Group’s policies are to pay Executive Directors a
salary at market levels for comparable jobs in the sector whilst recognising the relative size of the Group.
The performance management of the Executive Directors and key members of senior management and the determination
of their annual remuneration package is undertaken by the Remuneration Committee. No Director plays a part in any
decision about his or her own remuneration. Executive Directors are permitted to accept appointments outside the Group
subject to prior Board approval. The remuneration packages for Shaun Brittain, Marshall Evans, Andy Hogarth, Tim Jackson
and Diane Martyn are comprised of a basic salary and a performance related bonus as well as share-based payment
schemes as described below.
The remuneration of the Directors, which was all paid by the Group, is detailed in note seven of the notes to the financial
statements.
Basic salary
An individual’s basic salary is reviewed by the Remuneration Committee each year and when an individual changes position
or responsibility. In deciding appropriate levels the Committee takes into account objective research on comparable
companies and general market conditions.
Annual bonus
Annual bonuses are awarded at the discretion of the Remuneration Committee as an incentive and to reward performance
during the financial year pursuant to specific performance criteria. In exercising its discretion the Committee takes into
account (amongst other things) performance against budget and performance against market expectations. The
Committee believes that incentive compensation should recognise the growth and profitability of the business, which are
tied to the interests of shareholders.
A total bonus of £103,000 has been accrued in respect of the Executive Directors in recognition of performance exceeding
budget, in line with the Executive Bonus Scheme approved by the Remuneration Committee.
Directors’ share options
In October 2009, share options were issued to Shaun Brittain, Marshall Evans, Andy Hogarth, Tim Jackson and two other
senior executives.
These share options have a performance condition based on the increase in reported diluted Earnings per Share of the
Group from the base of 10.7p in December 2008 to the achieved diluted EPS in the year to December 2012. The award is
scaled up to a maximum of 150,000 shares for a doubling of diluted EPS.
These share options can be exercised between three and seven years of being granted and are detailed in note seven to
the notes to the financial statements.
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Joint Share Ownership Plan
In 2010 the Company established a Joint Share Ownership Plan (JSOP) to provide additional incentives to senior executives.
The JSOP interest runs from the date of the award until 30 June 2015. During this period the right to sell the JSOP award
shares is not at the discretion of the Directors but instead at the discretion of the Employee Benefit Trust. On the eventual
disposal of the shares, the amount received by the Directors is calculated based on certain business performance
conditions. The eventual payment to the Directors takes into account diluted EPS adjusted for amortisation of intangibles
in any financial year up to 2014 (from a minimum of 24p to a maximum of 42p) and the share price at the date of disposal.
The interests that the directors acquired in the shares jointly with the Staffline Group plc Employee Benefit Trust are
contained within note seven of the notes to the financial statements.
Policy on Non-Executive Directors’ Remuneration
The remuneration of the Non-Executive Directors is determined by the Board and based upon independent surveys of fees
paid to Non-Executive Directors of similar companies. The Non-Executive Directors do not receive any benefits apart from
their basic salaries or fees.
Service contracts
Shaun Brittain, Marshall Evans, Andy Hogarth, Tim Jackson and Diane Martyn have rolling service contracts requiring notice
from either party of one year. Nick Keegan and John Crabtree each have contracts terminable on six months’ notice given
by either party.
There are no contractual termination payments other than as a result of the contractual notice period.
Pension arrangements
The Group has a defined contribution pension scheme with Scottish Widows for all permanent employees. Executive
Directors are entitled to receive a contribution from the Group equivalent to 10% of their basic salary into this or another
scheme of their choice.
Benefits in kind
The Group provides private medical insurance for Shaun Brittain, Marshall Evans, Andy Hogarth, Tim Jackson and Diane
Martyn. No other benefits in kind are provided to Directors.
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15
Independent auditor’s report to the members of Staffline Group plc
For the year ended 31 December 2012
We have audited the group financial statements of Staffline Group plc for the year ended 31 December 2012 which comprise
the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated
statement of financial position, the consolidated statement of cash flows and the related notes. The financial reporting
framework that has been applied in their preparation is applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors and auditors
As explained more fully in the Directors’ Responsibilities Statement set out on page 9, the Directors are responsible for the
preparation of the group financial statements and for being satisfied that they give a true and fair view. Our responsibility is
to audit and express an opinion on the group financial statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s)
Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/apb/
scope/private.cfm.
Opinion on the financial statements
In our opinion the group financial statements:
●● give a true and fair view of the state of the group’s affairs as at 31 December 2012 and of its profit for the year then
ended;
●● have been properly prepared in accordance with IFRSs as adopted by the European Union; and
●● have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the group financial statements
are prepared is consistent with the group financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
●● certain disclosures of Directors’ remuneration specified by law are not made; or
●● we have not received all the information and explanations we require for our audit.
Other matter
We have reported separately on the parent company financial statements of Staffline Group plc for the year ended
31 December 2012.
David Munton
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
BIRMINGHAM
Date: 25 February 2013
16
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Proof 5
17
Consolidated statement of comprehensive income
For the year ended 31 December 2012
2012
Before
2012
amortisation
Amortisation
Note
£’000
£’000
Continuing operations
Sales revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit before amortisation of intangibles
and share based charge
Administrative expenses -
Share based payment charge
Administrative expenses - Amortisation of intangibles
Profit from operations
Finance costs
Profit for the period before taxation
Tax expense
Net profit and total comprehensive income
for the period
Total comprehensive income attributable to:
Non-controlling interest
Owners of the parent
Earnings per ordinary share
Basic
Diluted
4
5
6
8
9
2012
Total
£’000
2011
Total
£’000
366,980
288,303
(332,268)
34,712
(23,600)
(257,161)
31,142
(20,667)
11,112
10,475
(426)
(1,802)
8,884
(363)
8,521
(2,111)
(209)
(2,606)
7,660
(126)
7,534
(1,976)
366,980
(332,268)
34,712
(23,600)
11,112
(426)
-
10,686
(363)
10,323
(2,559)
-
-
-
-
-
-
(1,802)
(1,802)
-
(1,802)
448
7,764
(1,354)
6,410
5,558
(11)
6,421
(69)
5,627
29.7p
28.7p
25.9p
25.0p
The accompanying notes form an integral part of these financial statements.
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Proof 5
Consolidated statement of changes in equity
For the year ended 31 December 2012
Own
Share-
based
Total
Profit
attributable
Non-
Share
shares
Share
payment
and loss
to owners
controlling
At 1 January 2012
(audited)
Dividends
Share options issued
in equity settled share
based payments
Share options exercised
Acquisition of non-
controlling interest
(note 20)
Transactions with
owners
Profit for the period
Total comprehensive
income for the period
capital
£’000
2,284
-
-
5
-
5
-
-
JSOP
premium
reserve
account
of parent
interest
£’000
£’000
£’000
£’000
£’000
£’000
Total
equity
£’000
(1,157)
-
15,928
-
229
-
17,702
(1,578)
34,986
(1,578)
(87)
-
34,899
(1,578)
-
-
-
-
-
-
-
41
-
41
-
-
32
(186)
-
186
32
46
-
(58)
(58)
(154)
(1,450)
(1,558)
6,421
6,421
-
-
-
-
58
58
(11)
32
46
-
(1,500)
6,410
At 31 December 2012
2,289
(1,157)
15,969
75
22,673
39,849
(40) 39,809
6,421
6,421
(11)
6,410
Own
Share-
based
Total
Profit
attributable
Non-
Share
shares
Share
payment
and loss
to owners
controlling
premium
reserve
account
of parent
interest
At 1 January 2011
Dividends
Share options issued
in equity settled share
based payments
Share options exercised
Transactions with
owners
Profit for the period
Total comprehensive
income for the period
Balance at
capital
£’000
2,264
–
–
20
20
–
–
JSOP
£’000
(1,157)
–
–
–
–
–
–
£’000
15,735
–
–
193
193
–
–
£’000
198
–
£’000
13,512
£’000
30,552
(1,437)
(1,437)
31
–
–
–
31
213
31
(1,437)
(1,193)
Total
equity
£’000
£’000
(18)
30,534
–
–
–
–
(1,437)
31
213
(1,193)
–
–
5,627
5,627
(69)
5,558
5,627
5,627
(69)
5,558
31 December 2011
2,284
(1,157)
15,928
229
17,702
34,986
(87) 34,899
The accompanying notes form an integral part of these financial statements.
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Proof 5
19
Consolidated statement of financial position
As at 31 December 2012
Assets
Non-current assets
Goodwill
Other intangible assets
Property, plant & equipment
Deferred tax asset
Current
Trade & other receivables
Cash and cash equivalents
Total assets
Liabilities
Current
Trade and other payables
Borrowings
Other current liabilities
Current tax liabilities
Non-current
Borrowings
Other non-current liabilities
Deferred tax liabilities
Total liabilities
Equity
Share capital
Own shares
Share premium
Share based payment reserve
Profit & loss account
Non-controlling interest
Total equity
Total equity & liabilities
31
31
December
December
2012
£’000
2011
£’000
Note
10
11
12
18
13
14
15
16
17
16
17
18
19
30,971
3,031
2,343
140
36,485
59,598
3,650
63,248
99,733
46,678
678
2,928
1,325
51,609
7,556
70
689
59,924
2,289
(1,157)
15,969
75
22,673
39,849
(40)
39,809
99,733
30,032
3,898
2,811
-
36,741
46,744
3,687
50,431
87,172
38,463
2,984
2,345
1,519
45,311
5,624
392
946
52,273
2,284
(1,157)
15,928
229
17,702
34,986
(87)
34,899
87,172
The financial statements were approved by the Board of Directors on 25 February 2013.
