AnnuAl
RepoRt
2016
For the year ended
31 December 2016
02 Staffline Group plc • Annual Report 2016
Visit our website to stay up
to date with our latest news:
www.staffline.co.uk
Staffline Group plc • Annual Report 2016
03
Company details
Contents
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
Strategic Report
Group Overview
Group Strategy
(including Corporate Social Responsibility)
Chairman’s and Chief Executive’s Statement
Chief Financial Officer’s Statement
Principal risks and uncertainties
Governance
Corporate Governance Statement
Report on Remuneration
Report of the Directors
Independent Auditors’ Report
Consolidated Financial Statements
Consolidated Financial Statements
04-05
06-07
08-13
14-17
19-21
22-24
25
26-27
28
30-33
Notes to the Consolidated Financial Statements 34-63
Company Financial Statements
Independent Auditors’ Report
Company Financial Statements
Notes to the Company Financial Statements
65-66
67-68
69-77
Company registration number:
05268636
Registered office:
19 – 20 The Triangle
NG2 Business Park
Nottingham
NG2 1AE
Directors:
Ed Barker (Non-Executive Director)
John Crabtree OBE (Non-Executive Chairman)
Andy Hogarth (Group Chief Executive)
Tracy Lewis (Non-Executive Director)
Diane Martyn (Group Managing Director)
Chris Pullen (Chief Financial Officer)
Secretary:
Paul Collins
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
Gowling WLG (UK) LLP
2 Snow Hill
Birmingham
B4 6WR
Statutory Auditors:
PricewaterhouseCoopers LLP
Chartered Accountants
and Statutory Auditors
19 Cornwall Street
Birmingham
B3 2DT
Financial and trade Public Relations:
Buchanan Communications
107 Cheapside
London
EC2V 6DN
04 Staffline Group plc • Annual Report 2016
Strategic Report
Group overview
for the year ended 31 December 2016
Welcome to Staffline Group plc’s
Annual Report 2016
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 and combinations of EOS in 2012, Avanta in 2014, and A4e in 2015
has created a second business stream, rebranded PeoplePlus, to complement our
Staffing business. This has created a holistic group encompassing welfare to work,
communities and training for peoples entire work lifecycle. This is encapsulated in our
brand message of People-Skills-Jobs.
Highlights
Financial
• Revenues up 26% to £882.4m (2015: £702.2m)
• Group gross profit up 24% to £124.9m (2015: £100.9m)
• Underlying profit before tax* up 30% to £36.7m (2015: £28.3m)
• Reported profit before tax up by 244% to £18.9m (2015: £5.5m)
About Staffline
Staffline is a leading outsourcing organisation providing
services, mainly in the UK, to both Government and
commercial customers. The Staffing division supplies
up to 51,000 workers per day to more than 1,500
clients. Using the skills we have developed and learned
within Staffing we have developed a second division,
PeoplePlus, and have become a leading provider
to both Central and Local Government, offering a
wide range of services to help and support in the
Employability (Welfare to Work), Communities and
Skills arenas.
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 over 350 locations in the UK,
Eire and Poland.
The Staffing brands include:
• Staffline OnSite, based on clients’ premises and
providing both blue and white collar, out-sourced,
temporary workforces
• Select Appointments, a high street branch-based
operation providing white collar office staff, operated
entirely on a franchised basis by independent
business owners
• Staffline Express, a high street branch based
operation
• Driving Plus, providing HGV drivers to the driving
• Underlying diluted Earnings Per Share* up 23% to 114.0 pence (2015: 92.4 pence)
industry
• Reported diluted Earnings Per Share up 378% to 58.8 pence (2015: 12.3 pence)
• Staffline Agriculture, providing workers to the UK
• Net debt** significantly reduced from £63.1m at the end of FY 2015 to £36.7m at
the end of FY 2016, equal to 0.8 x 2016 underlying EBITDA of £44.9m
• Final dividend of 15.3 pence; total dividend for the year of 25.8 pence, an
increase of 29% (2015: 20.0 pence)
* Underlying excludes amortisation of intangible assets arising on business combinations, acquisition
and exceptional reorganisation costs and the non-cash charge/credit for share based payment costs
(see note 5).
** Net debt including unamortised transaction costs
Operational
• Record year within Staffing division:
- OnSites grew by 52 locations; total locations now 357
(2015: 305) – making Staffline the clear market leader
- Further success with one more white-collar OnSites established
- Newer divisions, Driving Plus, Ireland and Agriculture, each had an excellent
year
- Continuing strong pipeline of further opportunities
• PeoplePlus (previously Employability) achieved significant improvements as a fully
integrated business:
- Contract performance now in top quartile
farming and horticulture sectors
PeoplePlus (previously Employability)
Trading under the PeoplePlus brand, Government
contracts include:
• Work Programme, prime contractor in nine regions
and sub-contractor in three regions in England
• Steps to Success, prime contractor in Northern
Ireland
• Youth Guarantee (MyGo Centre), supporting youth
employment in the Ipswich area
• Building Employment through Education, working in
Schools in Northern Ireland
Training services:
• Skillspoint, a procurement consultancy specialising
in helping employers benefit from government-
funded, work-based training
• Prime contractor to the Skills Funding Agency
delivering Apprenticeships and Classroom Based
Learning across the UK.
- 22 other contracts won or extended within Employability division
- Only provider to secure inclusion on framework for all of the Government’s new
Community services:
welfare to work contracts
• Positive outlook for 2017 and on track to achieve ambitious five-year £1 billion
revenue target
• 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
• Independent Living Services, supporting 3,000
disabled people lead independent lives
• Visitor Centres for the Northern Ireland Prison Service
• Careers Hubs in Stoke and Staffordshire
Staffline Group plc • Annual Report 2016
05
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
Ten Year Summaries
The following five charts demonstrate the strong long term
growth in the Group’s turnover, profitability, earnings per
share and dividends:
Annual turnover £m - 10 year trend:
compound annual growth of 25%
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Annual underlying operating profits £m -
10 year trend: compound annual growth of 26%
Annual reported profit before tax £m - 10 year trend:
compound annual growth of 18%
18.9
7.0
7.5
8.5
8.6
10.5
5.5
4.4
3.4
3.5
20
18
16
14
12
10
8
6
4
2
0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Annual diluted underlying earnings per share pence -
10 year trend: compound annual growth of 27%
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Annual dividends per share pence - 10 year trend:
compound annual growth of 24%
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
06 Staffline Group plc • Annual Report 2016
Group strategy
Growth
Our continuing Group strategy is:
• To grow the employability sector of the PeoplePlus division 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 in 2017 and create stakeholder value through continued 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 for strategic acquisitions
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, racial,
physical or mental harassment
• We shall uphold the values of
honesty, integrity and fairness in 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
Paul Collins
Company Secretary
24 January 2017
Staffline Group plc • Annual Report 2016
07
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
Corporate Social
Responsibility (“CSR”)
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 Group continues to
implement a detailed Environmental and 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
Group’s environmental impact are being acted upon, which
will flow into the Group’s One Planet Strategy. This will
continue to focus on the following areas:
• Energy Consumption
• Waste
• Travel
• Sustainable Materials
Staffline Group plc continues to carry out extensive building
audits and 100% energy audits in order to identify areas
for improvement and reduce our CO2 footprint. The Group
Chief Executive is responsible for the implementation of
this policy and will make the necessary resources available
to fulfil 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 2016
We remain on track with
current market expectations
and are confident of continued
growth in shareholder value.
Strategic Report
Combined Chairman’s and
Chief Executive’s statement
for the year ended 31 December 2016
Andy Hogarth
Group Chief Executive
John Crabtree OBE
Non-Executive Chairman
Trading in 2016 continued to be very
strong, in particular with our Staffing
division achieving further significant
organic growth and another record in
total OnSites. Our PeoplePlus division
meanwhile has made good progress
as a fully integrated business now
rebranded following the acquisition of
A4e in April 2015.
2016 was the fourth year into our five year
plan to ‘Burst the Billion’, aiming to grow
Group revenues to over £1 billion by 2017,
and the financial performance this year means
that we remain on track to achieve this.
Total sales in 2016 grew 26% to £882.4m
(2015: £702.2m), with about half of this
growth being organic, derived from winning
new business from both new and existing
customers. Underlying profit before
tax, amortisation of intangible
assets arising on business
combinations, acquisition
and exceptional re-
organisation costs
in PeoplePlus and
the non-cash credit/
charge for share
based payment costs
(“SBPC”) increased
by 30% to £36.7m (2015: £28.3m). Reported
profit before tax increased by 244% to
£18.9m (2015: £5.5m).
Our Staffing business has continued to
go from strength to strength, achieving
considerable organic growth and ending the
year with a record 357 OnSites (December
2015: 305). This performance was
underpinned by our investment in a number
of start-up opportunities in the past few years,
as well as in our existing divisions, to expand
our operational reach and bring in new talent,
extending our highly scalable platform.
Our PeoplePlus division, which underwent a
significant expansion following the acquisition
of A4e in April 2015, is the largest provider
to the Department for Work and Pensions
of Work Programme contracts in the UK.
Whilst 2016 was a relatively quiet year for
new contracts being tendered, we continued
to focus on operational and management
changes. PeoplePlus has now started to
outperform most of our competitors on the
Work Programme and seven of our nine
prime contracts have achieved top quartile
performance during the period. Our efforts
in this regard were recognised recently when
PeoplePlus was confirmed as having qualified
for the bidding process in every region for
Staffline Group plc • Annual Report 2016
09
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
the new welfare to work programme, the only
provider to achieve such qualification. Whilst the
positive economic backdrop has continued to
negatively impact referral levels across our Work
Programme contracts (since there are very nearly
one million less unemployed people than when
the current contracts started), we have continued
to reduce overheads related to these contracts
through 2016 to ensure they maintain their
expected profitability.
It is now six months since the citizens of the UK
voted to leave the European Union (“EU”). In that
period we have not seen a reduction in demand
for our services or the availability of contractors.
Whilst it is too early to tell what the long-term
impact of “Brexit” may be, as the market-leading
provider of blue collar temporary workers, our
scale and capability has enabled us to manage a
period of gradual tightening of the labour market
and gives us confidence that we will continue to
do so. Staffline benefits from a reliable workforce
of over 292,000 contractors on our database.
Furthermore, any tightening in the labour market
is also likely to help the Employability side of our
business as this may make our Work Programme
candidates easier to place.
Overall, we are pleased to report that both Group
sales and profitability have increased in line with
the Board’s and the market’s expectations.
Financial review
Sales in 2016 grew by 26% to £882.4m
(2015: £702.2m) with gross profit increasing
by £24.0m, or 24% to £124.9m (2015:
£100.9m). This increase has come from a
mixture of strong organic revenue growth
(up 12%) and the full-year contribution of the
A4e, Diamond Recruitment and Milestone
Operations acquisitions in 2015. The Group’s
gross profit margin, at 14.2%, was 0.2%
lower than last year (2015: 14.4%), primarily
due to the impact of the National Living Wage
(“NLW”) in our Staffing division where pricing
is on a price per hour basis, not percentage of
wages. Underlying profit before tax, excluding
amortisation of intangible assets arising on
business combinations, acquisition and
exceptional re-organisation costs in PeoplePlus
and the non-cash credit/charge for Share
Based Payment Charges, increased by 30%,
from £28.3m in 2015 to £36.7m. On this basis,
adjusted diluted earnings per share rose by
23% to 114.0p (2015: 92.4p). Reported profit
before tax from continuing operations increased
by 244% to £18.9m (2015: £5.5m) and reported
diluted earnings per share from continuing
operations rose by 378% to 58.8p (2015: 12.3p).
As previously indicated, as a result of the high
levels of organic growth and a full year benefit
from acquisitions in 2015, we were able to
pay down net debt (including unamortised
transaction costs) significantly by the year end
to £36.7m, 42% lower than the £63.1m at
the 2015 year end. With improving free cash
flow levels, debt is expected to continue to
fall quickly in the coming year, with a net cash
position expected by the end of 2017.
Our robust financial position and strong cash
generation support both our Staffing and
PeoplePlus activities. Not only do they underpin
our Staffing clients’ confidence in our ability
to supply their temporary workers, who are
essential to ensuring continued production,
but financial strength is also a key criterion in
the contract bidding processes for employability
sector contracts.
Following on from 2015, when we were the
first company quoted on AIM, and the first
recruitment company, to be awarded the Fair
Tax Mark, recognising that we are open and
honest in ensuring we pay the amount of tax
due on our profits, this accreditation has since
been reconfirmed and renewed. As set out in
note 8, our tax charge for the year is £3.9m
(2015: £2.4m), an effective rate of 20.6% (2015:
43.8%) of our reported profit before taxation,
not significantly different to the UK corporation
tax rate of 20.0%.
Operational review
Staffing services
All of our onsite Staffing businesses saw
growth during 2016 despite some uncertainty
in the macro-economic backdrop. Sales rose
by 34% to £740.8m (2015: £554.5m), driven
by organic growth of 21% and the full year
benefit from the acquisitions in late 2015 of
both Diamond Recruitment in Northern Ireland
and Milestone Operations. Our gross profit
margin has marginally declined by 0.2% to 8.3%
(2015: 8.5%), driven by the on-boarding costs
of such a significant number of new OnSite
locations together with the impact of the rise in
National Living Wage (“NLW”) which increased
our sales but had no impact on our gross profit
(thus reducing the % gross profit margin). The
segmental underlying operating profit rose by
42% to £18.8m (2015: £13.2m). Reported
operating profit totalled £19.7m (2015: £3.5m).
We continue to build market share in our core
business, underpinned by our reputation in
the industry for being reliable and ethical. This
is despite the marketplace for many of our
clients remaining competitive, especially in the
food processing and production sectors, and
therefore for our business. The recruitment
industry continues to consolidate and as a
leading provider of temporary workers, we are
10 Staffline Group plc • Annual Report 2016
Combined Chairman’s and Chief Executive’s statement continued...
able to leverage our scale and capabilities
to support an increase in the net number of
OnSites from which we operate by a total of
52, ending the year with a record total of 357
locations. This increase has resulted from a
number of new clients choosing Staffline as
well as extensions to current contracts. Our
newer white-collar OnSites business won
a further location in 2016 (making a total
of 3 currently), the customer being a large
international bank. This is an encouraging
development, although somewhat later than
we had originally hoped, and the growth of this
division is a priority for 2017 and beyond.
We have also expanded our presence in
sectors including Manufacturing, Logistics and
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 divisions made
a positive contribution during the year.
We have continued to see the strengthening
of the UK economy lead to a tightening of
the labour market, with shortages particularly
pronounced in driving and other skilled areas,
but also in the unskilled sector in certain parts
of the UK. We have been able to fulfil all of our
customer requirements in 2016 and we have
plans in place to ensure that we continue to
do so in 2017. However the tightening labour
market is likely to lead to greater wage inflation,
supporting further demand for our flexible
labour services.
The introduction of the NLW, increasing the
minimum wage from £6.70 to £7.20 in April
2016, is likely to have encouraged more people
to enter the labour market. Further increases
are due to be introduced in the period until
2020 when the NLW is due to be at least £9
per hour. Whilst this significant increase in UK
wages may encourage an increase in migration
from Europe (while workers are still able to), it
is also likely to further widen the supply pool
of indigenous labour, thus helping Staffline to
continue to grow.
PeoplePlus (previously Employability)
The completion of the A4e acquisition in April
2015 significantly enhanced our position in the
employability arena. The combined PeoplePlus
business benefits from significant scale within
the Work Programme, the main contract for
Department of Work and Pensions (“DWP”).
With nine prime contracts and five sub-
contracts, PeoplePlus is the largest provider
by both the number of contracts and referrals.
Our performance in the nine prime contracts
improved hugely during 2016 and our current
performance puts all of them in the top half of
the league tables.
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, and Independent Living Services, all of
which are performing well.
The Transforming Rehabilitation contract,
awarded by the Ministry of Justice, is also
showing positive results, having successfully
commenced in the first half of 2015. The
only published metrics to date show that we
received the highest user satisfaction rating
of all the 21 providers and we are in the top
quartile for reducing re-offending.
We have made good progress in developing
our new Apprenticeship Levy offering ahead
of its launch in April 2017. In 2016, we have
been appointed by a number of customers to
support the delivery of bespoke apprenticeship
programmes, helping customers to implement
new schemes whilst achieving cost savings
through operational efficiencies. 2017 will see
even more opportunities to help our clients in
this way, with a number of further customer
opportunities already in the pipeline.
Revenues in the PeoplePlus division fell by
4% to £141.6m (2015: £147.7m). Due to
the improving economy and employment
landscape, referrals (and consequently
revenues) were lower in the year, more than
offsetting the full year effect on revenue of the
A4e acquisition (acquired in April 2015) and a
number of new contract wins. Having said this,
profitability of the enlarged PeoplePlus division
has been in line with our initial expectations,
supported by our continued focus on delivering
operational efficiencies. Gross profit increased
by 18% to £63.6m (2015: £54.0m). Underlying
segmental operating profitability rose by 24%
to £21.2m (2015: £17.1m). Reported operating
profits totalled £2.5m (2015: £4.0m).
The number of referrals we receive on the Work
Programme has steadily declined over the last
two years and revenues for the remaining three
months of the contract and the follow-on 24
months’ run-off will be lower than originally
Staffline Group plc • Annual Report 2016
11
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
This year’s
Staffing highlights
Continued expansion of the OnSite
model, increased by
52 sites
during the period.
Which takes the total to 357
Integrated Milestone
Operations and
Diamond Recruitment
Group, acquisitions in 2015,
making us dominant in the UK Driving
sector and in Ireland
Supplied 74 million hours
of temporary labour to more than
1,600 clients
51,100
temporary workers placed at ‘peak’
2,290,000
timesheets processed; an increase of
29% over 2015
Checked the ID’s of
144,100 candidates
expected. The segment has continued to be
successful in making claims and receiving
monies for prior year work performed, but not
previously recognised. In addition, we expect
that the operational efficiencies gained from
the integration of our three brands will maintain
the profitability of the business. Significant
reductions in both headcount and the number
of properties occupied, in the second half of
2016, will ensure a much smaller and more
efficient cost base in 2017. Reorganisation
costs of £8.0m (2015: £3.2m) were incurred
during the year in relation to the headcount and
property reductions, and were treated as non-
underlying expenses.
