PEOPLE | SKILLS | JOBS
ANNUAL REPORT 2015
For the year ended 31 December 2015
02 Staffline Group plc • Annual Report 2015
Company details
Contents
Strategic Report
Group Overview
Group Strategy
Chairman’s and Chief Executive’s Statement
Finance Director’s Statement
Principal risks and uncertainties
Governance
Corporate Governance Statement
Report on Remuneration
Report of the Directors
Independent Auditor’s Report
Consolidated Financial Statements
Consolidated Statements
04-05
06-07
08-13
14-17
18-21
22-24
25
26-27
28-29
30-33
Notes to the Consolidated Financial Statements 34-59
Company Statutory Financial Statements
Independent Auditor’s Report
Company Statements
Notes to the Company Financial Statements
60-61
62-64
65-73
Company registration number:
05268636
Registered office:
19 – 20 The Triangle
NG2 Business Park
Nottingham
NG2 1AE
Directors:
Andy Hogarth (Group Chief Executive)
Dame Christine Braddock (Non-Executive Director)
Diane Martyn (Group Managing Director)
Ed Barker (Non-Executive Director)
John Crabtree (Non-Executive Chairman)
Phil Ledgard (Group Finance Director)
Secretary:
Phil Ledgard
Nominated advisor and joint broker:
Liberum Capital
Ropemaker Place
25 Ropemaker Street
London
EC2Y 9LY
Joint broker:
Berenberg
60 Threadneedle Street
London
EC2R 8HP
Registrars:
Computershare Investor Services plc
PO Box 859
The Pavilions
Bridgewater Road
Bristol
BS99 1XZ
Bankers:
Lloyds Bank plc
33 Old Broad Street
London
BX2 1LB
HSBC Bank plc
Grove Park
Penman Way
Enderby
LE19 1SY
Solicitors:
Browne Jacobson LLP
Mowbray House
Castle Meadow Road
Nottingham
NG2 1BJ
Brabners Chaffe Street LLP
55 King Street
Manchester
M2 4LQ
Wragge & Co LLP
55 Colmore Row
Birmingham
B3 2AS
Statutory Auditors:
PricewaterhouseCoopers LLP
Chartered accountants
and statutory auditors
19 Cornwall Street
Birmingham
B3 2DT
Financial and trade PR:
Buchanan Communications
107 Cheapside
London
EC2V 6DN
Staffline Group plc • Annual Report 2015
03
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
Visit our website to stay up
to date with our latest news:
www.staffline.co.uk
04 Staffline Group plc • Annual Report 2015
Strategic Report
Group overview
for the year ended 31 December 2015
Staffline Group plc • Annual Report 2015
05
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
Welcome to Staffline Group plc’s Annual Report 2015
The Staffline Group was established in 1986 and since then has grown into a national organisation specialising in the provision of managed workforces to the
logistics, e-retail, manufacturing, driving, agriculture, food processing and support services sectors. We use training and business improvement techniques to
ensure increased levels of efficiency to give our clients a significant commercial advantage.
The acquisitions of EOS in 2012, Avanta in 2014, and A4e in 2015 being key suppliers in the welfare to work, employability and skills sectors, have created
further robust business streams to complement our Staffing business. This has created a holistic group encompassing the entire work lifecycle, and has been
rebranded PeoplePlus. This is encapsulated in our brand message of People Skills Jobs.
Highlights
Financial
• Revenues up 40% to £702.2 million (2014: £503.2 million)
• Group gross profit up 34% to £86.8 million (2014: £64.8 million)
• Underlying* profit before tax up 52% to £28.3 million
(2014: £18.6 million)
• Underlying diluted earnings per share up 55% to 92.4p
(2014: 59.7p)
• Final dividend of 12.5p; total dividend for the year of 20p
(2014: 13.5p), an increase of 47%
About Staffline
Staffline is a leading outsourcing organisation providing Staffing services
to industry, supplying up to 45,000 workers every day to more than 1,300
clients. In the last five years the Group has also grown to become a leading
provider of services in to the Government funded Employability (Welfare to
Work), Justice and Skills arena.
The business comprises two key areas:
Staffing Services
Specialising in providing complete labour solutions in agriculture, food processing,
manufacturing, e-retail, driving, and the logistics sectors, the recruitment
business operates from well over 300 locations in the UK, Eire and Poland.
The Staffing brands include:
* Underlying figures are stated before amortisation of acquired intangible assets,
acquisition and exceptional re-organisation costs in PeoplePlus and the non-cash
charge for share based payment costs (“SBPC”)
• Staffline OnSite, based on clients’ premises and providing both blue and
white collar, out-sourced, temporary workforces
Operational
• Select Appointments, a high street branch-based operation providing white
collar office staff,
• On track to meet five year growth ambition of £1bn in sales
• Staffline Express, a high street branch based operation
by 2017
• Record organic growth of the OnSite business
- Increased by net 70 sites during the reporting period to 305
(2014: 235)
- Strategic initiatives to support growth and customers through
industry trends, including HGV driver shortage
• Successful integration of three acquisitions
- Employability division: A4e in May 2015, now integrated and
rebranded as PeoplePlus
- Staffing division: Milestone Operations in September 2015
(HGV drivers) and Diamond Recruitment in October 2015
(in Northern Ireland)
• PeoplePlus benefiting from significantly enhanced position in
Employability arena
- 15 new government contracts won and extended during
the year
- Successful franchise of Avanta Saudi Arabia operations
- Well placed to grow within current Parliament and beyond
• Record new business pipeline continued into the new financial
year with additional contracts due to start in Q1 2016
• Driving Plus, providing HGV drivers to the driving industry
• Staffline Agriculture, providing workers to the UK farming and growing sectors
Employability
Comprising the PeoplePlus brand, Government contracts include:
• Work Programme, prime contractor in nine regions and sub-contracts
in five regions in England
• Steps to Success, prime contractor in Northern Ireland
• Youth Guarantee (MyGo Centre), supporting youth employment in the
Ipswich area
• Ministry of Justice Transforming Rehabilitation in Warwickshire and
West Mercia, helping to transform rehabilitation and probation services
• OLASS, delivery of training to prisoners in nine prisons in the East of England
• Building Employment through Education, working in Schools in
Northern Ireland
Training services:
• Elpis, a national training consultancy,
• Learning Plus, an e-learning platform
• Skillspoint, a procurement consultancy specialising in helping employers
benefit from government-funded, work-based training
Support services:
• The Money Advice Service,
• Independent Living Services
• Northern Ireland Prison Services, Visitor Centres
06 Staffline Group plc • Annual Report 2015
Group strategy
Growth
Our continuing Group strategy is:
• To grow the employability sector to be as strong as the OnSite recruitment services business
• To continue to be the largest provider of people in the UK blue collar market, with specialist
knowledge of the food, logistics and manufacturing sectors, supported by added value services
• To develop reputation and capability and be seen as a leading organisation in the employability,
skills and justice sectors
• To develop new sectors in white collar, agriculture and driving and to extend to new
geographical areas by “following the client”
• To grow Select Appointments (the franchise network) to be over 100 locations
• To continue to champion and implement best practices and be actively involved with our
governing bodies to help us serve our customers better
• To attract and retain the greatest talent
• To BURST THE BILLION and create stakeholder value through profitable growth
We are making significant progress in our journey through our five year growth strategy:
• 2013: a year of investing in people, new start up divisions and infrastructure;
• 2014: a year of strong growth, investment in our Welfare and Training division, and significant
operational progress;
• 2015: our 10th year as a member of AiM and a transformational year of organic and acquisitive
growth;
• 2016 to 2017: we’re on track to achieve our goal of £1 billion revenues via organic growth
supported by an ongoing appetite
Our principles
To achieve our vision, deliver our strategy and live our values, we follow a set of guiding principles
in all that we do:
Our team
• To provide a great place to work
• To create lots of opportunities to develop and progress
• To offer fast-paced and rewarding work
• To have an ever-changing environment. Every day brings something new
• To recognise success
Growth and profitability
• To operate ethical, commercial practices
• To implement efficiency-driven cost models
• To create profit through building long term relationships
• To support sustainable growth
• To deliver returns for our shareholders
People
• To protect people and their interests by acting responsibly at work and in the community
• To find lots of job opportunities, every day of the week
• To provide jobs on the door step
• To offer training, apprenticeships and guidance
• To work with reputable companies
Employer partner
• To fill every job with the right person, at the right time
• To listen, understand, respond and get results
• To do things the right way, for the right reason
• To improve performance for our customers through our added value services
• To get the job done
Our vision
and values
Our Group vision is to build and develop
the most reliable integrated workforce in
the country and be the leading creator of
opportunities, jobs and new ideas in the
employability, skills and justice sectors.
We do this through our brand values of:
• Teamwork: working together across
the business to achieve more for our
customers
• Respect: taking time to understand,
trust and support each other to
achieve shared success
• Commitment: demonstrating a
relentless and driven ambition to
exceed expectations
• Reliability: fulfilling all our customer
requirements, getting the job done
• Creativity: solving problems and
suggesting new ideas and insights
• Integrity: doing things the right way,
for the right reason, ethically, honestly,
every time
These values are driven by the Board
and are at the heart of all our processes
and decisions.
Our CSR focus
• We shall strive to improve our
environmental performance by
fostering and encouraging initiatives
that reduce waste
• We shall provide, and strive to
maintain, a clean, healthy and safe
working environment
• We shall support and encourage our
employees to help local community
organisations and activities
• We shall operate an equal
opportunities policy for all present and
potential future employees and flexible
workers
• We will offer our employees clear and
fair terms of employment and provide
resources to enable their continual
development
• We shall provide safeguards to ensure
that all employees are treated with
respect and without sexual, physical or
mental harassment
• We shall uphold the values of
honesty, integrity and fairness on our
relationships with stakeholders
• We will ensure that flexible workers
engaged by the company are not
subject to exploitation and are
provided with work opportunities in a
healthy and safe working environment
fully compliant with UK legislation
Phil Ledgard
Company Secretary
2015
Staffline Group plc • Annual Report 2015
07
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
Corporate Social Responsibility
At Staffline we place great importance on the role we play in helping
to support local communities and the environment surrounding us.
We understand the importance of integrating our business values
and operations to meet the expectations of our stakeholders.
These include clients, employees, flexible workers, regulators,
investors, suppliers, the community and the environment.
We recognise that our social, economic and environmental
responsibilities to our stakeholders are integral to our business.
We aim to demonstrate these responsibilities through our actions
and within our corporate policies. The Group has implemented a
robust Environmental and Sustainability Management system, “One
Planet”, which is supported by the following policies, strategies and
commitments:
• One Planet Strategy
• One Planet Development Plan
• Company Impact Register
• Legislation Register
This system is continually reviewed to ensure it remains
aligned to business objectives. The main objective for the
Group within 2015 was to ensure the business complied
with legislation recently introduced by the Government
and Environmental Agency called the Energy Saving
Opportunity Scheme (ESOS). Staffline Group plc carried
out extensive building audits and 100% Energy audits in
order to identify areas for improvement and reduce our
CO2 footprint.
The Chief Executive Officer is responsible for the
implementation of this policy and will make the necessary
resources available to realise our corporate responsibilities.
The responsibility for our performance rests with all
employees.
We continue to be independently assessed and certified by
EcoVadis, an international body with the aim of improving
environmental and social practices of companies by
leveraging the influence of global supply chains.
08 Staffline Group plc • Annual Report 2015
Overall, profitability in the
Group has increased in line
with our expectations.
Strategic Report
Combined Chairman’s and
Chief Executive’s statement
for the year ended 31 December 2015
Andy Hogarth
Chief Executive
John Crabtree OBE
Non-Executive Chairman
2015 marked our 10th anniversary since
being admitted to trading on AiM and
proved to be another year of significant
growth and opportunity for Staffline.
This was the third year of our five year
target to ‘Burst the Billion’, to grow
Group revenues to over £1 billion in
2017, and the performance this year
helped our plans to achieve this. Total
sales in 2015 grew 40% to £702.2m
(2014: £503.2m). Underlying profit
before tax, amortisation, acquisition
and exceptional re-organisation costs
in PeoplePlus and the non-cash charge
for share based payment costs (“SBPC”)
increased by 52% to £28.3m (2014:
£18.6m).
Our Staffing business has continued
to go from strength to strength,
achieving considerable
organic growth and ending
the year with a record
305 OnSites (2014:
235). This performance
was underpinned by
our investment in a
number of recent
start-up opportunities
as well as our existing
divisions to expand our operational reach
and bring in new talent, extending our highly
scalable platform. Two complementary bolt-
on acquisitions, Diamond Recruitment and
Milestone Operations, were also completed
later in the second half.
Our Employability division has also
undergone a significant expansion following
the acquisition of A4e in April 2015. The A4e
acquisition positions Staffline as the largest
provider of Work Programme contracts in
the UK, and the eight-month contribution
from the business has supported continued
organic growth within the division, which
has now been rebranded “PeoplePlus”.
The Transforming Rehabilitation contract,
awarded by the Ministry of Justice,
commenced in February 2015 and has had
an excellent start with us achieving all our
contractual milestones. We also announce
today that we have successfully transferred
our previous Avanta Employability operations
in the Kingdom of Saudi Arabia to a franchise
arrangement to be operated by our existing
joint venture partner in the country. The
Arabian Education and Training Group will
continue to operate this business under
an initial 10 year franchise agreement and
this agreement will allow us to focus on
Staffline Group plc • Annual Report 2015
09
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
UK operations where PeoplePlus has such
expertise.
Overall, we are pleased to report that sales and
profitability in the Group have increased in line
with our and the market’s expectations.
During 2015, we were also the first company
quoted on AIM and the first recruitment
company to be awarded the Fair Tax Mark,
for ensuring that we are open and honest in
ensuring we pay the amount of tax due on
our profits.
Financial review
Sales in 2015 grew by 40% to £702.2m (2014:
£503.2m) with gross profit increasing by £22m,
or 34.0% to £86.8m (2014: £64.8m). This
increase has come from a mixture of strong
organic growth and the part-year contribution
of the PeoplePlus, Diamond Recruitment and
Milestone Operations acquisitions. Underlying
profit before tax, amortisation, acquisition and
exceptional re-organisation costs in A4e and
the non-cash charge for share based payment
costs (SBPC) increased by 52%, from £18.6m
in 2014 to £28.3m. On this basis adjusted
diluted EPS rose to 92.4p (2014: 59.7p).
As previously indicated, as a result of the high
levels of organic growth and acquisitions in
2015, net debt (inclusive of transaction costs)
peaked at £63.1m at the year end, up from
£49.8m at the half year. With improving free
cash flow levels, this is expected to fall quickly
in the coming year to below c.0.75 x EBITDA
and continue to reduce through to 2018 and
beyond.
Our larger OnSite clients particularly appreciate
our robust financial position and strong cash
generation since they can be absolutely
certain of our ability to supply their temporary
workers who are essential to ensure continued
production. It is also essential to supporting the
growth ambitions of PeoplePlus, where financial
strength is a key criterion in the contract bidding
processes.
Operational review
Staffing services
All of our Staffing businesses saw growth during
2015, supported by a generally improving
economy. Sales rose by 26.7% to £554.5m,
driven by organic growth and also by the
acquisitions of both Diamond Recruitment in
Northern Ireland and Milestone Operations
towards the end of the year. Our gross profit
margin has marginally declined by 0.3% to
8.5%. This reverses the trend last year which
saw an improvement of 0.2% and has been
driven by the on-boarding costs of such a
significant number of new OnSite locations and
the impact of the rise in National Minimum Wage
(“NMW”) increasing our sales but keeping the
gross profit the same. The segmental underlying
operating profit rose by 14.1% to £13.2m.
We continue to generate significant
opportunities for the Group to build market
share in our core business, underpinned by our
ethical and reliable reputation in the industry,
despite the broader UK economy remaining a
highly competitive environment for many of our
clients in the food processing and production
sectors and therefore for our business. We
have benefited from the trend towards further
consolidation within the recruitment industry,
which has enabled us to increase the net
number of OnSites from which we operate by
a record total of 70, ending the year with a total
of 305 locations. This increase has resulted
from a number of new clients choosing Staffline
as well as extensions to current contracts. Our
new OnSites in 2016 also include the first two
white-collar OnSites. This is an encouraging
development, although somewhat later than
we had originally hoped, and the growth of this
division is a priority for 2016 and beyond.
We have also expanded our presence in
both new and existing sectors including
Manufacturing, Logistics & Distribution, Food
Processing, Agriculture and Driving Plus. Having
established a number of new divisions within
Staffing Services during 2013 as part of our
five year growth strategy, including Driving Plus,
Ireland and Agriculture, we continued to invest
during the period under review. As anticipated,
all three new divisions made a positive
contribution during the year.