Andy Hogarth
Director
Tim Jackson
Director
The accompanying notes form an integral part of these financial statements.
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Proof 5
Consolidated statement of cash flows
For the year ended 31 December 2012
Net cash inflow from operating activities
Cash flows from investing activities
Purchases of property, plant and equipment
Sale of property, plant and equipment
Acquisition of businesses - deferred consideration for prior acquisitions
Acquisition of businesses - deferred consideration for current acquisitions
Acquisition of businesses - cash acquired
Acquisition of businesses - cash paid
Net cash used in investing activities
Cash flows from financing activities:
New loans
Loan repayments
Interest paid
Dividends paid
Proceeds from the issue of share capital
Net cash flows from financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Year
Year
ended 31
ended 31
December
December
2012
£’000
6,843
2011
£’000
402
Note
26
(543)
24
(1,454)
(168)
315
(2,810)
(4,636)
2,500
(1,060)
(338)
(1,578)
46
(430)
(1,115)
-
(1,528)
(351)
8,896
(7,701)
(1,799)
5,000
(809)
(126)
(1,437)
213
2,841
1,777
1,444
1,841
397
Cash and cash equivalents at end of period
14
3,618
1,841
Net debt at beginning of year
Net change in cash and cash equivalents
Decrease in loans
Increase in RCF
Net debt at end of period
(4,921)
1,777
1,060
(2,500)
(4,584)
(2,264)
1,444
899
(5,000)
(4,921)
The accompanying notes form an integral part of these financial statements.
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Proof 5
21
Notes to the financial statements
For the year ended 31 December 2012
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 services in the welfare to work arena.
2 General information and statement of compliance
Staffline Group plc, a Public Limited Company is incorporated and domiciled in the United Kingdom. The Company acts as
the holding company of the Group. The registered office and principal place of business of the Group and its subsidiary
companies is disclosed on the company details page to these financial statements.
The financial statements for the year ended 31 December 2012 (including the comparatives for the year ended 31 December
2011) were approved and authorised for issue by the board of Directors on 25 February 2013.
The Group does not have an ultimate controlling related party.
3 Accounting policies
Basis of preparation
The consolidated financial statements of the Group have been prepared using the significant accounting policies and
measurement bases summarised below, and in accordance with International Financial Reporting Standards (IFRS) as
adopted by the EU.
Separate financial statements of Staffline Group plc (‘the Company’) have been prepared, on pages 47 to 52, under the
historical cost convention and in accordance with UK GAAP.
Functional and presentation currency
The consolidated financial statements are presented in sterling, which is also the functional currency of the parent company.
The principal accounting policies of the Group are set out below.
Consolidation of subsidiaries
The Group financial statements consolidate those of the parent company and all of its subsidiaries as at 31 December 2012.
Subsidiaries are all entities over which the Group has the power to control the financial and operating policies. The Group
obtains and exercises control through voting rights and presence on the respective boards of its subsidiaries. All subsidiaries
have a reporting date of 31 December.
Acquired subsidiaries and businesses are subject to the application of the acquisition accounting method. This involves the
recognition at fair value of all identifiable assets and liabilities, including contingent liabilities of the subsidiary, at the
acquisition date, regardless of whether or not they were recorded in the financial statements of the subsidiary or business
prior to acquisition. On initial recognition, the assets and liabilities of the subsidiary are included in the consolidated balance
sheet at these fair values, which are also used as the bases for subsequent measurement in accordance with the Group
accounting policies.
Group Learner has been consolidated in the financial statements as a subsidiary despite the group holding a non-controlling
interest only, of 40%, in the company. The results of Group Learner are highly immaterial to the financial statements
however.
Material intra-group balances and transactions, and any unrealised gains or losses arising from intra-group transactions,
are eliminated in preparing the consolidated financial statements.
Non-controlling interests, presented as part of equity, represent the portion of a subsidiary’s profit or loss and net assets
that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners
of the parent and the non-controlling interests based on their respective ownership interests.
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Proof 5
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 profit or loss immediately.
Segment reporting
The Group has two material operating segments: the provision of temporary staff to customers and the provision of
welfare to work services. 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.
The placement of permanent staff with customers, training and the provision of outsourced logistics services all contribute
less than 10% of the Group’s total revenue, profit and assets. Under the definitions contained in IFRS 8, the only material
geographic area that the Group operates in is the United Kingdom.
Revenue recognition
Income from the provision of temporary contractors is recognised at the end of the completed working week based on
hours worked multiplied by the contracted rate, net of rebates. Income from permanent placements is recognised when
the candidates start work. Income from training provision is recognised evenly across the period of the training. In each
case, revenue is only recognised when the labour or service has been provided and the Group is entitled to the revenue.
Provisions for rebates are accounted for in the same period the related sales are recorded, and are calculated in accordance
with the contractual arrangements in place.
Income from the provision of welfare to work services is recognised at the point the company earns the right to consideration
for services performed in agreement with contracts and contractual obligations. Under the terms of the contract with the
DWP, the welfare to work segment receives income when certain contractual milestones are met as each customer
passes through the programme. The segment recognises revenue in the financial statements in line with when services
are provided and when the milestone outcome can be assessed with reasonable certainty. The majority of income is
received based upon performance against set criteria. Where income is received in advance this is initially held in the
statement of financial position as deferred income and released to the statement of comprehensive income as services
are provided. Accrued income is recognised where services have been provided in advance of receipt of income and
based on all available evidence, the company expects to receive payment in accordance with the contract. In spreading
revenue over the period services are provided, the basis of revenue recognition considers historical experience and future
expectations in terms of success rates, and takes into account the anticipated length of period over which the services are
ultimately provided.
Operating expenses
Operating expenses are recognised in profit or loss upon utilisation of the service or at the date of their origin.
Goodwill
Goodwill represents the excess of the fair value of the cost of a business acquisition over the Group’s share of the fair value
of assets and liabilities acquired as at the date of acquisition. Goodwill is tested annually for impairment and carried at cost
less accumulated impairment losses.
Intangible assets
Assets acquired as part of a business combination
In accordance with IFRS 3 Business Combinations, an intangible asset acquired in a business combination is deemed to
have a cost to the Group of its fair value at the acquisition date. The fair value of the intangible asset reflects market
expectations about the probability that the future economic benefits embodied in the asset will flow to the Group. An
independent valuation is undertaken in order to assess the fair value of intangible assets acquired in a business combination.
22405.04
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Proof 5
23
Notes to the financial statements (continued)
For the year ended 31 December 2012
The fair value is then amortised over the economic life of the asset as detailed below. Where an intangible asset might be
separable, but only together with a related tangible or intangible asset, the group of assets is recognised as a single asset
separately from goodwill where the individual fair values of the assets in the group are not reliably measurable. Where the
individual fair values of the complementary assets are reliably measurable, the Group recognises them as a single asset
provided the individual assets have similar useful lives.
Customer contracts and Customer Lists
The fair value of acquired customer contracts and customer lists is capitalised and, subject to impairment reviews,
amortised over the estimated life of the customer contracts and customer lists acquired (estimated to be 2-5 years). The
amortisation is calculated so as to write off the fair value of the customer contracts and customer lists less their estimated
residual values over their estimated lives. An impairment review of customer contracts and customer lists is undertaken
when events or circumstances indicate the carrying amount may not be recoverable.
Property, plant and equipment
Freehold land and property, computer equipment and fixtures and fittings are carried at acquisition cost less subsequent
depreciation and impairment losses. Depreciation is charged on the cost less estimated residual value, which is assessed
annually, of these assets on a straight line basis over the estimated useful economic life of each asset.
The useful lives of property, plant and equipment can be summarised as follows:
Freehold buildings
Computer equipment
Fixtures and fittings
Motor vehicles
Impairment
50 years straight-line
3 years straight-line
3 years straight-line
25% reducing balance
Goodwill, other intangible assets and property, plant and equipment are subject to impairment testing.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at
cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies
of the related business combination and represent the lowest level within the Group at which management monitors the
related cash flows.
Individual intangible assets or cash-generating units that include goodwill with an indefinite useful life are tested for
impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events
or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds
its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell,
and value in use based on an internal discounted cash flow evaluation. Impairment losses recognised for cash-generating
units, to which goodwill has been allocated, are credited initially to the carrying amount of goodwill. Any remaining
impairment loss is charged pro rata to the other assets in the cash generating unit. With the exception of goodwill, all
assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist.
Leases
In accordance with IAS 17, the economic ownership of a leased asset is transferred to the lessee if the lessee bears
substantially all the risks and rewards related to the ownership of the leased asset. The related asset is recognised at the
time of inception of the lease at the fair value of the leased asset or, if lower, the present value of the lease payments plus
incidental payments, if any, to be borne by the lessee.
All other leases are treated as operating leases. Payments on operating lease agreements are recognised as an expense
on a straight-line basis. Associated costs, such as maintenance and insurance, are expensed as incurred. The Group does
not act as a lessor.
24
22405.04
9 April 2013 4:46 PM
Proof 5
In December 2007, the Group completed the purchase, sale and leaseback of a new Headquarters building for a purchase
price of £1,455,000 and a sale price of £1,727,000, less costs of £101,000, which is considered by management to be above
fair value. In accordance with IAS 17 the excess of proceeds over fair value was deferred and is being amortised over the
remaining lease term (10 years). The subsequent leasing agreement, which has been considered separately for the land
and buildings element, is treated in accordance with the Group’s existing operating lease accounting policy as detailed
above.