We are also pleased to confirm that we won
or extended 22 contracts during the year, all
working for either local or central government.
Whilst all were of relatively small value, the
largest being £4m over 18 months, we are
confident that the delay caused by the EU
Referendum will be resolved during 2017
and that these wins demonstrate our unique
positioning in the market which should lead to
further opportunities becoming available to us.
In addition, we are delighted to confirm that we
have successfully tendered for the Umbrella
Agreement for Employment and Health Related
Services (“UAEHRS”), the next iteration of the
DWP’s welfare to work programme (previously
referred to as the Work and Health Programme).
This enables us to bid for all contracts that are
put out to tender in all six geographic areas of
England and Wales so far awarded, the only
provider to achieve this.
ISO 9001, ISO 27001 and Investors
in People (“IIP”) accreditations
acquisition. To ensure that we maintain control
over our processes we have introduced both
ISO 9001, a certified management system, and
IIP, to ensure that we continue to motivate and
develop our staff. In addition PeoplePlus has
achieved the very demanding accreditation ISO
27001 for the security of our IT systems, which
represents a very important certification given
that we deal with the personal details of many
hundreds of thousands of people.
People
We continue with our focus on enhancing
and growing the capabilities of our people,
driving a high-performance culture whilst
harnessing talent which enables us to be
more agile. Even though the Group continues
to grow its revenues and profitability, the
number of employees in our Staffing business
has remained stable, but, by merging three
businesses together to form PeoplePlus in
2016, with the consequent consolidation of
headcount of that business, the Group’s total
workforce at 31 December 2016 of 2,485 (full
time equivalents) has seen a reduction of 809
on the 3,294 reported at the end of December
2015.
Developing our people is key to us as an
organisation and we have many ways of
encouraging this. Our ethos supports nurturing
talent within the business at all levels and
encourages self-development which in turn aids
succession planning, supporting the strategic
growth of the Group. We continue to place great
emphasis on the training and development of
our people, and we review our training needs on
an ongoing basis in line with our vision, values
and ambition to be an employer of choice.
Our organisation has grown significantly over
the last decade, both organically and through
Our key residential management development
programme, The Leadership Camp, has now
12 Staffline Group plc • Annual Report 2016
Combined Chairman’s and Chief Executive’s statement continued...
been delivered to nearly 150 delegates across
the Staffline Group since its launch in 2012
and continues to be further enhanced through
continued one to one Coaching sessions for all
delegates.
An additional suite of management workshops
has been delivered across the Group and 145
staff attended this year, incorporating:
• Self-Awareness together with Coaching
and Motivating a Winning Team
• Driving Sales through Customer Care
• How to Delight your Customer
• Effective Time Management
• Managing for Success
• Advanced Communication
• Commercial Awareness and Strategic
Planning
• Getting the Best from your Team
• Finance for Non-Financial Managers
People Management Workshops have been
delivered across the entire business in various
formats and these have been complemented
with the launch of Management Toolkits
covering all areas of People Management.
Over 300 managers have attended these
sessions during 2016.
Our Staffing division continues to champion
Recruitment and Employment Confederation
(“REC”) accreditations, 17 team members
having completed level two and a further 47
having completed level three, and we continue
to explore how we might enhance our offering
across the business with other qualifications.
Our PeoplePlus division has launched
a new Performance and Development
Review Process to support team members’
development and put in place managers to
create and lead high performing teams. All
1,800 team members have been involved in
this during 2016.
We believe that Apprenticeships will play a key
part in enhancing the skills and development
of our teams across the Group and we are
working closely with our Skills division of
PeoplePlus to ensure we offer appropriate
apprenticeships to the various divisions of the
business, in line with the introduction of the
Apprenticeship Levy. During 2016 we had over
50 employees completing Apprenticeships
and expect this to increase to over 200 during
2017.
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 and Safety Team has been awarded
Fellowship status within the International
Institute of Risk and Safety Management,
in addition to his Chartered Member of
the Institute of Occupational Safety and
Health membership, further supporting the
development of a culture of Health and Safety
across all business units.
Staffline actively monitors all aspects of Health
and 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 and Safety action plans with Senior
Management involvement throughout.
Following a review of the Group’s Health and
Safety management systems during 2015, a
number of updated policies and procedures
have been implemented during 2016. The
Health and Safety management systems
continue to allow the Group to demonstrate
that its corporate responsibilities are being
appropriately discharged. As Staffline has
grown, the Health and Safety team has also
increased in size to provide information, advice
and guidance.
The Group continues to implement a detailed
Environmental and 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 Group’s 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 saw regular audits
carried out to create baseline data with Key
Performance Indicators and SMART targets
implemented. 2016 has seen our environmental
impact being reported against these targets,
continuing to demonstrate the Group’s ongoing
positive environmental commitment.
Staffline Group plc • Annual Report 2016
13
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
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 they are working in areas covered by
the legislation, are recruited and supplied to
the standards required by the Gangmaster
Licensing Abuse Authority (“GLAA”). 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 fifth and final 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 four 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 newer 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 continued to invest in our technical
infrastructure, which has greatly improved our
business continuity capability, and are confident
that this is now industry leading, and leaves the
Group well placed going forward.
Over the next 12 months, we plan to upgrade
our payroll and billing system alongside the
development of a new data warehouse.
These upgrades are scheduled to start to go
live during quarter two of 2017, with project
completion anticipated by the end of quarter
three. 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, largely from existing Staffing
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.
Meanwhile our PeoplePlus division is well
placed to benefit as new contract opportunities
come through this year, both in welfare to
work, thanks to our success in tendering
for UAEHRS, and as a consequence of the
Apprenticeship Levy. In addition to driving
organic growth, we continue to look for further
bolt-on acquisitions primarily within our core
Staffing division and remain in discussions with
a number of companies.
Outlook
The outlook for Staffline remains positive.
Having made significant progress in 2016,
we are well placed to deliver ongoing growth
in the coming year. In Staffing, we will continue
to leverage our industry-leading reputation and
capabilities to help our clients manage their
workforce as effectively as possible, together
with further opportunities across a number of
strategic initiatives and the potential for bolt-on
acquisitions. In PeoplePlus, we remain focused
on combining strong operational performance
and efficiency to cement the improvements
made in 2016. This will support our ability
to secure new contracts as and when the
opportunities arise. Therefore, we remain on
track with current market expectations and are
confident of continued growth in shareholder
value.
As an expression of our confidence in the
Group’s prospects, the Directors propose
to increase the final dividend by 22% from
12.5 pence to 15.3 pence. This dividend
will be payable on Tuesday 4 July 2017 to
shareholders on the register at Friday 2 June
2017. The
ex-dividend date is Thursday 1 June 2017.
This will give a total dividend for the 2016
financial year of 25.8 pence, an increase of
29% (2015: 20.0 pence).
John Crabtree OBE
Non-Executive Chairman
Andy Hogarth
Group Chief Executive
24 January 2017
14 Staffline Group plc • Annual Report 2016
Strategic Report
Chief Financial Officer’s statement
for the year ended 31 December 2016
Financial highlights
2016 was a very strong year of growth with total revenue for the year increasing by 26% to £882.4m (2015: £702.2m). The financial result
includes the full year effect of a number of acquisitions in 2015 and strong organic revenue growth of 12%. The underlying Staffing
business also grew significantly in 2016 with a total of 52 additional OnSites and increased demand from our existing customer base
and the full benefits of this performance will come through in 2017. Revenues grew by £186.3m (34%) in our Staffing division, an organic
growth of 21% excluding the full year benefit of acquisitions in 2015.
In the reporting of its financial performance, the Group uses certain measures that are not defined
under IFRS, the Generally Accepted Accounting Principles (“GAAP”) under which the Group
reports. The Directors believe that these non-GAAP measures assist with the understanding of the
performance of the business. These non GAAP measures are not a substitute for, or superior to,
any IFRS measures of performance but they have been included as the Directors consider them
to be an important means of comparing performance year-on-year and they include key measures
used within the business for assessing performance. We acknowledge that the adjustments made
to arrive at underlying profit may not be comparable to those made by other companies, mainly in
respect of the adjustment for share based payment charges including both equity and cash settled
components. It should be noted that whilst the amortisation of acquisition related intangible assets
has been added back, the revenue from those acquisitions has not been eliminated.
Our overall gross profit has increased by 24% to £124.9m (2015: £100.9m) with gross profit
margins remaining strong at 14.2% (2015: 14.4%). Within this result is the movement in gross
margin % for the Staffing division which has decreased in 2016 to 8.3% (2015: 8.5%)
reflecting two trading trends. Firstly, the increasing National Living 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. Secondly, the Staffing division has invested in
resources to support the mobilisation of the high number of OnSite wins
during the year - this is a short term effect and these additional costs will
reverse in 2017.
One of the key performance indicators that the Board of Directors
monitors during the year is profit before taxation. Profit before taxation
grew by 244% to £18.9m (2015: £5.5m) whilst underlying profit before
taxation grew in line with expectations by 30% to £36.7m (2015:
£28.3m) and underlying profit before taxation as a percentage of
revenue grew to 4.2% (2015: 4.0%).
Staffline Group plc • Annual Report 2016
15
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
Non-underlying administrative charges
Non underlying administrative charges have reduced by £5.0m to
£17.8m in 2016 (2015: £22.8m). These charges are regarded as
recurring or non-recurring items of income or expenditure of a particular
size and/or nature relating to the operations of the business that, in the
Directors’ opinion, require separate identification. These items included in
“total” reported results but are excluded from “underlying” results. These
items can vary significantly from year to year and therefore create volatility
in reported earnings which does not reflect the Group’s underlying
performance.
They include exceptional restructuring costs of forming and reorganising
the PeoplePlus division, Share Based Payment charges and credits and
the amortisation of intangible assets arising on business combinations,
being either non-recurring or material in the context of our trading
performance during the year:
Amortisation of intangible assets
arising on business combinations
Share based payment (credit)/charges
Transaction costs
Reorganisation costs
Impairment of tangible fixed assets
(reorganisation related)
2016
(£m)
12.4
(2.9)
0.1
6.6
1.6
17.8
2015
(£m)
9.8
8.9
0.9
3.2
-
22.8
the increased underlying profit before taxation (£8.4m higher in 2016) and
reduced costs of Share Based Payment Charges (£11.8m lower in 2016),
only partially offset by the increase in exceptional costs of forming (last
year) and further reorganising (this year) the PeoplePlus division.
Removing non-cash charges for Share Based Payment Charges,
amortisation of intangible assets arising on business combinations and
the exceptional costs of reorganisation (and their respective taxation
impacts) results in an adjusted basic earnings per share increase of 24%
to 114.7p (2015: 92.8p) and an adjusted diluted earnings per share
increase of 23% to 114.0p (2015: 92.4p).
Statement of Financial Position, Cash Generation
and Financing
The Group Statement of Financial Position has not changed significantly
during the year. Total group assets have decreased by £14.0m to
£250.3m (2015: £264.3m as restated), due mainly to the amortisation
of intangible assets arising from the business acquisitions in 2015 and
2014. Trade and other receivables reduced by £13.7m despite the 26%
increase in sales, resulting in cash and bank balances being £14.7m
higher this year.
Post tax cash generation during the year has been strong with a
continued excellent credit control performance. Days Sales Outstanding
(“DSO”) at 31 December 2016 within Staffing Services remained low at
23 days (31 December 2015: 29 days).
Total Group liabilities have decreased by £24.5m to £166.6m (2015:
£191.1m as restated). Total borrowings (see note 18) reduced by £11.7m,
from £68.1m at the end of 2015 to £56.4m at the end of 2016. The
Group’s headroom versus available banking facilities as at 31 December
2016 was £41.8m (31 December 2015: £20.0m) as set out below:
The reorganisation costs noted above relate to the integration of EOS,
Avanta and A4e acquisitions into the newly formed PeoplePlus division.
This process was started in 2015 and continued in 2016. These costs
are principally the reduction in headcount and the exiting of properties no
longer required. The share based payment credit in 2016 arose due to
both the reduction in the company’s share price during the year and the
lapsing of interests on the resignation of certain executives.
Earnings per share
Statutory basic earnings per share increased to 59.1p (2015: 12.4p) and
the diluted earnings per share increased to 58.8p (2015: 12.3p) due to
Cash at bank
Overdraft facility
Additional Revolving Credit Facility
Bank Guarantee
Banking Facility Headroom
2016
(£m)
19.7
15.0
7.5
(0.4)
41.8
2015
(£m)
5.0
15.0
-
-
20.0
16 Staffline Group plc • Annual Report 2016
Throughout the year the Company remained comfortably within its banking facilities. Group banking facilities are summarised as follows:
Facility type
Term Loan (drawn in May 2015)
Loan notes falling due in 2016
Headline
amount
£35.0m
-
Revolving credit facility (including overdraft facility)
£57.5m
Unamortised transaction costs
Total Facilities
Less cash held
-
£92.5m
Net Debt (including unamortised transaction costs)
Net borrowing
as at 31 December 2016
Net borrowing
as at 31 December 2015
£21.9m
-
£35.0m
(£0.5m)
£56.4m
£19.7m
£36.7m
£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
(see below). Total finance charges, including the interest costs of the term
loan and loan notes were £3.4m for the year (2015: £1.9m).
During the year ended 31 December 2016, there was headroom against
each of the four banking covenants below at each of the four quarter
ends when covenants are formally assessed:
1. Cash flow cover – being the ratio of cash generated to debt servicing
costs
2. Interest cover – being the ratio of EBITDA, excluding share based
payment charges, to interest costs
3. Adjusted leverage – being the ratio of net debt to EBITDA excluding
share based payment charges (as adjusted for acquisitions)
4. Asset cover – being the ratio of trade debtors to net debt
The Directors have reviewed reasonable possible outcomes within the
next financial year, in accordance with IAS 1 paragraph 129, and have
concluded that the outcomes which were reasonably possible would not
involve either a covenant or banking facility breach during 2017. Cash
flows are monitored on a daily basis against forecasts that are updated
each month, to ensure that the Company continues to operate within its
banking facilities. It is expected that 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. These indicators are discussed above and in the
combined Chairman’s and Chief Executive’s Statement.
Revenue
2016
2015
£882.4m
£702.2m
Year on year total revenue growth
25.6%
39.6%
Organic revenue growth
11.7%
16.6%
Gross margin as a % of revenue
14.2%
14.4%
Underlying Profit Before Tax
£36.7m
£28.3m
Prior year adjustment: December 2015
Consolidated Statement of Comprehensive Income
Following the completion of the integration of the trades of A4e
and Avanta Enterprise businesses into the PeoplePlus division, and
standardisation of reporting, a more appropriate split of costs between
cost of sales and administrative expenses has now been identified. To
reflect this new split, the December 2015 financial year costs have been
restated, with £14.1m now being shown as administrative expenses
whereby they were originally reported under cost of sales. In respect of
the December 2015 year end results, the gross profit of the PeoplePlus
division, and therefore the group, has increased by £14.1m. The
December 2015 financial year gross profit margin of the PeoplePlus
division has increased from the previously reported 27.0% to the restated
36.6%, with the group gross profit margin increasing from the previously
reported 12.4% to the restated 14.4%. There is no impact on either total
costs or on operating profit.
Prior year adjustment: December 2015
Consolidated Statement of Financial Position
During the year end 31 December 2015, the Group acquired the entire
share capital of A4e Limited in April 2015 and Milestone Operations
Limited in September 2015. In accordance with IFRS 3 Business
Combinations, the directors made an initial assessment of the fair
values of the acquired assets and liabilities, resulting in Goodwill assets
of £15.6m and £3.0m respectively being created in the consolidated
statement of financial position. During April 2016 and September 2016
respectively (i.e. within 12 months of the acquisition date), the Directors
undertook a review of the provisional fair values, with adjustments being
reflected within the carrying value of Goodwill as at the acquisition date.
Net adjustments of £0.9m for A4e Limited and £1.3m for Milestone
Operations Limited were made this year, increasing the respective Goodwill
assets, shown as a prior year restatement of the Consolidated Statement
of Financial Position. Principally this related to the non-recoverability of
trade debtors and adjustments to the provision for onerous property leases
and other liabilities. 31 December 2015 net assets are unaffected by this
adjustment, remaining at the £73.2m as previously reported.
As at 31 December 2015, provisions for property dilapidation charges
were reported within both Accruals (£2.1m) and Other Non-Current
Liabilities (£1.4m). During the current financial year, this was corrected as
a prior year adjustment, with Other Non-Current Liabilities in respect of
property dilapidation charges as at 31 December 2015 being restated to
£3.5m, with a corresponding reduction in Accruals.
Underlying Profit Before Tax as a % of revenue
4.2%
4.0%
Financial Reporting Council (“FRC”)
Net Debt excluding unamortised
transaction costs
(£37.2m)
(£63.7m)
Staffing Services DSO (days) – year end
23.3
29.1
Highest number of Staffing temporary
contractors (per week)
51,100
45,001
Number of Staffing OnSites – year end
357
305
On 7th September 2016, the Company received a letter from the
FRC seeking clarification of certain disclosures, and non-disclosures,
within the December 2015 Annual Report and Accounts. Following
correspondence between the two parties, the Company accepted the
recommendations made by the FRC and agreed to expand certain of its
disclosures, which it has done in this Annual Report. On 8th December
2016 the FRC informed the Company that it had closed its enquiries on
the December 2015 Annual Report and Accounts.
The FRC review was based on our Annual Report and Accounts and
does not provide any assurance that they are correct in all, material
respects. The FRC role is not to verify the information provided but is to
consider compliance with reporting requirements.
Staffline Group plc • Annual Report 2016
17
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
2016 was a very
strong year of growth
with total revenue for
the year increasing by
26% to £882.4m.