HGV driver shortages remain a well-
documented problem in the industry, fuelled by
changes to driver education regulations, and we
expect resource will become even scarcer in this
area in the coming years. We believe significant
opportunities exist within the driving recruitment
sector and we will continue to support the
exciting organic growth of this division with
acquisitive bolt-on opportunities, such as the
acquisition of Milestone Operations.
Building on our success in Ireland, which has
demonstrated that we can better grow our
business by having one responsible individual
in a geographic area, in 2015 we appointed a
Country Director for Scotland to support further
growth.
We have continued to see the strengthening
of the UK economy lead to a tightening of
the labour market with shortages particularly
pronounced in the driving and other skilled
areas but also in the unskilled sector in certain
10 Staffline Group plc • Annual Report 2015
Combined Chairman’s and Chief Executive’s statement continued...
parts of the UK. We have been able to fulfil
all of our customer requirements in 2015
and we have contingent plans to ensure that
we continue to do so in 2016. However the
tightening labour market is likely to lead to
greater wage inflation and hence a greater cost
of recruitment in 2016, supporting demand for
our flexible labour services.
The introduction of the National Living Wage
(“NLW”), which will increase the minimum wage
from the current £6.70 to £7.20 in April 2016,
will no doubt start to encourage more people to
enter the labour market. The further increases
due to be introduced in the period until 2020
when it is set to be at least £9 per hour are
also likely to further encourage not only current
UK residents to enter work but also to further
encourage people from Eastern Europe to
come to the UK, supporting our growth and
increasing the supply of labour. Current levels of
NMW for unskilled workers vary across Europe,
from £7.11 in France, £6.29 in Germany, £6.09
in Austria, £3.38 in Greece, £1.84 in Poland
and £1.42 in Lithuania. Whilst this significant
increase in UK wages may encourage an
increase in migration from Europe it is likely to
further widen the supply pool of labour, thus
helping Staffline to continue to grow.
Employability
The completion of the A4e acquisition for an
effective consideration of £34.5m on 27th
April 2015 further significantly enhanced our
position in the Employability arena. Since it
has only contributed to the results for eight
months during the year, we will see the full
benefits of this transaction in 2016 and beyond.
Post-acquisition, we have now fully completed
the integration of A4e with our existing
businesses quicker than expected although
at a slightly higher cost and re-named the
division PeoplePlus. PeoplePlus benefits from
significant scale within the Department of Work
and Pensions (“DWP”) main contracts, the Work
Programme. With nine prime contracts and
five sub-contracts we are the largest provider
by both the number of contracts and referrals.
In addition, A4e brought us a number of other
contracts, including OLASS 4, delivering
training for prisoners in nine prisons in the
East of England, The Money Advice Service
and Independent Living Services.
Revenues in the division grew by 124.8%
to £147.7m reflecting the first full year effect
of the Avanta acquisition (acquired in June
2014) and a number of contract wins, with
gross profit increasing by 52.0% to £39.9m.
Underlying segmental operating profitability
rose by 119.4% to £17.1m. Profitability of the
enlarged PeoplePlus division has been in line
with our initial expectations although due to
the improving economy referrals, and therefore
revenues, were lower in the year. The number
of referrals we receive on the Work Programme
has steadily declined over the last two years
and revenues for the remaining 15 months
of the contract and the follow-on 24 months’
run-off will be lower than originally expected.
Nevertheless, the operational efficiencies
gained from the integration of our three brands
will ensure that predicted profitability will be
maintained.
The decision by Government to extend the
Work Programme by one year provides an
added benefit. PeoplePlus remains well placed
to capitalise on its existing Work Programme
contracts over the course of the current
parliament and going forwards into the next
contract round.
We are also pleased to announce that we won
or extended 15 contracts during the year, all
working for either local or central government.
Whilst all were of relatively small value, the
largest being £0.8m over 12 months we are
confident that the delay caused by the General
Staffline Group plc • Annual Report 2015
11
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
This year’s highlights
Continued expansion of the OnSite
model, increased by
70 sites
during the period.
Which takes the total to 305
Acquired Milestone
Operations and Diamond
Recruitment Group, making
us dominant in the UK Driving sector and
in Ireland
Supplied 55,001,985 hours
of temporary labour to more than
1,600 clients
45,001
temporary workers placed at ‘peak’
1,779,300
timesheets processed; an increase of
40.4% over 2014
Checked the ID’s of
122,320 candidates
Election will be cleared during 2016 and that
these wins demonstrate our unique positioning
in the market which should lead to further
opportunities becoming available to us.
ISO 9001 and Investors in People (“IIP”)
Our organisation has grown significantly over
the last couple of years, both organically and
through acquisition. We are currently in the
final stages of our assessment for Staffline
to achieve IIP accreditation for our Shared
Services. We have worked tirelessly to ensure
we have consistent and robust processes and
procedures across all the divisions to meet the
new IIP standards. The introduction of new HR
software will also enable automation and create
efficiencies across the business delivering a
self-service approach to managing data, all of
which will support our ability to provide accurate
management information reporting.
In addition to the above, we have achieved the
Recruitment and Employment Confederation’s
accreditation for the Group for 2015 and
continue to be Patrons of the Institute of
Employment Professionals. We will continue in
our mission to gain further accreditation and
increase levels of professionalism within our
business sector.
People
With the Group further expanding, we have seen
an increase to 847 employees in our Staffing
business and related shared services with
an additional 2,447 people employed by the
PeoplePlus business, bringing the Group’s total
workforce at 31 December to 3,294. The number
of contractors paid each week grew steadily
during the year peaking at just over 45,000 in
the lead-up to Christmas. Our ability to support
the ever-growing business with limited additional
central resource is testament to the quality and
commitment of our employees.
Our residential management development
programme has been delivered to 103
delegates through the Leadership Camp
since its launch in 2013 and has been further
complemented with one to one Coaching
sessions. An additional suite of management
workshops have been delivered to 107
managers last year which has incorporated:
• Self-Awareness together with Coaching and
Motivating a Winning Team;
• Driving Sales through Customer Care;
• Effective Time Management;
• Advanced Communication; and
• Commercial Awareness & Strategic Planning.
12 Staffline Group plc • Annual Report 2015
Combined Chairman’s and Chief Executive’s statement continued...
Additional programmes are being rolled out in
early 2016 to be delivered by subject matter
experts, with 28 days scheduled in the first six
months of the year dedicated to management
training. We have introduced 360 degree
feedback amongst our leadership and talent
pool population and continue to progress with
succession and talent planning for the Group.
In addition to our management development
offering, a number of eLearning training
solutions have been developed and rolled out
since the latter part of 2014, of which over 300
people have now completed multiple modules
since the launch. A wider Group launch
commenced in January 2015 across the Group
offering a full complement of solutions hosted by
the Group’s Learning Plus business.
Our ethos continues to support developing
talent within the business at all levels and
encourages self-development which in turn aids
succession planning, supporting the strategic
growth of the Company.
We continue to place great emphasis on the
training and development of our people in line
with our vision and values and ambition to be an
employer of choice. We are also ambassadors
of the Apprenticeship programmes and have
recently engaged 23 people in apprenticeships
across Shared Services and our National
Response Centre. Our aim is to enhance
capability within our existing workforce offering
a true resourcing strategy to grow from within.
In 2015 we appointed a Director of Talent
Development to develop our future leaders.
Health, safety and environment
Staffline continues to take a proactive
approach to the Health, Safety and welfare
of its employees and contractors. Our
strong commitment to Health and Safety
is demonstrated by the regular Senior
Management reviews taking place, the
outcomes of which are cascaded across
the business. In addition, the Head of
Staffline’s Health & Safety Team has recently
been awarded a Fellowship status within
the International Institute of Risk & Safety
Management, in addition to his Chartered
Member of the Institute of Occupational Safety
& Health membership, further supporting the
development of a culture of H&S across all
business units.
Staffline actively monitors all aspects of Health
& Safety using a “closed loop management
process”. This allows all areas to be identified
and documented during the audit process and
shows continual development against all Health
& Safety action plans with Senior Management
involvement throughout.
Having reviewed the Group’s Health & Safety
management systems during 2015, a number
of updated policies and procedures have been
implemented. The H&S management systems
continue to allow the Group to demonstrate
that its corporate responsibilities are being
appropriately discharged. As Staffline has
grown, the H&S Team has also increased in size
to provide information, advice and guidance
and during early 2016 regionally based H&S
specialists will be on hand to support the many
and various business units.
The Group continues to implement a detailed
Environmental & Sustainability Policy. In addition,
the Energy Saving Opportunity Scheme (“ESOS”)
audit results are being reviewed and the
opportunities highlighted in the report to reduce
the Groups environmental impact are being
acted upon which will flow into the Group’s The
One Planet Strategy. This will continue to focus
on the following areas:
• Energy consumption
• Waste
• Travel
• Sustainable materials
In addition to ESOS, 2015 has seen regular
audits carried out to create baseline data with
Key Performance Indicators and SMART targets
implemented which continue to demonstrate
the Group’s ongoing positive environmental
commitment.
IS027001
PeoplePlus has achieved this very demanding
accreditation for the security of our IT systems,
which represents a very important certification
when dealing with the personal details of so
many people.
Staffline Group plc • Annual Report 2015
13
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
invested in excess of £560,000 in our technical
infrastructure which has greatly improved our
business continuity capability and are confident
that this is now industry leading.
our competition as we are developing a number
of products which will allow our clients to derive
significant value for their businesses from this
change.
Over the next 12 months, we plan to upgrade
our payroll and billing system alongside the
development of a new data warehouse. These
upgrades will provide better analytics on which
to forecast and refine our product offerings,
allowing us to provide ever more added value
to our customers.
Current trading
Nearly one month into the new financial year,
we have started well, buoyed by additional
contracts from existing customers which are
due to start by the end of the first quarter. We
also have a sales pipeline which is larger than
ever before and we are focused on maintaining
our strong track record of organic growth by
supporting our clients’ requirements effectively
and efficiently.
As we have reported before, the number of
available HGV qualified drivers remains very
low and to improve the situation for our clients
we have extended our comprehensive training
scheme, ‘Warehouse to Wheels’ in which
we fund the training of suitably experienced
contractors and client staff to enable them to
become fully qualified HGV drivers. We believe
initiatives such as these will set us apart from
other recruiters in the sector in the years ahead.
We remain responsive and focused on adapting
to new regulations and government change.
An example of this is the introduction of the
apprenticeship levy which will be a further
opportunity for us to differentiate ourselves from
Our Employability division, PeoplePlus, is now
fully integrated and making good progress and
we expect the enlarged business to have a
significant impact financially and operationally
in 2016 and beyond.
In addition to driving organic growth, we continue
to look for further bolt-on acquisitions primarily
within our core Staffing business and remain in
discussions with a number of companies.
Outlook
The outlook for Staffline remains positive.
Having made significant progress in 2015, we
are well placed to deliver ongoing growth in the
coming year. We are confident that our strategic
initiatives, our track record of successful delivery
for our clients and our ability to take advantage
of industry trends will support our momentum
and enable us to achieve strong returns for our
shareholders.
As an expression of our confidence in the
Group’s prospects, the Directors propose to
increase the final dividend by 47% from 8.5p to
12.5p. This dividend will be payable on 5 July
2016 to shareholders on the register at 3 June
2016. The ex-dividend date is 2 June 2016.
This will give a total dividend for the 2015 year
of 20p, an increase of 48%.
John Crabtree OBE
Non-Executive Chairman Chief Executive
2016
Andy Hogarth
2016
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 Licensing
Authority (“GLA”). 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. We
are an active member and supporter of the
Stronger Together initiative to help prevent
exploitation and trafficking of workers.
Investing for growth
Our five year strategic growth plan, aimed at
broadening our market reach and increasing the
scale of all of our divisions, is now moving into
its fourth year and we are on track to achieve
our ambition of growing revenues to £1 billion
by 2017. As part of this growth plan, in the
past three years, we have invested significant
sums in both new divisions and new contracts.
We are already seeing the fruits of these
investments and we are confident that the new
divisions will continue to develop in the coming
years and contribute to driving both revenue
and profit growth.
As part of our strategic plans we have continued
to invest in our bespoke customer relationship
management (“CRM”) system, Infinity+, which
will further improve our operating efficiency
alongside investment in mobile technology
which seeks to simplify how we interact with
our customers and clients. We have also
14 Staffline Group plc • Annual Report 2015
Strategic Report
Finance Director’s statement
for the year ended 31 December 2015
Phil Ledgard
Finance Director
Financial highlights
2015 was a very strong year of
growth with total revenue for the year
increasing by 40% to £702.2m (2014:
£503.2m). The financial result includes
the effect of a number of acquisitions,
including the full year effect of the
acquisition of Avanta Enterprise Limited
in 2014, and three further acquisitions
in 2015 including A4e Limited in early
May, Milestone Operations Limited
in late September, and Diamond
Recruitment Group in early October. In
addition, organic revenue growth
strengthened considerably, up
16.6% compared to up 10.2%
in 2014. The underlying
Staffing business also grew
strongly in 2015 with a total
of 70 additional OnSites
and increased demand
from our existing customer
base and the full benefits of
this performance will come
through in 2016.
The A4e and Avanta acquisitions combined
with organic growth have given rise to a
significant change in the segmental balance
of the business over recent years, with
the renamed PeoplePlus division now
representing 21% of annual revenue, 46% of
annual gross margin and 54% of underlying
PBT. As intended, this enhances the profit
margin performance for the Group.
Our overall gross profit has increased by
33.7% to £86.8m with gross profit margins
remaining strong at 12.4% (2014: 12.9%).
Within this result is the movement in gross
margin % for the Staffing division which has
decreased in 2015 to 8.5% (2014: 8.8%)
reflecting two trading trends. Firstly, the
increasing National Minimum Wage has the
effect of increasing revenue but not changing
actual gross margin, meaning that the gross
margin % reduces. This factor has become
a regular feature of our Staffing gross margin
profile and will quicken with the introduction
of the mandatory Living Wage from April
2016. Secondly, the Staffing division
has invested in resources to support the
Staffline Group plc • Annual Report 2015
15
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
mobilisation of the high number of OnSite wins
during the year. This is a short term effect and
these additional costs will reverse in 2016.
One of the key performance indicators that
the Board of Directors monitors during the
year is profit before taxation, share based
payment charges (SBPC) and amortisation of
acquired intangible assets (Underlying PBT).
In addition, we have excluded from Underlying
PBT the one-off costs of acquisition relating
to A4e and the exceptional restructuring costs
of forming the PeoplePlus division, as they
are non-recurring and material in the context
of our trading performance during the year.
Underlying PBT grew in line with expectations
by over 52% to £28.3m (2014: £18.6m) and
Underlying PBT as a percentage of revenue
grew to 4.0% (2014: 3.7%).
Earnings per share
Removing non-cash charges for SBPC,
goodwill amortisation and the exceptional
costs of acquisition and reorganisation (and
their respective taxation impacts) results in an
adjusted basic earnings per share increase of
54.7% to 92.8p (2014: 60.0p) and an adjusted
diluted earnings per share increase of 54.8%
to 92.4p (2014: 59.7p).
roll out of our new Transforming Rehabilitation
probation services contract win in Warwickshire
and West Mercia (our Community Rehabilitation
Company).
Statutory basic earnings per share decreased
to 12.4p (2014: 28.6p) and the diluted earnings
per share decreased to 12.3p (2014: 28.5p)
due to the increased costs of SBPC, goodwill
amortisation and the exceptional costs of
acquiring and integrating A4e.
Post tax cash generation during the year
has been strong and excellent credit control
performance has succeeded in limiting our
working capital to 2.1% of revenue, on average.
DSO within Staffing Services remains low at 29
days (2014: 28.5 days).
Balance sheet, cash generation
and financing
The Group balance sheet has materially
changed during the year in particular as a result
of the acquisition of A4e. Total group assets
have increased by £81.5m to £263.2m
(2014: £181.7m). Of this increase, £45.2m
results from the increase in goodwill and other
intangible assets arising from the acquisitions
in 2015. Property, plant and equipment has
increased, partly due to the acquisitions, but
also due to the continuing investment made in
our IT infrastructure and that required to support
Total Group liabilities have increased by £72.8m
to £190m. This includes a restructuring of
the Group’s banking facilities following our
investment in the acquisitions in 2015 and
provides secured working capital facilities until
July 2019. Total borrowings (see note 16) have
increased to £68.1m from £35.8m in 2014. To
facilitate the future growth of the Group, after
the year end we have agreed an increase in the
Group’s banking facilities under the revolving
credit facilities of £7.5m, taking total available
facilities from £85.0m to £92.5m.