Taxation
Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the
current or prior reporting period, that are unpaid at the balance sheet date. They are calculated according to the tax rates
and tax laws applicable to the fiscal periods to which they relate, based on the taxable profit for the year.
Deferred income taxes are calculated using the liability method on temporary differences. This involves the comparison of
the carrying amounts of assets and liabilities in the consolidated financial statements with their respective tax bases.
However, in accordance with the rules set out in IAS 12, no deferred taxes are recognised on the initial recognition of
goodwill. This applies also to temporary differences associated with shares in subsidiaries if reversal of these temporary
differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. In
addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for
recognition as deferred tax assets.
Deferred tax liabilities are provided for in full if material. Deferred tax assets are recognised if it is probable that they will be
able to be offset against future taxable income. Deferred tax assets and liabilities are calculated, without discounting, at
tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively
enacted at the balance sheet date.
Most changes in deferred tax assets or liabilities are recognised as a component of tax expense in the profit or loss. Only
changes in deferred tax assets or liabilities that relate to a change in value of assets or liabilities that are charged directly
in other comprehensive income or equity are charged or credited directly to other comprehensive income or equity.
Pensions
Pensions to employees are provided through defined contributions to individual personal pension plans. A defined
contribution plan is a pension plan under which the Group pays fixed contributions to an independent entity. The Group has
no legal or constructive obligations to pay further contributions after payment of the fixed contribution.
Contributions recognised in respect of personal pension plans are expensed as they fall due. Liabilities and assets may be
recognised if underpayment or prepayment has occurred and are included in current liabilities or current assets as they
are normally of a short term nature.
Financial assets
The Group’s financial assets include cash, trade receivables and other receivables.
All financial assets are initially recognised at fair value, plus transaction costs. They are subsequently included at amortised
cost using the effective interest rate method.
Interest and other cash flows resulting from holding financial assets are recognised in the profit or loss when receivable,
regardless of how the related carrying amount of financial assets is measured.
Trade receivables are provided against when objective evidence is received that the Group will not be able to collect all
amounts due to it in accordance with the original terms of the receivables.
Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents include cash at bank and in hand, overdrafts and
short term highly liquid investments such as bank deposits less advances from banks repayable within three months from
the date of advance.
22405.04
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Proof 5
25
Notes to the financial statements (continued)
For the year ended 31 December 2012
Financial liabilities
The Group’s financial liabilities include bank loans, an overdraft facility, trade and other payables, including liabilities for
share-based payments, and other liabilities, which include deferred and contingent consideration payable in respect of
business acquisitions.
Financial liabilities are recognised when the Group becomes a party to the contractual agreements of the instrument. All
interest related charges are recognised as an expense in “Finance Cost” in the statement of comprehensive income.
Bank loans are raised for support of long term funding of the Group’s operations. They are recognised at proceeds
received, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption and direct
issue costs, are charged to the profit or loss on an accruals basis using the effective interest method and are added to the
carrying amount of the instrument to the extent that they are not settled in the period in which they arise.
Trade payables are recognised initially at their fair value and subsequently measured at amortised cost less settlement
payments.
Dividend distributions to shareholders are included in ‘other short term financial liabilities’ when the dividends are approved
by the shareholders’ meeting.
Contingent consideration is measured at fair value through profit or loss.
Other provisions, contingent liabilities and contingent assets
Other provisions are recognised when present obligations will probably lead to an outflow of economic resources from the
Group and they can be estimated reliably. The timing or amount of the outflow may still be uncertain. A present obligation
arises from the presence of a legal or constructive commitment that has resulted from past events, for example, legal
disputes or onerous contracts.
Provisions are measured as the estimated expenditure required to settle the present obligation, based on the most reliable
evidence available at the balance sheet date, including the risks and uncertainties associated with the present obligation.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined
by considering the class of obligations as a whole. In addition, long term provisions are discounted to their present values,
where time value of money is material.
All provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate.
In those cases where the possible outflow of economic resource as a result of present obligations is considered improbable
or remote, or the amount to be provided for cannot be measured reliably, no liability is recognised in the consolidated
statement of financial position.
Probable inflows of economic benefits to the Group that do not yet meet the recognition criteria of an asset are considered
contingent assets and therefore not recognised.
Equity
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its
liabilities.
Share capital is determined using the nominal value of shares that have been issued.
Own shares is determined using the nominal value of shares that were issued to the Employee Benefit Trust in relation to
the Joint Share Ownership Plan (JSOP). This Trust is controlled by the Group and therefore consolidated, resulting in the
‘Own shares’ deducted from equity.
The share premium account represents premiums received on the initial issuing of the share capital. Any transaction costs
associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.
The share based payment reserve represents the value of shares provided under share based payment arrangements.
The profit and loss account includes all current and prior period results as disclosed in the statement of comprehensive
income.
26
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9 April 2013 4:46 PM
Proof 5
Share-based employee remuneration
All share based payment arrangements are recognised in the consolidated financial statements. The Group operates
equity settled and cash settled share based remuneration plans for remuneration of its employees.
Equity Settled share based remuneration
All employee services received in exchange for the grant of any share based remuneration are measured at their fair
values. These are indirectly determined by reference to the fair value of the share options awarded. Their value is appraised
at the grant date and excludes the impact of any non-market vesting conditions (for example, profitability and sales growth
targets).
All share based remuneration is ultimately recognised as an expense in profit or loss in the statement of comprehensive
income with a corresponding credit to the share based payment reserve, net of deferred tax where applicable. If vesting
periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available
estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions
about the number of options that are expected to become exercisable. Estimates are subsequently revised, if there is any
indication that the number of share options expected to vest differs from previous estimates. No adjustment is made to
the expense recognised in prior periods if fewer share options ultimately are exercised than originally estimated.
Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the nominal
value of the shares issued are allocated to share capital with any excess being recorded as share premium.
Cash Settled share based remuneration
The Group has issued cash settled share based payments in respect of services provided by key employees. The share
based payment is measured at the fair value of the liability at the grant date and remeasured at fair value of the liability at
each subsequent balance sheet date. Where the fair value of the services provided cannot reliably be measured, the fair
value of the liability is used and the expense allocated over the vesting period. A financial liability is recognised for the fair
value of the share-based payments, and remeasured at the end of each reporting period and at settlement, with any
changes to the fair value recognised through the statement of comprehensive income.
Key sources of estimation uncertainty
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
seldom equal actual results. The estimates and assumptions that have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the next accounting year are as follows:
Impairment of goodwill
The annual impairment assessment in respect of goodwill requires estimates of the value-in-use of cash generating units
to which goodwill has been allocated to be calculated. As a result, estimates of future cash flows are required, together
with an appropriate discount factor for the purpose of determining the present value of those cash flows. The basis of
review of the carrying value of goodwill is as detailed in note 10.
Contingent consideration
As part of the acquisition process, a forecast is prepared which projects the financial performance of the business over the
expected earn-out period. These forecasts are reviewed and updated based on actual performance. Part of the cost of
the acquisition is dependent on the trading performance of the acquired business following the transaction. The contingent
consideration is based on these estimates of the future performance of the acquired business. The contingent consideration
is classified as a financial liability, measured at fair value with any changes in estimated value recognised in profit and loss
in the statement of comprehensive income.
Business combinations
On initial recognition, the assets and liabilities of the acquired business and the consideration paid for them are included in
the consolidated financial statements at their fair values. In measuring fair value, management uses estimates of future
cash flows and discount rates. Any subsequent change in these estimates would affect the amount of goodwill if the
change qualifies as a measurement period adjustment. Any other change would be recognised in profit or loss in the
statement of comprehensive income in the subsequent period. Details of acquired assets and liabilities assumed are given
in note 20.
22405.04
9 April 2013 4:46 PM
Proof 5
27
Notes to the financial statements (continued)
For the year ended 31 December 2012
Critical judgments in applying the Group’s accounting policies
The Directors consider that the only critical judgement in applying the accounting policies which are described above is:
Provisions
Provisions for future claims or onerous contracts are recognised when the Group has a present legal or constructive
obligation as a result of a past event, it is probable that an outflow of economic resources will be required from the Group
and amounts can be estimated reliably. Timing or the amount of the outflow may still be uncertain.
Adoption of new or amended IFRS
The Group has not early adopted the following new standards, amendments or interpretations that have been issued but
are not yet effective. The Directors anticipate that the adoption of these standards will not result in significant changes to
the Group’s accounting policies. The Group has commenced its assessment of the impact of these standards but it is not
yet in a position to state whether these standards would have a material impact on its results of operations and financial
position.
●● IFRS 9 Financial Instruments (effective 1 January 2015)
●● IFRS 13 Fair value measurement (effective 1 January 2013)
●● IFRS 10 Consolidated Financial Statements (effective 1 January 2013)
●● IFRS 11 Joint Arrangements (effective 1 January 2013)
●● IFRS 12 Disclosure of Interests in Other Entities (effective 1 January 2013)
●● IAS 27 (Revised), Separate Financial Statements (effective 1 January 2013)
●● IAS 28 (Revised), Investments in Associates and Joint Ventures (effective 1 January 2013)
4 Segmental reporting
Management currently identifies two operating segments: the provision of recruitment and outsourced human resource
services to industry and the provision of welfare to work services. These operating segments are monitored by the Group’s
Board and strategic decisions made on the basis of segment operating results.