18 Staffline Group plc • Annual Report 2016
Staffline Group plc • Annual Report 2016
19
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
Strategic Report
Principal risks
and uncertainties
for the year ended 31 December 2016
The Staffline Group plc board of directors has completed a robust and detailed assessment of the Group’s risk management processes
and the Group’s risk register.
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.
The Board reviews risks and uncertainties under four principle types:
• Strategic and market related
• Operational and compliance
• Reputational
• Financial
Four new key risks are included this year, being a shortage of Staffing resource, pressure on margins, the UK’s proposed exit from the European
Community and the termination of existing Work Programme contracts in March 2017. The six most significant risks to which, in the opinion of the
Directors, the Group is exposed are described below. Our responses to these risks are given in italic font.
Strategic and market related
Shortage of
staffing resource
With UK unemployment rates falling below 5% and issues around Brexit and foreign labour, there is a risk that our Staffing
division will not be able to obtain sufficient resource to fulfil its contractual obligations.
In addition, there is an industry wide shortage of qualified drivers with, as above, the risk that our Staffing division will not be
able to obtain sufficient resource to fulfil its contractual obligations.
The Group monitors national and regional labour statistics and has further developed its overseas recruitment function. The
Group promotes new driver apprenticeships and continues to improve the relationship between its PeoplePlus and Staffing
divisions, with PeoplePlus providing labour resource to Staffing.
The directors consider that this risk has increased during 2016.
UK’s proposed
exit from the
European Union
The referendum vote in June 2016 has led to the UK’s decision to leave the EU which creates uncertainty around the free
movement of labour between the EU and the UK.
The overall impact on the UK economy is uncertain, which in itself is a risk to the group.
The Group continues to monitor the timing of the invocation of Article 50 and the UK government’s negotiations with EU members
to understand how the free movement of labour will be effected. The Group continues to maintain a strong UK based candidate
pool. Until clarity over the UK’s exit is available, the Group continues to focus on the domestic market for new business, where
70% of Staffing’s revenues are from the domestic food sector and 10% from e-retail, both of which are non-cyclical. Finally, should
the UK economy head towards recession, higher unemployment would lead to more referrals to the Work and Health Programme.
The directors consider that this risk has increased during 2016, primarily as a result of wider macro - economic volatility
following the UK vote to leave the EU.
20 Staffline Group plc • Annual Report 2016
Principal risks and uncertainties continued...
Operational and compliance
Business
Interruption
– information
security breach
or cyber-attack
There are two issues the directors focus on with regard to this risk:
1. Major IT failure - As with all large scale businesses, including those in the market sectors in which we operate, we are
reliant on our IT systems to support and operate our business.
2. Business Interruption – Breach of security (Cyber-Crime) - The Group holds sensitive personal information in
respect of temporary workers, participants of our various PeoplePlus contracts, and our own staff. There is increased
evidence of cyber-crime.
Breaches or attacks could lead to potential reputational damage with a potential resultant loss of revenue, financial penalties
for the Group and diversion of management time.
The Group has an appropriate Disaster Recovery plan in place in the event of a major internal failure of our IT systems.
The Group’s IT systems in the two divisions are segregated, enabling divisional Business Continuity Plans which include the
utilisation of the other division’s physical locations. A back-up replica system has been put in place, maintained by a third
party company and back-up connections are also in place in both divisions. The Group has insurance in place for business
interruption and has in place suitable group policies and procedures. ISO 27001 is maintained within our group under the
stewardship of a Data Protection Officer. The Group has contracted a third party to carry out security penetration testing on
our systems and set up a project team to review the outcomes. Further measures are being reviewed to enhance the degree
of staff awareness and training of this risk across the group.
The directors consider that this risk has increased during 2016.
Pressure on
margins by
customers
Recent trends have seen Staffing revenues increase but with lower increases in gross profit margins. Margins per hour have
been declining in both absolute terms and in comparison to last year, in part due to the increasing cost of resourcing labour.
We understand that this is a trend across the Recruitment sector.
Staffing use a pricing model to ensure no offer is quoted or accepted which would put unacceptable pressure on margins.
Margins are reported across the division on a weekly basis. New business wins improves efficiency (overheads spread over
larger base) and reduce the impact of one customer demanding lower margins. Finally, the division will continue to provide
an excellent service and seek to achieve a high new customer win rate.
The directors consider that this risk has remained the same as in the prior year.
Staffline Group plc • Annual Report 2016
21
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
Principal risks and uncertainties continued...
Operational and compliance continued...
Termination of
Department for
Work and Pensions
(“DWP”) contracts
in March 2017
The end of the Work Programme (“WP”) and transition across to Work & Health Programme (“W&HP”) will reduce the potential
revenue accessible given the reduction in the size of the programme.
The Staffline Group could be faced with large scale redundancy and property closure costs associated with the end of the WP
contract should the new W&HP contract not be at the same scale or locations.
The Group successfully tendered for the Umbrella Agreement for Employment and Health Related Services (“UAEHRS”), the
next iteration of the DWP’s welfare to work programme (previously referred to as the Work and Health Programme). The Group
restructured its PeoplePlus division in 2016 to ensure it has a much smaller and more efficient cost base in 2017.
The directors consider that this risk has increased during 2016.
Financial
Compliance with
banking facility
agreements
The Group has a number of covenants both of a financial and information undertaking nature. Breaking any one of these
covenants can technically trigger an acceleration of payment of the group’s debt facilities.
Financial covenants are forecast up to three years in advance. Sufficient headroom has been agreed as part of the covenant
limits being set, and these headroom limits are re-forecast on a regular basis. The group finance team forecast and monitor
cash flows and banking facilities on a daily basis and comply with the other information undertakings required by our senior
facility agreement and, where required, obtain written agreement to any short term waiver requirements. The Group’s
relationship with our bankers remains strong.
The directors consider that this risk has reduced during 2016 due to the reduction in net debt.
On behalf of the Board
Chris Pullen
Chief Financial Officer
24 January 2017
22 Staffline Group plc • Annual Report 2016
Governance
Corporate governance
statement
for the year ended 31 December 2016
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, and has not, complied
with the full requirements of the UK Corporate Governance Code (the Code). However, we have reported on certain of our Corporate Governance
arrangements by drawing upon best practice available. 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 24.
The Board
The Board currently comprises the Non-Executive Chairman, the Group Chief Executive, the Group Managing Director, the Chief Financial Officer and two
Non-Executive Directors. Biographies of the Directors appear opposite 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)
Tracy Lewis
Non-Executive Director (A, R, N)
Staffline Group plc • Annual Report 2016
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
his 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 being a member of the Remuneration
and Nomination committees.
Andy Hogarth
Group Chief Executive (N)
Andy has held senior roles in a wide range of businesses
including retail, support services, healthcare, hospitality
and construction. As Finance Director he led the MBO and
subsequent trade sale in 2002 of Pipeline Constructors
Group, a £100m utility services business. He is currently CEO
of Staffline Group plc, sits on the board of an elderly care
charity and is a 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 Group Chief Executive in 2009.
John Crabtree OBE
Non-Executive Chairman (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. With effect
from 3 January 2017, John was appointed as Her Majesty’s
Lord-Lieutenant for the West Midlands.
G
o
v
e
r
n
a
n
c
e
Tracy Lewis has over 30 years’ experience within the retail
and manufacturing sectors having held a number of senior
positions. She has considerable experience in leadership
roles as well as sales, marketing, product and business
development functions. Tracy was CEO of Wacoal Europe
(formerly Eveden Group), a leading designer, manufacturer
and global distributor of premium lingerie and swimwear
brands and oversaw its sale to Japanese headquartered
Wacoal Holdings Corp. in 2012. Her previous executive
roles included management positions at Marks & Spencer
Plc, Mothercare Plc and Next Plc. Tracy was also a
Non-Executive Director of Original Additions (Beauty)
Ltd. Following her appointment to the board in August
2016, Tracy is chair of the Nomination and Remuneration
committees and is also a member of the Audit committee.
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
Chris Pullen
Chief Financial Officer (N)
Chris joined Staffline in September 2015 and was initially
responsible for Group Mergers and Acquisitions. He was
appointed Group Chief Financial Officer and an Executive
member of the Board in April 2016. Chris joined the Group
from Regus plc, the FTSE 250 listed provider of flexible
working solutions, where he was Global Managing Director of
its core Office division. He has previously held the role of CEO
of APCOA Parking (UK) Ltd, which provides parking services
across the UK, where he led a turnaround and subsequent
significant growth, as well as senior management positions at
itc Legal Services Ltd and National Car Parks Limited. Chris
was formerly an officer in the Coldstream Guards and holds
an MBA from the University of Durham Business School.
24 Staffline Group plc • Annual Report 2016
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 Tracy Lewis (previously
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 and key members of senior management. 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 met
once during 2016.
The Audit Committee, chaired by Ed Barker, has met four 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
external auditors and reviewing any reports from them 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
industry body standards (e.g. GLAA 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.
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 as was the case for the acquisition of A4e Limited in 2015.
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 19.
Going concern
The net debt position of the Group, discussed on page 15 of the Chief
Financial Officer’s report, has fallen during 2016 from £63.1m to £36.7m.
The Directors have reviewed forecasts for the next three years and detailed
forecasts covering the period up to the end of Q1 2018. These forecasts
demonstrate that the Group is expected to be able to operate fully within
its banking facilities for at least twelve months from the approval of this
Annual Report, with significant headroom being noted across all financial
covenants.
With improving free cash flow levels, debt is forecast to continue to fall
in 2017, with the Group expected to have a net cash position by the end
of 2017.
With strong financial performance for the year ended 31 December 2016
and a strong start to 2017 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 2016
25
Governance
Report on remuneration
for the year ended 31 December 2016
G
o
v
e
r
n
a
n
c
e
Remuneration Committee
The Company has a Remuneration
Committee comprising Tracy Lewis, who is
the Chairperson, John Crabtree OBE 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,
Chris Pullen and Diane Martyn are comprised
of a basic salary, car allowances, pension
contributions 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
Salaries for the Executive Directors are
reviewed by the Remuneration Committee
at specific times or when an individual
changes position or responsibility. In deciding
appropriate levels the Committee takes into
account objective research on comparable
companies, general market conditions
and performance. Since January 2013 the
Committee has held salary levels flat, but
acknowledge that a full review will take place
in January 2017, given the significant business
growth and additional responsibilities taken by
the Executive team.
Annual bonus
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 £135,000 (2015: £115,000)
has been accrued in respect of the current
Executive Directors in recognition of group
profitability meeting budget, in line with the
Executive Bonus Scheme approved by the
Remuneration Committee. The bonus for
Executive Directors is based on achieving
targeted Group underlying profit for the year
before taxation. For the full year, achievement
of 100% of target will result in 25% of base
salary being paid, payments being made on a
graduated basis from achievement of 95% of
target (below which no bonus is payable) up
to 150%. Target for the year was £37.6m. The
actual figure was £36.7m. Thus 97% of the
target was achieved, resulting in bonuses of
24.1% of base salary being payable to Andy
Hogarth, Diane Martyn and Chris Pullen.
Directors’ share options
In 2013, a maximum of 100,000 performance-
related share options were issued to a director,
Diane Martyn. The options vested 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 2016, the maximum
criteria had been met and accordingly the full
amount of shares have vested.
On 17 June 2016, a maximum of 100,000
performance-related share options were issued
to a director, Chris Pullen. The options vest in
June 2019 dependent upon the performance of
adjusted diluted earnings per share for the year
ended 31 December 2018; diluted underlying
earnings per share must be equal to, or greater
than, 115.5p for the shares to vest. As at 31
December 2016, the relevant earnings per
share measure was 114.0p so it is considered
likely that the full amount of shares will vest.
Joint Share Ownership Plan
In June 2013, the Company established
a Joint Share Ownership Plan (“JSOP”) to
provide additional incentives to certain senior
executives.
Annual bonuses are awarded at the discretion
of the Remuneration Committee as an incentive
and to reward performance during the financial
That JSOP runs from the date of the award
until 30 June 2018. During this period the right
to sell the JSOP award shares is not at the
discretion of the executives but instead at the
discretion of the Employee Benefit Trust. On
disposal of the shares, the amount received by
the executives is calculated based on certain
business performance conditions, as follows:
1. A range of underlying diluted Earnings Per
Share (“EPS”) of between 56.0p and 93.5p
required in any of financial years 2014 to
2017 inclusive (maximum 50% of the award).
2. 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 (nil
award if minimum EPS requirement above
not achieved).
The interests that Andy Hogarth, Diane Martyn
and Phil Ledgard 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.
Policy on Non-Executive
Directors’ remuneration
The remuneration of the Non-Executive
Directors is determined by the Board and based
upon independent surveys of fees paid to
Non-Executive Directors of similar companies.
The Non-Executive Directors do not receive any
benefits apart from their basic salaries or fees.
Service contracts
Andy Hogarth, Chris Pullen and Diane Martyn
have rolling service contracts requiring notice
from either party of one year. John Crabtree,
Ed Barker and Tracy Lewis 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.
The Group operates a defined benefit pension
scheme although no Directors are members of
the scheme.
Benefits in kind
The Group provides private medical insurance
for Andy Hogarth, Chris Pullen and Diane
Martyn. No other benefits in kind are provided
to current Directors.
26 Staffline Group plc • Annual Report 2016
Governance
Report of the Directors
for the year ended 31 December 2016
The Directors present their annual report for the Group and the Company together with the audited financial statements for the year
ended 31 December 2016.
A detailed review of the activities of the Group, including financial and non-financial key performance indicators, can be found in the Strategic Report,
along with details on the Group’s future developments. Financial Risk Management is detailed in note 26 of the financial statements.
An interim dividend of £2,663,000 (10.5 pence per share) was paid during the year (2015: £1,901,000, 7.5 pence per share). The Directors have
proposed a final dividend of £3,906,000 (15.3 pence per share) (2015: £3,170,000, 12.5 pence per share) to be paid on 4 July 2017, to shareholders
registered on 2 June 2017. This has not been included within creditors as it was not formally approved before the financial year end.
Directors
Substantial shareholdings
The Directors who held office during the year and up to the
date of approval of the Annual Report were:
E Barker
Dame C Braddock (resigned 19 May 2016)
J Crabtree OBE (Chairman)
A Hogarth
P Ledgard (resigned 31 May 2016)
T Lewis (appointed 19 August 2016)
D Martyn
C Pullen (appointed 18 April 2016)
Qualifying third party indemnity provisions
A qualifying third party indemnity provision as defined in
Section 232(2) of the Companies Act 2006 is in force at the
date of approval of the financial statements for the benefit
of each of the Directors in respect of liabilities incurred as a
result of their office, to the extent permitted by law. In respect
of those liabilities for which Directors may not be indemnified,
the company maintained a directors’ and officers’ liability
insurance policy throughout the financial year.
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.
The Company’s issued share capital consists of 27,749,389 ordinary shares with a
nominal value of 10 pence each (“Ordinary Shares”), each share having equal voting
rights.
The interests in excess of 3.0% of the issued ordinary share capital of the Company
which have been notified as at 31 December 2016 were as follows, representing
62.5% of the total issued ordinary share capital:
Ordinary shares of
10p each
Percentage of
ordinary shares %
Octopus Investments
Employee Benefit Trust
Standard Life Investments
3,423,270
2,220,400
1,882,776
River and Mercantile Asset Management
1,728,627
Directors of the company
Hargreave Hale – Stockbrokers
Legal and General Investment
Invesco Perpetual
Living Bridge
Slater Investments
Investec Asset Management
1,651,504
1,400,000
1,300,610
1,141,310
875,634
862,465
852,357
12.3
8.0
6.8
6.2
5.9
5.1
4.7
4.1
3.2
3.1
3.1
The shareholding for Directors of the company disclosed above excludes shares
held under the Company’s Joint Share Ownership Plan (“JSOP”) in which they
are beneficial co-owner of shares. Details of such shareholdings are given in
the Directors’ remuneration disclosures in note 7 to the financial statements. In
accordance with the AIM Rule 26, in so far as the Company is aware, the number
of shares and the percentage of the Company’s issued share capital that is not
in public hands is 3,871,904 and 13.9% respectively. This percentage comprises
the holdings of Directors of the company and the Employee Benefit Trust (the
Company’s Joint Share Ownership Plan).
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.
A resolution to re-appoint PricewaterhouseCoopers LLP as auditors will be
proposed at the forthcoming Annual General Meeting.
BY ORDER OF THE BOARD
Paul Collins
Company Secretary
24 January 2017
Staffline Group plc • Annual Report 2016
27
G
o
v
e
r
n
a
n
c
e
Directors’ Responsibilities Statement
The Directors are responsible for preparing the Annual Report and the Group and parent Company
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under
that law, the Directors are required to prepare the Group financial statements in accordance
with International Financial Reporting Standards (IFRSs) as adopted by the European Union
and applicable law and have elected to prepare the parent Company financial statements in
accordance with UK Accounting Standards, including FRS 101 “Reduced Disclosure Framework”.
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 of the Group and Company and of
the profit or loss of the Group for that period. In preparing these financial statements, the Directors
are required to:
• select suitable accounting policies and then apply them consistently;
• make judgments and accounting estimates that are reasonable and prudent;
• state whether applicable IFRSs have been followed, subject to any material departures
disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to
presume that the Group and parent Company will continue in business.
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 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.
Each of the Directors confirms that, to the best of their knowledge:
• the Group financial statements, which have been prepared in accordance with IFRS as
adopted by the EU, give a true and fair view of the assets, liabilities, financial position and
profit of the Group: and
• the Strategic Report includes a fair review of the development and performance of the
business and position of the Group, together with a description of the principal risks and
uncertainties that it faces.
Disclosure of information to the External Auditor
So far as the Directors are aware, there is no relevant audit information (as defined in section 418 of
the Companies Act 2006) of which the Company’s External Auditor is unaware. 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 Company’s External Auditor is aware of that
information.
28 Staffline Group plc • Annual Report 2016
Governance
Independent auditors’
report to the members
of Staffline Group plc
for the year ended 31 December 2016
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 2016
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 2016;
• 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 IFRSs as adopted by the
European Union, and applicable law.