Headroom on our working capital facilities as at
31 December 2015 was £20.0m.
16 Staffline Group plc • Annual Report 2015
2015 was a very strong year
of growth with total revenue
for the year increasing by
40% to £702.2m.
Staffline Group plc • Annual Report 2015
17
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
Finance Director’s statement continued...
Following the changes made, at the date of this report, Group banking facilities are summarised as follows:
Facility type
Term Loan (drawn in May 2015)
Loan notes fallings due in 2016
Revolving credit facility
(including overdraft facility)
Unamortised debt issue costs
TOTAL FACILITIES
Less cash held
NET DEBT
Headline
amount
(£m)
Net borrowing
as at 31 December 2015
(£m)
£35.0m
£9.0m
£48.5m
-
£92.5m
£33.7m
£9.0m
£26.0m
(£0.6m)
£68.1m
£5.0m
£63.1m
All term loan amounts are repayable quarterly through to maturity in 2019. Interest accrues on the term loan at between 1.4% and 2.4% plus LIBOR
or Bank Base Rate, depending upon the level of adjusted leverage. Total finance charges, including the interest costs of the term loan and loan notes,
(reflecting the additional cost of funding the acquisitions over the last two years) were £1.8m for the year (2014: £0.6m).
At 31 December 2015 the Group net debt peaked at £63.7m (2014: £17.8m), comprising cash of £5.0m (2014: £18.4m) and borrowings of £68.7m
(excluding unamortised debt issues costs) (2014: £36.2m).
Our free cash flow levels will support the swift reduction in net debt in the coming periods.
Key performance indicators
The Group monitors a number of performance indicators both financial and non-financial:
Revenue (£m)
Year on year total revenue growth (%)
Organic revenue growth (%)
Gross margin as a % of revenue (%)
Underlying PBT (£m)
Underlying PBT as a % of revenue (%)
Net (Debt) (£m)
Staffing Services DSO (days)
Highest number of temporary contractors
Number of OnSites
2015
£702.2m
39.6%
16.6%
12.4%
£28.3m
4.0%
(63.7)
29.1
45,001
305
2014
£503.2m
20.9%
10.2%
12.9%
£18.6m
3.7%
(17.8)
28.5
34,636
235
These indicators are discussed above and in the combined Chairman’s and CEO report.
18 Staffline Group plc • Annual Report 2015
Strategic Report
Principal risks
and uncertainties
for the year ended 31 December 2015
The Group is exposed to a variety of potential risks and uncertainties
which require on-going monitoring and management in order to mitigate
against any adverse impact on long-term performance.
The Board recognises that effective risk management is a critical part of achieving our strategic objectives. It employs a variety of systems and policies
to respond effectively to these risks and uncertainties to protect the continued strategic success of the Group. Risk management is co-ordinated at its
headquarters in close cooperation with the Board of Directors.
The Board reviews risks and uncertainties under three principle types:
• Strategic and market related risks and uncertainties
• Operational and compliance risks and uncertainties
• Financial risks and uncertainties
The most significant risks to which, in the opinion of the Directors, the Group is exposed are described opposite. Our responses to these risks are given in
italic font.
Staffline Group plc • Annual Report 2015
19
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
Strategic and market-related risks and uncertainties
Exposure to
significant changes
in the UK economy
The UK economic health can impact the Group in both positive and negative ways.
Due to the industries in which the Group’s Staffing division specialises, the Directors consider the Group to be relatively less
affected than others in the recruitment sector during a general economic cycle (downturn or upturn). 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 mitigate this risk by diversifying our service range and expanding our client base. We can expect to gain as
much business as we lose if we have a wide enough spread of clients. A recovery may provide some opportunities if clients
seek to use temporary staff in lieu of replacing permanent employees.
As unemployment rates fall, so the referral numbers to the Work Programme also fall.
We therefore employ a strategy of scalable operational platforms which can be flexibly increased or decreased to meet demand
over time. The on-going UK economic recovery also provides new opportunities, oriented towards skills development for the
UK economy and towards young people which will enable us to leverage our division’s capabilities into the future.
Highly competitive
market places
The Group operates in the recruitment services sector where there are a significant number of competitors and barriers to entry
are relatively low. The Group is therefore exposed to high levels of competition in securing new or retaining existing business.
To counter the threat of competitors seeking to win business from us, the Group builds strong long term relationships with its
customers through excellent service levels and through its rigorous selection and checking procedures. These ensure that all
contractors provided by the Group are fully compliant with the legal requirements
In addition, the Group’s strategy of an increasing diverse range of Staffing services further reduces the impact of any particular
area of competition faced.
Acquiring and
integrating
businesses
Concentration on
limited number
of significant
customers
Change in UK
governmental and
related central
governmental
policies
Long term
contracts and
commercial terms
The Group has made a number of acquisitions over recent years. There is a risk, post-acquisition, that an issue with a
customer, contract or staff member may impact the value of the acquisition.
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 an appropriate
acquisition team.
Dependence on key customers can lead to over reliance on a small portion of the portfolio and vulnerability should a major
customer cease to buy from the Group.
Our PeoplePlus division essentially has only one customer, being the UK Government. However, this is mitigated by the
fact that this division now has a number of different government contracts with several central government departments.
Our Staffing division continues to add important new customers to its portfolio every year, and this increasingly reduces the
proportional scale of any one customer. The top 10 customers in Staffing account for 59.1% of group revenue, up from 54%
last year.
The general election result in 2015 has given rise to little change to the Group. However, there is always a risk that a change in
UK central governmental policies could lead to reduced commercial opportunity for our services.
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.
Long term contracts within our PeoplePlus sector provide strong revenue visibility and yet it is important to ensure that related
commercial and operational terms and commitments are profitable and viable for long periods of time.
Authorisation practices for bids are well established in the Group ensuring that all material aspects of pricing and other
commercial terms are reviewed by the Board or other senior management teams as appropriate. Contractual variations during
the life of a contract are similarly subject to appropriate Board level reviews.
20 Staffline Group plc • Annual Report 2015
Principal risks and uncertainties continued...
Operational and compliance risks and uncertainties
Fulfilling our
PeoplePlus
contractual
commitments
Ensuring
compliance
with legislative
and regulatory
requirements
Within our PeoplePlus segment, 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.
Our other business segment, Staffing services, makes us ideally placed to find suitable jobs. This, coupled with our 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, acts as an
effective mitigating action.
The Group faces the risk that one of our members of staff may deliberately by-pass the procedures set up which ensure we
fully comply with our industry legislative requirements and related best practice standards. There is a reputational and financial
risk to the business should someone deliberately choose to do this.
We have put robust checks and audit procedures in place to detect and quickly respond to such acts. These are operated by
our in-house compliance team. In addition, we work closely with the Gangmaster Licensing Authority (GLA) and recruitment
governing bodies, such as the Recruitment and Employment Confederation (REC) and the Association of Labour Providers
(ALP) to ensure that the business is up-to-date on these issues.
Major failure of
IT systems
As with all large scale businesses, including those in the market sectors we operate in, we are reliant on our IT systems to
support and operate our business.
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. We have put back-up
and alternative solutions in place.
Breach of data
security policies
and procedures
Market demand
changes arising
from changes in
regulations
The Group holds personal data in respect of Staffing temporary workers, participants of our various PeoplePlus sector
contracts, and our own staff. This requires robust data security measures across the Group.
Strong controls over data access are employed in the business coupled with appropriate training of those entrusted with such
data. Suitable group policies and procedures are enforced and ISO27001 is maintained within the group under the stewardship
of a Data Protection Officer.
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.
We actively engage and participate with principle industry bodies for our market sectors to stay abreast of all potential
developments and remain confident that our strategy allows us to respond to any such threats quickly and effectively.
Staffline Group plc • Annual Report 2015
21
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
Financial risks and uncertainties
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. As 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.
The Group has adopted a policy of carefully monitoring all customers, in particular those who lack an appropriate credit history.
We have procedures to check the creditworthiness of new clients with external agencies and we check current customers
periodically. The Group’s trade and other receivables are actively monitored to avoid significant concentrations of credit risk.
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 £1.1 million on sales of £1.6 billion, equating to 0.07% of sales.
Liquidity risk
The Group requires adequate and appropriate financing facilities to be in place at all times to fund working capital requirements,
expansion and to allow for potential further acquisitions.
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. Facilities are described in note 16 on page 51 and are secured until July 2019. We hold regular
discussions to ensure we have our Bank’s backing to support strategic plans.
Interest rate risk
All financial liabilities of the Group owed to the Group’s bankers are subject to floating interest rates which are subject to
increase.
Competitive rates have been negotiated with the Group’s bankers. The rate paid on bank loans and overdrafts is linked to our
leverage ratio in the Group although has been 1.35% above base rate since the facilities were refreshed and forecasts indicate
it will remain so for the foreseeable future. The Board consider that the cost of swapping this floating rate basis into a fixed rate
is not commercially warranted at this time, but will be kept under review.
Phil Ledgard
Finance Director
2016
22 Staffline Group plc • Annual Report 2015
Governance
Corporate governance
statement
for the year ended 31 December 2015
Statement by the Directors on compliance with certain of 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 full
requirements of the UK Corporate Governance Code (the Code). However, we have reported on our Corporate Governance arrangements by drawing
upon best practice available, including those aspects of the Code we consider relevant to the company. The number of Non-Executive Directors equals
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 on
page 23.
The Board
The Board currently comprises the Non-Executive Chairman, the Chief Executive, the Group Managing Director, the Finance Director and two Non-Executive
Directors. 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 are considered by the Board to be independent.
Ed Barker
Non-Executive Director (A, R, N)
Andy Hogarth
Chief Executive (N)
Staffline Group plc • Annual Report 2015
23
Ed Barker has over 12 years of experience in the retail sector
working across a number of senior financial and operational
functions including; Group Reporting, Financial Planning &
Analysis, Tax, Pensions, Group Financial Controller and Retail
& Logistics Finance. Prior to working in industry, he achieved
professional ACA qualification with PwC in 1998, and was made
an FCA in 2013. Following his appointment to the board in
November 2014, Ed is chairman of the Audit Committee as well
as becoming a member of the Remuneration and Nomination
committees.
Dame Christine Braddock
Non-Executive Director (A, R, N)
Dame Christine Braddock has over thirty years’ experience in
Senior Leadership of Further Education organisations and has
worked within the Probation Service, Home Office and Private
Sector Colleges.
Christine was awarded a CBE for service to Further Education
and a DBE for services to the business and education community
in the 2013 New Years’ Honours list. Christine was the first public
sector person appointed to be the President of the Greater
Birmingham Chamber of Commerce and was the first woman
to be appointed to the Greater Birmingham and Solihull LEP
Board. She has held a number of appointments at local Regional
and National Level including; Chair of the Education and Skills
Engineering UK and Director of the Quality Improvement Agency
and has been a West Midlands council member of the CBI and
Aston University for the last ten years. Dame Christine currently
holds the position of Chairman of Birmingham Children’s Hospital
and joined the board in July 2014. Dame Christine is chair of the
Remuneration and Nomination committees.
John Crabtree OBE
Non-Executive Chairman (A, R, N)
John Crabtree joined the Board on 1 March 2005 as a Non-
Executive Director. 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 leading national and international
practice. John has a number of business interests, including
being Non-Executive Chairman of Real Estate Investors plc, SLR
Holdings Limited, Birmingham Hippodrome Theatre Trust, and
the charity Sense.
G
o
v
e
r
n
a
n
c
e
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 non-executive Director of the
Birmingham Hippodrome. He is a Director of Hogarths
Hotels, two boutique hotels in Solihull and Kidderminster.
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 appointed
Chief Executive in 2009.
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.
Phil Ledgard
Finance Director (N)
Phil Ledgard FCA joined Staffline as Group Finance
Director in October 2013. Phil worked for G4S for 10
years prior to joining Staffline, his last role being FD of
the £250m Facilities Management division of G4S. Phil
gained his accountancy qualification with PwC, has a
BA in Accounting and Financial Analysis from Warwick
Business School and is a Trustee Director of Ex Cathedra
in Birmingham.
24 Staffline Group plc • Annual Report 2015
Corporate Governance statement continued...
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 Dame Christine Braddock
has met twice 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 is responsible for ensuring that the balance
of the Board is appropriate to control and direct the business. It has not
been required to meet during 2015.
The Audit Committee, chaired by Ed Barker, 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 also 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, and for
the appointment of the Group’s external auditors.
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 we maintain
appropriate levels of on-going training to ensure 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.
In addition, the group has an internal assurance function. Its current role
is primarily focused at monitoring compliance with industry standards
and requirements of the PeoplePlus division. This has developed
further in 2015 providing a group capability for checking compliance
with wider internal control policies across the group, enhancing our
internal information security standards, and assisting the Board with risk
management practices across the Group. Each of the PeoplePlus and
Staffing divisions now has an Audit and Risk Committee which reviews
the material business risks faced by each division and the actions taken
to mitigate those risks.
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, such as
when they are large scale, acquisitions continue to be run on separate
systems and this is the case for the acquisition of A4e Limited this year.
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
regularly. The principal risks and uncertainties facing the Group are
included in the Strategic Report on page 18.
Going concern
At the end of October 2015, as a consequence of the on-going growth
of the group through increased business and a number of acquisitions,
the group experienced some pressure in relation to the available working
capital headroom provided by the banking facilities and went above its
agreed bank facility limits for four days. The company received the full
support of its lenders throughout and subsequently agreed an increase in
the group facilities, which, in the view of the Directors, provides suitable
headroom for the business for the foreseeable future.
In considering the on-going funding requirements of the Group, the
Directors have prepared cash flow forecasts extending to December 2018.
These indicate that the Group expects to be able to continue to operate
within its amended bank facilities and meet all of their related financial
covenant tests for the foreseeable future. The Board regularly reviewed
and discussed the group’s bank facilities during 2015 to ensure they are
kept appropriate for Group requirements. The Group benefits from strong
working relationships with its banks and had net cash headroom versus its
working capital facilities of £20.0m at 31 December 2015.
Strong financial performance for the year ended 31 December 2015 and a
strong start to 2016 the Directors are of the view that it is appropriate for
the financial statements to be prepared on a going concern basis.
Staffline Group plc • Annual Report 2015
25
Governance
Report on remuneration
for the year ended 31 December 2015
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.
G
o
v
e
r
n
a
n
c
e
Service contracts
Andy Hogarth, Phil Ledgard and Diane Martyn
have rolling service contracts requiring notice
from either party of one year. John Crabtree,
Dame Christine Braddock and Ed Barker 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 Andy Hogarth, Phil Ledgard and Diane
Martyn. No other benefits in kind are provided
to Directors.
Remuneration Committee
The Company has a Remuneration Committee
comprising Dame Christine Braddock, who
is the Chairperson, and Ed Barker. 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 Andy Hogarth, Phil
Ledgard 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 7 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 £115,000 (2014: £115,000)
has been accrued in respect of the Executive
Directors in recognition of group profitability
meeting budget, in line with the Executive
Bonus Scheme approved by the Remuneration
Committee.
Directors’ share options
In March 2013, share options were issued
to Diane Martyn. The options vest in March
2016 on a sliding scale dependent upon the
performance of adjusted diluted earnings per
share over the three years ended 31 December
2015; as of 31 December 2015, the maximum
criteria has been met and accordingly the full
amount of shares are expected to vest.
Joint Share Ownership Plan
In 2010, the Company established a Joint
Share Ownership Plan (JSOP) to provide
additional incentives to senior executives.
That JSOP interest ran from the date of the
award until 30 June 2015. During this period
the right to sell the JSOP award shares was not
at the discretion of the Directors but instead at
the discretion of the Employee Benefit Trust. On
disposal of the shares, the amount received by
the Directors was calculated based on certain
business performance conditions. The payment
to the Directors took into account fully diluted
EPS adjusted for amortisation of intangibles
and a share based payment charge 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.
In 2013, the Company established a further
JSOP on a similar basis to the 2010 issue, but
with a range of adjusted EPS of between 56p
and 93.5p and 50% of the award is subject to
an additional condition that total shareholder
return exceeds the increase in the FTSE AIM All
Share Total Return Index over the period. The
JSOP runs until 30 June 2018.
The interests that the Directors acquired in
the shares jointly with the Staffline Group plc
Employee Benefit Trust are contained within
note 7 of the notes to the financial statements.
26 Staffline Group plc • Annual Report 2015
Governance
Report of the Directors
for the year ended 31 December 2015
The Directors present their annual report together with the audited
financial statements for the year ended 31 December 2015.
A detailed review of the activities of the Group, including financial and non-financial key performance indicators, can be found in the Strategic Report.