Segment information for the reporting period is as follows:
Recruitment
services
2012
£'000
Welfare
to work
2012
£'000
Total
Recruitment
Welfare
Group
services
to work
2012
£'000
2011
£'000
2011
£'000
Total
Group
2011
£'000
Segment continuing operations:
Sales revenue from external customers
354,121
12,859
366,980
(322,201)
31,920
(21,256)
(360)
(10,067)
2,792
(1,422)
(562)
(332,268)
34,712
(22,678)
(922)
278,631
(251,698)
26,933
(17,751)
(251)
9,672
288,303
(5,463)
4,209
(2,219)
(446)
(257,161)
31,142
(19,970)
(697)
Cost of sales
Segment gross profit
Administrative expenses
Depreciation
Segment operating profit before
amortisation of intangibles and share
based payment charge
Administrative expenses - share based
payment charge
Amortisation of intangibles
Segment profit from operations
10,304
808
11,112
8,931
1,544
10,475
(426)
(1,349)
8,529
-
(453)
355
(426)
(1,802)
8,884
(209)
(1,568)
7,154
-
(1,038)
506
(209)
(2,606)
7,660
Segment assets
91,779
7,954
99,733
77,633
9,539
87,172
The Group purchased Eos Works Group Limited (Eos), a welfare to work provider, on 21 April 2011 thus creating two
segments during the year ended 31 December 2011.
During 2012, two customers in the recruitment services segment contributed greater than 10% of that segment’s revenues
being 17.4% and 10.8% of that segment’s revenues (2011: one customer greater than 10%). The welfare to work segment
revenues relate solely to one customer.
The Group’s revenues from external customers and its non-current assets all arise in the United Kingdom.
28
22405.04
9 April 2013 4:46 PM
Proof 5
5 Administrative expenses
Employee benefits expenses (note 7)
Depreciation
Other expenses
2012
£’000
16,691
1,015
2011
£’000
13,679
697
6,320
24,026
6,500
20,876
Auditors’ remuneration in their capacity as auditors of the parent company is £7,000 (2011: £7,000) and in their capacity as
auditor of subsidiary companies is £60,500 (2011: £60,000). Non-audit remuneration in respect of tax compliance services
totalled £14,550 (2011: £12,000) and in respect of other advice totalled £7,150 (2011: £15,500).
6 Finance costs
Interest payable on bank and other loans and overdraft
7 Directors and employees remuneration
Employee benefits expense
Expense recognised for employee benefits is analysed below:
Wages and salaries
Social security costs
Other pension costs - defined contribution plans
Share option charge - cash settled
Share option charge - equity settled
The average number of persons (including Directors) employed by the Group during the year was:
- administrative staff
- sales staff
2012
£’000
363
2011
£’000
126
2012
£’000
17,896
1,787
305
394
2011
£’000
14,086
1,461
287
178
32
20,414
31
16,043
Number
Number
632
61
693
457
41
498
Of the £20,414,000 total employee benefits cost above, £3,722,774 relating to Eos is included in cost of sales and therefore
not reflected in administrative expenses in note 5 above.
Included in cost of sales are temporary workers’ remuneration paid through the temporary payroll of subsidiary companies
as follows:
Wages and salaries
Social security costs
The average number of temporary workers contracted by the Group during the year was:
2012
£’000
2011
£’000
300,312
224,493
17,993
318,305
14,313
238,806
Number
22,223
Number
15,811
22405.04
9 April 2013 4:46 PM
Proof 5
29
Notes to the financial statements (continued)
For the year ended 31 December 2012
Directors’ remuneration
The remuneration of the Directors, which was all paid by Staffline Recruitment Limited, the Company’s wholly owned
subsidiary undertaking, was as follows:
2012
Salary and fees
Bonus
Benefits in kind
Subtotal
Pension contributions
Share- based
employee
remuneration
Total
2011
Salary and fees
Bonus
Benefits in kind
Subtotal
Pension contributions
Share- based
employee
remuneration
Total
A Hogarth M Evans T Jackson
S Brittain
D Martyn N Keegan J Crabtree
£'000
£'000
£'000
£'000
£'000
£'000
£'000
192
45
2
239
18
101
358
146
20
2
168
13
51
232
138
19
2
159
12
70
241
138
19
2
159
13
68
240
92
-
-
92
5
-
97
35
-
-
35
-
-
35
62
-
-
62
-
-
62
A Hogarth M Evans T Jackson
S Brittain
D Martyn N Keegan J Crabtree
£'000
£'000
£'000
£'000
£'000
£'000
£'000
186
98
2
286
18
47
351
127
69
2
198
12
24
234
115
62
2
179
11
120
65
2
187
11
33
223
32
230
-
-
-
-
-
-
-
34
-
-
34
-
-
34
53
-
-
53
-
-
53
Total
£'000
803
103
8
914
61
290
1,265
Total
£'000
635
294
8
937
52
136
1,125
Share-based employee remuneration
Approved Employee Share Option Plan
At 31 December 2012 the Group operated a share based payment scheme (EMI scheme) for certain employees. However
as the number of employees now exceeds 250 the qualification criteria for an EMI scheme are no longer met so no further
share options can be issued under the scheme.
The share option scheme was available to all full time members of staff, with the exception of the Directors, subject to the
rules of the scheme, the key points of which are as follows;
●● only staff with in excess of six months service are eligible;
●● the number of options granted is a factor of length of service and current salary;
●● options are exercisable between two and seven years of being granted;
●● except in certain limited circumstances all options lapse if an employee leaves the Group; and
●● exercise of options is not subject to any specific performance criteria.
Performance Related Share Option Plan
The share options issued to Shaun Brittain, Marshall Evans, Andy Hogarth and Tim Jackson and two other senior executives
have different conditions which are detailed below.
These share options have a performance condition based on the increase in reported Diluted Earnings per Share of the
Group from the base of 10.7p in December 2008 to the achieved Diluted EPS in the year to December 2012. The award is
scaled up to a maximum of 150,000 shares for a doubling of diluted EPS.
The share options can be exercised between three and seven years of being granted. Details of the Directors’ share
options are as follows:
At 1 Jan
Exercised/
At 31 Dec
Exercise
Date of grant
19 Oct 2009
19 Oct 2009
19 Oct 2009
19 Oct 2009
2012
Granted
Lapsed
150,000
150,000
150,000
150,000
-
-
-
-
-
-
-
-
2012
150,000
150,000
150,000
150,000
price
47.5p
47.5p
47.5p
47.5p
A Hogarth
M Evans
S Brittain
T Jackson
30
22405.04
9 April 2013 4:46 PM
Proof 5
Except as noted under the Joint Share Option Plan below, all share based employee remuneration will be settled in equity.
The Group has no other legal or constructive obligation to repurchase or settle the options in cash.
Share options and the weighted average exercise price are as follows for the reporting periods presented:
Outstanding at start of period
Granted
Lapsed
Exercised
Outstanding at end of period
Weighted
average
exercise
price
(pence)
Number
1,180,095
-
(207,263)
(43,663)
929,169
2012
Number
73
-
1,187,799
200,000
(176)
(4,577)
(105)
(203,127)
50 1,180,095
Weighted
average
exercise
price
(pence)
2011
62
179
(93)
(105)
73
The Group has the following outstanding share options and exercise prices:
Weighted
Weighted
average
average
exercise
Contractual
price
life
(pence)
(months)
2012
£’000
20112
£’000
-
126
167
92
54
48
-
-
-
-
-
-
-
-
Number
-
3,466
9,976
7,991
7,736
900,000
-
Weighted
Weighted
average
average
exercise
Contractual
price
life
(pence)
(months)
2011
£’000
2011
£’000
94
124
158
94
54
48
179
-
-
-
-
-
12
54
Number
1,400
10,186
23,101
25,929
19,479
900,000
200,000
Date exercisable and (option life):
2007 (up to 2012)
2008 (up to 2013)
2009 (up to 2014)
2010 (up to 2015)
2011 (up to 2016)
2013 (up to 2016)
2016 (up to 2021)
Share options have exercise prices between 47.5p and 174.0p. The weighted average share price during the year was
232p (2011: 213p).
During the year, options over 43,663 ordinary shares (2011: 203,127) were exercised and the market price on the date of
exercise ranged from 238.0p – 240.0p (2011: 209.5p – 223.5p).
The number of share options exercisable at the end of the year was 29,169 (2011: 80,095). The weighted average price of
the options exercisable at the end of the year was 50p (2011: 73p).
The fair value of options granted was determined using the Black-Scholes valuation model. Significant inputs into the
calculations were:
●● share price at date of grant
●● exercise prices as detailed above
●● 30% (2011: 30%) volatility based on expected and historical share price
●● a risk free interest rate of 4% (2011: 4%)
●● all options are assumed to be exercised after two years from the date of grant of the options (with the exception of the
Directors and senior managers options which are expected to vest after three years)
●● dividends in line with current levels.
22405.04
9 April 2013 4:46 PM
Proof 5
31
Notes to the financial statements (continued)
For the year ended 31 December 2012
Joint Share Ownership Plan
In 2010 the Company established a Joint Share Ownership Plan (JSOP) to provide additional incentives to senior executives.
The directors and senior executives participating in the JSOP acquired an interest in the shares jointly with the Staffline
Group plc Employee Benefit Trust. The directors’ interests are detailed below:
A Hogarth
M Evans
S Brittain
T Jackson
Award date
6 Sep 2010
6 Sep 2010
6 Sep 2010
6 Sep 2010
Participation
Interest over
Date on which
price
(number of shares)
92p
92p
92p
92p
306,863
145,400
200,000
205,000
exercisable
30/06/2015
30/06/2015
30/06/2015
30/06/2015
The JSOP interest runs from the date of the award until 30 June 2015. During this period the right to sell the JSOP award
shares is not at the discretion of the Directors but instead at the discretion of the Employee Benefit Trust. On the eventual
disposal of the shares, the amount received by the Directors is calculated based on certain business performance
conditions. The eventual payment to the Directors takes into account diluted EPS adjusted for amortisation of intangibles
in any full year up to 2014 (from a minimum of 24p to a maximum of 42p) and the share price at the date of disposal. Diluted
EPS adjusted for amortisation of intangibles is disclosed in note 9.
