Free share tips posted weekly! This week’s free AIM share tip is Staffline (STAF).
Interim results from AIM-listed Staffline, covering the first half of 2021, have been released and in our opinion there were some very encouraging signs despite a modest loss being incurred. The company’s share price has surged higher in recent months, continuing its recovery having fallen into the teens at the bottom of the market slump in March 2020. However, circumstances have changed dramatically since then and we feel that there is plenty of potential for the rally to continue.
The Staffline Group was founded in 1986 and has developed into the market leading Recruitment and Training group in the UK. It now has three divisions. Flexible blue -collar workers are provided through Recruitment GB. Through this division an average of around 37,000 staff per day work at 450 client sites in industries such as agriculture, supermarkets, drinks, driving, food processing, logistics and manufacturing. The Recruitment Ireland business is a leading end to end solutions provider with an average of around 5,000 staff per day operating across 20 industries, 10 branch locations and 15 onsite customer locations. PeoplePlus is a leading skills and employability business which aims to help people transform their lives, maintain jobs and develop their careers. The division works with employers as well as central, local and devolved governments.
In the six months ended 30 June 2021 revenue was £451m versus £430m in the corresponding period a year earlier. Underlying operating profit was £4.6m (2020: £0.1m) and the reported loss after tax on continuing activities was £0.6m versus a restated loss of £45.9m in the first half of 2020. The balance sheet was significantly strengthened by net proceeds of £46.4m from an equity raise, which saw new shares issued at a price of 50p each in May. This led to net cash of £20.9m as at 30 June 2021 compared to net debt of £36.2m a year earlier. Further improvements in trading cash flow, cash collection and timing differences also helped in this regard.
There have been increased levels of client activity but the company has highlighted economic uncertainty and other risks due to the pandemic and sector-specific labour shortages so this is by no means a one-way bet. Trading is said to be in line with market expectations, which were increased following a trading update in July and although visibility of future earnings is limited, current forecasts are relatively undemanding. The shares stand at a steep discount to the levels at which they have traded in the not too distant past and the share price was in four figures as recently as 2019. There is a lot of work ahead but scope for significant capital gains for those buying in now. We rate the shares as a SPECULATIVE BUY.
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