An interim dividend of £1,901,000 (7.5p per share) was paid during the year (2014: £1,227,500, 5p per share). The Directors have proposed a final dividend
of £3,169,874 (12.5p per share) (2014: £2,358,542, 8.5p per share) to be paid on 5 July 2016, to shareholders registered on 30 June 2016. 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:
Ordinary shares of
10p each
Percentage of
ordinary shares %
A Hogarth
D Martyn
Dame C Braddock
E Barker
J Crabtree OBE
P Ledgard
Employee involvement
The Directors recognise the value of involving employees in the
business and ensure that matters of concern to them, including
the Group’s strategic objectives, vision, values and principles
are communicated in an open and regular manner. Employees
are kept aware of progress versus these objectives and key
developments within the Group by regular briefings and these
include communications published on the group’s intranet
and presentations by group and subsidiary management at
conferences, roadshows and at routine office and site briefings.
Senior staff participate in various bonus scheme arrangements
linked to financial performance.
Octopus Investments
Fidelity Worldwide Investment
Standard Life Investments
3,033,775
2,662,385
2,148,675
River and Mercantile Asset Management
1,697,000
Directors of the company
Hargreave Hale – Stockbrokers
Legal and General Investment
Invesco Perpetual
JPMorgan Asset Management
Investec Asset Management
Schroder Investment Management
1,624,129
1,480,756
1,300,610
920,452
868,959
852,357
845,780
10.9
9.6
7.7
6.1
5.9
5.3
4.7
3.3
3.1
3.1
3.1
The shareholding for A J Hogarth excludes shares held under the Company’s Joint
Share Ownership Plan (JSOP) in which he is a beneficial co-owner of shares. Details of
such shareholdings are given in the Report on Directors’ remuneration.
Disabled persons
Auditors
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.
Substantial shareholdings
The interests in excess of 3% of the issued ordinary share
capital of the Company which have been notified as at 31
December 2015 were as follows:
During the year the directors appointed PricewaterhouseCoopers LLP as auditors,
replacing Grant Thornton UK LLP, and a resolution will be proposed for their re-
appointment at the forthcoming Annual General Meeting.
BY ORDER OF THE BOARD
Phil Ledgard
Company Secretary
2016
Staffline Group plc • Annual Report 2015
27
G
o
v
e
r
n
a
n
c
e
Directors’ Responsibilities Statement
The Directors are responsible for preparing the Strategic Report
and 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 Company and 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; and
• state whether applicable IFRSs have been followed, subject to
any material departures disclosed and explained in the financial
statements.
The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Company’s and Group’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and 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 Company and
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 auditor is 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.
28 Staffline Group plc • Annual Report 2015
Governance
Independent auditor’s
report to the members
of Staffline Group plc
for the year ended 31 December 2015
Report on the group financial statements
Our opinion
In our opinion, Staffline Group plc’s
group financial statements (the “financial
statements”):
• give a true and fair view of the state of
the group’s affairs as at 31 December
2015 and of its profit and cash flows for
the year then ended;
• have been properly prepared in
accordance with International Financial
Reporting Standards (“IFRSs”) as
adopted by the European Union; and
• have been prepared in accordance with
the requirements of the Companies Act
2006.
What we have audited
The financial statements, included within the
Annual Report, comprise:
• the consolidated statement of financial
position as at 31 December 2015;
• the consolidated statement of
comprehensive income for the year then
ended;
• the consolidated statement of cash
flows for the year then ended;
• the consolidated statement of changes
in equity for the year then ended; and
• the notes to the financial statements,
which include a summary of significant
accounting policies and other
explanatory information.
The financial reporting framework that
has been applied in the preparation of the
financial statements is applicable law and
IFRSs as adopted by the European Union.
In applying the financial reporting framework,
the directors have made a number of
subjective judgements, for example in
respect of significant accounting estimates.
In making such estimates, they have made
assumptions and considered future events.
Opinion on other matter
prescribed by the Companies
Act 2006
In our opinion, the information given in the
Strategic Report and the Report of the
Directors for the financial year for which
the financial statements are prepared is
consistent with the financial statements.
Other matters on which we are
required to report by exception
Adequacy of information and explanations
received
Under the Companies Act 2006 we are
required to report to you if, in our opinion,
we have not received all the information and
explanations we require for our audit. We
have no exceptions to report arising from this
responsibility.
Directors’ remuneration
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. We have
no exceptions to report arising from this
responsibility.
Responsibilities for the financial
statements and the audit
Our responsibilities and those of the directors
As explained more fully in the Directors’
Responsibilities Statement set out on page
27, the directors are responsible for the
preparation of the 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 financial statements
in accordance with applicable law and
International Standards on Auditing (UK
and Ireland) (“ISAs (UK & Ireland)”). Those
standards require us to comply with the
Auditing Practices Board’s Ethical Standards
for Auditors.
This report, including the opinions, has been
prepared for and only for the company’s
members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act
2006 and for no other purpose. We do not,
in giving these opinions, accept or assume
responsibility for any other purpose or to any
other person to whom this report is shown or
into whose hands it may come save where
expressly agreed by our prior consent in
writing.
What an audit of the financial
statements involves
We conducted our audit in accordance
with ISAs (UK & Ireland). An audit involves
obtaining evidence about the amounts
and disclosures in the financial statements
sufficient to give reasonable assurance that
the financial statements are free from material
misstatement, whether caused by fraud or
error. This includes an assessment of:
• whether the accounting policies
are appropriate to the group’s
circumstances and have been
consistently applied and adequately
disclosed;
• the reasonableness of significant
accounting estimates made by the
directors; and
• the overall presentation of the financial
statements.
We primarily focus our work in these areas
by assessing the directors’ judgements
against available evidence, forming our own
judgements, and evaluating the disclosures in
the financial statements.
We test and examine information, using
sampling and other auditing techniques, to
the extent we consider necessary to provide
a reasonable basis for us to draw conclusions.
We obtain audit evidence through testing
the effectiveness of controls, substantive
procedures or a combination of both.
In addition, we read all the financial and
non-financial information in the Annual Report
to identify material inconsistencies with the
audited financial statements and to identify
any information that is apparently materially
incorrect based on, or materially inconsistent
with, the knowledge acquired by us in
the course of performing the audit.
If we become aware of any apparent material
misstatements or inconsistencies we
consider the implications for our report.
Other matters
We have reported separately on the company
financial statements of Staffline Group plc for
the year ended 31 December 2015.
Steven Kentish
Senior Statutory Auditor
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham
Date: 26 January 2016
Staffline Group plc • Annual Report 2015
29
G
o
v
e
r
n
a
n
c
e
30 Staffline Group plc • Annual Report 2015
Consolidated statement of comprehensive income
for the year ended 31 December 2015
2015
Underlying
£’000
2015 Non
underlying*
£’000
Note
2015
Total
£’000
2014
Underlying
£’000
4
702,206
(615,456)
86,750
(56,439)
30,311
(2,021)
28,290
(5,188)
23,102
Continuing operations
Sales revenue
Cost of sales
Gross profit
Administrative expenses
5, 29
Operating profit
Finance costs
6
Profit for the period before taxation
Tax expense
8
Profit from continuing operations
Loss after tax on discontinued operations
Profit for the period
Items that will not be reclassified to the profit
and loss account - actuarial gains
Items that may be reclassified to the profit
and loss account – cumulative translation loss
Net profit and total comprehensive
income for the period
Earnings per ordinary share
9
Continuing operations:
Basic
Diluted
Discontinued operations:
Basic
Diluted
-
-
-
(22,814)
(22,814)
-
(22,814)
2,791
(20,023)
702,206
503,167
(615,456)
(438,320)
64,847
(45,478)
19,369
(779)
18,590
(4,342)
14,248
86,750
(79,253)
7,497
(2,021)
5,476
(2,397)
3,079
(712)
2,367
563
(84)
2,846
12.4p
12.3p
(2.9p)
(2.8p)
2014 Total
(restated)
£’000
503,167
(438,320)
64,847
(53,615)
11,232
(779)
10,453
(3,655)
6,798
-
6,798
6,798
28.6p
28.5p
2014 Non
underlying*
(restated)
£’000
-
-
-
(8,137)
(8,137)
-
(8,137)
687
(7,450)
-
-
-
-
* the non-underlying result includes the share based payment charge, amortisation of acquired intangible assets, acquisition costs and exceptional
reorganisation costs.
The accompanying notes form an integral part of these financial statements.
Staffline Group plc • Annual Report 2015
31
Consolidated statement of changes in equity
for the year ended 31 December 2015
Share
capital
£’000
Own shares
JSOP
£’000
Share
premium
£’000
Share based
payment
reserve
£’000
Profit and
loss
account
£’000
Total equity
£’000
At 1 January 2015
Dividends
Issue of new shares to JSOP
Share options issued in equity settled
share based payments
Issue of new shares
Transactions with owners
Profit for the period
Actuarial gains
Cumulative translation adjustments
Total comprehensive income for the period
2,775
(9,776)
39,930
-
-
-
-
-
-
-
-
-
-
742
-
-
742
-
-
-
-
-
-
-
2
2
-
-
-
-
61
-
-
30
-
30
-
-
-
-
31,470
(3,989)
9,089
-
-
5,100
2,367
563
(84)
64,460
(3,989)
9,831
30
2
5,874
2,367
563
(84)
2,846
2,846
At 31 December 2015
2,775
(9,034)
39,932
91
39,416
73,180
Share
capital
£’000
Own shares
JSOP
£’000
Share
premium
£’000
Share based
payment
reserve
£’000
Profit and
loss
account
£’000
Total equity
£’000
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
C
o
n
s
o
l
i
d
a
t
e
d
At 1 January 2014 as previously stated
2,569
(9,211)
24,195
Prior year adjustment (note 3)
-
-
-
At 1 January 2014
Dividends
Issue of new shares to JSOP
Share options issued in equity settled share based payments
Issue of new shares
Share issue costs
Transactions with owners
Profit for the period (restated)
Total comprehensive income for the period
2,569
(9,211)
24,195
-
6
-
200
-
206
-
-
-
(565)
-
-
-
-
559
-
15,800
(624)
(565)
15,735
-
-
-
-
31
-
31
-
-
30
-
-
30
-
-
28,166
45,750
(744)
27,422
(2,750)
-
-
-
-
(744)
45,006
(2,750)
-
30
16,000
(624)
(2,750)
12,656
6,798
6,798
6,798
6,798
Balance at 31 December 2014 (restated)
2,775
(9,776)
39,930
61
31,470
64,460
The accompanying notes form an integral part of these financial statements.
32 Staffline Group plc • Annual Report 2015
Consolidated statement of financial position
for the year ended 31 December 2015
Note
2015
£’000
2014 (restated)
£’000
Assets
Non-current assets
Goodwill
Other intangible assets
Property, plant & equipment
Deferred tax asset
Current
Trade & other receivables
Retirement benefit asset
Current assets held for sale
Cash and cash equivalents
Total assets
Liabilities
Current
Trade and other payables
Borrowings
Current liabilities held for sale
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
Total equity
Total equity & liabilities
10
11
12
18
13
28
27
14
15
16
27
17
16
17
18
19
89,306
36,714
9,338
940
136,298
117,776
2,437 -
1,687 -
5,026
126,926
263,224
102,506
20,702
2,540 -
2,967
233
128,948
47,447
7,576
6,073
61,096
190,044
2,775
(9,034)
39,932
91
39,416
73,180
263,224
69,733
12,014
4,885
327
86,959
76,414
18,364
94,778
181,737
69,466
13,363
5,489
2,335
90,653
22,401
2,044
2,179
26,624
117,277
2,775
(9,776)
39,930
61
31,470
64,460
181,737
The financial statements were approved by the Board of Directors on 26 January 2016.
A Hogarth
Director
P Ledgard
Director
The accompanying notes form an integral part of these financial statements.
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
C
o
n
s
o
l
i
d
a
t
e
d
Consolidated statement of cash flows
for the year ended 31 December 2015
Note
25
Cash flow from operating activities
Taxes paid
Net cash inflow from operating activities
Cash flows from investing activities
Purchases of property, plant and equipment
Sale of property, plant and equipment
Purchase of intangible assets
Acquisition of businesses - cash paid, net of cash acquired
Net cash used in investing activities
Cash flows from financing activities:
New loans (net of transaction fees)
Loan repayments
Acquisition of businesses - deferred consideration for prior acquisitions
Lease repayments
Interest paid
Dividends paid
Proceeds from sale of JSOP shares
Settlement of JSOP liability
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
Cash and cash equivalents at end of period
14
Staffline Group plc • Annual Report 2015
33
2015
£’000
2014 (restated)
£’000
14,431
(5,016)
9,415
(3,935)
-
(500)
(20,073)
(24,508)
53,141
(35,335)
(11,000)
(28)
(1,773)
(3,989)
9,832
(9,088)
-
1,760
(13,333)
18,359
5,026
17,599
(2,495)
15,104
(2,707)
14
-
(26,614)
(29,307)
9,575
(1,352)
(165)
-
(602)
(2,750)
-
-
15,376
20,082
5,879
12,480
18,359
The accompanying notes form an integral part of these financial statements.
34 Staffline Group plc • Annual Report 2015
Notes to the consolidated financial statements
for the year ended 31 December 2015
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
and skills training.
2. General information and statement of compliance
Staffline Group plc, a Public Limited Company listed on AIM, 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 company
registration number is 05268636.
The financial statements for the year ended 31 December 2015 (including
the comparatives for the year ended 31 December 2014) were approved
and authorised for issue by the board of Directors on 26th January 2016.
The Group does not have an ultimate controlling related party.
3. Accounting policies
Basis of preparation
The consolidated financial statements are prepared for the 52 weeks
ended 3 January 2016. The consolidated financial statements of the
Group have been prepared on a going concern basis using the significant
accounting policies and measurement bases summarised below, and
in accordance with International Financial Reporting Standards (IFRS)
as adopted by the EU. The financial statements are prepared under the
historical cost convention except for contingent consideration and cash
settled share options which are measured at fair value.
Separate financial statements of Staffline Group plc (‘the Company’)
have been prepared, on pages 60 onwards, under the historical cost
convention and in accordance with International Financial Reporting
Standards (IFRS) as adopted by the EU.
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.
Prior year adjustment
Following a review of the carrying value of the Group’s deferred tax assets,
a prior year adjustment has been made in the 2014 comparatives to
reduce the deferred tax asset on the share based payment reserve as
at 31 December 2014 from £1,514,000 to £58,000. The prior year tax
charge has accordingly increased from £2,943,000 to £3,655,000 with
£744,000 posted to the 2013 closing profit and loss reserve. Earnings per
share has also been restated. The impact on the prior year net assets is a
reduction of £1,456,000.
The dilapidation provision in the prior year has been reclassified from
accruals to other liabilities to more accurately reflect the nature of the cost.
There is no impact on net assets. In the consolidated statement of cash
flows, deferred consideration paid on acquisition of businesses is now
classified within financing activities, rather than investing activities.
Consolidation of subsidiaries
The Group financial statements consolidate those of the parent company
and all of its subsidiaries as at 31 December 2015 in accordance with
IFRS 10. Subsidiaries are all entities to which the Group is exposed or
has rights to variable returns and the ability to affect those returns through
power over the subsidiary. All subsidiaries have a reporting date of
31 December, with all subsidiary accounts prepared for the 52 weeks
ended 3 January 2016. The results of subsidiaries whose accounts are
prepared in a currency other than Sterling, are translated at the average
rates of exchange during the period and their year end balances at the year-
end rate. Translation adjustments are taken to the profit and loss reserves.
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.
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.
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, “Staffing Services” and the provision of
welfare to work and other training services, together “PeoplePlus”. Each
of these operating segments is managed separately as each requires
different technologies, marketing approaches and other resources. For
management purposes, the Group uses the same measurement policies
as those used in its financial statements.
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
Staffing Services
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 contractually 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.
The Staffing business has a limited number of second tier arrangements
whereby another recruitment company will provide contractors to the
Group to enable the Group to fulfil a customer’s requirement. Where this
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
C
o
n
s
o
l
i
d
a
t
e
d
Staffline Group plc • Annual Report 2015
35
arrangement constitutes an agency relationship rather than principal, no
sale or cost of sale is recognised in the income statement. The value of
agency sales in the year is £5.2m (2014: £2.3m).
impairment losses. Depreciation is charged on the cost less the estimated
residual value, which is assessed annually, of these assets on a straight
line basis over the estimated useful economic life of each asset.
Employability
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. 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, customer lists and licences
The fair value of acquired customer contracts, customer lists and licences
is capitalised and, subject to impairment reviews, amortised over their
estimated lives (estimated to be 2-5 years). The amortisation is calculated
so as to write off their fair value less their estimated residual values over
their estimated lives. An impairment review is undertaken when events or
circumstances indicate the carrying amount may not be recoverable.