The JSOP is settled in cash and therefore accounted for as a cash settled scheme.
The fair value of the liability was determined using the Binomial valuation model as at 31 December 2012. Significant inputs
into the calculations were:
●● share price at date of grant;
●● exercise prices as detailed above;
●● 30% (2011: 30%) volatility based on expected and historical share price;
●● a risk free interest rate of 4% (2011: 4%);
●● the disposal of shares and settlement of scheme on 30 June 2015;
●● 75% (2011: 62.5%) pay-out ratio based on management expectations; and
●● 33.3% forfeiture rate to account for employees that leave before the vesting date.
Share-based employee remuneration
In total £426,000 of employee remuneration expense has been included in the consolidated statement of comprehensive
income for the year ended 31 December 2012 (2011: £209,000) which increased the share based payment reserve by
£32,000 (2011: £31,000) in respect of equity settled schemes and created a liability of £394,000 (2011: £178,000) in respect
of cash settled schemes.
Key management personnel
The key management are considered to be the Board of Directors of Staffline Group plc, whose remuneration can be seen
within note 7. Disclosures in accordance with IAS 24 are included in note 21.
8 Tax expense
The relationship between the expected tax expense and the tax expense actually recognised in the statement of
comprehensive income can be reconciled as follows:
Result for the year before tax
Tax rate
Expected tax expense
Adjustment for non-deductible expenses relating to short term
temporary differences
Other non-deductible expenses
Adjustment in respect of prior year
Deferred tax credit
Actual tax expense
Tax expense comprises:
Current tax expense
Deferred tax expense
- origination and reversal of temporary differences
Tax expense
32
2012
%
24.5%
24.8%
2012
£’000
8,521
2,088
13
587
-
(577)
2,111
2,688
(577)
2,111
2011
%
26.5%
26.2%
2011
£’000
7,534
1,997
20
390
124
(555)
1,976
2,531
(555)
1,976
22405.04
9 April 2013 4:46 PM
Proof 5
9 Earnings per share
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 any own shares (JSOP). The calculation of
the diluted earnings per share is based on the basic earnings per share adjusted to allow for all dilutive potential ordinary
shares.
Details of the earnings and weighted average number of shares used in the calculations are set out below:
Earnings (£'000)
Weighted average number of shares
Earnings per share (pence)
Earnings per share (pence) before amortisation
Basic
2012
6,410
21,614,114
29.7p
35.9p
Basic
2011
5,558
Diluted
Diluted
2012
6,410
2011
5,558
21,446,973 22,343,159 22,223,142
25.9p
35.1p
28.7p
34.8p
25.0p
33.9p
The weighted average number of shares has been increased by 729,045 (2011: 776,169) shares to take account of all
dilutive potential ordinary shares that could be issued under the share option scheme and all shares issued during the year
excluding own shares.
Dividends
During the year, Staffline Group plc paid interim dividends of £670,210 (2011: £623,853) to its equity shareholders. This
represents a payment of 3.1p (2011: 2.9p) per share. A final dividend of £1,081,566 has been proposed (2011: £908,027) but
has not been accrued within these financial statements. This represents a payment of 5.0p (2011: 4.2p) per share. The final
dividend for 2011 was declared and paid in 2012.
10 Goodwill
Gross carrying amount
At 1 January 2011
Additions
At 31 December 2011
Additions
At 31 December 2012
Goodwill above relates to the following acquisitions:
Staffline Recruitment Limited
Onsite Partnership Limited
Peter Rowley Limited
A La Carte Recruitment Limited
Qubic Recruitment Solutions Limited
Ethos Recruitment Limited
Eos Works Group Limited
Taskforce Recruitment Limited
Go New Recruitment Limited
Total
£’000
26,162
3,870
30,032
939
30,971
Original cost
£’000
22,326
1,855
764
744
745
76
1,585
1,937
939
Date of acquisition
8 December 2004
16 March 2007
1 December 2009
17 May 2010
5 November 2010
14 March 2011
21 April 2011
12 September 2011
14 September 2012
Following acquisition, with the exception of Eos, each of the businesses have been, or are in the process of being, fully
integrated into the core recruitment business of the group. Therefore, management consider there to be two cash
generating units (in line with the business segments defined in note 4), and have tested these two cash generating units
for impairment. The total net book value of other intangible assets allocated to the two cash generating units is as follows:
Recruitment services: £1,446,000 (2011: £1,860,000) and Welfare to Work £1,585,000 (2011: £2,038,000).
For both segments the recoverable amount of goodwill was determined based on a value-in-use calculation, covering a
detailed one year forecast, followed by an extrapolation of expected cash flows over the next ten years at a growth rate
of 5% (Recruitment Services) and 2% (Welfare to Work), and a pre-tax discount rate of 10% based on weighted average
cost of capital. The recruitment services growth rate is based on the continuation of historic organic growth achieved by
the business over the past 10 years. This has been achieved by sales growth with existing and new customers offset
partially by a reduction in gross margins.
22405.04
9 April 2013 4:46 PM
Proof 5
33
Notes to the financial statements (continued)
For the year ended 31 December 2012
The growth rate exceeds the long term average growth rate for the markets in which the two segments operate, but this
is deemed reasonable based on the reasons noted above. Management have used a forecast period of ten years as they
feel this represents the minimum period over which the business model they have developed is sustainable. Management’s
key assumptions for both segments are that there will be no significant changes in the business and that turnover and profit
growth will be below historic levels. In respect of the Welfare to Work segment management have assumed that the
existing government contract will be replaced with like contracts over time. Management have considered internal and
external market data in setting their assumptions.
Apart from the considerations described in determining the value-in-use of the cash generating units above, the Group’s
management are not currently aware of any other probable changes that would necessitate changes in its key estimates.
Impairment testing
For the purpose of annual impairment testing, goodwill is allocated to the cash generating units expected to benefit from
the synergies of the business combinations in which the goodwill arises as follows:
Recruitment services
Welfare to work services
Goodwill as at 31 December
2012
£’000
29,386
1,585
30,971
2011
£’000
28,447
1,585
30,032
The Directors do not believe that any reasonably possible changes in the assumptions used in calculating the value-in-use
would result in the recoverable amount of goodwill falling below the carrying value and impairment becoming necessary.
11 Other intangible assets
The Group’s other intangible assets include the customer contracts and lists obtained through the acquisition of the
companies in note 10 above. The expected remaining useful life of these assets is 1 - 5 years. The carrying amounts for the
financial year under review can be analysed as follows:
Gross carrying amount
At 1 January 2011
Additions through business combinations
At 31 December 2011
Additions through business combinations
At 31 December 2012
Amortisation
At 1 January 2011
Provided in year
At 31 December 2011
Provided in year
At 31 December 2012
Net book amount at 31 December 2012
Net book amount at 31 December 2011
Customer
Customer
contracts
£’000
-
3,076
3,076
-
3,076
£’000
-
1,038
1,038
453
1,491
1,585
2,038
lists
£’000
2,350
2,132
4,482
935
5,417
£’000
1,054
1,568
2,622
1,349
3,971
1,446
1,860
Total
£’000
2,350
5,208
7,558
935
8,493
£’000
1,054
2,606
3,660
1,802
5,462
3,031
3,898
The carrying amount of the material intangible asset – Eos Work Programme contract is £1,585,000. The remaining
amortisation period is 3.5 years. There are no intangible assets with restricted title.
34
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9 April 2013 4:46 PM
Proof 5
12 Property, plant and equipment
Gross carrying amount
At 1 January 2011
Additions
Additions - business combinations
Disposals
At 31 December 2011
Additions
Additions - business combinations
Disposals
At 31 December 2012
Depreciation
At 1 January 2011
Provided in year
Disposals
At 31 December 2011
Provided in year
Disposals
At 31 December 2012
Net book value at 31 December 2012
Net book value at 31 December 2011
Land and
Computer
Fixtures
Motor
buildings
equipment
and fittings
vehicles
£’000
600
570
808
-
1,978
63
-
-
2,041
36
264
-
300
348
-
648
1,393
1,678
£’000
590
464
184
(95)
1,143
385
26
(29)
1,525
116
300
(94)
322
479
(14)
787
738
821
£’000
157
255
107
(158)
361
95
38
(65)
429
124
117
(158)
83
182
(40)
225
204
278
£’000
45
-
14
(13)
46
-
-
(20)
26
-
16
(4)
12
6
-
18
8
34
Total
£’000
1,392
1,289
1,113
(266)
3,528
543
64
(114)
4,021
276
697
(256)
717
1,015
(54)
1,678
2,343
2,811
All assets stated above are secured against bank loans outstanding at the year end.
13 Trade and other receivables
Trade and other receivables
Accrued income
2012
£’000
58,472
1,126
59,598
2011
£’000
46,744
-
46,744
Trade and other receivables are usually due within 14 - 30 days and do not bear any effective interest rate. All trade
receivables are subject to credit risk exposure. Other than those disclosed in note 4, the Group does not identify specific
concentrations of credit risk with regards to trade and other receivables as the amounts recognised represent a large
number of receivables from various customers.
The fair value of these short term financial assets is not individually determined as the carrying amount is a reasonable
approximation of fair value.
