Staffline Group

Highly resilient outsourced human resources specialist Staffline grew its profits in a grim 2009 for the recruitment industry.

Calendar year financials from the AIM-quoted blue collar temporary and contract staff supplier showed an impressive rise in pre-tax profits from £3.4m to £3.6m – ahead of expectations – despite lower sales of £115m (2008: £120.8m), as recession rumbled on in the industry. Net debt was reduced from £6m to £5m and in a confident signal, the total dividend was increased by 7% to 3.1p.

As well as cost cutting and a significantly reduced interest bill, Staffline’s profitability benefited from ongoing expansion in the number of OnSites – locations where the company manages temporary recruitment for clients on their own premises – by 7 to 119 during the period. The core OnSite division now accounts for 86% of sales, up from 79% a year ago, with most of the recent wins coming from the resilient food processing sector, though demand from the manufacturing and automotive sectors remains unsurprisingly subdued.

Three acquisitions, bringing a combined £10m of annual sales into the fold, were integrated last year, namely Peter Rowley, La Gente and The Workplace, and chairman and chief executive Andy Hogarth continues to scout for bolt-on deals.

According to the amiable Hogarth, trading in the early weeks of 2010 has met expectations and ‘we are continuing to see strong demand for new OnSites, particularly in the food processing sector’. Five new sites are set to open shortly and he assures investors will see the annualised financial benefits of last year’s latter half new openings in 2010.

Proven, profitable and with an improved balance sheet, analysts see Staffline delivering profits of £4.2m and earnings of 13.3p (2009: 11.5p) this year. On those estimates, the shares, originally backed by Growth Company Investor at 122p in 2005, represent great value, selling for a little over six times earnings and offering an attractive 3.7% yield. Buy.