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
3-5 years straight line
3-5 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.
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.
Property, plant and equipment
Freehold land and property, computer equipment and fixtures and
fittings are carried at acquisition cost less subsequent depreciation and
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
Taxation
36 Staffline Group plc • Annual Report 2015
Notes to the consolidated financial statements (continued)
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.
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 and contingent liabilities
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.
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.
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.
Financial assets
Equity
The Group’s financial assets include cash, trade receivables and other
receivables.
An equity instrument is any contract that evidences a residual interest in
the assets of an entity after deducting all of its liabilities.
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.
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.
Financial liabilities
The Group’s financial liabilities include bank loans, loan notes, 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.
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 granted
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.
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
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
C
o
n
s
o
l
i
d
a
t
e
d
Staffline Group plc • Annual Report 2015
37
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 certain 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
re-measured at fair value of the liability at each subsequent balance sheet
date. A financial liability is recognised for the fair value of the share based
payments at the date of the grant and is re-measured at the end of each
reporting period and at settlement with any changes to the fair value
recognised in profit or loss in 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:
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.
Critical judgments in applying the Group’s accounting policies
The Directors consider that the only critical judgements in applying
the accounting policies which are described above are
• The fair value adjustments included in note 10 relating to the
acquisitions in the year;
• The assumptions used in the impairment review, assessing
the carrying value of goodwill versus underlying value-in-use.
More details are included in note 10; and
• The estimation of the probability of the vesting conditions,
attached to the JSOP, being met.
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, based on EU mandatory effective dates, for periods
commencing on 1st January 2016. 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 (IASB effective date 1 January 2018)*;
• IFRS 14 Regulatory Deferral Accounts (effective 1 January 2016)*;
• IFRS 15 Revenue from Contracts with Customers (effective 1 January
2018)*;
• Amendments to IFRS 11: Accounting for Acquisitions of Interests in
Joint Operations (IASB effective date 1 January 2016)*
• Clarification of Acceptable methods of Depreciation and Amortisation
– Amendments to IAS 16 and IAS 38 (IASB effective date 1 January
2016);
• Annual improvement to IFRSs 2012-2014 Cycle (effective 1 January
2016)*;
Impairment of goodwill
• Amendments to IAS 16 and IAS 41: Bearer Plants (effective 1 January
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.
2016)*;
• Amendments to IAS 27: Equity Method in Separate Financial
Statements (effective 1 January 2016)*;
• Sale or Contribution of Assets between an Investor and it Associate
or Joint Ventures – Amendments to IFRS 10 and IAS 28 (deferred
indefinitely)*.
• Amendments to IFRS10 and IAS 28: Application of consolidation
exception (effective 1 January 2016)
• Amendments to IFRS 12: Application of consolidation exception
(effective 1 January 2016)
• Amendments to IAS1: Disclosure Initiative (effective 1 January 2016)
*not adopted by the EU (as at 6 January 2016)
4. Segmental reporting
Management currently identifies two operating segments: the provision of
recruitment and outsourced human resource services to industry (‘Staffing
Services’) and the provision of welfare to work services, skills training and,
as of February 2015, probationary services - collectively this segment is
called ‘PeoplePlus’. These operating segments are monitored by the Chief
Operating Decision Maker, the Group’s Board, and strategic decisions
made on the basis of segment operating results.
38 Staffline Group plc • Annual Report 2015
Notes to the consolidated financial statements (continued)
4. Segmental Reporting (continued)
Segment information for the reporting
period is as follows:
Segment continuing operations:
Staffing
Services PeoplePlus
2015
2015
£’000
£’000
Total
Group
2015
£’000
Staffing
Services
2014
PeoplePlus
2014
£’000
£’000
Total
Group
2014
£’000
Sales revenue from external customers
554,489
147,717
702,206
437,452
65,715
503,167
Cost of sales
Segment gross profit
Administrative expenses
Depreciation
(507,610)
(107,846)
(615,456)
(398,836)
(39,484)
(438,320)
46,879
39,871
86,750
38,616
26,231
64,847
(33,124)
(19,692)
(52,816)
(26,549)
(16,953)
(43,502)
(557)
(3,066)
(3,623)
(499)
(1,477)
(1,976)
Segment operating profit before amortisation
of intangibles, transaction costs and share based
payment charge
13,198
17,113
Administrative expenses – share based payment charge
(8,948)
-
Administrative expenses – reorganisation costs
-
(3,200)
Administrative expenses – transaction costs
Amortisation of intangibles
Segment profit from operations
Total non-current assets
Total current assets
Total liabilities
Capital expenditure
(167)
(616)
3,467
36,439
92,757
148,982
608
(687)
(9,196)
4,030
99,859
34,169
41,062
3,327
30,311
(8,948)
(3,200)
(854)
(9,812)
7,497
136,298
126,926
190,044
3,935
11,568
(3,665)
-
(23)
(530)
7,350
28,773
75,763
99,467
681
7,801
-
-
(637)
(3,282)
3,882
58,186
19,015
17,810
2,026
19,369
(3,665)
-
(660)
(3,812)
11,232
86,959
94,778
117,277
2,707
During 2015, one customer in the Staffing Services segment contributed greater than 10% of the Group’s revenues being 15.1% (£83m) of that
segment’s revenues (2014: one customer being 18.5%, £81m); the amount receivable from this customer at 31 December 2015 is £11.0m (2014: £9.6m).
The PeoplePlus segment has one customer contributing more than 10% of the Group’s revenue, being 66% of that segment’s revenues (2014: none);
the amount receivable from this customer at 31 December 2015 is £0.9m (2014 £nil).
5. Administrative expenses
Employee benefits expenses (note 7)
Depreciation
Operating lease expenses
Other expenses
Total
2015
£’000
2014
£’000
33,331
31,185
3,623
2,643
16,842
56,439
1,976
1,849
10,468
45,478
Auditors’ remuneration in their capacity as auditors of the parent company is £13,750 (2014: £13,750) and in their capacity as auditor of subsidiary
companies is £254,250 (2014: £120,000). Non-audit remuneration in respect of tax compliance services totalled £40,000 (2014: £15,000) and in respect
of other advice totalled £nil (2014: £123,000); the other advice in the prior year relates to tax advice on the setting up of the JSOP and acquisition advice.
The prior year fees are all in relation to the Group’s previous auditors.
Operating lease expenses of £3,520,000 (2014: £nil) relating to the PeoplePlus segment is included in cost of sales and therefore not reflected above.
6. Finance costs
Interest payable on term loan, loan notes and overdraft
Unwinding of loan note discount
Amortisation of debt issue costs
Total
2015
£’000
1,773
124
124
2,021
2014
£’000
602
115
62
779
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
C
o
n
s
o
l
i
d
a
t
e
d
Staffline Group plc • Annual Report 2015
39
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
Total
2015
£’000
2014
£’000
84,214
35,849
7,593
2,084
8,918
30
3,244
606
3,635
30
102,839
43,364
Number
Number
The average number of persons (including Directors)
employed by the Group during the year was:
Sales and administrative
3,768
1,611
Of the £102,839,000 (2014: £43,364,000) total employee benefits cost above, £60,560,000 (2014: £12,180,000) relating to the PeoplePlus segment 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
Total
The average number of temporary workers contracted
by the Group during the year was:
Directors’ remuneration
2015
£’000
2014
£’000
431,342
369,443
25,048
23,106
456,390
392,549
Number
Number
35,869
28,240
The remuneration of the Directors, which was all paid by Staffline Recruitment Limited, the Company’s wholly owned subsidiary undertaking, was as follows:
2015
Salary and fees
Bonus
Benefits in kind
Subtotal
Pension contributions
Total
A
Hogarth
P
Ledgard
D
Martyn
J
Crabtree
£’000
232
55
2
289
22
311
£’000
152
10
1
163
14
177
£’000
212
50
1
263
20
283
£’000
63
-
-
63
-
63
E
Barker
£’000
C
Braddock
£’000
30
-
-
30
-
30
35
-
-
35
-
35
Total
£’000
724
115
4
843
56
899
The Group incurred an income statement charge of £4.6m in relation to cash and equity settled share options held by the directors. The total is split as
follows: A Hogarth (£3,142,000, 2014: £857,000), D Martyn (£1,050,000, 2014: £205,000) and P Ledgard (£406,000, 2014: £53,000).
40 Staffline Group plc • Annual Report 2015
Notes to the consolidated financial statements (continued)
7. Directors and employees remuneration (continued)
2014
Salary and fees
Bonus
Benefits in kind
Subtotal
Pension contributions
Total
A
Hogarth
P
Ledgard
£’000
232
55
2
289
22
311
£’000
152
10
1
163
14
177
D
Martyn
£’000
212
50
1
263
20
283
N
Keegan
J
Crabtree
£’000
£’000
E
Barker
£’000
C
Braddock
£’000
32
-
-
32
-
32
63
-
-
63
-
63
5
-
-
5
-
5
20
-
-
20
-
20
Total
£’000
716
115
4
835
56
891
Share based employee remuneration
Approved Employee Share Option Plan
At 31 December 2015 the Group operates 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
In 2013, a maximum of 100,000 performance-related share options were issued to a director, Diane Martyn. The options vest in March 2016 on a sliding
scale dependent upon the performance of adjusted diluted earnings per share over the three years ended 31 December 2015; as of 31 December 2015,
the maximum criteria has been met and accordingly the full amount of shares are expected to vest:
D Martyn
8 March 2013
100,000
100,000
-
100,000
348.6p
Date of grant
At 1 Jan
2015
Granted
Exercised
At 31 Dec
2015
Exercise
price
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)
2015
330
-
-
92
336
Number
107,261
-
(995)
(1,838)
104,428
Weighted average
exercise price
(pence)
2014
327
-
(162)
-
330
Number
109,116
-
(1,855)
-
107,261
Staffline Group plc • Annual Report 2015
41
The Group has the following outstanding share options and exercise prices:
Date exercisable and (option life):
2010 (up to 2015)
2011 (up to 2016)
2013 (up to 2016)
2016 (up to 2021)
Number
-
4,428
-
100,000
Weighted
average
exercise price
(pence)
2015
Weighted
average
contractual life
(months)
2015
Weighted
average
exercise price
(pence)
2014
Number
Weighted
average
contractual life
(months)
2014
i
F
n
a
n
c
a
i
-
54
-
349
-
-
-
15
2,833
4,428
-
100,000
92
54
-
349
l
S
t
a
t
e
m
e
n
t
s
-
-
-
15
C
o
n
s
o
l
i
d
a
t
e
d
Share options have exercise prices between 54p and 348.6p. The weighted average share price during the year was 1,215p (2014: 815p).
The number of share options exercisable at the end of the year was 4,428 (2014: 7,261). The weighted average price of the options exercisable at the
end of the year was 54p (2014: 69p).
Joint Share Ownership Plan
In September 2010 and July 2013 the Company established two Joint Share Ownership Plans (JSOP) to provide additional incentives to senior
executives. During 2015, the September 2010 JSOP scheme vested and no interests remain.
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
D Martyn
P Ledgard
Award date
4 Jul 2013
4 Jul 2013
2 Dec 2013
Participation price
Interest over
(number of shares)
411.5p
411.5p
563p
350,000
350,000
170,000
Date on which
exercisable
30/06/2018
30/06/2018
30/06/2018
The JSOP shares are held jointly between the director and the Staffline Group plc Employee Benefit Trust. Under the terms of the JSOP rules the
directors are eligible to receive the excess of any disposal proceeds received for the JSOP shares over the participation price. The JSOP shares do not
carry dividend or voting rights whilst they are jointly held by the director and the Staffline Group plc Employee Benefit Trust. For the July 2013 award, the
shares vest at the minimum number when the diluted EPS pre amortisation exceeds 56p in any full year up to 2017. The shares vest at the maximum
number when a) the diluted EPS pre amortisation equals 93.5p and b) the increase in total shareholder return exceeds the increase in the FTSE AIM All
Share Total Return Index. If diluted EPS pre amortisation does not equal 56p in any full year up to 2017, the directors’ interest in the shares lapses.
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 2015. Significant inputs into the calculations were:
• share price at date of grant;
• exercise prices as detailed above;
• an average of 35% (2014: 32.5%) volatility based on expected and historical share price;
• risk free interest rate of 0.98% (2014: 0.6% and 1.22%);
• the disposal of shares and settlement of scheme on 30 June 2015 and 30 June 2018 respectively; and
• 46% forfeiture rate on the 2013 JSOPs (2014: 46%) and 33% on the 2010 JSOP (2014: 33%) to account for employees that leave before the
vesting date.
42 Staffline Group plc • Annual Report 2015
Notes to the consolidated financial statements (continued)
7. Directors and employees remuneration (continued)
Share based employee remuneration
In total £8,948,000 of employee remuneration expense has been included in the consolidated statement of comprehensive income for the year ended
31 December 2015 (2014: £3,665,000) which increased the share based payment reserve by £30,000 (2014: £30,000) in respect of equity settled
schemes and increased the liability by £8,918,000 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 above, and the divisional
directors who participate in the JSOP. The aggregate remuneration for the divisional directors for the year is £1,310,000 (2014: £1,381,000). Disclosures
in accordance with IAS 24 are included in note 20.
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
Other non-deductible expenses
Adjustment in respect of prior year
Overseas profits not subject to UK tax
Actual tax expense
Tax expense comprises:
Current tax expense
Deferred tax (income)/expense
- fixed asset timing differences
- intangible asset permanent difference
- share based payment temporary difference
Tax expense
2015
£’000
5,476
1,109
1,784
(496)
-
2,397
5,207
(803)
(1,857)
(150)
2,397
2015
%
20.25%
43.8%
2014
%
21.5%
34.9%
2014
£’000
10,453
2,247
1,378
63
(33)
3,655
4,016
271
(632)
-
3,655
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
C
o
n
s
o
l
i
d
a
t
e
d
Staffline Group plc • Annual Report 2015
43
During 2015, the Board decided to embark on a process to enhance the transparency and communication of the Group’s tax affairs, which resulted in the
Group issuing a tax policy and achieving the Fair Tax Mark. A copy of the Group’s policy is available at www.staffline.co.uk/investors/group-tax-policy. The
following disclosures are given to comply with the commitments made in that policy.
UK corporation tax on profits for the year
Adjustment in respect of prior years
UK current tax charge
Deferred tax
Timing differences arising in the year
UK deferred tax charge
Total UK tax charge for the year
Tax reconciliation:
Profit before tax
Tax due if paid at UK corporation tax rate (20.25%)
Adjusting items:
Depreciation in excess of capital allowances
Expenses not deductible
Adjustment to tax charge in prior period
Current tax charge for the year
Adjustments relating to deferred taxation:
Depreciation in excess of capital allowances
Permanent difference on consolidated intangible asset amortisation
Short term timing difference on share based payment reserve
Total deferred taxation credit for the year
Total UK tax charge for the year
Effective current tax rate for the year
Effective total tax rate for the year
Note
(i)
(ii)
(i)
(ii)
(ii)
(iii)
(iv)
2015
£’000
5,703
(496)
5,207
(2,810)
(2,810)
2,397
5,476
1,109
803
3,791
(496)
5,207
(803)
(1,857)
(150)
(2,810)
2,397
21.2%
18.3%
(i)
capital allowances are tax relief provided in law for the expenditure the Group makes on fixed assets. In 2015, the rate at which fixed assets have
been depreciated in the profit and loss account is in excess of the capital allowances claimed, giving rise to an additional current tax charge.
Conversely, this treatment results in an increase in the tax written down value of the assets and a corresponding deferred tax asset is both recognised
and increased. This deferred tax asset will be recovered in the future when capital allowances claimed exceed the depreciation charge.
(ii} certain transaction costs relating to the acquisitions during the year, the amortisation charge relating to consolidated intangible assets and the
JSOP profit and loss charge are not deductible under UK corporation tax and are therefore added back to taxable profits. A deferred tax liability is
recognised for consolidated intangible assets which is amortised to the profit and loss account in line with the amortisation charge – this gives rise to
a deferred tax credit each year. No deferred tax is recognised on the JSOP charges.
(iii) the effective current tax rate for the year is calculated as the current tax expense on underlying profit before taxation i.e. excluding the non-underlying
charges as described in note 5. These charges are not included in the underlying effective tax rate as they are not routine trading charges.
(iv) the effective total tax rate is less than the UK corporation tax rate of 20.25% for the year due to the tax credit relating to the prior year of £496,000.
There are no material profits arising overseas and accordingly no disclosures relating to overseas’ tax are included within the financial statements.
Changes to the UK corporation tax rates were announced in the Chancellor’s Budget on 8 July 2015. These include reductions to the main rate to reduce
the rate to 19% from 1 April 2017 and to 18% from 1 April 2020. There is no material impact on deferred tax.