Some of the unimpaired trade receivables are past due as at the reporting date. The age of financial assets past due but
not impaired, is as follows:
Not more than three months
More than three months but no more than six months
14 Cash and cash equivalents
Cash and cash equivalents
Bank overdraft (see note 16)
Cash and cash equivalents per cash flow statement
2012
£’000
13,586
293
13,879
2012
£’000
3,650
(32)
3,618
2011
£’000
8,585
139
8,724
2011
£’000
3,687
(1,846)
1,841
Cash and cash equivalents consist of cash on hand and balances with banks only. At the year-end £3,650,000 (2011:
£3,687,000) of cash on hand and balances with banks were held by subsidiary undertakings however this balance is
available for use by the Company.
22405.04
9 April 2013 4:46 PM
Proof 5
35
Notes to the financial statements (continued)
For the year ended 31 December 2012
15 Trade and other payables
Trade and other payables
Accruals
Deferred income
2012
£’000
27,926
18,212
540
46,678
2011
£’000
21,752
13,624
3,087
38,463
The fair value of trade and other payables has not been separately disclosed as, due to their short duration, the Directors
consider the carrying amounts recognised in the balance sheet to be a reasonable approximation of their fair value. Trade
and other payables include a share based payment liability of £588,000.
16 Borrowings
Bank loans and overdrafts are repayable as follows:
In one year or less or on demand
In more than one year but not more than two years
In more than two years but not more than three years
In more than three years but not more than four years
Debt issue costs
Split:
Current liabilities:
Bank loans
Overdraft
Non-current liabilities:
Bank loans and revolving credit facility
2012
£’000
678
7,556
-
-
8,234
-
8,234
646
32
678
7,556
8,234
2011
£’000
2,984
603
5,034
25
8,646
(38)
8,608
1,138
1,846
2,984
5,624
8,608
The bank loans and revolving credit facility (RCF) and overdrafts are secured by a debenture over all the assets of the
Group. The balance of the first bank loan is repayable in one instalment of £268,000 plus one final payment of £322,000
on 30 June 2013. Interest accrues on the loan at 1.0% (2011: 1.0%) above base rate.
The second bank loan is secured by a first legal charge over a freehold property and is repayable in 120 monthly capital
and interest payments of £5,830 until 20 June 2015. Interest accrues on the loan at 1.5% (2011: 1.5%) above base rate.
The RCF of £7.5 million was drawn down in full on 1 July 2012. The facility is repayable at the latest on 21 July 2014. Interest
accrues on the loan at between 2.2% and 2.5% above LIBOR plus a non-utilisation fee of between 0.88% and 1%.
During the period repayments totalling £1,060,000 (2011: £809,000) were made against the bank loans. The bank loans
contain various covenants which, if breached, could lead to the loans becoming payable on demand. The relevant
covenants have all been comfortably satisfied in 2011 and 2012.
On the basis of discounting the future loan repayments at a rate of 5% the theoretical fair value of the bank and other loans
is £627,432 at 31 December 2012 (2011: £1,680,777). Fair values of the bank and other loans have been determined by
calculating the present values at the balance sheet date of the future cash flows, using fixed effective market interest rates
available to the Group.
36
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Proof 5
17 Other liabilities
Due within one year
Deferred income
Deferred consideration
Contingent consideration
Due after more than one year
Deferred income
Contingent consideration
2012
£’000
17
1,158
1,753
2,928
70
-
70
2011
£’000
17
-
2,328
2,345
85
307
392
The deferred income relates to the current head office building for the Group which was subject to a sale and lease back
transaction in December 2007, with a sales price above fair value. The excess of proceeds over fair value has been
deferred and is being amortised over the remaining lease term. The subsequent leasing agreement is treated as an
operating lease. See note 22 for further information relating to details on the Group’s operating lease agreements.
See note 20 for further details on the deferred consideration and contingent consideration balances which relate to
acquisitions made in the current and prior year.
18 Deferred tax
Deferred tax liabilities (assets)
Non current assets
-Other intangible assets
Current liabilities
-share based payment liability
Recognised as:
Deferred tax asset
Deferred tax liability
Deferred tax liabilities (assets)
Non current assets
-Other intangible assets
Recognised as:
Deferred tax liability
Recognised
Recognised
1 January
in business
2012
£’000
combination
£’000
180
-
180
946
-
946
-
946
in profit
and loss
£’000
(437)
(140)
(577)
Recognised
Recognised
1 January
in business
2011
£’000
combination
£’000
in profit
and loss
£’000
1,500
(554)
-
-
31
December
2012
£’000
689
(140)
549
(140)
689
31
December
2011
£’000
946
946
There are unprovided deferred tax assets amounting to £200,000 (2011:£Nil) in relation to capital allowances. The gross
amount is £834,000. This amount has not been recognised as it is probable that the temporary difference will not reverse
in the foreseeable future.
22405.04
9 April 2013 4:46 PM
Proof 5
37
Notes to the financial statements (continued)
For the year ended 31 December 2012
19 Share capital
Authorised
30,000,000 ordinary 10p shares
Allotted and issued
22,888,578 ordinary 10p shares
Shares issued and fully paid at the beginning of the period
Shares issued during the year
Shares previously issued paid during the year
Shares issued and fully paid
Shares issued but not fully paid
Shares issued
Shares authorised but unissued
Total equity shares issued at end of period
2012
£’000
2011
£’000
3,000
3,000
2,289
2,264
Ordinary 10p shares
Year ended
Year ended
31 December 2012
31 December 2011
22,831,629
22,628,502
43,663
13,286
203,127
-
22,888,578
22,831,629
-
22,888,578
7,111,422
30,000,000
13,286
22,844,915
7,155,085
30,000,000
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 1,257,263 shares held by the EBT where the right to dividends has been waived.
At 31 December 2012 all issued shares were fully paid, at 31 December 2011 13,286 shares were not fully paid.
20 Business combinations
The Company made a total of 4 acquisitions during the year. An adjustment was required to the book values of the assets
and liabilities of the businesses acquired in order to present the net assets at fair values in accordance with group
accounting policies. The purchases were accounted for as acquisitions. Goodwill is primarily related to growth expectations,
expected future profitability, the skill and expertise of the acquired workforce, and expected cost synergies. The goodwill
that arose from these business combinations is not expected to be deductible for tax purposes.
The following acquisitions were made during the year to enhance the Group’s recruitment services segment:
●● On 10 August 2012 a Group undertaking acquired the trade and assets of DKM Driving Limited and DKM Energy
Limited, based in Nottingham;
●● On 14 September 2012 a Group undertaking acquired Go New Recruitment Limited, based in Swindon and Go New
Recruitment (Gloucester) Limited based in Gloucester and assumed control by acquiring 100% of the voting rights;
●● On 23 October 2012 a Group undertaking acquired Select Appointments Limited and assumed control by acquiring
100% of the voting rights; and
●● On 11 December 2012 a Group undertaking acquired the trade and assets of GB Resourcing Limited, based in
Birmingham.
38
22405.04
9 April 2013 4:46 PM
Proof 5
These acquisitions were individually immaterial to the Group and have, therefore, been disclosed in aggregate. The
aggregate amounts in respect of the above are detailed below:
Intangible Assets - customer lists
Fixtures and fittings
Trade and other receivables
Cash at bank
Deferred tax asset
Deferred tax liability
Trade and other payables
Net assets at acquisition
Goodwill
Satisfied by:
Cash
Contingent consideration
Deferred consideration
Total Book
Provisional
Value at
Fair Value
Fair Value
Acquisition
Adjustment
to group
£’000
-
16
6,372
315
246
-
(3,426)
3,523
£’000
935
-
-
-
(211)
(185)
-
539
£’000
935
16
6,372
315
35
(185)
(3,426)
4,062
939
5,001
2,810
1,033
1,158
5,001
Acquisition costs recognised as expenses (included within administrative expenses) in the year amounted to £82,597
(2011: £57,000).
Consideration transferred
The acquisitions were settled in cash amounting to £2,810,000 with future consideration payable of £1,158,000. The
purchase agreements included an additional contingent consideration of £1,033,000 payable only if the profits met the
target level agreed by both parties. The additional consideration will be paid in accordance with the specific agreements
for each acquisition. The fair value of the contingent consideration liability initially recognised also reflects management’s
estimate as at 31 December 2012 based on current results and forecasts.
Identifiable net assets
The fair value of trade and other receivables acquired as part of the business combination amounted to £6,372,000 which
equated to the gross contractual amount.
Contribution to the Group results
The above acquisitions contributed post acquisition revenues of £3,597,000 and profits totalling £129,000. If the acquisitions
had been made on 1 January 2012 revenues of £18,390,000 and an operating profit before amortisation of intangible assets
of £502,000 would have been included.
Goodwill
The goodwill recognised relates to expected synergies to be achieved as a result of combining the operations of the
businesses.
Acquisition of non controlling interest
On 26 July 2012 the company acquired the balance of shares that it did not already own in House of Logistics Limited for
nil consideration. Following the transaction the company owns 100% of the share capital and the subsidiary became a
dormant company.
22405.04
9 April 2013 4:46 PM
Proof 5
39
Notes to the financial statements (continued)
For the year ended 31 December 2012
21 Related party transactions
The only related parties are the Group’s Directors and Group undertakings. Transactions with wholly owned Group entities
are exempt from disclosure.
Transactions with Group undertakings not wholly owned
On 29 July 2012 the business and assets of House of Logistics Limited were transferred to a Group undertaking. Prior to
that point, during the year the Group undertaking has paid for certain expenses on behalf of House of Logistics Limited
during the year amounting to £424,230 (2011: £1,700,538). At 31 December 2012 there is no intercompany balance between
the Group and House of Logistics Limited as this was eliminated on consolidation (2011: £382,160).
