Staffline Group

In the face of ongoing recessionary pressures, human resources outsourcing specialist Staffline has remained robustly profitable and is poised for good growth when the economy improves.

In its latest market missive, the Nottingham-based concern confirmed that earnings for the 2009 calendar year will meet forecasts, upgraded in November, thanks to cost cutting and business wins in the second half of last year. Though market conditions have remained challenging, CEO Andy Hogarth says Staffline, a supplier of blue-collar temporary workers to the defensive food sector as well as to logistics, manufacturing and automotive companies, enjoyed a better 2009 than management had originally expected.

Benefiting from a branch number reduction and the culling of the headcount by 20%, Staffline sees scope for further efficiency gains following recent bolt-on acquisitions and, given its strong trading performance, continues to scout with a degree of confidence for further acquisitions.

Issued back in September, financials for the first half of 2009 showcased the group’s resilience, showing pre-tax profits maintained at £1.4m, on sales down 11% to £49m, in a declining market. When the annual numbers are formally announced in March, investors can expect pre-tax profits of £3.5m and 11.1p of earnings, with £4.2m and 13.3p forecast for 2010 – dividend payments of 2.9p and 3.1p are likely.

Based on those estimates, the shares, offering a near 4% yield, sell for only seven times 2009 earnings and less than six times forecast earnings for 2010. That rating is decidedly ungenerous for a cash-generative business with good long-term growth prospects. Buy.