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 matters
prescribed by the Companies
Act 2006
In our opinion, based on the work undertaken
in the course of the audit:
• 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; and
• the Strategic Report and the Report of the
Directors have been prepared in accordance
with applicable legal requirements.
In addition, in light of the knowledge
and understanding of the group and its
environment obtained in the course of the
audit, we are required to report if we have
identified any material misstatements in the
Strategic Report and the Report of the Directors.
We have nothing to report in this respect.
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:
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, 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
• 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.
With respect to the Strategic Report and
Report of the Directors, we consider whether
those reports include the disclosures required
by applicable legal requirements.
Other matter
We have reported separately on the company
financial statements of Staffline Group plc for
the year ended 31 December 2016.
Steven Kentish
Senior Statutory Auditor
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham
Date: 24 January 2017
Staffline Group plc • Annual Report 2016
29
G
o
v
e
r
n
a
n
c
e
30 Staffline Group plc • Annual Report 2016
Consolidated statement of comprehensive income
for the year ended 31 December 2016
2016
Underlying
£’m
2016 Non
underlying*
£’m
Note
Continuing operations
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit
Finance costs
Profit for the year before taxation
Tax expense
Profit from continuing operations
Profit/(Loss) after tax on
discontinued operations
Profit for the year
4
5
5
6
8
9
882.4
(757.5)
124.9
(84.9)
40.0
(3.3)
36.7
(7.6)
29.1
-
-
-
(17.8)
(17.8)
-
(17.8)
3.7
(14.1)
Items that will not be reclassified to the profit and loss
account - actuarial (losses) and gains, net of deferred tax
Items that may be reclassified to the profit and loss
account – cumulative translation loss, net of tax
Net profit and total comprehensive
income for the year, net of tax
Earnings per ordinary share
10
Continuing operations:
Basic
Diluted
Discontinued operations:
Basic
Diluted
Underlying:
Basic
Diluted
2016
Total
£’m
882.4
(757.5)
124.9
(102.7)
22.2
(3.3)
18.9
(3.9)
15.0
0.8
15.8
(1.1)
-
14.7
59.1 pence
58.8 pence
3.2 pence
3.1 pence
114.7 pence
114.0 pence
2015
Underlying
(restated)
£’m
2015 Non
underlying*
£’m
2015 Total
(restated)
£’m
702.2
(601.3)
100.9
(70.6)
30.3
(2.0)
28.3
(5.2)
23.1
-
-
-
(22.8)
(22.8)
-
(22.8)
2.8
(20.0)
702.2
(601.3)
100.9
(93.4)
7.5
(2.0)
5.5
(2.4)
3.1
(0.7)
2.4
0.5
(0.1)
2.8
12.4 pence
12.3 pence
(2.9 pence)
(2.8 pence)
92.8 pence
92.4 pence
The accompanying notes 1-28 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
Staffline Group plc • Annual Report 2016
31
Consolidated statement of changes in equity
for the year ended 31 December 2016
Share
capital
£’m
Own shares
JSOP
£’m
Share
premium
£’m
Share based
payment
reserve
£’m
Profit and
loss
account
£’m
Total equity
£’m
At 1 January 2016
Dividends (note 10)
Sale of Joint Share Ownership Plan (“JSOP”)
shares no longer required
Share options issued in equity settled
share based payments
Share options vested in the year
Transactions with owners
Profit for the year
Actuarial losses
Cumulative translation adjustments
Total comprehensive income for the year, net of tax
2.8
-
-
-
-
-
-
-
-
(9.0)
-
0.1
-
0.1
-
-
-
-
39.9
0.1
-
-
-
-
-
-
-
-
-
-
0.1
(0.1)
-
-
-
-
-
39.4
(5.8)
1.4
-
0.1
(4.3)
15.8
(1.1)
-
14.7
73.2
(5.8)
1.5
0.1
-
(4.2)
15.8
(1.1)
-
14.7
At 31 December 2016
2.8
(8.9)
39.9
0.1
49.8
83.7
Share
capital
£’m
Own shares
JSOP
£’m
Share
premium
£’m
Share based
payment
reserve
£’m
Profit and
loss
account
£’m
Total
equity
£’m
At 1 January 2015
Dividends (note 10)
Vesting of Joint Share Ownership Plan (“JSOP”) shares
Share options issued in equity settled share based payments
Issue of new shares
Transactions with owners
Profit for the year
Actuarial gains
Cumulative translation (loss)
Total comprehensive income for the year, net of tax
2.8
-
-
-
-
-
-
-
-
-
(9.8)
-
0.8
-
-
0.8
-
-
-
-
39.9
0.1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
31.5
(4.0)
9.1
-
-
5.1
2.4
0.5
(0.1)
2.8
64.5
(4.0)
9.9
-
-
5.9
2.4
0.5
(0.1)
2.8
At 31 December 2015
2.8
(9.0)
39.9
0.1
39.4
73.2
The accompanying notes 1-28 form an integral part of these financial statements.
32 Staffline Group plc • Annual Report 2016
Consolidated statement of financial position
as at 31 December 2016
Note
2016
£’m
2015 (restated)
£’m
Assets
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Deferred tax asset
Current
Trade and 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 and loss account
Total equity
Total equity & liabilities
11
12
13
20
14
15
9
16
17
18
9
19
18
19
20
21
91.6
25.8
8.0
0.9
126.3
103.1
1.2
-
19.7
124.0
91.5
36.7
9.3
0.9
138.4
116.8
2.4
1.7
5.0
125.9
250.3
264.3
97.5
8.6
-
0.5
2.5
109.1
47.8
6.2
3.5
57.5
166.6
2.8
(8.9)
39.9
0.1
49.8
83.7
250.3
101.3
20.7
2.5
3.0
0.4
127.9
47.4
9.7
6.1
63.2
191.1
2.8
(9.0)
39.9
0.1
39.4
73.2
264.3
Please see notes 3 and 11 for details on the 2015 restatement. The accompanying notes 1-28 form an integral part of these financial statements.
The financial statements were approved by the Board of Directors on 24 January 2017.
A Hogarth
Director
C Pullen
Director
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 2016
33
Consolidated statement of cash flows
for the year ended 31 December 2016
Cash flows from operating activities
Taxation paid
Taxation received
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 - software
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 year acquisitions
Interest paid
Dividends paid
Proceeds from sale of Joint Share Ownership Plan shares
Settlement of Joint Share Ownership Plan liability
Proceeds from the issue of share capital
Net cash flows (used in)/generated 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
Note
27
13
12
10
16
2016
£’m
46.9
(5.6)
1.6
42.9
(3.6)
-
(3.3)
-
(6.9)
8.9
(11.9)
(10.9)
(3.1)
(5.8)
1.5
-
-
(21.3)
14.7
5.0
19.7
2015
£’m
14.4
(5.0)
-
9.4
(3.9)
-
(0.5)
(20.1)
(24.5)
53.1
(35.3)
(11.0)
(1.8)
(4.0)
9.8
(9.1)
-
1.7
(13.4)
18.4
5.0
The accompanying notes 1-28 form an integral part of these financial statements.
34 Staffline Group plc • Annual Report 2016
Notes to the consolidated financial statements
for the year ended 31 December 2016
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.
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.
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 2016
(including the comparatives for the year ended 31 December 2015)
were approved and authorised for issue by the board of Directors on
24 January 2017.
The Company does not have an ultimate controlling related party.
3. Accounting policies
Basis of preparation
The consolidated financial statements are prepared for the year ended
31 December 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 64 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.
Consolidation of subsidiaries
The Group financial statements consolidate those of the parent company
and all of its subsidiaries as at 31 December 2016 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 PeoplePlus subsidiaries have
a reporting date of 31 December 2016 (2015: 31 December 2015),
with all Staffing subsidiary accounts prepared for the 52 weeks ended
1 January 2017 (2015: 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 year
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
Prior year adjustment: December 2015 Consolidated Statement
of Comprehensive Income
Reclassification of PeoplePlus costs between cost of sales and
administrative expenses
Following the completion of the integration of the trades of A4e
and Avanta Enterprise businesses into the PeoplePlus division, and
standardisation of reporting, a more appropriate split of costs between
cost of sales and administrative expenses has now been identified. To
reflect this new split, the December 2015 financial year costs have been
restated, with £14.1m now being shown as administrative expenses
whereby they were originally reported under cost of sales.
In respect of the December 2015 year end results, the gross profit of the
PeoplePlus division, and therefore the group, has increased by £14.1m.
The December 2015 financial year gross profit margin of the PeoplePlus
division has increased from the previously reported 27.0% to the restated
36.6%, with the group gross profit margin increasing from the previously
reported 12.4% to the restated 14.4%.
There is no impact on total costs or operating profit.
Prior year adjustment: December 2015 Consolidated Statement
of Financial Position
Finalisation of fair value adjustments in respect of 2015 acquisitions
During the year end 31 December 2015, the Group acquired the entire
share capital of A4e Limited in April 2015 and Milestone Operations
Limited in September 2015. In accordance with IFRS 3 Business
Combinations, the directors made an initial assessment of the fair
values of the acquired assets and liabilities, resulting in Goodwill assets
of £15.6m and £3.0m respectively being created in the consolidated
statement of financial position. During April 2016 and September 2016
respectively (i.e. within 12 months of the acquisition dates), the Directors
undertook a review of the provisional fair values, with adjustments being
reflected within the carrying value of Goodwill as at the acquisition date.
Net adjustments of £0.9m for A4e Limited and £1.3m for Milestone
Operations Limited were made this year, increasing the respective Goodwill
assets, shown as a prior year restatement of the Consolidated Statement
of Financial Position. Principally this related to the non-recoverability of
trade debtors and adjustments to the provision for onerous property
leases and other liabilities. 31 December 2015 net assets are unaffected
by this adjustment, remaining at the £73.2m as previously reported.
Reclassification of dilapidation provisions
As at 31 December 2015, provisions for property dilapidation charges
were reported within both Accruals (£2.1m) and Other Non-Current
Liabilities (£1.4m). During the current financial year, this was corrected as
a prior year adjustment, with Other Non-Current Liabilities in respect of
property dilapidation charges as at 31 December 2015 being restated to
£3.5m, with a corresponding reduction in Accruals. There is no effect on
either total liabilities or net assets.
Underlying profit – non GAAP measures of performance
In the reporting of its financial performance, the Group uses certain
measures that are not defined under IFRS, the Generally Accepted
Accounting Principles (GAAP) under which the Group reports. The
Directors believe that these non-GAAP measures assist with the
understanding of the performance of the business. These non GAAP
measures are not a substitute for, or superior to, any IFRS measures
of performance but they have been included as the Directors consider
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 2016
35
them to be an important means of comparing performance year-
on-year and they include key measures used within the business for
assessing performance. We acknowledge that the adjustments made
to arrive at underlying profit may not be comparable to those made by
other companies, mainly in respect of the adjustment for share based
payment charges including both equity and cash settled components.
It should be noted that whilst the amortisation of acquisition related
intangible assets has been added back, the revenue from those
acquisitions has not been eliminated.
Non-underlying charges are regarded as recurring or non-recurring
items of income or expenditure of a particular size and/or nature relating
to the operations of the business that, in the Directors’ opinion, require
separate identification. These items are included in “total” reported
results but are excluded from “underlying” results. These items can vary
significantly from year to year and therefore create volatility in reported
earnings which does not reflect the Group’s underlying performance.
They include exceptional restructuring costs of forming and reorganising
the PeoplePlus division, share based payment charges and credits and
the amortisation of intangible assets arising on business combinations,
being either non-recurring or material in the context of our trading
performance during the year.
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.
arrangement constitutes an agency relationship rather than principal, no
sale or cost of sale is recognised in the income statement.
PeoplePlus
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 Department for Work and
Pensions (“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.
As a standard part of the contracts with the DWP, the division receives
quarterly payments, in arrears, where it has earned the right to make
a claim for payment but has not done so within the required time
frames. Revenue for these payments, which relates to services already
performed, is recognised once the division has an expectation that
these payments will be received. The amount of revenue recognised
is based upon the amounts expected to be recovered by these future
payments, which is based upon the historic evidence of such payments.
Operating expenses
Operating expenses are recognised in profit or loss in the statement of
comprehensive income when incurred and are classified according to
their nature.
Segment reporting
Goodwill
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
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
36 Staffline Group plc • Annual Report 2016
Notes to the consolidated financial statements (continued)
Intangible assets (continued)
when events or circumstances indicate the carrying amount may not be
recoverable.
Computer software
Computer software is carried at acquisition cost less subsequent
amortisation and impairment losses. Amortisation 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.
The useful lives of computer software is 3-5 years and are amortised on
a straight line basis.
Property, plant and equipment
Freehold land and property, computer equipment, fixtures and fittings
and motor vehicles are carried at acquisition cost less subsequent
depreciation and impairment losses. Depreciation is charged on the cost
less the estimated residual value, which is assessed annually, of these
assets over the estimated useful economic life of each asset.
The useful lives of property, plant and equipment and the depreciation
basis can be summarised as follows:
Freehold buildings
Computer equipment
Fixtures and fittings
Motor vehicles
50 years straight line
3-5 years straight line
3-5 years straight line
25% reducing balance
Impairment
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 £1.5m
and a sale price of £1.7m, less costs of £0.1m, which is considered
by management to be above fair value. In accordance with IAS 17 the
excess of proceeds over fair value was deferred and is being amortised
over the remaining lease term (10 years). The subsequent leasing
agreement, which has been considered separately for the land and
buildings element, is treated in accordance with the Group’s existing
operating lease accounting policy as detailed above.
Taxation
Current income tax assets and/or liabilities comprise those obligations to,
or claims from, fiscal authorities relating to the current or prior reporting
period, that are unpaid at the balance sheet date. They are calculated
according to the tax rates and tax laws applicable to the fiscal periods to
which they relate, based on the taxable profit for the year.
Deferred income taxes are calculated using the liability method on
temporary differences. This involves the comparison of the carrying
amounts of assets and liabilities in the consolidated financial statements
with their respective tax bases. However, in accordance with the
rules set out in IAS 12, no deferred taxes are recognised on the initial
recognition of goodwill. This applies also to temporary differences
associated with shares in subsidiaries if reversal of these temporary
differences can be controlled by the Group and it is probable that
reversal will not occur in the foreseeable future. In addition, tax losses
available to be carried forward as well as other income tax credits to the
Group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are provided for in full if material. Deferred tax
assets are recognised if it is probable that they will be able to be offset
against future taxable income. Deferred tax assets and liabilities are
calculated, without discounting, at tax rates that are expected to apply
to their respective period of realisation, provided they are enacted or
substantively enacted at the statement of financial position 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
The group contributes to a number of pension arrangements.
The schemes are generally funded through payments to insurance
companies or trustee-administered funds, determined by periodic
actuarial calculations. The group has both defined contribution and
defined benefit plans. A defined contribution plan is a pension plan under
which the group pays fixed contributions into a separate entity. The
group has no legal or constructive obligation to pay further contributions
if the fund does not hold sufficient assets to pay all employees the
benefits relating to employee service in the current and prior periods.
A defined benefit plan is a pension plan that is not a defined contribution
plan. Typically defined benefit plans define an amount of pension benefit
that an employee will receive on retirement, usually dependent on one or
more factors such as age, years of service and compensation.
Defined benefit
The asset recognised in the statement of financial position in respect of
defined benefit pension plans is the present value of the defined benefit
obligation at the end of the reporting period less the fair value of plan
assets, together with adjustments for unrecognised past-service costs.
The defined benefit obligation is calculated annually by independent
actuaries using the projected unit credit method. The present value of the
defined benefits obligation is determined by discounting the estimated
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 2016
37
future cash outflows using interest rates of high-quality corporate bonds
that have terms to maturity approximating to the terms of the related
pension obligations.
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.
Actuarial gains and losses arising from experience adjustments and
changes in actuarial assumptions are charged or credited to equity in
other comprehensive income in the period in which they arise.
Past service costs are recognised immediately in income, unless the
changes to the pension plan are conditional on the employees remaining
in service for a specified period of time (the vesting period). In this case,
the past service costs are amortised on a straight-line basis over the
vesting period.
Defined contribution
A defined contribution plan is a pension plan under which the Group
pays fixed contributions to an independent entity. The Group has
no legal or constructive obligations to pay further contributions after
payment of the fixed contribution. Contributions recognised in respect
of personal pension plans are expensed as they fall due. Liabilities and
assets may be recognised if underpayment or prepayment has occurred
and are included in current liabilities or current assets as they are
normally of a short term nature.
Financial assets
The Group’s financial assets include cash, trade receivables and other
receivables.
All financial assets are initially recognised at fair value, plus transaction
costs. They are subsequently included at amortised cost using the
effective interest rate method.
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.
Provisions are measured as the estimated expenditure required to settle
the present obligation, based on the most reliable evidence available at
the balance sheet date, including the risks and uncertainties associated
with the present obligation. Where there are a number of similar
obligations, the likelihood that an outflow will be required in settlement
is determined by considering the class of obligations as a whole. In
addition, long term provisions are discounted to their present values,
where time value of money is material.
All provisions are reviewed at each balance sheet date and adjusted to
reflect the current best estimate.
In those cases where the possible outflow of economic resource as a
result of present obligations is considered improbable or remote, or the
amount to be provided for cannot be measured reliably, no liability is
recognised in the consolidated statement of financial position.
Equity
An equity instrument is any contract that evidences a residual interest in
the assets of an entity after deducting all of its liabilities.
Share capital is determined using the nominal value of shares that have
been issued.
Own shares is determined using the nominal value of shares that were
issued to the Employee Benefit Trust in relation to the Joint Share
Ownership Plan (“JSOP”). This Trust is controlled by the Group and
therefore consolidated, resulting in the ‘Own shares’ deducted from
equity.
The share premium account represents premiums received on the initial
issuing of the share capital. Any transaction costs associated with the
issuing of shares are deducted from share premium, net of any related
income tax benefits.
The share based payment reserve represents the value of shares
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.
Financial liabilities
Dividends
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.
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 but remain unpaid at the year end.