Transactions with Group directors
The Group Directors’ personal remuneration includes the following expenses:
Short-term employee benefits:
Salaries and fees
Bonus – unpaid
Social security costs
Benefits in kind
Post employment benefits:
Pension contributions
Share based payments:
Share based employee remuneration
2012
£’000
2011
£’000
803
103
140
8
61
290
635
294
190
8
52
136
1,405
1,315
22 Operating leases
The Group’s aggregate minimum operating lease payments for the full remaining lives of the leases are as follows:
In one year or less
Between one and five years
In five years or more
2012
2011
Land and
Land and
buildings
buildings
£’000
101
1,865
996
2,962
£’000
113
1,864
1,722
3,699
Lease payments recognised as an expense during the year ended 31 December 2012 amounted to £1,163,000
(2011: £477,000).
Operating lease agreements do not contain any contingent rent clauses. None of the operating lease agreements contain
renewal or purchase options or escalation clauses or any restrictions regarding dividends, future leasing or additional debt.
No sub-lease
income
is due as all assets held under
lease agreements are used exclusively by
the Group.
23 Contingencies
The Group had no contingent assets or liabilities at 31 December 2012 or 31 December 2011.
24 Capital commitments
The Group had no capital commitments at 31 December 2012 or 31 December 2011.
40
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9 April 2013 4:46 PM
Proof 5
25 Risk management objectives and policies
The Group is exposed to a variety of financial risks through its use of financial instruments which result from both its
operating and investing activities. The Group’s risk management is coordinated at its headquarters, in close co-operation
with the Board of Directors.
The Group does not actively engage in the trading of financial assets for speculative purposes. The most significant
financial risks to which the Group is exposed are described below.
Credit risk
Generally, the Group’s maximum exposure to credit risk is limited to the carrying amount of the financial assets recognised
at the balance sheet date, as summarised below:
Trade and other receivables (note 13)
Cash and cash equivalents
Accrued income
2012
2011
Loans and
Loans and
receivables
receivables
and
and
balance
balance
sheet totals
sheet totals
£’000
58,472
3,650
1,126
63,248
£’000
46,744
3,687
-
50,431
Credit risk is only disclosed in circumstances where the maximum potential loss differs significantly from the financial
asset’s carrying amount.
The Group’s trade and other receivables are actively monitored to avoid significant concentrations of credit risk. Details in
respect of trade receivables at 31 December 2012 are provided in note 13.
The Group has adopted a policy of carefully monitoring all customers, especially those who lack an appropriate credit
history.
Liquidity risk
The Group seeks to manage financial risks to ensure sufficient liquidity is available to meet foreseeable needs and to invest
cash assets safely and profitably. Short term flexibility is achieved by the use of a bank overdraft facility up to £15,000,000.
Interest rate risk
All financial liabilities of the Group are subject to floating interest rates. Competitive rates have been renegotiated with the
Group’s bankers and the rate paid on bank loans has been set at 1% or 1.5% above base rate, and interest accrues on the
RCF at between 2.2% and 2.5% above LIBOR. The following table illustrates the sensitivity of the net result for the year and
equity to a reasonably possible change in interest rates of +/- one percentage point with effect from the beginning of the
year.
(Decrease)/increase in net result and equity £’000
Foreign currency sensitivity
2012
£’000
+1%
(85)
2012
%
–1%
85
2011
£’000
+1%
(86)
20101
%
–1%
86
Most of the Group’s transactions are carried out in sterling. Exposure to currency exchange rates arises from the Group’s
overseas sales and purchases which are predominantly denominated in Polish zloty. These sales and purchases are
immaterial to the Group’s total sales and purchases. Due to the highly immaterial nature of these foreign currency
transactions the Group has not entered into any foreign currency risk mitigation strategies to date. This will be kept under
review as overseas business continues to grow.
22405.04
9 April 2013 4:46 PM
Proof 5
41
Notes to the financial statements (continued)
For the year ended 31 December 2012
Financial liabilities
The Group’s liabilities are classified as follows:
2012
2012
2012
2012
Financial liabilities
Other financial
at fair value through
liabilities at amortised
Liabilities not within
cost
the scope of IAS 39
Balance sheet total
Bank loan
RCF
Overdraft
Trade and other payables
Accruals
Deferred income
Other liabilities
Deferred tax
Corporation tax
Total
Bank loan
RCF
Overdraft
Trade and other payables
Accruals
Deferred income
Other liabilities
Deferred tax
Corporation tax
Total
profit or loss
£’000
-
-
-
-
-
-
1,753
-
-
£’000
702
7,500
32
27,338
11,989
-
1,158
-
-
£’000
-
-
-
588
6,223
540
87
689
1,325
9,452
£’000
702
7,500
32
27,926
18,212
540
2,998
689
1,325
59,924
1,753
48,719
2011
2011
2011
2011
Financial liabilities
Other financial
at fair value through
liabilities at amortised
Liabilities not within
profit or loss
£’000
-
-
-
-
2,635
-
-
-
-
cost
the scope of IAS 39
Balance sheet total
£’000
1,762
5,000
1,846
21,558
-
9,384
-
-
-
£’000
-
-
-
194
102
4,240
3,087
946
1,519
£’000
1,762
5,000
1,846
21,752
2,737
13,624
3,087
946
1,519
2,635
39,550
10,088
52,273
Fair value represents amounts at which an asset could be exchanged or a liability settled on an arm’s length basis.
Financial assets and financial liabilities measured at fair value are grouped into three levels of fair value hierarchy. This
grouping is determined based on the lowest level of significant inputs used in the fair value measurement, as follows:
●● level 1 - quoted prices in active markets for identical assets and liabilities
●● level 2 - inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly or
indirectly
●● level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs)
The Group has financial liabilities in the level 3 classification which are as follows:
Other liabilities include £1,753,000 of contingent consideration which has been measured using management’s estimate of
the likely amounts payable in respect of acquisitions made in both the current and prior year and the application of a
discount rate.
42
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Proof 5
Maturity of financial liabilities
The analysis of the maturity of financial liabilities at 31 December 2012 is as follows:
2012
Less
than
Two
More
to five
than five
2011
Less
than
Two
More
to five
than five
Bank loan
RCF
Overdraft
Trade and other payables
Other liabilities
Total
one year
£’000
646
-
32
39,327
2,911
42,916
years
£’000
56
7,500
-
-
-
7,556
26 Cash flows from operating activities
Profit before taxation
Adjustments for:
Finance costs
Depreciation, loss on disposal and amortisation
Operating profit before changes in working capital and
provisions
Change in trade and other receivables
Change in trade and other payables
Cash generated from operations*
Employee cash settled share options
Employee equity settled share options
Taxes paid
Net cash inflow from operating activities
Total
one year
years
£’000
-
-
-
£’000
702
7,500
32
39,327
-
-
2,911
- 50,472
£’000
1,138
-
1,846
30,942
2,345
36,271
years
£’000
624
5,000
-
-
290
5,914
years
£’000
-
-
-
-
-
-
Total
£’000
1,762
5,000
1,846
30,942
2,635
42,185
Year ended
Year ended
31 December 2012
31 December 2011
8,521
363
2,853
11,737
(6,482)
4,044
9,299
394
32
(2,882)
6,843
7,534
126
3,137
10,797
(10,324)
1,506
1,979
178
31
(1,786)
402
* The cash generated from operations in 2011 was lowered by £7,141,000 as a result of creditors acquired through
acquisitions but paid after acquisition.
27 Capital management policies and procedures
The Board’s current priorities for the Group’s free cash flow are to fund Group development, maintain the strength of the
balance sheet and to support a sustainable dividend policy. The Group’s overall strategy remains unchanged from last year
in that it manages its capital to ensure that the Group will be able to continue as a going concern through the economic
cycle.
The capital structure of the Group consists of net debt, which is represented by cash and cash equivalents (note 14), bank
loans, overdrafts and revolving credit facilities (note 16) and equity attributable to equity holders of the parent, comprising
issued share capital, reserves and retained earnings as disclosed in note 19.
The Group is not restricted to any externally imposed capital requirements.
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43
Notes to the financial statements (continued)
For the year ended 31 December 2012
28 Presentation of summarised consolidated statement of comprehensive income
The effect of the amortisation of the Group’s intangible assets has been separately disclosed on the face of the consolidated
statement of comprehensive income. This is reported below, together with the comparatives for 2011.
2012
Before
2011
Before
amortisation
Amortisation
Total
amortisation
Amortisation
£’000
£’000
£’000
£’000
£’000
Continuing operations
Sales revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit before amortisation of
intangibles
Administrative expenses – share based
payment charge
Amortisation of intangibles
Profit from operations
Finance costs
Profit for the period before taxation
Tax expense
Net profit and total comprehensive
366,980
(332,268)
34,712
(23,600)
11,112
(426)
-
10,686
(363)
10,323
(2,559)
-
-
-
-
-
-
(1,802)
(1,802)
-
(1,802)
448
366,980
(332,268)
34,712
(23,600)
288,303
(257,161)
31,142
(20,667)
11,112
10,475
(426)
(1,802)
8,884
(363)
8,521
(2,111)
(209)
-
10,266
(126)
10,140
(2,611)
-
-
-
-
-
-
(2,606)
(2,606)
-
(2,606)
635
Total
£’000
288,303
(257,161)
31,142
(20,667)
10,475
(209)
(2,606)
7,660
(126)
7,534
(1,976)
income for the period
7,764
(1,354)
6,410
7,529
(1,971)
5,558
The above splits out 2011 so that it is directly comparable to 2012.
44
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Proof 5
Staffline Group plc
Company statutory financial statements
(prepared under UK GAAP)
For the year ended 31 December 2012
Company number 05268636
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45
Contents
Directors’ responsibilities statement
Report of the independent auditor
Principal accounting policies
Balance sheet
Notes to the financial statements
47
48
49
50
51 – 52
46
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Proof 5
Director’s responsibility statement
For the year ended 31 December 2012
The Directors are responsible for preparing the Directors’ Report and the company financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors
have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and applicable laws). Under company law the Directors must not approve
the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss
of the company for that period. In preparing these financial statements, the Directors are required to:
●● select suitable accounting policies and then apply them consistently;
●● make judgments and accounting estimates that are reasonable and prudent;
●● state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed
and explained in the financial statements;
●● prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will
continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and
enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
The Directors confirm that:
●● so far as each Director is aware, there is no relevant audit information of which the company’s auditors are unaware;
and
●● the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit
information and to establish that the auditors are aware of that information.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
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47
Independent auditor’s report to the members of Staffline Group plc
For the year ended 31 December 2012
We have audited the parent company financial statements of Staffline Group plc for the year ended 31 December 2012
which comprise the parent company balance sheet and the related notes. The financial reporting framework that has been
applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice).
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors and auditors
As explained more fully in the Directors’ Responsibility Statement set out on page 47, the Directors are responsible for the
preparation of the parent company financial statements and for being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the parent company financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing
Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit and financial statements
A description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/apb/
scope/private.cfm.
Opinion on financial statements
In our opinion the parent company financial statements:
●● give a true and fair view of the state of the company’s affairs as at 31 December 2012;
●● have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
●● have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are
prepared is consistent with the parent company financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you
if, in our opinion:
●● adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
●● the parent company financial statements are not in agreement with the accounting records and returns; or
●● certain disclosures of Directors’ remuneration specified by law are not made; or
●● we have not received all the information and explanations we require for our audit.
Other matters
We have reported separately on the group financial statements of Staffline Group plc for the year ended
31 December 2012.
David Munton
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
BIRMINGHAM
Date: 25 February 2013
48
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Proof 5
Principal accounting policies
For the year ended 31 December 2012
Basis of preparation
The financial statements have been prepared under the historical cost convention and in accordance with UK accounting
standards and applicable law.
The principal accounting policies of the Company are set out below which have remained unchanged from the
previous year.
During the current and previous years a technical breach of the Companies Act 2006 has been identified in relation to
dividends paid in 2011 and 2012. This arose due to the previous accounts filed at Companies House not showing sufficient
distributable reserves to cover the level of dividends paid. However, at the time the dividend was actually paid, sufficient
additional distributable reserves had been paid up to Staffline Group plc from its subsidiaries to ensure that Staffline Group
plc was able to pay the dividend. The directors will seek legal advice and will seek to remedy this breach at the earliest
opportunity.
Investments
Investments in the Company are included at cost less amounts written off. Where the consideration for the acquisition of
a subsidiary undertaking includes shares in the Company to which the provisions of Section 612 of the Companies Act 2006
apply, cost represents the nominal value of shares issued together with the fair value of any additional consideration given
and costs.
Deferred taxation
Deferred tax is recognised on all timing differences where the transactions or events that give the Company an obligation
to pay more tax in the future, or a right to pay less tax in the future, have occurred by the balance sheet date. Deferred
tax assets are recognised when it is more likely than not that they will be recovered. Deferred tax is measured using rates
of tax that have been enacted or substantively enacted by the balance sheet date. Deferred tax is not discounted.
Financial instruments
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements
entered into. An equity instrument is any contract that evidences a residual interest in the assets of the entity after
deducting all of its financial liabilities.
Where the contractual obligations of financial instruments (including share capital) are equivalent to a similar debt
instrument, those financial instruments are classed as financial liabilities. Financial liabilities are presented as such in the
balance sheet. Finance costs and gains or losses relating to financial liabilities are included in the profit and loss account.
Finance costs are calculated on a straight line basis.
Where the contractual terms of share capital do not have any terms meeting the definition of a financial liability then this is
classed as an equity instrument. Dividends and distributions relating to equity instruments are debited direct to equity.
Goodwill
Goodwill represents the excess of the fair value of the cost of a business acquisition over the Group’s share of the fair value
of assets and liabilities acquired as at the date of acquisition. Goodwill is amortised over 20 years which represents its
expected useful life.
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49
Company balance sheet
At 31 December 2012
Fixed assets
Investments
Intangible assets: Goodwill
Total fixed assets
Current assets – amounts due from group companies
Creditors: amounts falling due within one year
Net current assets/(liabilities)
Total assets less current liabilities and net assets
Capital and reserves
Called up share capital
Share premium account
Profit and loss account
Equity shareholder’s funds
Note
2012
£’000
2011
£’000
30
31
32
33
34
34
18,528
1,900
20,428
1,000
770
230
20,658
2,289
15,969
2,400
20,658
18,528
2,000
20,528
1,316
(1,316)
19,212
2,284
15,928
1,000
19,212
The financial statements were approved by the Board of Directors on 25 February 2013.
Andy Hogarth
Director
Tim Jackson
Director
50
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Proof 5
Notes to the UK GAAP financial statements
For the year ended 31 December 2012
28 Profit for the financial year
The Company has taken advantage of section 408 of the Companies Act 2006 and has not included its own profit and loss
account in these financial statements. The Company’s profit for the year before dividends paid was £1,500,000 (2011:
£1,436,935).
Auditors remuneration incurred by the Company during the year for audit services totalled £7,000 (2011: £7,000).
29 Directors and employees remuneration
As in previous years all Group Directors are remunerated by Staffline Recruitment Limited. Details of Directors’ remuneration
is disclosed within the Report on Remuneration on page 14.
The average number of persons (including Directors) employed by the Company during the year was 7 (2011: 6).
30 Fixed asset investments
Cost and net book amount at 31 December 2011 and 31 December 2012
The Company holds interests in the following companies:
Investment
in group
undertakings
£’000
18,528
Subsidiaries
share capital held
Country of incorporation
Nature of business
Proportion of ordinary
Staffline Recruitment Limited
Peter Rowley Limited*
A La Carte Recruitment Limited*
Staffline Polska Sp. zoo*
Staffline Gliwice Sp. zoo*
House of Logistics Limited*
Eos Works Limited*
Ethos Recruitment Limited*
Taskforce Recruitment Limited*
Go New Recruitment Limited*
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Go New Recruitment (Glos.) Limited*
100%
Select Appointments Limited*
100%
England and Wales
England and Wales
England and Wales
Poland
Poland
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Recruitment
Training
Recruitment
Recruitment
Recruitment
Business Consultancy
Welfare to work
Recruitment
Recruitment
Recruitment
Recruitment
Recruitment
*These companies are owned indirectly through other group companies.
Joint ventures
share capital held
Country of incorporation
Nature of business
Group Learner Limited
40%
England and Wales
Training
Proportion of ordinary
The financial position and performance of Group Learner Limited for the year ended 31 December 2012 is highly immaterial
to Staffline Group plc.
31 Goodwill
Cost at 31 December 2011
Amortisation provided in year
Gross carrying amount at 31 December 2012
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Proof 5
£’000
2,000
100
1,900
51
Notes to the UK GAAP financial statements (continued)
For the year ended 31 December 2012
32 Creditors: amounts falling due within one year
Amounts due to Group undertakings
33 Share capital
Authorised
2012
£’000
770
2012
£’000
2011
£’000
1,316
2011
£’000
30,000,000 (2011: 30,000,000) ordinary 10p shares
3,000
3,000
Allotted and issued
22,888,578 (2011: 22,844,915) ordinary 10p shares
2,289
2,284
Share options
At 31 December 2012 the following ordinary share options granted were outstanding
Date of grant
8 June 2006
9 December 2006
8 June 2007
1 October 2007
1 April 2008
1 October 2008
1 October 2009
20 October 2009
Number
Exercise price
Exercise period
1,908
1,558
7,613
2,363
3,822
4,169
7,736
900,000
130p
120p
174p
143p
121p
66p
54p
09/06/08 - 08/06/13
10/12/08 - 09/12/13
09/06/09 - 08/06/14
02/10/09 - 01/10/14
02/04/10 - 01/04/15
02/10/10 - 01/10/15
02/10/11 - 01/10/16
47.5p
21/10/12 - 20/10/16
For full details of share options and the share based payment charge calculation see note 7.
34 Reserves
At 1 January 2012
Retained profit for the year
Share options exercised
Dividends paid
At 31 December 2012
35 Contingent liabilities
Profit
Share
and loss
premium
account
£’000
15,928
-
41
-
15,969
£’000
1,000
2,978
-
(1,578)
2,400
A cross guarantee exists between all companies in the Group for all amounts payable to Bank of Scotland and NatWest.
The maximum potential liability to the Company at year end is £8,466,000.
36 Capital commitments
There were no capital commitments at 31 December 2012 or at 31 December 2011.
52
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22405.04
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Proof 5
S
t
a
f
f
l
i
n
e
G
r
o
u
p
P
l
c
A
n
n
u
a
l
R
e
p
o
r
t
2
0
1
2
Staffline Group plc
19 – 20 The Triangle
NG2 Business Park
Nottingham
NG2 1AE
Tel: 0115 950 0885
Fax: 0115 950 0627
www.staffline.co.uk
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Proof 5