44 Staffline Group plc • Annual Report 2015
Notes to the consolidated financial statements (continued)
9. Earnings per share and dividends
The calculation of basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of
shares in issue during the year, after deducting 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 on continuing operations (£’000)
Earnings on discontinued operations (£’000)
Basic
2015
3,079
(712)
Basic*
2014
6,798
-
Diluted
2015
3,079
(712) -
Diluted*
2014
6,798
Weighted average number of shares
24,882,807
23,750,562
24,989,777
23,857,420
Earnings per share (pence):
Continuing
Discontinued
Underlying earnings per share (pence)**
12.4p
(2.9p)
92.8p
28.6p
-
60.0p
12.3p
(2.8p) -
92.4p
28.5p
59.7p
*Prior year earnings per share restated as a result of the prior year adjustment referred to in note 3.
**Earnings after adjusting for amortisation of acquired intangibles, share based payment charge, transaction costs and reorganisation costs including the tax effect.
The weighted average number of shares has been increased by 1,132,245 (2014: 1,507,628) shares to take account of the full year effect of the two
million shares issued during the prior year and the effect of the eight hundred thousand shares exercised under the 2010 JSOP.
Dividends
During the year, Staffline Group plc paid interim dividends of £1,901,000 (2014: £1,227,500) to its equity shareholders. This represents a payment of 7.5p
(2014: 5p) per share. A final dividend of £3,169,874 has been proposed (2014: £2,358,542) but has not been accrued within these financial statements.
This represents a payment of 12.5p (2014: 8.5p) per share. The final dividend for 2014 of £2,358,542 was declared and paid in 2015.
10. Goodwill
Gross carrying amount
At 1 January 2014
Additions
At 31 December 2014
Additions
At 31 December 2015
Additions
a) A4e Limited
Total
£’000
30,971
38,762
69,733
19,573
89,306
On 27th April 2015 the Group announced the purchase of A4e Limited (‘A4e’). The Group paid £22.4m for the entire issued share capital and assumed
A4e’s net debt of £11.0m, which, including other deal related costs, results in an effective consideration therefore of £34.5m.
A4e is a leading provider of Welfare to Work and skills training services in the UK. Following the acquisition, the Group has become one of the largest
Work Programme providers in the UK in terms of the number of job seekers supported and contract regions serviced, with a Work Programme presence
in nine regions as a prime contractor and six further regions as a sub-contractor. This is a key long term growth initiative for the Group.
The purchase consideration was funded by a £35m term loan. Directly attributable acquisition costs of £687,000 were included within administrative
expenses and £354,000 of debt issue costs were capitalised in the balance sheet against the term loan and are being amortised to the income statement
over the term of the loan.
In accordance with IFRS 3 Business Combinations, the directors have made an initial assessment of the fair values of the acquired assets and liabilities,
which, along with identified fair value adjustments, are shown in the table below. Any revisions to the provisional fair values within 12 months of the
acquisition date will be reflected within the carrying value of goodwill as at the acquisition date.
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
C
o
n
s
o
l
i
d
a
t
e
d
Staffline Group plc • Annual Report 2015
45
Goodwill
Property, plant and equipment
Trade and other receivables
Cash
Pension asset
Trade and other payables
Corporation tax
Deferred tax liability
Borrowings
Deferred tax liability on acquired intangibles
Net liabilities acquired
Intangible assets identified – customer contracts (see note 11)
Goodwill
Subtotal
Provisional fair value
£’000
-
8,868
20,517
9,503
1,874
(33,289)
2,008
(580)
(19,768)
(4,424)
(15,291)
22,118
15,583
22,410
The cross selling opportunities and increased scale of the Group’s Welfare to Work trade (part of the PeoplePlus segment) give rise to consolidated
goodwill of £15.6m, which is not separately identifiable as other intangible assets. No goodwill is deductible for corporation tax.
At the time of the acquisition, there were several revenue streams that were approaching the end of their contracts and which were subsequently
deemed to be onerous contracts. The above fair values include provisions for these contracts. The other fair value adjustments in the table above relate
to elimination of acquired goodwill, dilapidation provisions, pre-acquisition costs not provided for and write offs of irrecoverable receivables.
For the period from 28 April to 31 December 2015, A4E had revenues of £58.9 million and profit after tax of £0.8 million. If the acquisition had occurred
on 1 January 2015, the Group’s revenues and profit after tax for the year ended 31 December 2015 would have been £749 million and £3.7 million
respectively.
b) Milestone Operations Limited
On 28th September 2015 the Group announced the acquisition of Milestone Operations Limited (“Milestone”), a recruitment business specialising in
temporary and permanent jobs for professional drivers, warehouse staff and industry experts within the transport, distribution, industrial and utilities
sectors.
Milestone services client sites throughout the UK with dedicated teams based at six operating centres, with a focus on LGV/HGV jobs as well as forklift,
warehouse, office and technician jobs. Milestone manages recruitment with a unique Driver Performance Management System and Reward Scheme,
designed to help improve driver performance through training, serving to improve efficiencies for clients and reward drivers for their loyalty and good
performance.
As previously indicated, the Group continues to see strong levels of demand for HGV drivers, combined with an ongoing systemic shortage of available
HGV drivers in the UK. The acquisition therefore represents an attractive strategic fit with Staffline’s existing driving division, Driving Plus, strengthening
the Group’s geographic reach across the UK, as well as bringing a blue chip client base.
c) Diamond Recruitment Group
On 12th October 2015 the Group announced the acquisition of the trade and assets of Diamond Recruitment Group (“Diamond”), a leading recruitment
agency based in Northern Ireland. Diamond specialises in temporary and permanent recruitment solutions and has expertise in a number of Staffline’s
core business sectors. Diamond brings a number of large blue-chip clients based in Northern Ireland as well as knowledge of the local area and an
excellent reputation with clients.
The combined acquired assets and liabilities of Milestone and Diamond are immaterial to the Group and accordingly the table below shows the
combined fair value of the assets and liabilities acquired.
46 Staffline Group plc • Annual Report 2015
Notes to the consolidated financial statements (continued)
10. Goodwill (continued)
Property, plant and equipment
Trade and other receivables
Cash
Trade and other payables
Corporation tax debtor
Borrowings
Deferred tax liability
Net assets acquired
Intangible assets identified – customer contracts (see note 11)
Goodwill
Subtotal
Provisional fair value
£’000
188
13,088
177
(7,908)
226
(5,567)
(952)
(748)
7,649
3,990
10,891
Consideration for the acquisitions included cash on completion of £7.9m and deferred consideration of £3m. The acquisitions increase the Group’s
geographic presence in the Driving and Northern Ireland temporary labour markets respectively. This gives rise to consolidated goodwill of £4m, which
is not separately identifiable of other intangible assets. No goodwill is deductible for corporation tax.
Fair value adjustments relating to the write off of irrecoverable prepayments and recognition of liabilities for post-acquisition invoices that relate to the
pre-acquisition period were included in the provisional fair values of the net liabilities acquired.
For the period from acquisition to 31 December 2015, the acquired entities above had revenues of £24.8 million and profit after tax of £0.5 million. If the
acquisition had occurred on 1 January 2015, the Group’s revenues and profit after tax for the year ended 31 December 2015 would have been £770.4
million and £3.6 million respectively.
d) The Warwickshire & West Mercia Community Rehabilitation Company Limited
In November 2014 the Group was awarded the probation and rehabilitation contract for Warwickshire and West Mercia by the Ministry of Justice. In
January 2015 the acquisition of the related limited company was legally completed. Both the consideration and acquired net assets are immaterial and
accordingly no further disclosures are included in the financial statements.
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
C
o
n
s
o
l
i
d
a
t
e
d
Staffline Group plc • Annual Report 2015
47
Impairment review
The breakdown of Goodwill by entity is listed below:
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*
PeoplePlus Group Limited (formerly Avanta Enterprise Limited)
Softmist Limited
A4e Limited
Milestone Operations Limited*
Diamond Recruitment Group*
Date of acquisition
Carrying value £’000
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
6 June 2014
2 July 2014
27 April 2015
29 September 2015
13 October 2015
22,326
1,855
764
744
745
76
1,585
1,937
939
37,670
1,092
15,208
3,027
963
Following their acquisition, the businesses asterisked above were fully integrated into the core Staffing division. A4e along with Eos Works, Avanta and
Softmist make up the trade of the People Plus division. 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.
Staffing Services
Employability
Goodwill as at 31 December
2015
£’000
33,376
55,555
88,931
2014
£’000
29,386
40,347
69,733
For both segments the recoverable amount of goodwill was determined based on a value-in-use calculation, covering a detailed three year forecast,
followed by an extrapolation of expected cash flows over the next two years with a pre-tax discount rate of 9.8% (2014: 11%) based on weighted
average cost of capital. The organic Staffing Services growth rates for the three year forecasts are between 7% and 10% and are based on the
continuation of historic organic growth achieved by the business over the past 3 years. This has been achieved by sales growth with both existing and
new customers and acquisitions. The growth rate for Staffing Services exceeds the long term average growth rate for the market but this is deemed
reasonable based on a) the growth experienced over the past 3 years and b) the detailed business plans for 2016-2018. Beyond the three year
forecast, no growth has been included in the calculation on the grounds of prudence. The People Plus growth rate is assumed to be nil due to the
uncertainty around the constitution of the Work Programme 2 contracts, which begin in 2017. It is however expected that the Group will be awarded,
at worst, the same number of contracts and at similar rates to existing contracts. The assumption around the granting of the new awards is based on
the current level of (publicly known) performance of both the Avanta and A4E contracts in comparison to competitors.
The results of the impairment review discussed above showed significant headroom in both cash generating units and accordingly no impairment is
noted. Apart from the considerations described in determining the value-in-use of the cash generating units above, 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.
There have been no amendments to the fair values recognised on the prior year acquisitions.
48 Staffline Group plc • Annual Report 2015
Notes to the consolidated financial statements (continued)
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 plus the
acquisition of a software licence obtained in 2013. There are no intangible assets with restricted title.
There are four individually material intangible assets:
- customer contracts in A4E Limited. The carrying value of the asset is £18,353,000 which is being amortised over the remaining life of the main
contract, 39 months;
- customer contracts in Diamond Recruitment Group. The carrying value of the asset is £2,743,000 which is being amortised over 5 years;
- customer contracts in Milestone Operations Limited. The carrying value of the asset is £4,523,000 which is being amortised over 5 years;
- customer contracts in PeoplePlus Group Limited. The carrying value of the asset is £5,373,000 (2014: £9,672,000) which is being amortised over 3 years.
Software
£’000
Licenses
£’000
Customer
contracts
£’000
Customer
lists
£’000
Total
£’000
Gross carrying amount
At 1 January 2014
Additions through business combinations
At 31 December 2014
Additions
Additions through business combinations
Transfer from property, plant and equipment
At 31 December 2015
Amortisation
At 1 January 2014
Provided in year
At 31 December 2014
Provided in year
Transfer from property, plant and equipment
At 31 December 2015
Net book amount at 31 December 2015
Net book amount at 31 December 2014
-
-
-
500
-
5,153
5,653
-
-
-
-
908
908
4,745
-
2,040
3,776
5,417
11,233
-
11,821
-
11,821
2,040
-
-
-
15,597
-
29,767
-
5,417
-
-
-
2,040
45,364
5,417
170
680
850
680
-
1,530
510
1,190
1,943
2,855
4,798
9,132
-
5,115
277
5,392
-
-
13,930
5,392
31,434
10,799
25
25
23,054
500
29,767
5,153
58,474
7,228
3,812
11,040
9,812
908
21,760
36,714
12,014
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
C
o
n
s
o
l
i
d
a
t
e
d
Staffline Group plc • Annual Report 2015
49
12. Property, plant and equipment
Land and
buildings
£’000
Computer
equipment
£’000
Assets in
course of
construction
£’000
Fixtures
and
fittings
£’000
Motor
vehicles
£’000
Gross carrying amount
At 1 January 2014
Additions
Additions - business combinations
Disposals
Transfer
At 31 December 2014
Additions
Additions - business combinations
Disposals
Reclassifications*
Transfer to other intangible assets
Currency translation differences
At 31 December 2015
Depreciation
At 1 January 2014
Provided in year
Disposals
At 31 December 2014
Provided in year
Disposals
Transfer to other intangible assets
Currency translation differences
At 31 December 2015
Net book value
At 31 December 2015
At 31 December 2014
2,069
121
-
-
-
2,190
893
1,298
(230)
(614)
-
(4)
3,533
1,019
281
-
1,300
261
(230)
-
(1)
1,330
2,203
890
2,172
1,076
582
(23)
-
3,807
1,594
7,404
(619)
(69)
(5,153)
(62)
6,902
1,321
815
(22)
2,114
2,376
(613)
(908)
(58)
2,911
3,991
1,693
-
-
-
-
-
-
700
-
-
-
-
-
495
1,498
1,518
(138)
(17)
3,356
747
347
(540)
(36)
-
(39)
700
3,835
-
-
-
-
-
-
-
-
-
700
-
345
865
(127)
1,083
937
(536)
-
(35)
1,449
2,386
2,273
48
12
-
(30)
17
47
1
83
(7)
-
-
(7)
117
31
15
(28)
18
49
(3)
-
(5)
59
58
29
* as described in note 27, the assets of A4E Australia have been reclassified as current assets held for sale in accordance with IFRS 5.
Total
£’000
4,784
2,707
2,100
(191)
-
9,400
3,935
9,132
(1,396)
(719)
(5,153)
(112)
15,087
2,716
1,976
(177)
4,515
3,623
(1,382)
(908)
(99)
5,749
9,338
4,885
50 Staffline Group plc • Annual Report 2015
Notes to the consolidated financial statements (continued)
13. Trade and other receivables
Trade and other receivables
Accrued income
2015
£’000
99,358
18,418
117,776
2014
£’000
68,795
7,619
76,414
Trade and other receivables are usually due within 30 days and do not bear any effective interest rate. All trade receivables are subject to credit risk
exposure. 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.
There is no bad debt provision due to the cash collection history. 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
2015
£’000
10,264
786
11,050
2015
£’000
5,026
-
5,026
2014
£’000
10,461
328
10,789
2014
£’000
18,364
(5)
18,359
Cash and cash equivalents consist of cash on hand and balances with banks only. At the year-end £4,989,000 (2014: £18,364,000) of cash on hand and
balances with banks were held by subsidiary undertakings however this balance is available for use by the Company. £1,275,000 of the year-end cash
balance was held outside of the group overdraft facility with Lloyds.
15. Trade and other payables
Trade and other payables
Accruals
Other taxation and social security
2015
£’000
16,786
46,242
39,478
102,506
2014
£’000
7,911
29,885
31,670
69,466
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.
Staffline Group plc • Annual Report 2015
51
2015
£’000
20,868
8,750
39,125
(594)
68,149
2015
£’000
11,875
8,993
(166)
-
2014
£’000
13,468
11,409
11,250
(363)
35,764
2014
£’000
2,500
10,964
(106)
5
20,702
13,363
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
C
o
n
s
o
l
i
d
a
t
e
d
26,000
21,875
-
(428)
47,447
68,149
(68,742)
5,026
7,500
6,250
8,909
(258)
22,401
35,764
(36,128)
18,364
(17,764)
16. Borrowings
Borrowings 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 five years
Unamortised transaction costs
Split:
Current liabilities:
Term loan
Discounted loan notes
Unamortised transaction costs
Overdraft
Non-current liabilities:
Revolving credit facility
Term loan
Discounted loan notes
Unamortised transaction costs
Total borrowings
Total borrowings excluding unamortised transaction costs
Cash (note 14)
Net debt as disclosed in consolidated statement of cash flows
(63,716)
The term loan, discounted loan notes and revolving credit facility (RCF) are secured by a debenture over all the assets of the Group.
A term loan of £35m was drawn down in June as part of the A4e acquisition. The loan is repayable quarterly and matures in 2019. Interest accrues on
the loan at between 1.4% and 2.4% plus LIBOR, depending upon the level of adjusted leverage as defined in the banking covenants.
As part of the Avanta acquisition in 2014, there was £20m of deferred consideration due to the vendors, £11m which was paid in 2015 and £9m due
to be paid in 2016. The deferred consideration is in the form of bank guaranteed, coupon-bearing loan notes. The two loan notes have been discounted
back to the book values disclosed above. Interest on the bank guarantees is charged at 1.4%.
The revolving credit facility is repayable in 2019 and interest accrues at the same rate as the term loan. Subsequent to the year end the group has
secured a further £7.5m of working capital facility.