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
Final dividends are recognised as a distribution in the period in which
they are approved by the shareholders. Interim dividends are recorded
in the period in which they are paid. Distributions to owners of the
Company are not recognised in the statement of comprehensive
income under IFRS, but are disclosed as a component of the statement
of changes in equity.
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
certain of its Directors and employees.
Equity settled share based remuneration
All employee services received in exchange for the grant of any share
based remuneration are measured at their fair values. These are
indirectly determined by reference to the fair value of the share options
awarded. Their value is appraised at the grant date and excludes the
impact of any non-market vesting conditions (for example, profitability
and sales growth targets). All share based remuneration is ultimately
recognised as an expense in profit or loss in the statement of
comprehensive income with a corresponding credit to the share based
payment reserve, net of deferred tax where applicable.
If vesting periods or other vesting conditions apply, the expense is
allocated over the vesting period, based on the best available estimate
of the number of share options expected to vest. Non-market vesting
conditions are included in assumptions about the number of options
that are expected to become exercisable. Estimates are subsequently
38 Staffline Group plc • Annual Report 2016
Notes to the consolidated financial statements (continued)
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 in place cash settled share based payment schemes
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. The fair value of awards is recognised over the periods in which
employees render service.
Critical judgments and estimate uncertainty in applying the
Group’s accounting policies
The Directors consider that the only critical judgement in applying the
accounting policies which are described above is:
• IAS 19, together with IFRIC 14 (“The limit on a defined pension
asset”), regulations only allow a surplus to be recognised as an asset
in the balance sheet to the extent that it can be recovered through
reduced contributions in the future or through refunds from the
scheme. The amount that can be recognised is affected by the value
of future accruals or benefits and future payments to be made under
the Recovery Plan. Having reviewed the pension scheme rules, the
Directors have considered it is correct to recognise the pension
scheme asset. The Directors note that there are proposals that may
lead to the modification of IFRIC 14 which the directors will keep
under review as it may impact the recognition of a surplus arising
where the trustees have discretionary rights to enhance benefits
from the pension scheme on winding up. The directors will consider
appropriate disclosures of the impact of such a modification to the
standard as appropriate.
The Directors consider that the estimate uncertainties in applying the
accounting policies which are described above are:
• The fair value adjustments included in note 11 relating to the
acquisitions during the prior year. On initial recognition, the assets
and liabilities of the acquired business and the consideration paid
for them are included in the consolidated financial statements at
their fair values. In measuring fair value, management uses estimates
of future cash flows and discount rates. Any subsequent change
in these estimates would affect the amount of goodwill if the
change qualifies as a measurement period adjustment. Any other
change would be recognised in profit or loss in the statement of
comprehensive income in the subsequent period.
• The assumptions used in the impairment review, assessing the
carrying value of goodwill versus underlying value-in-use. More
details are included in note 11;
• The estimation of the probability of the vesting conditions, attached
to the JSOP, being met; and
• Revenue recognition is an area of significant judgement. Within the
PeoplePlus division judgement is required in relation to the amount
of revenue recognised for monies that will be paid to the division,
based upon prior work performed, but not invoiced at the year-end.
The key judgements within these estimates relate to the quantum
of claims that will be paid (at a reduced rate) and the percentage of
these where successful claims can be made (and payment is made
at the full contracted rate). Revenue has been recognised based
upon the historical data for the applicable contracts. In arriving at
this judgement management have based their assessment of
revenues on historical percentages of outcomes. This historical
percentage may not reflect the future claims percentage. If the
rate of future claims reduced by 10%, compared to the historical
estimate, revenues and profits before tax would reduce by £0.7m.
Conversely if the percentage of successful claims were to increase
by 10%, against management expectations, then additional
revenues and profits before tax of £0.7m would be recorded as at
31 December 2016.
• The Group calculates the provisions for rebates based on contractual
arrangements. There is an element of judgement included in this
calculation, with the Group taking into account historical experience
and future expectations.
• The Group considers Goodwill and other Intangible Assets to be
recoverable based on the three year budget to 2019. By its nature
this is therefore an estimate uncertainty. 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 and other intangible
assets is as detailed in note 11.
• The Group has dilapidation provisions against its leased property
estate. The provision is determined based on an independent
valuation of the estimated total cost payable on expiry of the
respective lease. The timing and value of the costs are uncertain
due to exit date and the final liability will be subject to negotiation
and is therefore an estimate uncertainty.
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 1 January 2017. The Group will look at the impact of
the new standards in the coming months and will provide an update of
their impact at the half year.
• IFRS 2 Share- based payment: Amendments to clarify the
classification and measurement of share-based payment
transactions (IASB effective date 1 January 2018);
• IFRS 9 Financial Instruments (IASB effective date 1 January 2018);
• IFRS 15 Revenue from Contracts with Customers (effective 1
January 2018);
• IFRS 16 Leases (effective 1 January 2017)*;
• IAS 7 Statement of Cash Flows: Amendment as a result of
Disclosure Initiative (effective 1 January 2017)*;
• Annual improvement to IFRSs 2014-2016 Cycle (effective 1 January
2017)*;
• IFRIC 14 Limit of Defined Benefit Asset: The impact of this is
disclosed within critical judgments.
*not endorsed by the EU (as at 24 January 2017)
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 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
are made on the basis of segment operating results.
Staffline Group plc • Annual Report 2016
39
4. Segmental Reporting (continued)
Segment information for the reporting period is as follows:
Staffing
Services PeoplePlus
2016
2016
Total
Group
2016
Total
Staffing
Group
Services PeoplePlus
(restated –
(restated –
see note 3) see note 3)
2015
(restated –
see note 3)
2015
2015
£’m
£’m
£’m
£’m
£’m
£’m
Segment continuing operations:
Sales revenue from external customers
Cost of sales
Segment gross profit
Administrative expenses
Depreciation, software amortisation
Segment underlying operating profit *
740.8
(679.5)
61.3
(41.8)
(0.7)
18.8
Administrative expenses – share based payment credit/(charge)
2.9
Administrative expenses – reorganisation costs
Administrative expenses – transaction costs
(0.2)
(0.1)
141.6
882.4
(78.0)
(757.5)
63.6
(38.2)
(4.2)
21.2
-
(8.0)
-
124.9
(80.0)
(4.9)
40.0
2.9
(8.2)
(0.1)
Amortisation of intangibles arising on business combinations
(1.7)
(10.7)
(12.4)
Segment profit from operations
Finance costs
Segment profit before taxation
Tax expense
Segment profit from continuing operations
Total non-current assets
Total current assets
Total assets
Total liabilities
Capital expenditure including software
19.7
(3.1)
16.6
(2.8)
13.8
68.7
95.9
164.6
139.6
1.4
2.5
(0.2)
2.3
(1.1)
1.2
57.6
28.1
85.7
27.0
5.5
22.2
(3.3)
18.9
(3.9)
15.0
126.3
124.0
250.3
166.6
6.9
554.5
(507.6)
46.9
(33.2)
(0.5)
13.2
(8.9)
-
(0.2)
(0.6)
3.5
(1.8)
1.7
(2.1)
(0.4)
37.6
92.3
129.9
149.7
0.6
147.7
(93.7)
54.0
(33.8)
(3.1)
17.1
-
(3.2)
(0.7)
(9.2)
4.0
(0.2)
3.8
(0.3)
3.5
100.8
33.6
134.4
41.4
3.8
702.2
(601.3)
100.9
(67.0)
(3.6)
30.3
(8.9)
(3.2)
(0.9)
(9.8)
7.5
(2.0)
5.5
(2.4)
3.1
138.4
125.9
264.3
191.1
4.4
* Segment underlying operating profit stated before amortisation of intangibles arising on business combinations, acquisition costs, reorganisation
costs and share based payment credits/charges.
All head office costs are allocated to the Staffing Services division in the above results. This results from the historical nature of the Group with the
PeoplePlus division only being acquired in the past couple of years and reflects where the costs are predominantly incurred.
During 2016, one customer in the Staffing Services segment contributed greater than 10% of the Group’s revenue, representing £93m or 12.6%
of that segment’s revenues (2015: one customer representing £83m or 15.1%); the amount receivable from this customer at 31 December 2016
is £13.6m (2015: £11.0m). The PeoplePlus segment has no customer contributing more than 10% of the Group’s revenue during 2016 (2015: one
customer, representing £98m or 66% of that segment’s revenues; the amount receivable from this customer at 31 December 2015 was £0.9m).
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
40 Staffline Group plc • Annual Report 2016
Notes to the consolidated financial statements (continued)
5. Expenses by nature
Expenses by nature are as follows:
Underlying expenses
Employee benefits expenses – cost of sales
Employee benefits expenses – administrative expenses
Depreciation and software amortisation
Operating lease expenses
Other expenses
Disclosed as:
Cost of sales
Administrative expenses - underlying
2016
£’m
684.2
39.2
4.9
7.6
106.5
842.4
757.5
84.9
842.4
2015
(restated
see note 3)
£’m
517.0
33.5
3.6
6.2
111.6
671.9
601.3
70.6
671.9
Auditors’ remuneration in their capacity as auditors of the parent company is £13,750 (2015: £13,750) and in their capacity as auditor of subsidiary
companies is £181,250 (2015: £254,250). Non-audit remuneration in respect of tax compliance services totalled £27,000 (2015: £40,000) and in
respect of other advice totalled £44,000 (2015: £nil); the other advice this year relates to a review of the Group’s responses to the Financial Reporting
Council enquiries, certification of year-end covenant reporting and assistance in the liquidation of dormant companies.
Non-underlying administrative expenses
Amortisation of intangible assets arising on business combinations
(licences, customer contracts)
Share based payment (credit)/charges
Transaction costs
Reorganisation costs
Impairment of tangible fixed assets (reorganisation related)
2016
£’m
12.4
(2.9)
0.1
6.6
1.6
17.8
Tax credit on above non underlying expenses
Post taxation effect on above non underlying costs
(3.7)
14.1
2015
£’m
9.8
8.9
0.9
3.2
-
22.8
(2.8)
20.0
The reorganisation costs noted above relate to the integration of the acquisition of EOS, Avanta and A4e into the newly formed PeoplePlus division.
This process was started in 2015 and continued in 2016 – principally being due to the reduction in headcount and the exiting of properties no longer
required. The share based payment credit arose due to both the reduction in the company’s share price during the year and the lapsing of interests on
the resignation of certain executives.
6. Finance costs
Interest payable on financing arrangements (includes term loan,
loan notes, overdraft and amortisation of debt issue costs)
Unwinding of loan note discount
Pension interest (income)/cost
Total
2016
£’m
3.4
-
(0.1)
3.3
2015
£’m
1.9
0.1
-
2.0
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 2016
41
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
Other pension costs – defined benefit plan service cost
Share option (credit)/charge - cash settled
Share option charge - equity settled
Included in administrative expenses (note 5)
Included in PeoplePlus cost of sales
Share option (credit)/charge
2016
£’m
79.9
7.7
2.0
0.2
89.8
(3.0)
0.1
86.9
39.2
50.6
(2.9)
86.9
2015
£’m
84.2
7.6
2.1
0.2
94.1
8.9
-
103.0
33.5
60.6
8.9
103.0
The average monthly number of persons (including Directors)
employed by the Group during the year was:
- Sales and administrative
2,793
3,768
Number
Number
Included in cost of sales are temporary workers’ remuneration paid through the payroll of subsidiary companies as follows:
Wages and salaries
Social security costs
The average monthly number of temporary workers contracted
by the Group during the year was:
2016
£’m
598.9
34.7
633.6
2015
£’m
431.4
25.0
456.4
Number
Number
40,894
35,869
Directors’ remuneration
The remuneration of the Directors, which was all paid by Staffline Recruitment Limited, the Company’s wholly owned subsidiary undertaking, was as follows:
2016
Salary and fees
Bonus
Benefits in kind
Subtotal
Pension contributions
Total
A
Hogarth
D
Martyn
C
Pullen
P
J
Ledgard Crabtree
E
C
Barker Braddock
T
Lewis
Total
£’000
232
£’000
220
£’000
149
53
2
287
22
309
48
1
269
9
278
34
1
184
14
198
£’000
£’000
£’000
£’000
£’000
£’000
63
-
-
63
6
69
63
-
-
63
-
63
30
-
-
30
-
30
20
-
-
20
-
20
10
-
-
10
-
10
787
135
4
926
51
977
In addition, P Ledgard received a payment of £19,000 in respect of loss of office. The Group received an income statement credit of £0.8m (2015:
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 (£0.2m credit, 2015:
charge of £3.1m), D Martyn (£0.2m credit, 2015: charge of £1.1m) and P Ledgard (£0.4m credit, 2015: charge of £0.4m).
42 Staffline Group plc • Annual Report 2016
Notes to the consolidated financial statements (continued)
7. Directors and employees remuneration (continued)
A
Hogarth
£’000
D
Martyn
£’000
P
Ledgard
£’000
J
Crabtree
£’000
E
Barker
£’000
C
Braddock
£’000
232
55
2
289
22
311
212
50
1
263
20
283
152
10
1
163
14
177
63
-
-
63
-
63
30
-
-
30
-
30
35
-
-
35
-
35
Total
£’000
724
115
4
843
56
899
2015
Salary and fees
Bonus
Benefits in kind
Subtotal
Pension contributions
Total
Share based employee remuneration
Approved Employee Share Option Plan
At 31 December 2016 the Group operates a share based payment scheme (EMI scheme) for certain employees. However as the number of employees
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 vested 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 2016, the
maximum criteria has been met and accordingly the full amount of shares vested in March 2016. As at 31 December 2016 these options had not been
exercised.
On 17 June 2016, a maximum of 100,000 performance-related share options were issued to a director, Chris Pullen. The options vest in June 2019
dependent upon the performance of adjusted diluted earnings per share for the year ended 31 December 2018; diluted underlying earnings per
share must be equal to, or greater than, 115.5p for the shares to vest. As at 31 December 2016, the similar earnings per share was 114.0p so it is
considered likely that the full amount of shares will vest:
D Martyn
C Pullen
Date of grant
At 1 Jan
2016
Number
Granted
Number
Exercised
Number
8 March 2013
100,000
-
20 June 2016
-
100,000
-
-
At 31 Dec
2016
Number
100,000
100,000
Exercise
price
348.6p
991.5p
Except as noted under the Joint Share Ownership 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 years presented:
Outstanding at start of year
Granted
Lapsed
Exercised
Outstanding at end of year
Weighted average
exercise price
(pence)
2016
336
991
-
-
670
Number
2016
104,428
100,000
(4,428)
-
200,000
Weighted average
exercise price
(pence)
2015
330
-
-
92
336
Number
2015
107,261
-
(995)
(1,838)
104,428
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 2016
43
The Group has the following outstanding share options and exercise prices:
Weighted Weighted average
remaining
contractual life
(months)
2016
average
exercise price
(pence)
2016
-
349
991
-
-
30
Number
2016
-
100,000
100,000
Weighted Weighted average
remaining
contractual life
(months)
2015
average
exercise price
(pence)
2015
54
349
-
-
3
-
Number
remaining
2015
4,428
100,000
-
Date exercisable and (option life):
2011 (up to 2016)
2016 (up to 2021)
2019 (up to 2024)
Share options have exercise prices between 349pence and 991pence. The weighted average share price during the year was 1,066pence (2015:
1,215pence).
The number of share options exercisable at the end of the year was 100,000 (2015: 4,428). The weighted average price of the options exercisable
at the end of the year was 349pence (2015: 54pence).
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 (during the year the interests of P Ledgard were reduced from 170,000 to 50,000 on his resignation
as a director):
A Hogarth
D Martyn
P Ledgard
Award date
4 Jul 2013
4 Jul 2013
2 Dec 2013
Participation price
411.5p
411.5p
563.0p
31 December 2016
Interest over
number of shares
350,000
350,000
50,000
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 underlying diluted Earnings Per Share (“EPS”) before non-underlying net charges exceeds
56p in any full financial year up to 2017. The shares vest at the maximum number when a) the underlying diluted EPS before non-underlying net
charges equals 93.5p in any full financial year and b) the increase in total shareholder return exceeds the increase in the FTSE AIM All Share Total
Return Index. If underlying diluted EPS before non-underlying net charges does not equal 56p in any full year up to and including December 2017,
the directors’ interest in the shares lapses. If the increase in total shareholder return does not exceed the increase in the FTSE AIM All Share Total
Return Index, the shares only vest at 50% of the maximum number.
Underlying diluted Earnings Per Share (“EPS”) before non-underlying net charges is disclosed in note 10. The figure for 2016 was 114.0p so the EPS
condition has been achieved. From 4th July 2013 to 31 December 2016, the Staffline Group plc share price has increased by 110% compared to
an increase of 22% over the same period in the FTSE AIM All Share Total Return Index. The expectation is therefore that the maximum number of
shares will vest in June 2018.
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 2016. Significant inputs into the calculations were:
• Share price at date of grant;
• Exercise prices as detailed above;
• An average of 35.6% (2015: 35.0%) volatility based on expected and historical share price;
• Risk free interest rate of 0.003% (2015: 0.980%);
• The disposal of shares and settlement of scheme on 30 June 2018; and
• Assumption that no further relevant employees will leave before the vesting date (liability calculated based on existing employees, with exception
of P Ledgard as noted above) and excludes those who have left the group and whose entitlements have been forfeited.
44 Staffline Group plc • Annual Report 2016
Notes to the consolidated financial statements (continued)
7. Directors and employees remuneration (continued)
Share based employee remuneration
In total a credit of £2.9m of employee remuneration expense has been included in the consolidated statement of comprehensive income for the year
ended 31 December 2016 (2015: charge of £8.9m) which increased the share based payment reserve by £nil (2015: £30,000) in respect of equity
settled schemes and reduced the liability by £2.9m (2015: increased liability by £8.9m) 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 £1.6m (2015: £1.3m). In addition
compensation payments of £0.3m (2015: £nil) were made on the departure of three divisional directors during the year. Disclosures in accordance with
IAS 24 are included in note 22.
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:
Profit for the year before taxation
Tax rate
Expected tax expense
Other non-deductible expenses (net)
Adjustment in respect of prior years
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 fixed asset permanent difference
- other temporary difference
Actual tax expense
2016
%
20.0%
20.6%
2016
£’m
18.9
3.8
(0.2)
0.3
-
3.9
6.3
0.1
(2.4)
(0.1)
3.9
2015
%
20.2%
43.8%
2015
£’m
5.5
1.1
1.8
(0.5)
-
2.4
5.2
(0.8)
(1.9)
(0.1)
2.4
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 2016
45
The Board continues to improve the transparency and communication of the Group’s tax affairs. In 2015 the Group issued a tax policy and achieved
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 (credit)
Total UK tax charge for the year
Tax reconciliation:
Profit before taxation
Tax due if paid at UK corporation tax rate 20.00 % (2015: 20.25%)
Adjusting items:
Depreciation in excess of capital allowances – current year
Expenses not deductible
Adjustment in respect of prior years
Current tax charge for the year
Adjustments relating to deferred taxation:
Depreciation in excess of capital allowances
Permanent difference on consolidated intangible asset amortisation
Other short term timing differences (net)
Total deferred taxation credit for the year
Total UK tax charge for the year
Effective underlying current tax rate for the year
Effective underlying total tax rate for the year
Note
(i)
(ii)
(i)
(ii)
(ii)
(iii)
(iv)
2016
£’m
6.0
0.3
6.3
(2.4)
(2.4)
3.9
18.9
3.8
0.4
1.8
0.3
6.3
0.1
(2.4)
(0.1)
(2.4)
3.9
21.0%
20.6%
2015
£’m
5.7
(0.5)
5.2
(2.8)
(2.8)
2.4
5.5
1.1
0.8
3.8
(0.5)
5.2
(0.8)
(1.9)
(0.1)
(2.8)
2.4
21.2%
18.3%
(i) capital allowances are tax relief provided in law for expenditure the Group makes on fixed assets (including software). In 2016, the rate at which
fixed assets have been depreciated in the statement of comprehensive income 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 intangible assets arising on business
combinations and the JSOP profit and loss credit (2015: charge) are not allowable under UK corporation tax and are therefore excluded from
taxable profits. A deferred tax liability is recognised in respect of consolidated intangible assets. This liability is reduced each year in line with
amortisation charge, giving 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 greater than (2015: lower than) the UK corporation tax rate of 20.0% for the year due to the tax charge relating to the
prior year of £0.3m (2015: credit £0.5m).
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. On 16 March 2016 it was announced in the Chancellor’s Budget that the
UK Corporation Tax main rate from 1 April 2020 will be reduced to 17%. There is no material impact on deferred tax.
46 Staffline Group plc • Annual Report 2016
Notes to the consolidated financial statements (continued)
9. Assets held for sale and discontinued operations
During the prior year, the Board decided to dispose of its interests in PeoplePlus Enterprises Pty Limited (formerly A4e Pty Limited - “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 in the table below.
The total assets and total liabilities of A4e Australia were held as current assets held for sale and current liabilities held for sale respectively as at
31 December 2015. The sale was completed in April 2016 for net proceeds of £nil. In addition to the £0.8m of net liabilities reported as held for resale
as at 31 December 2015, operating losses of £0.2m were incurred this financial year to the date of disposal. Thus a net profit of £1.0m was reported
this year on disposal of the A4e Australia (£nil proceeds, £1.0m net liabilities at date of disposal). The cash flows of A4e Australia are consistent with
the operating results.
Sales
Cost of sales
Gross result/(loss)
Administrative expenses
Operating loss
Profit on disposal of subsidiary
Profit/ (Loss) before and after taxation – discontinued operations
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
2016
£’m
1.7
(1.7)
-
(0.2)
(0.2)
1.0
0.8
-
-
-
-
-
-
2015
£’m
2.3
(2.4)
(0.1)
(0.6)
(0.7)
-
(0.7)
0.7
0.9
0.1
1.7
(2.5)
(2.5)
10. 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 shares held in the JSOP – “own shares”. The calculation of the diluted earnings per share is based
on the basic earnings per share as adjusted to take into account the potential issue of ordinary shares resulting from share options granted to certain
senior management.
Details of the earnings and weighted average number of shares used in the calculations are set out below:
Earnings on continuing operations (£’m)
Earnings on discontinued operations (£’m)
Weighted average number of shares (000)
Earnings per share (pence):
Continuing
Discontinued
Underlying earnings per share (pence)*
Basic
2016
15.0
0.8
25,367
59.1p
3.2p
114.7p
Basic
2015
3.1
(0.7)
24,883
12.4p
(2.9p)
92.8p
Diluted
2016
15.0
0.8
25,520
58.8p
3.1p
114.0p
Diluted
2015
3.1
(0.7)
24,990
12.3p
(2.8p)
92.4p
*Underlying earnings after adjusting for amortisation of intangibles arising on business combinations, share based payment credits/charges, acquisition related costs and
reorganisation costs including the tax effect.
Staffline Group plc • Annual Report 2016
47
The weighted average number of shares (basic) has been increased by 484,000 (2015: 1,132,000) shares to take account of the full year effect of
the 807,000 shares exercised under the 2010 JSOP during the prior year and the effect of the 170,000 shares sold by the 2010 JSOP scheme this
year as no longer required.
Dividends
During the year, Staffline Group plc paid dividends of £5.8m (2015: £4.0m) to its equity shareholders:
Interim 2016 paid November 2016 (Interim 2015 paid November 2015)
Final 2015 paid July 2016 (Final 2014 paid July 2015)
Total paid during the year
2016
£’m
2.7
3.1
5.8
2015
£’m
1.9
2.1
4.0
2016
per share
(pence)
10.5p
12.5p
23.0p
2015
per share
(pence)
7.5p
8.5p
16.0p
A final dividend for 2016 of £3.9m has been proposed (2015: £3.1m – paid July 2016) but has not been accrued within these financial statements.
This represents a payment of 15.3 pence (2015: 12.5 pence) per share. The final dividend for 2016 is proposed for payment in July 2017.
11. Goodwill
Gross carrying amount
At 1 January 2015
Additions – A4e Limited £15.6m, Milestone Operations Limited £3.0m,
Diamond Recruitment Group £1.0m
At 31 December 2015 as reported
Adjustments – A4e Limited £0.9m, Milestone Operations Limited £1.3m (see below)
At 31 December 2015 as restated
Additions – Paragon Training (NI) Limited
At 31 December 2016
Additions
a) A4e Limited
Total (restated
see note 3)
£’m
69.7
19.6
89.3
2.2
91.5
0.1
91.6
On 27 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 therefore, including other deal related costs, results in an effective consideration of £34.5m. The purchase
consideration was funded by a £35.0m term loan. Directly attributable acquisition costs of £0.7m were included within administrative expenses (non-
underlying) and £0.4m of debt issue costs were capitalised in the statement of financial position against the term loan and are being amortised to the
statement of comprehensive income over the term of the loan.
In accordance with IFRS 3 Business Combinations, the directors 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. During April 2016 (i.e. within 12 months of the acquisition date), the Directors
undertook a review of the provisional fair values, with adjustments being reflected within the carrying value of goodwill as at the acquisition date.
Net adjustments of £0.9m were made this year, which has been shown as a prior year restatement. Principally this related to the non-recoverability
of amounts due to A4e.
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
48 Staffline Group plc • Annual Report 2016
Notes to the consolidated financial statements (continued)
11. Goodwill (continued)
Provisional fair value
31 December 2015
£’m
Adjustments
Final fair value
31 December 2015
£’m
Goodwill
Property, plant and equipment
Trade and other receivables
Accrued income
Provision against recoverability of accrued income
Cash
Pension asset
Trade and other payables
Corporation tax recoverable
Deferred tax liability
Borrowings
Deferred tax liability on acquired intangibles
Net liabilities acquired
Intangible assets identified – customer contracts
Goodwill (not tax deductible)
Consideration
-
8.9
8.6
11.9
(2.7)
9.5
1.9
(30.6)
2.0
(0.6)
(19.8)
(4.4)
(15.3)
22.1
15.6
22.4
-
-
(0.9)
0.3
-
-
(0.3)
-
-
-
-
(0.9)
-
0.9
-
8.9
8.6
11.0
(2.4)
9.5
1.9
(30.9)
2.0
(0.6)
(19.8)
(4.4)
(16.2)
22.1
16.5
22.4
b) Milestone Operations Limited and Diamond Recruitment Group
On 28 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.
On 12 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.
Consideration for the acquisitions included cash on completion of £7.9m and deferred consideration of £3.0m. This gave rise to consolidated goodwill
of £4.0m, which is not separately identifiable of other intangible assets. 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.
In accordance with IFRS 3 Business Combinations, the directors 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. During September 2016 (i.e. within 12 months of the acquisition
dates), the Directors undertook a review of the provisional fair values, with adjustments being reflected within the carrying value of goodwill as at the
acquisition date.
Net adjustments of £1.3m were made this year, which has been shown as a prior year restatement. Principally this related to adjustments to the
provision for onerous property leases and other liabilities and the write off of debtor balances not recoverable.
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 2016
49
Provisional fair value
31 December 2015
£’m
Adjustments
Final fair value
31 December 2015
£’m
0.2
13.1
0.2
(7.9)
0.2
(5.5)
(1.0)
(0.7)
7.6
4.0
10.9
-
(0.4)
-
(0.7)
(0.2)
-
-
(1.3)
-
1.3
-
0.2
12.7
0.2
(8.6)
-
(5.5)
(1.0)
(2.0)
7.6
5.3
10.9
Property, plant and equipment
Trade and other receivables
Cash
Trade and other payables
Corporation tax debtor
Borrowings
Deferred tax liability
Net liabilities acquired
Intangible assets identified – customer contracts
Goodwill (not tax deductible)
Consideration
c) Paragon Training (NI) Limited
On 15 February 2016, the Group acquired the entire issued share capital of Paragon Training (NI) Limited (“Paragon”), a training company based
and operating in Northern Ireland. Initial consideration of £0.3m was paid with a further £0.1m payable by March 2018 if certain trading conditions
are met. No provision has been made for the potential deferred consideration. The value of net assets acquired totalled £0.2m, of which £0.2m was
cash at bank, so £0.1m of intangible assets arose on acquisition. On 15 February 2016, the trade of Paragon was transferred to a fellow subsidiary
company, PeoplePlus (Works) NI Limited. For the 10.5 month post-acquisition period from 15 February 2016 to 31 December 2016, a turnover of
£0.6m and loss before taxation of £0.1m was attributed to the acquired trade.
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*
Taskforce Recruitment Limited*
Go New Recruitment Limited*
Milestone Operations Limited*
Diamond Recruitment Group*
Staffing Services division
Eos Works Group Limited
PeoplePlus Group Limited (formerly Avanta Enterprise Limited)
Softmist Limited
A4e Limited
Paragon Training (NI) Limited
PeoplePlus division
Total
Date of
acquisition
31 December 2016
£’m
31 December 2015
£’m
8 December 2004
22.3
22.3
16 March 2007
1 December 2009
17 May 2010
5 November 2010
14 March 2011
12 September 2011
14 September 2012
29 September 2015
13 October 2015
21 April 2011
6 June 2014
2 July 2014
27 April 2015
15 February 2016
1.9
0.8
0.7
0.7
0.1
1.9
0.9
4.3
1.0
34.6
1.6
37.7
1.1
16.5
1.9
0.8
0.7
0.7
0.1
1.9
0.9
4.3
1.0
34.6
1.6
37.7
1.1
16.5
0.1
57.0
91.6
-
56.9
91.5
Following their acquisition, the businesses asterisked above were fully integrated into the core Staffing Services division. A4e along with Eos Works,
Avanta Enterprise 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.
50 Staffline Group plc • Annual Report 2016
Notes to the consolidated financial statements (continued)
11. Goodwill (continued)
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 10.7% (2015: 9.8%) based on weighted
average cost of capital. The organic Staffing Services annual profit growth rates for the three year forecasts are between 10% and 14% 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 from 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 2017-2019. Beyond the three
year forecast, no growth has been included in the calculation on the grounds of prudence. The PeoplePlus annual profit growth rate is assumed to be
nil due to the uncertainty around the constitution of the Work and Health Programme contracts, which begin in late 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.
Margins for both divisions have been forecast to follow current trends.
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.
The review also indicates that no provision is required to write down the carrying value of other intangible assets and tangible fixed assets (2015: £nil).
12. Other intangible assets
The Group’s other intangible assets include the customer contracts and lists obtained through the acquisition of the companies in note 11 above plus the
acquisition of a software licence obtained in 2013 and acquired software. There are no intangible assets with restricted title.
As at 31 December 2016, there are five individually material other intangible assets:
i. Customer contracts in A4E Limited. The carrying value of the asset is £12.7m (2015: £18.4m) which is being amortised over the remaining life of the
main contract, 27 months.
ii. Customer contracts in Milestone Operations Limited. The carrying value of the asset is £3.6m (2015: £4.5m) which is being amortised over 5 years.
iii. Software developed for the Ministry of Justice contract. The carrying value of the asset is £2.9m (2015: £0.5m) which is being amortised over 5 years.
iv. Software developed for the Work Programme contract. The carrying value of the asset is £2.4m (2015: £4.0m) which is being amortised over 4 years.
v. Customer contracts in Diamond Recruitment Group. The carrying value of the asset is £2.2m (2015: £2.7m) which is being amortised over 5 years.
Gross carrying amount
At 1 January 2015
Additions
Additions through business combinations
Transfer from property, plant and equipment
At 31 December 2015
Additions
At 31 December 2016
Amortisation
At 1 January 2015
Charged in the year
Transfer from property, plant and equipment
At 31 December 2015
Charged in the year
At 31 December 2016
Net book amount at 31 December 2016
Net book amount at 31 December 2015
Software
£’m
Licenses
£’m
Customer
contracts
£’m
Customer
lists
£’m
-
0.5
-
5.1
5.6
3.3
8.9
-
-
0.9
0.9
1.8
2.7
6.2
4.7
2.0
-
-
-
2.0
-
2.0
0.8
0.7
-
1.5
0.5
2.0
-
0.5
15.6
-
29.8
-
45.4
-
45.4
4.8
9.1
-
13.9
11.9
25.8
19.6
31.5
5.5
-
-
-
5.5
-
5.5
5.5
-
-
5.5
-
5.5
-
-
Total
£’m
23.1
0.5
29.8
5.1
58.5
3.3
61.8
11.1
9.8
0.9
21.8
14.2
36.0
25.8
36.7
Staffline Group plc • Annual Report 2016
51
13. Property, plant and equipment
Land and
buildings
£’m
Computer
equipment
£’m
Assets in
course of
construction
£’m
Fixtures
and
fittings
£’m
Motor
vehicles
£’m
Gross carrying amount
At 1 January 2015
Additions
Additions - business combinations
Disposals
Reclassification – assets for resale*
Transfer to other intangible assets**
Currency translation differences
At 31 December 2015
Additions
Reclassification
Disposals
At 31 December 2016
Depreciation
At 1 January 2015
Charged in the year
Disposals
Transfer to other intangible assets**
Currency translation differences
At 31 December 2015
Charged in the year - operating
Charged in the year - impairment
Disposals
At 31 December 2016
Net book value
At 31 December 2016
At 31 December 2015
2.2
0.9
1.3
(0.2)
(0.6)
-
-
3.6
2.6
(0.8)
(0.2)
5.2
1.3
0.3
(0.3)
-
-
1.3
0.4
-
-
1.7
3.5
2.3
3.8
1.6
7.4
(0.6)
(0.1)
(5.1)
(0.1)
6.9
1.7
-
-
8.6
2.1
2.3
(0.5)
(0.9)
-
3.0
1.7
1.3
-
6.0
2.6
3.9
-
0.7
-
-
-
-
-
0.7
(0.7)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.7
3.4
0.7
0.3
(0.6)
-
-
-
3.8
-
0.8
-
4.6
1.0
1.0
(0.6)
-
-
1.4
1.0
0.3
-
2.7
1.9
2.4
-
-
0.1
-
-
-
-
0.1
-
-
-
0.1
0.1
-
-
-
-
0.1
-
-
-
0.1
-
-
Total
£m
9.4
3.9
9.1
(1.4)
(0.7)
(5.1)
(0.1)
15.1
3.6
-
(0.2)
18.5
4.5
3.6
(1.4)
(0.9)
-
5.8
3.1
1.6
-
10.5
8.0
9.3
* as described in note 9, the tangible fixed assets of A4e Australia were reclassified during 2015 as current assets held for sale in accordance with IFRS 5.
**Acquired Software assets previously disclosed as Computer Equipment were reclassified as Intangible Software assets during 2015.
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
52 Staffline Group plc • Annual Report 2016
Notes to the consolidated financial statements (continued)
14. Trade and other receivables
Trade and other receivables
Accrued income
2015
(restated
see note 3)
£’m
99.0
17.8
116.8
2016
£’m
91.2
11.9
103.1
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.
Included in the trade and other receivables balance above is a bad debt provision of £0.1m (2015: £nil). Some of the 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
More than six months
2016
£’m
12.1
1.0
0.2
13.3
2015
£’m
10.3
0.8
-
11.1
15. 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. Given that the fair value
of plan assets is only £9.0m (2015: £8.3m) only significant disclosures are reported below.
The amounts recognised in the balance sheet are determined as follows:
Present value of funded obligations
Fair value of plan assets
Net asset in the balance sheet at 31 December
2016
£’m
(7.8)
9.0
1.2
The movement in the defined benefit obligation over the year is as follows:
Balance at 1 January
Acquired obligation
Interest cost
Service cost – current accrual cost
Benefits paid
Actuarial loss/(gain) on change in assumptions
Liability in the balance sheet at 31 December
Membership numbers (active 2016: 26, 2015: 32)
2016
£’m
5.9
-
0.2
0.2
(0.2)
1.7
7.8
275
2015
£’m
(5.9)
8.3
2.4
2015
£’m
-
6.6
0.2
0.2
(0.2)
(0.9)
5.9
286
Staffline Group plc • Annual Report 2016
53
The liabilities have been calculated using the following principal actuarial assumptions:
Inflation rate (RPI)
Inflation rate (CPI)
Salary increase
Discount rate (derived from AA rated corporate bonds
yield curve) and expected rate of return
Future pension increases for leavers
2016
3.3%
2.5%
3.3%
2.9%
3.3%
2015
3.1%
2.3%
3.1%
4.0%
3.1%
Assumptions regarding future mortality experience are set based on actuarial advice in accordance with published statistics and experience.
Mortality assumptions are based on the following mortality tables (i) S2NMA (ii) S2NFA with medium cohort adjustments subject to a minimum annual
improvement rate of 1.0% (Dec 2015: 1.0%) for males and 0.75% (Dec 2015: 0.75%) for females. The mortality assumptions used were as follows:
2016
years
2015
years
Longevity at age 65 (2015: age 65) for current pensioners
- men
- women
Longevity at age 65 (2015: age 65) for future pensioners
- men
- women
22.5
24.2
23.8
25.3
The movement in the fair value of the plan assets over the year is as follows:
Balance at 1 January
Acquired assets
Expected return
Contributions
Benefits paid
Actuarial gain/(loss) on asset return
Asset in the balance sheet at 31 December
2016
£’m
8.3
-
0.3
0.3
(0.2)
0.3
9.0
At 31 December 2016, the Scheme’s assets, at market value, were distributed as follows:
Bonds (59% of assets as at 31 December 2016)
Equities (36% of assets as at 31 December 2016)
Cash (5% of assets as at 31 December 2016)
Asset in the balance sheet at 31 December
5.3
3.2
0.5
9.0
There are £nil (2015: £nil) contributions unpaid at the year-end.
22.3
24.4
23.6
25.5
2015
£’m
-
8.5
0.2
0.1
(0.2)
(0.3)
8.3
4.9
2.5
0.9
8.3
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
54 Staffline Group plc • Annual Report 2016
Notes to the consolidated financial statements (continued)
15. Retirement benefit asset (continued)
All investments are managed by the investment advisers and Standard Life within the Standard Life ‘wrap investment’ portfolio where the investments
are held within Dimensional Funds at the year end. All funds are passively managed. The funds held by the Scheme are all pooled investment vehicles
and therefore the investment manager is responsible for appointing an independent custodian. The objective of each of these funds is to match the
investment return in a particular investment market subject to an acceptable degree of tracking-error that is monitored by the Trustees.
A charge of £0.2m (2015: £0.2m) is included within the income statement within administrative expenses being employers contributions to the scheme;
a net actuarial loss, after deferred taxation, of £1.1m (2015: gain of £0.5m) is included within other comprehensive income.
16. Cash and cash equivalents
Cash and cash equivalents
Bank overdraft
Cash and cash equivalents per cash flow statement
2016
£’m
19.7
-
19.7
2015
£’m
5.0
-
5.0
Cash and cash equivalents consist of cash on hand and balances with banks only. At the year-end £19.7m (2015: £5.0m) of cash on hand and
balances with banks were held by subsidiary undertakings, however this balance is available for use by the Company. £0.9m (2015: £1.3m) of the year-
end cash balance was held at the Bank of Ireland, outside of the group overdraft facility with Lloyds Banking Group and HSBC Bank. Long term credit
ratings for the three banks are currently as follows:
HSBC
Lloyds Banking Group
Bank of Ireland
Fitch
AA-
A+
BBB-
Standard
& Poors
AA-
BBB+
BBB
The group’s banking facility headroom versus available bank facilities is as follows:
Cash at bank
Overdraft facility
Additional Revolving Credit Facility
Bank guarantee
Banking Facility Headroom
17. Trade and other payables
Trade and other payables
Accruals
Other taxation and social security
2016
£’m
19.7
15.0
7.5
(0.4)
41.8
2016
£’m
13.1
37.6
46.8
97.5
2015
£’m
5.0
15.0
-
-
20.0
2015
(restated see
notes 3 & 11)
£’m
17.7
44.1
39.5
101.3
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 statement of financial position to be a reasonable approximation of their fair value.
Staffline Group plc • Annual Report 2016
55
18. 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
Total borrowings
Split:
Current liabilities:
Term loan
Discounted loan notes (repaid during 2016)
Unamortised transaction costs
Bank overdraft
Non-current liabilities:
Revolving credit facility
Term loan
Unamortised transaction costs
Total borrowings
Total borrowings excluding unamortised transaction costs
Less: Cash (note 16)
Net debt as disclosed in consolidated statement of cash flows
2016
£’m
8.8
8.8
39.3
(0.5)
56.4
2016
£’m
8.8
-
(0.2)
-
8.6
35.0
13.1
(0.3)
47.8
56.4
56.9
19.7
37.2
2015
£’m
20.9
8.7
39.1
(0.6)
68.1
2015
£’m
11.9
9.0
(0.2)
-
20.7
26.0
21.8
(0.4)
47.4
68.1
68.7
5.0
63.7
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 2015 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 was paid in 2015 and £9m paid in
2016. The deferred consideration was in the form of bank guaranteed, coupon-bearing loan notes. The two loan notes were discounted back to the
book values disclosed above. Interest on the bank guarantees was charged at 1.4%.
The RCF of £35.0m is repayable in 2019 and interest accrues at the same rate as the term loan. In 2016 the group secured a further £7.5m of
working capital facility, available to be drawn down with two days’ notice (not included in the borrowings above as not drawn down as at 31
December 2016).
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 2016
Notes to the consolidated financial statements (continued)
19. Other liabilities
Due within one year (Current)
Deferred income
Deferred consideration
Cash settled JSOP liability
Due after more than one year (Non-current)
Deferred income
Dilapidation provision (note 20)
Cash settled JSOP liability
2015
(restated
see note 3)
£’m
-
3.0
-
3.0
-
3.5
6.2
9.7
2016
£’m
-
0.5
-
0.5
-
3.0
3.2
6.2
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 23 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.
20. Provisions for liabilities
At 1 January 2016 (restated – see note 3)
Additions to the income statement
Additions to the statement of changes in equity
Amount utilised
Unused amounts reversed to the income statement
At 31 December 2016
Dilapidation provision
Dilapidation provision
£’m
Deferred taxation
£’m
3.5
-
-
(0.4)
(0.1)
3.0
5.2
(2.4)
(0.2)
-
-
2.6
Total
£’m
8.7
(2.4)
(0.2)
(0.4)
(0.1)
5.6
The dilapidations provision covers all of the Group’s leased property estate. The provision is determined based on an independent valuation of the estimated
total cost payable on expiry of the respective lease. The timing and value of the costs are uncertain due to exit date and the final liability will be subject to
negotiation.
Staffline Group plc • Annual Report 2016
57
Deferred taxation
Deferred tax assets/(liabilities)
Property, plant and equipment
temporary timing differences
Acquired intangible assets
Retirement benefit asset
Share based payment liability
Recognised as:
Deferred tax asset
Deferred tax liability
Recognised in
Comprehensive
Income
- current
£’m
Recognised in
Comprehensive
Income
- prior year
£’m
1 January
2016
£’m
Pensions –
statement of
changes in equity
£’m
31
December
2016
£’m
0.7
(5.7)
(0.4)
0.2
(5.2)
0.9
(6.1)
(5.2)
0.4
2.4
-
(0.1)
2.7
0.3
2.4
2.7
(0.3)
-
-
-
(0.3)
(0.3)
-
(0.3)
-
-
0.2
-
0.2
-
0.2
0.2
0.8
(3.3)
(0.2)
0.1
(2.6)
0.9
(3.5)
(2.6)
There are no material deferred tax assets that have not been recognised (2015: nil).
21. Share capital
Authorised
30,000,000 (2015: 30,000,000) ordinary 10pence shares
Allotted and issued
27,749,389 (2015: 27,749,389) ordinary 10pence shares
2016
£’m
3.0
2.8
2015
£’m
3.0
2.8
2016
Number
2015
Number
Shares issued and fully paid at the beginning of the year
27,749,389
27,747,551
Shares issued during the year
-
1,838
Shares issued and fully paid at the end of the year
27,749,389
27,749,389
Shares authorised but unissued
2,250,611
2,250,611
Total equity shares authorised at end of the year
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 2,220,400 shares (31 December 2015: 2,390,400 shares) held at 31 December 2016 by the Employee Benefit Trust where the right to dividends
has been waived.
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
58 Staffline Group plc • Annual Report 2016
Notes to the consolidated financial statements (continued)
22. Related party transactions
The only related parties are the Group’s Directors, key management personnel 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 (credit)/charge
2016
£’000
787
135
4
91
51
(832)
236
2015
£’000
724
115
4
99
56
4,598
5,596
Transactions with Key Management Personnel
The Group Key Management Personnel’s personal remuneration, which includes the Group Directors’ remuneration disclosed above, includes the
following expenses:
Short-term employee benefits:
Salaries and fees
Bonus – unpaid at year-end
Benefits in kind
Social security costs
Pension contributions
Compensation payments on resignation
Share based employee remuneration (credit)/charge
2016
£’000
2015
£’000
1,854
1,727
411
13
262
121
300
(2,982)
(21)
199
13
250
127
-
8,948
11,264
In addition to the above, the Group spent £25,600 (2015: £28,000) in accommodation expenses at Hogarths Hotel, which is owned by a person
connected to the Group Chief Executive. £200 remains outstanding at the year-end (2015: £3,000). During the prior year, a director loaned £2.0m to
the company. This attracted no interest charges and was repaid in full prior to 31 December 2015.
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 2016
59
23. 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
2016
Land and buildings
£’m
2015
Land and buildings
£’m
3.5
5.7
1.9
11.1
6.0
7.2
2.7
15.9
Lease payments recognised as an expense during the year ended 31 December 2016 amounted to £7.6m (2015: £6.2m). 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.
24. Contingencies
A cross guarantee exists between all companies in the Group for all amounts payable to Lloyds Banking Group and HSBC Bank. The Group
amounts owing to Lloyds Banking Group and HSBC Bank at the 2016 year-end are £38.1m (2015: £65.0m).
The Group has no other material contingent assets or liabilities at either 31 December 2016 or 31 December 2015.
25. Capital commitments
The Group had no material capital commitments at either 31 December 2016 or 31 December 2015.
26. 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 14)
Cash and cash equivalents (note 16)
Accrued income (note 14)
2016
Loans and receivables
and balance sheet totals
£’m
2015
Loans and receivables
and balance sheet totals
(restated see note 11)
£’m
91.2
19.7
11.9
122.8
99.0
5.0
17.8
121.8
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 2016 are provided in note 14. Substantially all of the trade within the PeoplePlus division is with local government,
therefore the credit risk with these customers is considered low.
The Group has adopted a policy of carefully monitoring all customers, especially those who lack an appropriate credit history.
60 Staffline Group plc • Annual Report 2016
Notes to the consolidated financial statements (continued)
26. Risk management objectives and policies (continued)
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 of up to £15.0m (31 December 2015: £15.0m) and the use of a
working capital facility of £7.5m (31 December 2015: £nil) that was secured during the year.
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 Revolving Credit Facility (“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 £’m
Foreign currency sensitivity
2016
+1%
(0.6)
2016
-1%
0.6
2015
+1%
(0.9)
2015
-1%
0.9
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:
2016
Financial liabilities
at fair value
through profit or loss
£’m
2016
Other financial
liabilities at
amortised cost
£’m
2016
Liabilities not
within the scope
of IAS 39
£’m
2016
Balance sheet
total
£’m
Term loan and loan notes
Revolving Credit Facility
Trade and other payables
Taxation and social security
Accruals
Deferred consideration
Dilapidation provision
Deferred income
Other liabilities - JSOP
Corporation tax
Total
-
-
-
-
-
-
-
-
-
-
-
21.9
35.0
13.1
46.8
37.6
-
-
-
-
-
154.4
-
-
-
-
-
0.5
3.0
-
3.2
2.5
9.2
21.9
35.0
13.1
46.8
37.6
0.5
3.0
-
3.2
2.5
163.6
It is considered that the fair value of the Group’s financial assets and liabilities equal the book value.
Staffline Group plc • Annual Report 2016
61
Term loan and loan notes
Revolving Credit Facility
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
£’m
2015
Other financial
liabilities at
amortised cost
£’m
2015
Liabilities not
within the scope
of IAS 39
£’m
2015
Balance sheet
total
£’m
-
-
-
-
-
-
-
-
-
-
-
42.7
26.0
17.7
39.5
44.1
-
-
-
-
-
170.0
-
-
-
-
-
3.0
3.5
-
6.2
0.4
13.1
42.7
26.0
17.7
39.5
44.1
3.0
3.5
-
6.2
0.4
183.1
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 of the above classifications.
Maturity of financial liabilities
The analysis of the maturity of financial liabilities within the scope of IAS 39 at 31 December 2016 is as follows:
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
2016
Less than
one year
£’m
2016
Two to
five years
£’m
2016
More than
five years
£’m
Term loan
Revolving Credit Facility
Loan notes
Trade and other payables
Taxation and social security
Accruals
Total
8.8
-
-
13.1
46.8
37.6
13.1
35.0
-
-
-
-
106.3
48.1
-
-
-
-
-
-
-
2016
Total
£’m
21.9
35.0
-
13.1
46.8
37.6
2015
Less than
one year
£’m
11.9
-
9.0
17.7
39.5
44.1
21.8
26.0
-
-
-
-
154.4
122.2
47.8
2015
2015
Two to More than
five years
£’m
five years
£’m
2015
(restated
see note 11)
Total
£’m
33.7
26.0
9.0
17.7
39.5
44.1
170.0
-
-
-
-
-
-
-
62 Staffline Group plc • Annual Report 2016
Notes to the consolidated financial statements (continued)
26. Risk management objectives and policies (continued)
The analysis of the maturity of contractual undiscounted financial liabilities at 31 December 2016 is as follows:
2016
Less than
one year
£’m
2016
Two to
five years
£’m
2016
More than
five years
£’m
Term loan
Revolving Credit Facility
Loan notes
Trade and other payables
Taxation and social security
Accruals
Total
9.1
0.7
-
13.1
46.8
37.6
13.3
35.5
-
-
-
-
107.3
48.8
-
-
-
-
-
-
-
2016
Total
£’m
22.4
36.2
-
13.1
46.8
37.6
2015
Less than
one year
£’m
2015
Two to
five years
£’m
2015
2015
(restated
More than see note 11)
five years
Total
£’m
£’m
12.4
0.5
9.0
17.7
39.5
44.1
22.4
27.2
-
-
-
-
-
-
-
-
-
-
-
34.8
27.7
9.0
17.7
39.5
44.1
172.8
156.1
123.2
49.6
27. Cash flows from operating activities
Profit before taxation
Adjustments for:
Operating loss on discontinued operations
Finance costs
Depreciation, loss on disposal and amortisation - underlying
Depreciation, loss on disposal and amortisation – non underlying
Operating profit before changes in working capital and share options
Change in trade and other receivables
Change in trade, other payables and provisions
Cash generated from operations
Additional pension contributions
Employee cash settled share options (non-cash (credit)/charge)
Employee equity settled share options
Net cash inflow from operating activities
2016
£’m
18.9
(0.2)
3.3
5.1
14.0
41.1
13.2
(4.5)
49.8
-
(2.9)
-
46.9
2015
£’m
5.5
(0.7)
2.0
3.6
9.8
20.2
(7.1)
(6.9)
6.2
(0.7)
8.9
-
14.4
Staffline Group plc • Annual Report 2016
63
Movement in net debt
Net debt at 1 January 2016 (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 2016 (excluding transaction fees)
Represented by:
Cash and cash equivalents (note 16)
Current borrowings (note 18)
Non-current borrowings (note 18)
Net debt including transaction fees
Transaction fees
Net debt at 31 December 2016 (excluding transaction fees)
2016
£’m
(63.7)
-
-
(0.1)
11.9
14.7
(37.2)
£’m
19.7
(8.6)
(47.8)
(36.7)
(0.5)
(37.2)
2015
£’m
(17.8)
(25.3)
(53.5)
(0.1)
46.3
(13.3)
(63.7)
£’m
5.0
(20.7)
(47.4)
(63.1)
(0.6)
(63.7)
Non-cash items included above represent employees cash settled share options, the unwinding of the discount on loan notes and the movement
of transaction costs in relation to debt issue fees.
28. 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 statement of financial
position 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 16), bank loans, overdrafts and
revolving credit facilities (note 18) 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.
During the year, there was headroom against each of the four banking covenants below at each of the four quarter ends when covenants are
formally assessed:
1. Cash flow cover – being the ratio of cash generated to debt servicing costs
2. Interest cover – being the ratio of EBITDA, excluding share based payment charges, to interest costs
3. Adjusted leverage – being the ratio of net debt to EBITDA excluding share based payment charges (as adjusted for acquisitions)
4. Asset cover – being the ratio of trade debtors to net debt
The directors have reviewed reasonable possible outcomes within the next financial year, in accordance with IAS 1 paragraph 129, and have concluded
that the outcomes which were reasonably possible would not involve either a covenant or banking facility breach during 2017. Cash flows are monitored
on a daily basis against forecasts that are updated each month, to ensure that the Group continues to operate within its banking facilities.
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
64 Staffline Group plc • Annual Report 2016
Staffline Group plc
Company statutory financial statements
for the year ended 31 December 2016
Company number 05268636
Staffline Group plc • Annual Report 2016
65
Independent auditors’ report
to the members of Staffline Group plc
for the year ended 31 December 2016
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 2016;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
What we have audited
The financial statements, included within the Annual Report, comprise:
• the company statement of financial position as at 31 December 2016;
• 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.
i
F
n
a
n
c
a
i
l
The financial reporting framework that has been applied in the preparation of the financial statements is United Kingdom Accounting Standards,
comprising FRS 101 “Reduced Disclosure Framework”, and applicable law (United Kingdom Generally Accepted Accounting Practice).
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.
S
t
a
t
e
m
e
n
t
s
Opinion on other matter prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• 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; and
• the Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements.
In addition, in light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we are required
to report if we have identified any material misstatements in the Strategic Report and the Report of the Directors. We have nothing to report in this
respect.
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.
C
o
m
p
a
n
y
66 Staffline Group plc • Annual Report 2016
Independent auditors’ report
to the members of Staffline Group plc (continued)
Responsibilities for the financial statements and the audit
Our responsibilities and those of the directors
As explained more fully in the Directors’ Responsibilities Statement, 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. With respect to the Strategic Report and Report of the Directors, we consider whether those reports include the disclosures required by
applicable legal requirements.
Other matter
We have reported separately on the group financial statements of Staffline Group plc for the year ended 31 December 2016.
Steven Kentish (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham
Date: 24 January 2017
Staffline Group plc • Annual Report 2016
67
Company statement of changes in equity
for the year ended 31 December 2016
At 1 January 2016
Dividends (see note 10)
Disposal of Joint Share Ownership Plan (“JSOP”) shares
Transactions with owners
Profit for the year
Total comprehensive income for the year, net of tax
Share
capital
£’m
2.8
-
-
-
-
-
Own shares
JSOP
£’m
(9.0)
-
0.1
0.1
-
-
Share
premium
£’m
39.9
-
-
-
-
-
At 31 December 2016
2.8
(8.9)
39.9
At 1 January 2015
Dividends (see note 10)
Vesting of Joint Share Ownership Plan (“JSOP”) shares
Issue of new shares
Transactions with owners
Profit for the year
Total comprehensive income for the year, net of tax
Share
capital
£’m
2.8
-
-
-
-
-
-
Own shares
JSOP
£’m
(9.8)
-
0.8
-
0.8
-
-
Share
premium
£’m
39.9
-
-
-
-
-
-
Profit and
loss account
£’m
17.7
(5.8)
1.4
(4.4)
5.4
5.4
18.7
Profit and
loss account
£’m
8.2
(4.0)
9.1
-
5.1
4.4
4.4
Total
equity
£’m
51.4
(5.8)
1.5
(4.3)
5.4
5.4
52.5
Total
equity
£’m
41.1
(4.0)
9.9
-
5.9
4.4
4.4
Balance at 31 December 2015
2.8
(9.0)
39.9
17.7
51.4
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
m
p
a
n
y
68 Staffline Group plc • Annual Report 2016
Company statement of financial position
as at 31 December 2016
Note
2016
£’m
Assets
Non-current assets
Other intangible assets
Investments
Current
Trade and 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 and loss account
Total equity
Total equity & liabilities
31
32
33
34
35
36
35
36
37
-
55.0
55.0
30.0
-
30.0
85.0
7.9
8.6
-
16.5
12.8
3.2
16.0
32.5
2.8
(8.9)
39.9
18.7
52.5
85.0
2015
£’m
0.5
58.0
58.5
41.3
-
41.3
99.8
0.1
20.7
-
20.8
21.4
6.2
27.6
48.4
2.8
(9.0)
39.9
17.7
51.4
99.8
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 £5.4m (2015: £4.4m).
The financial statements were approved by the Board of Directors on 24 January 2017.
A Hogarth
Director
C Pullen
Director
Staffline Group plc • Annual Report 2016
69
Notes to the company financial statements
For the year ended 31 December 2016
Accounting Policies
Basis of preparation
The financial statements have been prepared in accordance with Financial Reporting Standard 101, ‘Reduced Disclosure Framework’ (‘FRS 101’).
The financial statements have been prepared under the historical cost convention and in accordance with the Companies Act 2006.
The preparation of financial statements in conformity with FRS 101 requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the company’s accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed elsewhere in this note.
The transition to Financial Reporting Standard 101 has been made in accordance with International Financial Reporting Standard 1 “First-time
adoption of International Financial Reporting Standards”.
The company previously reported under IFRS. Accordingly, the transition has not resulted in any amendments to the profit for the financial year
ended 31 December 2015 or the statement of financial position as at 31 December 2015 or 31 December 2014, as previously reported.
The following exemptions from the requirements of IFRS have been applied in the preparation of these financial statements, in accordance with FRS 101:
• Paragraphs 45(b) and 46 to 52 of IFRS 2, ‘Share-based payment’ (details of the number and weighted-average exercise prices of share options,
and how the fair value of goods or services received was determined);
• IFRS 7, ‘Financial Instruments: Disclosures’;
• Paragraphs 91 to 99 of IFRS 13, ‘Fair value measurement’ (disclosure of valuation techniques and inputs used for fair value measurement of
assets and liabilities);
• Paragraph 38 of IAS 1, ‘Presentation of financial statements’ comparative information requirements in respect of:
– paragraph 79(a)(iv) of IAS 1;
– paragraph 73(e) of IAS 16;
– paragraph 118(e) of IAS 38;
– requirements of paragraphs 62 and B64 of IFRS3 Business Combinations;
– paragraph 33(c) of IFRS5
• The following paragraphs of IAS 1, ‘Presentation of financial statements’:
– 10(d), (statement of cash flows)
– 10(f) (a statement of financial position as at the beginning of the preceding period when an entity applies an accounting policy retrospectively
or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements),
– 16 (statement of compliance with all IFRS),
– 38A (requirement for minimum of two primary statements, including cash flow statements),
– 38B-D (additional comparative information),
– 40A-D (requirements for a third statement of financial position
– 111 (cash flow statement information), and
– 134-136 (capital management disclosures)
• IAS 7, ‘Statement of cash flows’;
• Paragraph 30 and 31 of IAS 8 ‘Accounting policies, changes in accounting estimates and errors’ (requirement for the disclosure of information
when an entity has not applied a new IFRS that has been issued but is not yet effective);
• Paragraph 17 of IAS 24, ‘Related party disclosures’ (key management compensation); and
• The requirements in IAS 24, ‘Related party disclosures’ to disclose related party transactions entered into between two or more members of a
group.
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.
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.
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
70 Staffline Group plc • Annual Report 2016
Notes to the company financial statements (continued)
Deferred taxation (continued)
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.
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.
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 but remain unpaid at the financial year end.
Staffline Group plc • Annual Report 2016
71
29. 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 £5.4m (2015: £4.4m). Auditors remuneration incurred by the Company during
the year for audit services totalled £13,750 (2015: £13,750).
30. Directors and employees remuneration
As in previous years all Group Directors are remunerated by Staffline Recruitment Limited, a 100% owned subsidiary company. Details of directors’
remuneration is disclosed within note 7 and within the Report on Remuneration on page 25.
The average number of persons (including Directors) employed by the Company during the year was 6 (2015: 6). Employee costs were £nil (2015: £nil).
31. Intangible assets
The Intangible asset relates to a software license.
Net book value at 31 December 2015
Amortisation charged in the year
Net book value at 31 December 2016
32. Fixed asset investments
Total
£’m
0.5
(0.5)
-
Cost and net book amount at 31 December 2015
Movement in JSOP investment
Cost and net book amount at 31 December 2016
Investment in group undertakings
£’m
58.0
(3.0)
55.0
The net credit to the investments relates to the movement in relation to the Joint Share Ownership Plan. As the liability has decreased, part of the initial
capital contribution made by the Company to its subsidiaries has now been returned.
The Company holds interests in the following companies:
Subsidiaries
Staffline Recruitment Limited (1)
Elpis Limited* (1)
A La Carte Recruitment Limited* (1)
Staffline Polska Sp. Zoo* (2)
Staffline Gliwice Sp. Zoo* (2)
Go New Sp. Zoo* (2)
JFDI Group Limited (1)
Staffline Recruitment Limited (3)
Eos Works Group Limited (1)
Eos Works Limited* (1)
Ethos Recruitment Limited* (1)
Taskforce Recruitment Limited* (1)
Go New Recruitment Holdings Limited* (1)
Go New Recruitment Limited* (1)
Go New Recruitment (Gloucester) Limited* (1)
Select Appointments Limited* (1)
Learning Plus System Limited (1)
Staffline Holdings Limited (1)
Proportion of ordinary
share capital held
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Country of incorporation
Nature of business
England and Wales
Recruitment
England and Wales
England and Wales
Poland
Poland
Poland
England and Wales
Dormant
Dormant
Recruitment
Recruitment
Recruitment
Dormant
Republic of Ireland
Recruitment
England and Wales
Dormant
England and Wales
Welfare to work
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Dormant
Dormant
Dormant
Dormant
Dormant
England and Wales
Recruitment
England and Wales
Training
England and Wales
Intermediary holding
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
72 Staffline Group plc • Annual Report 2016
Notes to the company financial statements (continued)
32. Fixed asset Investments (continued)
Subsidiaries
PeoplePlus Group Limited* (1)
Softmist Limited* (1)
PeoplePlus (Works) NI Limited* (4)
Paragon Training (NI) Limited* (4)
A4e Limited (1)
Milestone Operations Limited* (1)
Milestone Logistics Limited (1)
Staffline Limited (1)
Driving Plus Limited* (1)
Onsite Partnership Limited (1)
Broomco (4198) Limited* (1)
Proportion of ordinary
share capital held
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Country of incorporation
Nature of business
England and Wales
Welfare to Work
England and Wales
Northern Ireland
Northern Ireland
Training
Training
Training
England and Wales
Welfare to Work
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Dormant
Dormant
Dormant
Dormant
Dormant
England and Wales
Intermediary holding
Warwickshire and West Mercia Community Rehabilitation Company Limited* (5)
100%
England and Wales
Welfare to Work
Mercia Community Action CIC* (5)
Network Projects Limited* (1)
TNG Limited* (1)
A4e Management Limited* (1)
A4e Enterprise Limited* (1)
A4e Wales Limited* (1)
PeoplePlus Scotland Limited* (6)
A4e Ireland Limited* (7)
A4e Europe Limited* (1)
A4e Worldwide Limited* (1)
A4e Employee Trustee Limited* (1)
A4e Insight Limited* (1)
Action For Employment Trustees Limited* (1)
Qubic Recruitment Solutions Limited* (1)
Agency Plus Limited* (1)
Techsearch Technology Limited* (1)
Skillspoint Limited* (1)
Staffline Trustees Limited* (1)
England and Wales
Welfare to Work
England and Wales
England and Wales
Dormant
Dormant
England and Wales
Welfare to Work
England and Wales
Welfare to Work
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
England and Wales
Scotland
Northern Ireland
England and Wales
England and Wales
100%
England and Wales
100%
100%
100%
100%
100%
100%
100%
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
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
* These companies are owned indirectly through other group companies.
The registered office of the above subsidiaries are:
(1) 19-20 The Triangle, NG2 Business Park, Nottingham, NG2 1AE
(2) ul. Fryderyka Chopina 2, 44-100 Gliwice, Poland
(3) Fitzwilliam Hall, Ballsbridge, Dublin 2
(4) 38a Mallusk Road, Newtownabbey, Northern Ireland, BT36 4PP
(5) Elgar House, Shrub Hill Road, Worcester, England, WR4 9EE
(6) Southern Exchange House, 34 Earl Grey Street, Edinburgh, EH3 9BN
(7) 8 Meadowbank Road, Suite 6, 7 & 9, Carrickfergus Enterprise, Carrickfergus, County Antrim, BT38 8YF
Staffline Group plc • Annual Report 2016
73
33. Trade and other receivables
Other debtors
Amounts due from Group undertakings
2016
£’m
0.2
29.8
30.0
2015
£’m
1.5
39.8
41.3
Amounts due from Group undertakings are non-interest bearing, unsecured and repayable on demand.
34. Trade and other payables
Accruals
Amounts due to Group undertakings
2016
£’m
0.1
7.8
7.9
2015
£’m
0.1
-
0.1
Amounts due to Group undertakings are non-interest bearing, unsecured and repayable on demand.
35. 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
Unamortised transaction costs
Total borrowings
Total borrowings excluding unamortised transaction costs
Cash
Net debt excluding unamortised transaction costs
2016
£’m
8.8
8.8
4.4
(0.6)
21.4
8.8
-
(0.2)
8.6
13.2
(0.4)
12.8
21.4
22.0
-
22.0
2015
£’m
20.9
8.7
13.1
(0.6)
42.1
11.9
9.0
(0.2)
20.7
21.8
(0.4)
21.4
42.1
42.7
-
42.7
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 2015 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
was paid in 2016. The deferred consideration was in the form of bank guaranteed, coupon-bearing loan notes. The two loan notes were discounted
back to the book values disclosed above in the comparative year. Interest on the bank guarantees was 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
74 Staffline Group plc • Annual Report 2016
Notes to the company financial statements (continued)
36. Other liabilities
Due within one year
Cash settled JSOP liability
Due after more than one year
Cash settled JSOP liability
37. Share Capital
Authorised
30,000,000 (2015: 30,000,000) ordinary 10p shares
Allotted and issued
27,749,389 (2015: 27,749,389) ordinary 10p shares
2016
£’m
-
- -
3.2
3.2
2016
£’m
3.0
2016
£’m
2.8
2015
£’m
-
6.2
6.2
2015
£’m
3.0
2015
£’m
2.8
For full details of share options and the share based payment charge calculation see note 7.
Staffline Group plc • Annual Report 2016
75
38. 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
2016
Loans and
receivables
and balance
sheet totals
£’m
2015
Loans and
receivables
and balance
sheet totals
£’m
29.8
-
0.2
30.0
39.8
-
1.5
41.3
Credit risk is only disclosed in circumstances where the maximum potential loss differs significantly from the financial asset’s carrying amount.
i
F
n
a
n
c
a
i
l
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.
S
t
a
t
e
m
e
n
t
s
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.
(Decrease)/increase in net result and equity £’m
Foreign currency sensitivity
2016
+1%
(0.4)
2016
-1%
0.4
2015
+1%
(0.7)
2015
-1%
0.7
The Company’s transactions are mostly carried out in sterling. The company also operates a franchise in Saudi Arabia who pay the license and
franchise fees in United Arab Emirates Dirhams (“AED”). The Company has not entered into any foreign currency risk mitigation strategies to date.
The following table illustrates the sensitivity of the net result for the year and equity to a reasonably possible change in exchange rates of +/- one
percentage point with effect from the beginning of the year.
(Decrease)/increase in net result and equity £’m
2016
+1%
-
2016
-1%
-
2015
+1%
-
2015
-1%
-
C
o
m
p
a
n
y
76 Staffline Group plc • Annual Report 2016
Notes to the company financial statements (continued)
38. Risk management objectives and policies (continued)
Financial liabilities
The Company’s liabilities are classified as follows:
2016
Financial liabilities
at fair value through
profit or loss
£’m
2016
Other financial
liabilities at
amortised cost
£’m
2016
Liabilities not
within the scope
of IAS 39
£’m
2016
Balance sheet
total
£’m
Term loan and loan notes
(excluding unamortised transaction costs)
Accruals
Amounts due to Group undertakings
Other liabilities - JSOP
Total
-
-
-
-
-
22.0
0.1
7.8
-
29.9
-
-
-
3.2
3.2
The Company consider that the fair value of the Company’s financial assets and liabilities equal the book value.
Term loan and loan notes
(excluding unamortised transaction costs)
Accruals
Other liabilities - JSOP
Total
2015
Financial liabilities
at fair value through
profit or loss
£’m
2015
Other financial
liabilities at
amortised cost
£’m
2015
Liabilities not
within the scope
of IAS 39
£’m
-
-
-
-
42.7
0.1
-
42.8
-
-
6.2
6.2
22.0
0.1
7.8
3.2
33.1
2015
Balance sheet
total
£’m
42.7
0.1
6.2
49.0
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 Company has no financial assets or liabilities in any of the above classifications.
Staffline Group plc • Annual Report 2016
77
Maturity of financial liabilities
The analysis of the maturity of financial liabilities at 31 December 2016 is as follows:
2016
Less than
one year
£’m
8.8
-
7.8
0.1
2016
Two to
five years
£’m
13.2
-
-
-
16.7
13.2
2016
More than
five years
£’m
-
-
-
-
-
Term loan
Loan notes
Amounts due to
Group undertakings
Accruals
Total
2016
Total
£’m
22.0
-
7.8
0.1
29.9
2015
Less than
one year
£’m
11.9
9.0
-
0.1
2015
Two to
five years
£’m
21.9
-
-
-
21.0
21.9
2015
More than
five years
£’m
-
-
-
-
-
The analysis of the maturity of contractual undiscounted financial liabilities at 31 December 2016 is as follows:
2016
Less than
one year
£’m
9.1
-
7.8
0.1
2016
Two to
five years
£’m
13.3
-
-
-
17.0
13.3
2016
More than
five years
£’m
-
-
-
-
-
Term loan
Loan notes
Amounts due to
Group undertakings
Accruals
Total
2016
Total
£’m
22.4
-
7.8
0.1
30.3
2015
Less than
one year
£’m
12.4
9.0
-
0.1
21.6
2015
Two to
five years
£’m
22.4
-
-
-
22.4
2015
More than
five years
£’m
-
-
-
-
-
2015
Total
£’m
33.8
9.0
-
0.1
42.9
2015
Total
£’m
34.8
9.0
-
0.1
43.9
39. Contingent liabilities
A cross guarantee exists between all companies in the Group for all amounts payable to Lloyds Banking Group and HSBC. The Group amounts owing
to Lloyds Banking Group and HSBC Bank at the 2016 year-end are £38.1m (2015: £65.0m).
40. Capital commitments
There were no capital commitments at 31 December 2016 or at 31 December 2015.
41. Related parties
The company has taken advantage of the exemptions contained in FRS 101 Reduced Disclosure Framework and has therefore not disclosed
transactions or balances with wholly owned subsidiaries of Staffline Group plc. Details of related party transactions are given in note 22 to the
consolidated financial statements.
42. Transition to FRS 101
The transition to Financial Reporting Standard 101 has been made in accordance with International Financial Reporting Standard 1 “First-time
adoption of International Financial Reporting Standards”.
The company previously reported under IFRS. Accordingly, the transition has not resulted in any amendments to the profit for the financial year
ended 31 December 2015 or the statement of financial position as at 31 December 2015 or 31 December 2014, as previously reported.
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
78 Staffline Group plc • Annual Report 2016
Notes: