12 March 2019 – update and restoration of trading

Shares in Staffline have been released from suspension following a statement clarifying issues which surfaced some weeks ago.  Staffline will release preliminary results for the year ended 31 December 2018 once the audit process is complete but it anticipates underlying trading performance in line with expectations and expectations for the current financial year remain unchanged. As previously announced, net debt as at the end of 2018 was around £63m.  There has since been an improvement of approximately £10m.  The only real outstanding concern is historical compliance with National Minimum Wage Regulations 2015.  Staffline has been in discussion with HMRC to quantify underpayments made in the years prior to 2018. Potential underpayments identified relate to a limited number of food production facilities and the payment for preparation time, which is generally the time spent donning workwear.  A provision of £4.4m had already been made for estimated additional costs in accounts for the year ended 31 December 2018 as part of the £20m of exceptional costs.  As a result of legal advice, the charge has been increased by £3.5m.  This appears to be a genuine exceptional cost and is the only change against market expectations identified.  On this basis, little has actually changed but it may take some time for the shares to recover fully.  We feel that the shares are now a LONG TERM BUY as they look cheap based on fundamentals but there could be volatility in the near term.