52 Staffline Group plc • Annual Report 2015
Notes to the consolidated financial statements (continued)
17. Other liabilities
Due within one year
Deferred income
Deferred consideration
Cash settled JSOP liability
Due after more than one year
Deferred income
Dilapidation provision
Cash settled JSOP liability
2015
£’000
17
2,950 -
-
2,967
17
1,379
6,180
7,576
2014
£’000
17
5,472
5,489
33
1,131
880
2,044
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 21 for further information relating to details on the Group’s operating lease agreements.
The dilapidation provision in the prior year has been reclassified from accruals to other liabilities to more accurately reflect the nature of the cost.
18. Deferred tax (restated)
1 January
Deferred tax
assets/(liabilities)
Property, plant and equipment
temporary timing differences
Acquired intangible assets
Retirement benefit asset
(as originally Prior year 1 January Recognised Recognised
on
(restated)
acquisition
2015
£’000
£’000
stated) adjustment
2015
£’000
in profit
and loss
£’000
2015
£’000
31
Assets held December
2015
£’000
for sale
£’000
269
(2,179)
-
-
-
-
269
803
(205)
(135)
(2,179)
1,857
(5,376)
-
58
-
150
(375)
-
-
-
-
732
(5,698)
(375)
208
Share based payment liability
1,514
(1,456)
Recognised as:
Deferred tax asset
Deferred tax liability
(396)
(1,456)
(1,852)
2,810
(5,956)
(135)
(5,133)
1,783
(1,456)
327
953
(205)
(135)
940
(2,179)
-
(2,179)
1,857
(5,751)
-
(6,073)
There are no material deferred tax assets that have not been recognised (2014: nil). As described in note 27, the assets of A4E Australia have been
reclassified as current assets held for sale in accordance with IFRS 5; accordingly the A4E Australia deferred tax asset is reclassified in the above table.
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
C
o
n
s
o
l
i
d
a
t
e
d
Staffline Group plc • Annual Report 2015
53
19. Share capital
Authorised
30,000,000 (2014: 30,000,000) ordinary 10p shares
Allotted and issued
27,749,389 (2014: 27,747,551) ordinary 10p shares
2015
£’000
3,000
2,775
2014
£’000
3,000
2,775
Year ended
31 December
2015
Year ended
31 December
2014
Shares issued and fully paid at the beginning of the period
27,747,551
25,687,551
Shares issued during the year
Shares issued and fully paid
Shares authorised but unissued
1,838
2,060,000
27,749,389
27,747,551
2,250,611
2,252,449
Total equity shares issued at end of period
30,000,000
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
2,390,400 shares held by the EBT where the right to dividends has been waived.
20. 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 Directors
The Group Directors’ personal remuneration includes the following expenses:
Short-term employee benefits:
Salaries and fees
Bonus – unpaid at year-end
Benefits in kind
Social security costs
Pension contributions
Share based employee remuneration
2015
£’000
724
115
4
99
56
4,598
5,596
2014
£’000
716
115
4
115
56
1,114
2,120
In addition to the above, the Group spent £28,484 (2014: £30,585) in accommodation expenses at Hogarth’s Hotel, which is owned by the Chief
Executive. £2,647 remains outstanding at year-end (2014: £2,558).
During the year, a director loaned £2m to the company. This attracted no interest charges and was repaid in full prior to 31 December 2015.
54 Staffline Group plc • Annual Report 2015
Notes to the consolidated financial statements (continued)
21. 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
2015
Land and
buildings
£’000
6,017
7,250
2,661
15,928
2014
Land and
buildings
£’000
285
3,392
220
3,897
Lease payments recognised as an expense during the year ended 31 December 2015 amounted to £6,163,000 (2014: £1,849,000). 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.
22. Contingencies
A cross guarantee exists between all companies in the Group for all amounts payable to Lloyds. The Group amount owing to Lloyds at year-end is £56.0m.
The Group has no other contingent assets or liabilities at 31 December 2015 or 31 December 2014.
23. Capital commitments
The Group had no material capital commitments at either 31 December 2015 or 31 December 2014.
24. 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 co-ordinated 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 (note 14)
Accrued income (note 13)
2015
Loans and
receivables
and balance
sheet totals
£’000
2014
Loans and
receivables
and balance
sheet totals
£’000
99,358
5,026
18,418
122,802
68,795
18,364
7,619
94,778
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 2015 are provided in note 13.
The Group has adopted a policy of carefully monitoring all customers, especially those who lack an appropriate credit history.
Staffline Group plc • Annual Report 2015
55
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. Subsequent to the year end the group has secured
a further £7,500,000 of working capital facility.
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 both the term loan and RCF has been set at 1.4% 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
2015
+1%
(933)
2015
-1%
933
2014
+1%
(221)
2014
-1%
221
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 and the Euro (Republic of Ireland). 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.
Financial liabilities
The Group’s liabilities are classified as follows:
Term loan and loan notes
RCF
Trade and other payables
Taxation and social security
Accruals
Deferred consideration
Dilapidation provision
Deferred income
Other liabilities -JSOP
Corporation tax
Total
2015
Financial liabilities
at fair value
through profit or loss
£’000
2015
Other financial
liabilities at
amortised cost
£’000
2015
Liabilities not
within the scope
of IAS 39
£’000
2015
Balance sheet
total
£’000
-
-
-
-
-
-
-
-
-
-
-
42,743
26,000
16,786
39,478
46,242
-
-
-
-
-
-
-
-
-
-
2,950
1,379
34
6,180
233
42,743
26,000
16,786
39,478
46,242
2,950
1,379
34
6,180
233
171,249
10,776
182,025
It is considered that the fair value of the Group’s financial assets and liabilities equal the book value.
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
C
o
n
s
o
l
i
d
a
t
e
d
56 Staffline Group plc • Annual Report 2015
Notes to the consolidated financial statements (continued)
24. Risk Management objectives and policies (continued)
Term loan and loan notes
RCF
Overdraft
Trade and other payables
Accruals
Dilapidation provision
Deferred income
Other liabilities
Deferred tax
Corporation tax
Total
2014
Financial liabilities
at fair value
through profit or loss
£’000
2014
Other financial
liabilities at
amortised cost
£’000
2014
Liabilities not
within the scope
of IAS 39
£’000
2014
Balance sheet
total
£’000
-
-
-
-
-
-
-
-
-
-
-
28,623
7,500
5
39,581
29,885
-
-
-
-
-
-
-
-
-
-
1,131
50
6,352
2,179
2,335
28,623
7,500
5
39,581
29,885
1,131
50
6,352
2,179
2,335
105,594
12,047
117,641
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 no financial assets or liabilities in any classification.
Maturity of financial liabilities
The analysis of the maturity of financial liabilities within the scope of IAS 39 at 31 December 2015 is as follows:
2015
Less than
one year
£’000
11,875
-
8,993
-
Term loan
RCF
Loan notes
Overdraft
Trade and other payables
14,786
Taxation and social security
39,478
2015
Two to
five years
£’000
21,875
26,000
-
-
-
-
-
2015
More than
five years
£’000
-
-
-
-
-
-
-
-
2015
Total
£’000
33,750
26,000
8,993
-
14,786
39,478
48,242
171,249
2014
Less than
one year
£’000
2014
Two to
five years
£’000
2014
More than
five years
£’000
2,500
-
10,964
5
7,911
31,670
29,885
82,935
6,250
7,500
8,909
-
-
-
-
22,659
-
-
-
-
-
-
-
-
2014
Total
£’000
8,750
7,500
19,873
5
7,911
31,670
29,885
105,594
Accruals
Total
48,242
123,374
47,875
Staffline Group plc • Annual Report 2015
57
The analysis of the maturity of contractual undiscounted financial liabilities at 31 December 2015 is as follows:
2015
Less than
one year
£’000
12,383
481
9,028
Term loan
RCF
Loan notes
Trade and other payables
14,786
Taxation and social security
39,478
48,242
Accruals
Total
2015
Two to
five years
£’000
22,364
27,243
-
-
-
-
2015
More than
five years
£’000
-
-
-
-
-
-
-
2014
2014
Two to More than
five years
£’000
five years
£’000
2015
Total
£’000
34,747
27,724
2014
Less than
one year
£’000
2,637
139
9,028
11,234
14,786
39,478
48,242
7,911
31,670
29,885
6,390
7,720
9,028
-
-
-
2014
Total
£’000
9,027
7,859
20,262
7,911
31,670
29,885
106,614
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
C
o
n
s
o
l
i
d
a
t
e
d
-
-
-
-
-
-
-
124,398
49,607
174,005
83,476
23,138
25. Cash flows from operating activities
Profit before taxation
Adjustments for:
Loss on discontinued operations
Finance costs
Depreciation, loss on disposal and amortisation
Operating profit before changes in working capital and share options
Change in trade and other receivables
Change in trade and other payables
Cash generated from operations
Additional pension contributions
Employee cash settled share options
Employee equity settled share options
Year ended
31 December
2015
£’000
Year ended
31 December
2014
£’000
5,476
10,453
(712) -
2,021
13,449
20,234
(7,140)
(6,861)
6,233
(750) -
8,918
30
779
5,789
17,021
(6,282)
3,195
13,934
3,635
30
Net cash inflow from operating activities
14,431
17,599
Movement in net debt
Net debt at 1 January 2015 (excluding transaction fees)
Acquired debt
New loans (excluding transaction fees)
Unwinding of discount on loan notes
Loan repayments
Change in cash and cash equivalents
Net debt at 31 December 2015
£’000
(17,764)
(25,335)
(53,495)
(124)
46,335
(13,333)
(63,716)
58 Staffline Group plc • Annual Report 2015
Notes to the consolidated financial statements (continued)
26. 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 the consolidated statement of changes in equity.
The only restrictions on the Group’s capital relates to the covenants attached to the debt facilities.
27. Assets held for sale
During the year, the Board decided to dispose of A4E Australia and its related subsidiaries. In accordance with ‘IFRS 5 Non-current assets held for sale and
discontinued operations’, the post- acquisition results of A4E Australia are disclosed in the income statement as discontinued operations – breakdown
included below in the table.
The total assets and total liabilities of A4E Australia are held as current assets held for sale and current liabilities held for sale respectively. A sale is
expected within 12 months of the balance sheet date at a value higher than the carrying value of the net current liabilities held for sale. The cash flows
of A4E Australia are consistent with the operating results.
Sales
Cost of sales
Gross loss
Administrative expenses
Operating loss
Interest receivable
Loss before and after taxation
Property, plant and equipment
Trade and other receivables
Deferred taxation asset
Current assets held for sale
Trade and other payables
Current liabilities held for sale
Year ended
31 December
2015
£’000
2,275
(2,411)
(136)
(579)
(715)
3
(712)
719
833
135
1,687
(2,540)
(2,540)
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
C
o
n
s
o
l
i
d
a
t
e
d
Staffline Group plc • Annual Report 2015
59
28. Retirement benefit asset
One of the Group’s subsidiaries operates a defined benefit pension scheme for its staff. The scheme is closed to new entrants.
The amounts recognised in the balance sheet are determined as follows:
Present value of funded obligations
Fair value of plan assets
Asset in the balance sheet
The movement in the defined benefit obligation over the year is as follows:
Balance at 1 January 2015
Acquired obligation
Interest cost
Service cost
Benefits paid
Actuarial gain
Asset in the balance sheet
The movement in the fair value of the plan assets over the year is as follows:
Balance at 1 January 2015
Acquired assets
Expected return
Contributions
Benefits paid
Actuarial loss
Asset in the balance sheet
Year ended
31 December
2015
£’000
(5,878)
8,315
2,437
2015
£’000
-
6,644
169
191
(243)
(883)
5,878
2015
£’000
-
8,518
169
191
(243)
(320)
8,315
A charge of £191,000 is included within the income statement within administrative expenses; a net actuarial gain of £563,000 is included within other
comprehensive income.
29. Non-underlying administrative expenses
Included within administrative expenses are the following non underlying costs
Amortisation of acquired intangible assets
Share based payment charges
Transaction costs
Reorganisation costs
2015
£’000
2014
£’000
9,812
8,948
854
3,200 -
3,812
3,665
660
22,814
8,137
Reorganisation costs are the exceptional restructuring costs of forming the PeoplePlus division.
60 Staffline Group plc • Annual Report 2015
Company statutory financial statements
for the year ended 31 December 2015. Company number 05268636
Independent auditor’s report
to the members of Staffline Group plc
for the year ended 31 December 2015
Report on the company financial statements
Our opinion
In our opinion, Staffline Group plc’s company financial statements (the “financial statements”):
• give a true and fair view of the state of the company’s affairs as at 31 December 2015 and of its profit and cash flows for the year then ended;
• have been properly prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
What we have audited
The financial statements, included within the Annual Report, comprise:
• the company statement of financial position as at 31 December 2015;
• the company statement of cash flows for the year then ended;
• the company statement of changes in equity for the year then ended; and
• the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information.
The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and IFRSs as adopted by the
European Union.
In applying the financial reporting framework, the directors have made a number of subjective judgements, for example in respect of significant
accounting estimates. In making such estimates, they have made assumptions and considered future events.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion, the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements are
prepared is consistent with the financial statements.
Other matters on which we are required to report by exception
Adequacy of information and explanations received
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not
visited by us; or
• the financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Directors’ remuneration
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. We have no exceptions to report arising from this responsibility.
Staffline Group plc • Annual Report 2015
61
Responsibilities for the financial statements and the audit
Our responsibilities and those of the directors
As explained more fully in the Directors’ Responsibilities Statement set out on page 27, the directors are responsible for the preparation of the 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 financial statements in accordance with applicable law and International Standards on
Auditing (UK and Ireland) (“ISAs (UK & Ireland)”). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16
of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose
or to
any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
What an audit of the financial statements involves
We conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about the amounts and disclosures in the
financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by
fraud or error. This includes an assessment of:
• whether the accounting policies are appropriate to the company’s circumstances and have been consistently applied and adequately disclosed;
• the reasonableness of significant accounting estimates made by the directors; and
• the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing the directors’ judgements against available evidence, forming our own judgements, and
evaluating the disclosures in the financial statements.
We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis
for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.
In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial
statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired
by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications
for our report.
Other matter
We have reported separately on the group financial statements of Staffline Group plc for the year ended 31 December 2015.
Steven Kentish (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham
Date: 26th January 2016
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
C
o
m
p
a
n
y
S
t
a
t
u
t
o
r
y
62 Staffline Group plc • Annual Report 2015
Company statement of changes in equity
for the year ended 31 December 2015
At 1 January 2015
Dividends
Vesting of JSOP shares
Issue of new shares
Transactions with owners
Profit for the period
Total comprehensive income for the period
Share
capital
£’000
2,775
Own shares
JSOP
£’000
(9,776)
Share
premium
£’000
39,930
-
-
-
-
-
-
-
742
-
742
-
-
-
-
2
2
-
-
Profit and
loss account
£’000
8,207
(3,989)
9,089
-
5,100
4,441
4,441
Total
equity
£’000
41,136
(3,989)
9,831
2
5,844
4,441
4,441
At 31 December 2015
2,775
(9,034)
39,932
17,748
51,421
At 1 January 2014
Dividends
Issue of new shares to JSOP
Issue of new shares
Share issue costs
Transactions with owners
Profit for the period as previously reported
Profit impact on transition to IFRS (note 31)
Total comprehensive income for the period
Share
capital
£’000
2,569
-
6
200
-
206
-
-
-
Own shares
JSOP
£’000
(9,211)
-
(565)
-
-
(565)
-
-
-
Share
premium
£’000
24,195
-
559
15,800
(624)
15,735
-
-
-
Profit and
loss account
£’000
9,633
(2,750)
-
-
-
(2,750)
1,224
100
1,324
Total
equity
£’000
27,186
(2,750)
-
16,000
(624)
12,626
1,224
100
1,324
Balance at 31 December 2014
2,775
(9,776)
39,930
8,207
41,136
The accompanying notes form an integral part of these financial statements.
Staffline Group plc • Annual Report 2015
63
Company statement of financial position
at 31 December 2015
Assets
Non-current assets
Other intangible assets
Investments
Current
Trade & other receivables
Cash and cash equivalents
Total assets
Liabilities
Current
Trade and other payables
Borrowings
Other current liabilities
Non-current
Borrowings
Other non-current liabilities
Total liabilities
Equity
Share capital
Own shares
Share premium
Profit & loss account
Total equity
Total equity & liabilities
Note
34
33
35
36
37
38
37
38
39
2015
£’000
500
58,011
58,511
41,343
36
41,379
99,890
141
20,702
-
20,843
21,446
6,180
27,626
48,469
2,775
(9,034)
39,932
17,748
51,421
99,890
2014
£’000
1,166
26,684
27,850
47,904
65
47,969
75,819
72
13,358
5,472
18,902
14,901
880
15,781
34,683
2,775
(9,776)
39,930
8,207
41,136
75,819
The financial statements were approved by the Board of Directors on 26 January 2016.
A Hogarth
Director
P Ledgard
Director
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
C
o
m
p
a
n
y
S
t
a
t
u
t
o
r
y
64 Staffline Group plc • Annual Report 2015
Company statement of cash flows
at 31 December 2015
Net cash inflow/(outflow) from operating activities
Cash flows from investing activities
Acquisition of businesses - cash paid, net of cash acquired
Note
41
Dividends received
Net cash used in investing activities
Cash flows from financing activities:
New loans (net of transaction fees)
Loan repayments
Acquisition of businesses - deferred consideration for prior acquisitions
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 year
Cash and cash equivalents at end of year
Net debt at beginning of year
Net change in cash and cash equivalents
Repayment of loans
New loans net of transaction fees
Unwinding of loan notes and transaction fees
Net debt at end of year
37
The comparative statement of cash flows is unaudited due to the transition to IFRS.
2015
£’000
8,757
(22,410) -
3,989
(18,421)
34,646
(10,000)
(11,000) -
(766)
(3,989)
744
9,635
(29)
65
36
(28,558)
(29)
21,000
(34,646)
(474)
(42,707)
Unaudited
2014
£’000
(23,250)
2,750
2,750
9,575
(1,250)
(386)
(2,750)
15,376
20,565
65
-
65
-
65
-
(28,623)
-
(28,558)
The accompanying notes form an integral part of these financial statements.
Staffline Group plc • Annual Report 2015
65
Notes to the company financial statements
For the year ended 31 December 2015
Basis of preparation
The financial statements have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards
(IFRS) as adopted by the EU. The transition to International Financial Reporting Standards has been made in accordance with International Financial
Reporting Standard 1 “First-time adoption of International Financial Reporting Standards”.
The transition to International Financial Reporting Standards (‘IFRS’) reporting has resulted in a number of changes in the reported financial statements,
notes thereto and accounting principles compared to the previous annual report. Note 30 provides further details on the transition from UK GAAP to IFRS.
Investments
Investments in the subsidiaries 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.
i
F
n
a
n
c
a
i
l
Deferred taxation
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 financial statements with their respective tax bases.
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.
S
t
a
t
e
m
e
n
t
s
Intangible assets
Other intangible assets relate to the fair value of acquired intellectual property rights of a software product which is subject to impairment reviews and is
being amortised over 3 years, the expected useful life. The amortisation is calculated so as to write off the fair value less the estimated residual values
over the estimated useful life. An impairment review is undertaken when events or circumstances indicate the carrying amount may not be recoverable.
Share based payment
The Company has issued cash settled share based payment in respect of services provided by key employees of one of its subsidiaries. The share
based payment is measured at the fair value of the liability at the grant date and re-measured at the fair value of the liability at each subsequent balance
sheet date. A liability is recognised for the fair value of the share based payments with the corresponding entry recognised as an increase in the
investment held in the subsidiary.
Financial assets
The Company’s financial assets include cash and amounts due from group companies.
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.
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.
Financial liabilities
The Company’s financial liabilities include bank loans and loan notes.
Financial liabilities are recognised when the Company 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 Company’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.
Dividend distributions to shareholders are included in ‘other short term financial liabilities’ when the dividends are approved by the shareholders’ meeting.
C
o
m
p
a
n
y
S
t
a
t
u
t
o
r
y
66 Staffline Group plc • Annual Report 2015
Notes to the company financial statements (continued)
30. Transition to international financial reporting standards
The transition from previous UK GAAP to IFRS has been made in accordance with IFRS 1, “First-time Adoption of International Financial Reporting Standards”.
The Company’s financial statements for the year ended 31 December 2015 and the comparatives presented for the period ended 31 December 2014
comply with all presentation, recognition and measurement requirements of IFRS applicable for accounting periods commencing on or after 1 January 2014.
The following reconciliations and explanatory notes thereto describe the effects of the transition for the financial year 2014. All explanations should be
read in conjunction with the IFRS accounting policies of Staffline Group plc.
Statutory profit and loss account for the year ended 31 December 2014 and balance sheet at 31 December 2014
The re-measurement of balance sheet items as at 31 December 2014 may be summarised as follows:
Reconciliation as at 31 December 2014
Goodwill
Profit and loss account
Total adjustment to equity
UK GAAP
£’000
1,700
8,107
8,107
Effect of
transition
£’000
100
100
100
IFRS
£’000
1,800
8,207
8,207
The reconciliation of the Group’s equity reported under previous GAAP to its equity under IFRS as at 31 December 2014 may be summarised as follows:
Reconciliation as at 31 December 2014
Retained earnings - UK GAAP
Reversal of goodwill amortisation – prior year
Retained earnings - IFRS
£’000
8,107
100
8,207
Profit and loss reported under UK GAAP for the year ended 31 December 2014 is reconciled to IFRS as follows:
Reconciliation as at 31 December 2014
Sales revenue
Cost of sales
Gross profit
Administrative expenses
Operating result
Amortisation of goodwill
Dividends income
Finance costs
Result for the period before taxation
Tax income
Net result for the period
UK GAAP
£’000
Effect of
transition
£’000
-
(-)
-
(978)
(978)
(100)
2,750
(447)
1,225
-
1,225
-
-
-
-
-
100
-
-
100
-
100
IFRS
£’000
-
(-)
-
(978)
(978)
-
2,750
(447)
1,325
-
1,325
The Company has modified its former balance sheet and income statement structure on transition to IFRS. The main changes may be summarised as follows:
• to eliminate the amortisation of goodwill
• goodwill reclassified to investments
Following the transition to IFRS, investments that have previously been hived down into a fellow group company and previously recognised as goodwill,
have been reclassified to Investments.
Staffline Group plc • Annual Report 2015
67
31. 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 £4,441,000 (2014: £1,324,000). Auditors remuneration incurred by the Company
during the year for audit services totalled £13,750 (2014: £13,750).
32. 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 25.
The average number of persons (including Directors) employed by the Company during the year was 6 (2014: 6).
33. Fixed asset investments
Investment in group undertakings
£’000
Cost and net book amount at 31 December 2014 as previously stated
Impact on transition to IFRS (note 30)
Cost and net book amount at 31 December 2014
Additions
Cost and net book amount at 31 December 2015
The Company holds interests in the following companies:
24,884
1,800
26,684
31,327
58,011
Subsidiaries
Staffline Recruitment Limited
Elpis Limited*
A La Carte Recruitment Limited*
Staffline Polska Sp. zoo*
Staffline Gliwice Sp. zoo*
Go New Sp. Zoo *
House of Logistics Limited*
Staffline Recruitment Ireland Limited
Eos Works Group Limited
Eos Works Limited*
Ethos Recruitment Limited*
Taskforce Recruitment Limited*
Go New Recruitment Holdings Limited*
Go New Recruitment Limited*
Go New Recruitment (Glos.) Limited*
Select Appointments Limited*
Learning Plus System Limited
Staffline Holdings Limited
PeoplePlus Group Limited*
Softmist Limited*
Proportion of ordinary
share capital held
Country of incorporation
Nature of business
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
90%
100%
100%
England and Wales
England and Wales
England and Wales
Poland
Poland
Poland
England and Wales
Republic of Ireland
England and Wales
Recruitment
Dormant
Dormant
Recruitment
Recruitment
Recruitment
Dormant
Recruitment
Dormant
England and Wales
Welfare to Work
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Dormant
Dormant
Dormant
Dormant
Dormant
Recruitment
Training
England and Wales
Intermediary holding
England and Wales
Welfare to Work
England and Wales
Training
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
C
o
m
p
a
n
y
S
t
a
t
u
t
o
r
y
68 Staffline Group plc • Annual Report 2015
Notes to the company financial statements (continued)
33. Fixed asset investments (continued)
Subsidiaries
Staffline Recruitment Limited
Elpis Limited*
A La Carte Recruitment Limited*
Staffline Polska Sp. zoo*
Staffline Gliwice Sp. zoo*
Go New Sp. Zoo *
House of Logistics Limited*
Staffline Recruitment Ireland Limited
Eos Works Group Limited
Eos Works Limited*
Ethos Recruitment Limited*
Taskforce Recruitment Limited*
Go New Recruitment Holdings Limited*
Go New Recruitment Limited*
Go New Recruitment (Glos.) Limited*
Select Appointments Limited*
Learning Plus System Limited
Staffline Holdings Limited
PeoplePlus Group Limited*
Softmist Limited*
Proportion of ordinary
share capital held
Country of incorporation
Nature of business
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
90%
100%
100%
England and Wales
England and Wales
England and Wales
Poland
Poland
Poland
England and Wales
Republic of Ireland
England and Wales
Recruitment
Dormant
Dormant
Recruitment
Recruitment
Recruitment
Dormant
Recruitment
Dormant
England and Wales
Welfare to Work
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Dormant
Dormant
Dormant
Dormant
Dormant
Recruitment
Training
England and Wales
Intermediary holding
England and Wales
Welfare to Work
England and Wales
Training
*These companies are owned indirectly through other group companies.
34. Intangible assets
The Intangible asset related to a software license which has a remaining useful economic life of two years.
Net book value at 31 December 2014
Amortisation provided in year
Net book value at 31 December 2015
35. Trade and other receivables
Other debtors
Amounts due from Group undertakings
Total
£’000
1,166
(666)
500
2015
£’000
1,484 -
39,859
41,343
2014
£’000
47,904
47,904
The amounts due from Group undertakings are no-interest bearing, unsecured and repayable on demand
Staffline Group plc • Annual Report 2015
69
36. Trade and other payables
Accruals
37. Borrowings
Borrowings 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 five years
Unamortised transaction costs
Split:
Current liabilities:
Term loan
Discounted loan notes
Unamortised transaction costs
Non-current liabilities:
Term loan
Discounted loan notes
Unamortised transaction costs
Total borrowings
2015
£’000
141
141
2015
£’000
20,868
8,750
13,125
(595)
42,148
11,875
8,993
(166)
20,702
21,875
-
(429)
21,446
42,148
2014
£’000
72
72
2014
£’000
13,464
11,409
3,750
(364)
28,259
2,500
10,964
(106)
13,358
6,250
8,909
(258)
14,901
28,259
Total borrowings excluding unamortised transaction costs
(42,743)
Cash
36
Net debt as disclosed in consolidated statement of cash flows
(42,707)
(28,623)
65
(28,558)
The term loan and discounted loan notes are secured by a debenture over all the assets of the Group.
A term loan of £35m was drawn down in June as part of the A4E acquisition. The loan is repayable quarterly and matures in 2019. Interest accrues on
the loan at between 1.4% and 2.4% plus LIBOR, depending upon the level of adjusted leverage as defined in the banking covenants.
As part of the Avanta acquisition in 2014, there was £20m of deferred consideration due to the vendors, £11m which was paid in 2015 and £9m due to
be paid in 2016. The deferred consideration is in the form of bank guaranteed, coupon-bearing loan notes. The two loan notes have been discounted
back to the book values disclosed above. Interest on the bank guarantees is charged at 1.4%.
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
C
o
m
p
a
n
y
S
t
a
t
u
t
o
r
y
70 Staffline Group plc • Annual Report 2015
Notes to the company financial statements (continued)
38. Other liabilities
Due within one year
Cash settled JSOP liability
Due after more than one year
Cash settled JSOP liability
39. Share Capital
Authorised
30,000,000 (2014: 30,000,000) ordinary 10p shares
Due after more than one year
27,749,389 (2014: 27,747,551) ordinary 10p shares
2015
£’000
-
-
6,180
6,180
2015
£’000
3,000
2015
£’000
2,775
2014
£’000
5,472
5,472
880
880
2014
£’000
3,000
2014
£’000
2,775
For full details of share options and the share based payment charge calculation see note 7.
40. Risk management objectives and policies
The Company is exposed to a variety of financial risks through its use of financial instruments which result from both its operating and investing activities.
The Company’s risk management is co-ordinated at its headquarters, in close co-operation with the Board of Directors.
The Company does not actively engage in the trading of financial assets for speculative purposes. The most significant financial risks to which the
Company is exposed are described below.
Credit risk
Generally, the Company’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:
Amounts due from group companies
Cash and cash equivalents
Other debtors
2015
Loans and
receivables
and balance
sheet totals
£’000
39,859
36
1,484
41,379
2014
Loans and
receivables
and balance
sheet totals
£’000
47,904
65
-
47,969
Credit risk is only disclosed in circumstances where the maximum potential loss differs significantly from the financial asset’s carrying amount.
Liquidity risk
The Company seeks to manage financial risks to ensure sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely
and profitably.
Staffline Group plc • Annual Report 2015
71
Interest rate risk
All financial liabilities of the Company are subject to floating interest rates. Competitive rates have been renegotiated with the Company’s bankers and
the rate paid on the term has been set at 1.4% 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.
2015
+1%
(743)
2015
-1%
743
2014
+1%
(221)
2014
-1%
221
(Decrease)/increase in net result and equity £’000
Foreign currency sensitivity
The Company’s transactions are all carried out in sterling.
Financial liabilities
The Company’s liabilities are classified as follows:
i
F
n
a
n
c
a
i
l
Term loan and loan notes
Accruals
Other liabilities - JSOP
Total
2015
Financial liabilities
at fair value through
£’000
2015
Other financial
liabilities at
£’000
2015
Liabilities not
within the scope
£’000
2015
Balance sheet
total
£’000
S
t
a
t
e
m
e
n
t
s
-
-
-
-
42,743
141
-
42,884
-
-
6,180
6,180
42,743
141
6,180
49,064
The Company consider that the fair value of the Company’s financial assets and liabilities equal the book value.
Term loan and loan notes
Accruals
Other liabilities - JSOP
Total
2014
Financial liabilities
at fair value through
£’000
2014
Other financial
liabilities at
£’000
2014
Liabilities not
within the scope
£’000
2014
Balance sheet
total
£’000
-
-
-
-
28,623
72
-
28,695
-
-
6,352
6,352
28,623
72
6,352
35,047
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 no financial assets or liabilities in any classification.
C
o
m
p
a
n
y
S
t
a
t
u
t
o
r
y
72 Staffline Group plc • Annual Report 2015
Notes to the company financial statements (continued)
40. Risk management objectives and policies (continued)
Maturity of financial liabilities
The analysis of the maturity of financial liabilities at 31 December 2015 is as follows:
2015
Less than
one year
£’000
2015
Two to
five years
£’000
2015
More than
five years
£’000
11,875
21,875
8,993
141
-
-
21,009
21,875
-
-
-
-
Term loan
Loan notes
Accruals
Total
2015
Total
£’000
33,750
8,993
141
2014
Less than
one year
£’000
2,500
10,964
72
42,884
13,536
15,159
2014
Two to
five years
£’000
2014
More than
five years
£’000
The analysis of the maturity of contractual undiscounted financial liabilities at 31 December 2015 is as follows:
2015
Less than
one year
£’000
2015
Two to
five years
£’000
2015
More than
five years
£’000
12,383
22,364
9,028
141
-
-
21,552
22,364
-
-
-
-
Term loan
Loan notes
Accruals
Total
2015
Total
£’000
34,747
9,028
141
2014
Less than
one year
£’000
2,637
11,234
72
43,916
13,943
15,418
2014
Two to
five years
£’000
2014
More than
five years
£’000
6,250
8,909
-
6,390
9,028
-
2014
Total
£’000
8,750
19,873
72
28,695
2014
Total
£’000
9,027
20,262
72
29,361
-
-
-
-
-
-
-
-
Staffline Group plc • Annual Report 2015
73
41. Cash flows from operating activities
Profit before taxation
Adjustments for:
Finance costs
Depreciation, loss on disposal and amortisation
Dividend income
Operating profit before changes in working capital
and share options
Change in trade and other receivables
Change in trade and other payables
Net cash inflow/(outflow) from operating activities
42. Contingent liabilities
Year ended
31 December
2015
£’000
Year ended
31 December
2014
£’000
4,441
1,324
1,014
667
(3,989)
2,133
6,561
63
8,757
447
667
(2,750)
(312)
(42,883)
19,945
(23,250)
A cross guarantee exists between all companies in the Group for all amounts payable to Lloyds. The Group amount owing to Lloyds at year-end
is £56.0m.
43. Capital commitments
There were no capital commitments at 31 December 2015 or at 31 December 2014.
44. Related parties
The company has taken the IAS 24 exemption to not disclose transactions with wholly owned subsidiary undertakings. Details of related
party transactions are given in note 20 to the consolidated financial statements.
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
C
o
m
p
a
n
y
S
t
a
t
u
t
o
r
y
74 Staffline Group plc • Annual Report 2015
Notes: