Staffline Group (LSE:STAF) — Interim Results

0:02 Good afternoon, ladies and gentlemen, and welcome to the STAFFLINE GROUP PLC Interim Results Investor Presentation. Throughout this presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Please just simply type in your question and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted and publish responses where it's appropriate to do so. These will be available via your Investor Meet company dashboard, and we notify you by email when they're

0:33 ready for your review. I'd also like to remind you that this presentation is being recorded. Before we begin, we would like to submit to the following poll. And if you'd be so kind as to give that your attention, we would be most grateful. And I'd now like to hand over to Daniel Quint, CFO, and Albert Ellis, CEO from STAFFLINE. Good afternoon. Good afternoon, everybody. And my name is Albert Ellis. I'm the CEO of STAFFLINE GROUP. And I have as as the as the presenters just said, Daniel Quint with me. We've both been in the recruitment industry for many years. I think it's over thirty years between us. We have lots of experience. But we've been with STAFFLINE now just under a year in terms of our experience here. And these are our maiden results after the equity raise that we that we that we did in the last couple of months.

1:21 The next slide is just really giving you a heads up in terms of the topics that we want to cover. You know, strategy. We we with this this presentation is not going to do a deep dive. It's an interim. It's an update, but it's gonna focus on the financials. This is the detail that Daniel's gonna be presenting as CFO. And as you can see, it will have also some some some discussion around the operational review, what happened in the business in the last six months. And I will refresh, if if if you need it, your memories around our brands and our services. But before we do that, you know, if we got four key elements to our strategy. The first one is capitalizing on our market leadership. And for many of you that know STAFFLINE, you'll know that we have a very, very dominant market leadership in the blue collar recruitment industry in both The UK and also the island of Ireland.

2:17 And we have a position of scale that whilst I was optimistic during the pandemic, I've really seen the evidence of the edge that we have as we've been going through this period in terms of how our clients have seen our brand and our market leadership as a huge plus to helping them deliver recruit recruitment and labor. So I'm gonna talk a little bit more about that later on in the slides, but the first point is almost our most important point, which is capitalizing on this dominant position. As we're in a very tight labor market, it's the it's it's it's companies with dominant positions that are going to benefit in the longer term. We also have a strategy is to to broaden our portfolio, and I will talk about that very briefly. But we this is more to do on this. You know, we have a white collar recruitment business. Permanent recruitment has not been a feature of the group historically, but, actually, it's cash generative. It's higher margin.

3:13 If you know Robert Walters and Michael Page, you'll know that permanent recruitment is a great driver of cash and a great driver of value, and that's an opportunity for the STAFFLINE GROUP. People Plus is our third strategic initiative. This business has had its ups and downs in the past. You know, it most recently made a loss in in the early part of the pandemic. We've turned that loss from into a profit for the six months, and I think that's one of our most outstanding as a team, would I would add, actions that we can report today is turning this business into a profitable business. And finally, last but not least, The Republic Of Ireland is an area where, you know, from our base in the North, where in Belfast, our head office, you know, commands 20% of the market leadership in that geography, we can quite easily expand in the South, in The Republic where we have a good brand, we have track record. And actually, The Republic Of Ireland and the North Of Ireland, there's been a sort of an economic resurgence between the two geographies as the pandemic has hit and as we've had the Brexit.

4:22 There's been there's been a sort of an a a a resurgence in trade between the two areas, and it's just a great platform for us to grow our market share. Of course, it's a highly attractive market. It's smaller, but it's less competitive, and actually, it has better pricing. Onto the highlights, which I'm sure that you might have read. I want to just pick out three important bullets. The first one is the refinancing. The transformation of the group's balance sheet has been absolutely key to us being confident in the group's prospects. Really, STAFFLINE came with a little bit of a health warning twelve months ago in terms of its financial condition, as you well know. This was reflected actually in conversations with customers, in conversations with our stakeholders in the government, and actually was always a challenge which which just created background noise and unnecessary friction in all of our interactions and not only with our customers, but also with staff and talent. And you know that people will work for businesses that are well capitalized with good prospects. So the transformation of the group's balance sheet has in essence also transformed our our our prospects as our customers have reflected back to us how delighted and how pleased they are and how reassured they are that our position is now in an attractive one. We have work new working capital facilities,

5:43 and we've had some equity, which Daniel will talk about. The other two points is one is we've actually exceeded expectations for the first half of the year. It it maybe the messaging gets a little bit muddied sometimes and people don't quite know the detail. But first of all, I think in April, but then also on the July 28, we upgraded our expectations twice in terms of our trading and the market actually revised upwards those those estimates. So, you know, we've had a very strong six months and it's only been six weeks since the last upgrade. And the final point I want to make is that the businesses turnaround has been achieved, and there's no doubt about it. And what we want to do is take you through some of the details, some of the the financials that will actually reveal the levers and the and of power and the and the sort of metrics that we can that we can use to drive more efficiencies and a better performance in the future.

6:41 So with that, over to Daniel. Good afternoon, everyone. I'm now gonna take you through the key financials of the first half of the year. You may have seen some of them in the r and s, I'll take you through the the the key items from our perspective. And, firstly, we we focus very much so on gross profit, but it all it's obviously the case that revenue has increased 430,000,000 to 451,000,000 from half one last year to this year. So a healthy increase. But very importantly, the fees that we earn as represented through gross profit has increased to £39,000,000 and that's an increase of 14% compared to last year. Very healthily, the margin gross profit margin has increased naught point 8% to 8.7% from 7.9% last year. A really, really good performance across the divisions on our ComeOnTra app in a subsequent slide.

7:36 And additionally, conversion to underlying operating profit significantly improved to 11.8% compared to just naught point 3% last year, showing and illustrating the actions that we took on the overhead cost base really coming to fruition. And then all that combined to be able to deliver an underlying operating profit increased to 4,600,000 from just naught 100,000 the year before. And further to that, we also, therefore, as part of our balance sheet activities, were able to reduce finance cost by a third to 1,400,000. And on the balance sheet, we have for the first time in two or three years net cash of 20,900,000, which is up 57,100,000 to to really delivering a successful position at half year.

8:24 That's majoratively driven by the £46,400,000 equity raise, but I'll come on to further reasons for that in in a couple of slides time. But when you stand back and look at those numbers for h one two thousand and twenty one and consider the journey that the group has been on over the last twenty four, thirty six months, I think that's a really good position and a good platform for the remainder of the year. Now a bit more about those gross margins. So gross profit margins, I've I've divided this over the three divisions on the first three sets of columns on on the table on the left, and I've just given you an indication on the right hand side of the proportion of group revenue and group gross profit that each of the division represents. So with Recruitment GB, they've increased their gross margins for by naught point three percentage points.

9:13 That's coming as a result of a a slight rebalancing remix of between the food supply chain customers, which, of course, did very well in the pandemic, and non food supply chain customers, which are slightly higher margins. And as we came out of COVID in h one, especially in q two, we saw those margins improve. You can also see in Ireland next next division along 99% to 10.1%, a 1.1% improvement. Very, very tight margin control during COVID, ensuring that the customers we were delivering for were good work customers, delivering good margin for the group. And finally, people plus improved from nineteen point seven to twenty three point two percent gross profit margin driven by last year being at the beginning of COVID when we received government support, but only on cost basis. And as we've returned to our cost plus margin commercials, as we exit from COVID, we've seen the improvement over last year towards this year. That, of course, totals to given the improvement 7.9 to 8.7%.

10:21 So all in all, in total, a really healthy platform of margin growth year over year, which bodes well for the second half of the year. In terms of underlying operating profit, where did that growth from naught point one to 4.6 come from? So I've illustrated this by dividing this into the three divisions. You can see the first division there, recruitment GB, delivered 1,900,000 of that improvement both through volume and margin improvement as we've seen on on the previous slides. We've also been able to invest in our our governance and our regulatory infrastructure in what is a a very intensely regulated environment, whether it's national minimum wage or or workers, etcetera, all needing to be regulated very importantly.

11:07 And this is an area that the group was a little fragile on a couple of years ago and when it came a little unstuck. And we have turned it around, put a really strong governance and infrastructure regime in place, and now not only maintaining that but enhancing it. So hence that investment. Recruitment improved on operating profit year over year marginally. That was because q one twenty twenty was a stellar quarter for recruitment Ireland, and therefore the comparative was very difficult in q one this year. But in q two, in the recruitment part of of Ireland, we've seen 35% increase actually in gross profit. So a a really a good end to the half which bodes also very well for h two. And finally, the biggest divisional turnaround of the group, People Plus, which delivered £3,100,000 of the of the improvement in operating profit across all areas by volume margin and overhead cost savings as you can see, no point six there, where there was a cost base that needed to be made more efficient towards the end of the first half last year, we've delivered over the last twelve months.

12:13 And I'm really pleased with that. And finally, for a group that hasn't paid out senior corporate bonuses for the last few years, it's appropriate as we've turned the group around to provide for potential bonuses as long as targets are hit and hence the the nil point five part of the the bridge there at the end. So that is the journey that we've gone on from last year to this year in terms of underlying operating profit. Final, p and l slides. And this also, is an illustration of the improved health of the group. So this is non underlying costs. And you will see that in h one twenty one, the only non underlying costs we had were non cash and were the amortization of intangible assets on business combinations.

13:00 And the point I make by this slide is that we've removed all non underlying cash costs only with a non cash amortization charge. And if you look at the prior year and the year before that, you'll see the level of noise that was going through the p and l on a non underlying basis. And it is it is Albert's and Mines and the group's intentions to drive the the group forward operationally, but also reportingly on a clean basis. And and here is the first illustration of that. To move on to net debt, what I've done here is illustrate net debt but also adjust for a couple of anomalies that allows one to look at net debt on a like for like basis across the last four half reporting points.

13:47 So I've adjusted for two items. The first is normalizing for deferred VAT. You'll all be familiar with the as a result of COVID, the government allowed VAT due between March and June 2020 to be deferred to this year, and we've started paying that back in June. And those payments go through to January 2022. But it is appropriate if comparing on a like for like basis to add that back in as though it would have been paid last year and and hence add it to the net debt. And secondly, we previously had an element of off balance sheet debt, which as a result of our debt refinancing in June alongside the equity raise has come back onto the balance sheet. But because that was off balance sheet in the three previous reporting halves,

14:32 I've added that back in so that you have a a like for like presentation. And what you can see here is that the normalized adjusted net debt of £95,900,000 in June 2020 is now down to £19,700,000, which is an improvement of £76,200,000. I fully recognize a large portion of that, of course, is as a result of the equity raise, But, of course, additional elements such as improvements in trading, operational operational profits, cash collections, etcetera, have added to that £46,000,000 to make that that move down with the £76,000,000. So we're really, really pleased with with that position. And just to move on to the next slide, giving an illustration of some of the key items moving from the reported net debt of £36,200,000 last year to the reported net cash. So this is not normalized or adjusted as I did on the previous slide, but it's it's the actual reported amounts. These are the key movements throughout the year, and I'll and I'll just go through those top five. The first one is the item I mentioned on the previous slide, £17,800,000 of of off balance sheet debt that was brought on balance sheet during our debt refinancing.

15:44 That's item one. Item two, strong underlying EBITDA of £13,700,000. Item three, circa £25,000,000 worth of of trade receivable improve and reduction and and cash collection optimization. There is a circa £15,000,000 of three estimate of timing in that, but it's a really good result nonetheless and and and sets us in a really good balance sheet position. And second to last, corporation tax refunds from HMRC. We've recovered £5,900,000. My group finance team's done an excellent piece of work in terms of going back through the years to ensure that we have recovered all the amounts that were overpaid as a result of non underlying charges and losses, etcetera, and recovered that to date. And finally, of course, book ending on the right hand side, the £46,400,000 equity raise. And that takes you on the full journey from the net debt of 36.2 in June 2020 to the net cash of 20.9 at the 06/30/2021.

16:49 And final finance slide from me is some productivity KPIs here. Firstly, in the top left corner, the recruitment businesses combined, gross profit per fee earner, which was up 25.4% compared to h one twenty twenty last year at £37,500 comparing to that £29,900 last year. And on the top right hand side, People Plus' total revenue against total employees, again, up 30.6% compared to h one twenty twenty at £30,700 versus last year's twenty three thousand five hundred pounds. So two productivity measures that are positive as a result of two things. Firstly, growing gross profits and increasing revenues in People Plus, but also as a result of the headcount reduction, which I illustrate there at the bottom of the slide.

17:39 And I show the arrow from June 2019 to June 2021 this year of a reduction of 520 heads, which I just explained there on the bottom right of this slide. A decrease of of of a couple of hundreds in recruitment GB. We delayered that division to optimize its operating efficiency in recruitment Ireland, a general reduction in central overheads, head counts, as well as frontline as a result of the pandemic. And then also driven mostly by the pandemic, but not totally. People plus this reduction of mainly lower tutor numbers. And then when we see our skill centers and prisons continue to reopen, those numbers are easily flexed upwards in line with revenue and gross profit growth. So that's the end of the finance section of the presentation.

18:30 I will hand back to Albert to take the presentation forward. Thanks, Daniel. Right. So we we just before we get into the operations, just a reminder that we have three divisions and two brands. We we've got two services, really, recruitment and training, and we have three divisions in the way we manage the group. The UK, England, Wales, and Scotland under the STAFFLINE GB brand, and and then Ireland is managed separately, and then People Plus represents the training business. What I wanted to do, though, is also just show that under the broad STAFFLINE brand, we also operate Omega, our engineering and technical white collar recruiter, and Brightworks, which is Scotland's largest recruiter. In fact, the nearest rival to Brightwork and STAFFLINE in Scotland is only half the size. And then finally, we have Datum, our consultancy, niche consultancy, and, you know, not a recruiter, but actually a recruitment process and procurement outsourcer, mainly in the construction industry, but a really good little business, plenty of plenty of opportunity facing them into the future as well. So just a summary of our brands and our services, which hopefully demonstrate that we've got quite a broad spread and we can actually leverage all the growth in in those various different markets.

20:00 I'm going to start with the recruitment GB business, which is essentially The UK, Scotland, and Wales, and I'm going to just talk a little bit about the growth and where it's come from. We we've actually increased revenue as you can see there quite substantially, and gross profit has followed that increase in revenue, and recruitment businesses notoriously struggle to increase their gross profit in line with revenue. Price is always under under pressure, and and and the the this is a key measure for mainly investors to see that we're in we're keeping and maintaining our pricing, and we also are improving our mix so that our gross profit is, is is actually growing strongly. Now we've had growth in the food, as you can imagine. You've seen our previous RNS statements in the food, the online meal kit deliveries, you know, the Gusto's and the HelloFreshers of this world. Our particular client that we've won and secured has has grown strongly over the pandemic, spurred on by the fact that people, you know, delivering, everything online and procuring online. And then finally, the logistics sector, which has been really a a, you know, a proxy for for online, and we've seen, you know, high demand, and you've read about the demand for drivers, for HCV drivers, and for staff in in the supply chain.

21:19 The travel and hospitality sectors have been, as you would expect, subdued for the entirety of this period under review because, of course, lockdown only ended after our June 30 interim cutoff. I'm not going to talk too much right now about the candidate shortages. I've just noted them there. You know, there's candidate shortages across the board, but as I've said, probably at the top of this presentation, we we're facing into a strong market, and candidate shortages are inevitable, and they're not seen to they shouldn't be seen as a bad thing necessarily, but they can hold back the growth of the business. We've just got to work with our clients in terms of resolving and helping them through that and actually being creative and innovative in terms of finding those candidates. We also expect that the public policies, mainly in relation to furlough, but also in relation to job centers and claimants and welfare, we expect those policies to flex and begin to help assist easing those shortages with the end of furlough, in particular, at the end of the month.

22:22 Look. The the business has had a great six months. It's the largest business in the group. It's delivered. It's tripled its its profits. And actually, crucially, the restructuring has given it a much better conversion ratio. As you know, if you're a recruiter or you follow recruiters, conversion ratio is your asset test in terms of whether your gross profits converting the right amount of profit to the operating profit. So we've doubled that from six to 13%, really pleased with that. Then we're on to Ireland now and of course Ireland is much it's a much smaller business, but it's perfectly formed. It has some great stats, you can see the shape of it. You know, 21% conversion ratio, you know, 2.5, 2.4%, net net net net EBIT over revenue. This is a good business that actually has never made a loss. It's got a very capable management team. Now, of course, if the first thing that might perhaps you'll you'll that'll strike you is that the numbers are broadly similar to the prior year, and I just wanna reiterate something that Daniel picked out, which is that actually Ireland lags The UK by three to six months.

23:36 It certainly lagged The UK going into the lockdown last year, it had a very strong first quarter. And, actually, if you've been following the news, you'll know that The Republic in particular has had one of the most severe lockdowns in in the world, possibly with the exception of Australia and New Zealand. And that, of course, has hampered our our ability to hire, train, and actually exploit permanent recruitment. It's been the same for everybody. So those are the reasons why the numbers on the face of it look similar to the prior year. The underlying trends are very strong, and as Daniel has pointed out, the quarter two numbers versus quarter two last year, you know, up in double digits. Growth growth is coming through very nicely. Mainly, Ireland is also a white collar business, you know, white collar recruitment business focused both in the public sector and the private sector. The public sector also tends to lag the private sector slightly, just the nature of the biz the business, and so that you you get a double lag then. So we're really expecting Ireland to deliver a strong second half and into the first half of next year, see some really good performances there. Once again, a really tight cost base under tight control, excellent conversion ratio. One little point I'll I'll make is that we want that conversion ratio perhaps to ease and float down slightly because we want to improve the we want to improve the headcounts and invest in fee earners, and actually, there's a trade off between conversion and and and growth, and we need to grow a little bit

25:06 more particularly into next year and that will be at the expense of of the conversion ratio just slightly going into next year.

25:15 And then finally, last but not least, our people plus and training business, you know, this is a market leading business well known in the sector for excellent delivery. Always scores high in any in any tender tender that that that we're involved with. And it's most recently secured three three contracts. They called restarts, and they're about the, you know, the government's initiatives post furlough to put people back into work to reskill them as the economy has shifted and moved and adjusted. And it's actually we're at the at the forefront in many areas, particularly in places like Wales and other areas like the Northeast and Kent where we will be delivering those restart contracts on behalf of prime suppliers.

26:00 So a business that has grown its revenue, you can see them from 35 to 40,000,000 and its gross profit, and it's got a

26:06 really nice shape around its figures. This has been driven by employability. The business has two core sectors, employability, which is about taking people who are not in work and putting them into work or putting them into their own business, something that if you explore the People Plus website, you'll learn more about. And it's a little known fact that we're the largest provider of support and government support for people who want to start their own businesses, and we've seen that, you know, at record levels in the last few months. On the skills side, as you'd expect, you know, the read across here is, of course, schools and universities where actually the contagion from COVID has been really quite, you know, quite challenging. So the skills has been impacted by the skill centers have been impacted by COVID. This remains the case.

26:53 We've had the first six months of lockdown, obviously, constraining, and then we've had in person training being introduced over the summer. Really training doesn't really get going until the autumn. So the first six months has reflected that constraint. And finally, just want to make a really big point about the turnaround from through from 1,100,000 to a 3,000,000 profit. That's been a tremendous achievement by the very talented team that we have at People Plus. Really one of the stunning turnarounds and highlights of this this of this six months. Of course, that will fade slightly as the other two businesses generate profits, and actually they bounce off comparators that are profitable into the second half of the year. So expect all businesses to grow into the second half of the year, and and so, you know, that that's people plus really good result. We're delighted that it's that that it's in profit. Of course, we also disposed of the apprenticeship business towards the back end of last year, so quite a lot of restructuring there, but we're seeing that coming through on the conversion ratio, moving up from 15% to 20%.

28:00 Now I thought I'd talk a little bit about the this is not the most recent stats. They've actually the the August stats have been just released in the last twenty four hours, but, you know, these tell the same story, and August is just a continuum of that. These are the July job market stats, and they, you know, they're not they're not a press release from some from a recruiter in the industry, you know, anecdotal evidence and surveys. These are actual figures taken from the HMRC and other and and other areas. And what you can see is that payroll employees, which is actually the size of the formal employment market. So, you know, that is the size that's the total size of our market with 29,000,000 because I think there's been another 200,000 added since these stats. 29,000,000 people on payrolls who will need who will move jobs at some point and who, you know, will also come to seek opportunities.

28:56 So that's the total market. It's always good to have a market that's growing. And, of course, we have a tight labor market as well, and as I've said, it's beneficial to recruitment. Now why I've picked out ours is actually you've heard a lot about productivity, about how the the British economy, you know, in terms of its productivity has been lagging some of its neighbors and and competitors. Now this is a good example of that that actually the pandemic has made this somewhat worse. And, actually, the good news is it's bouncing back, but it hasn't got back to pre pandemic levels yet. There's a lot of reasons for this, not least of all the the so called pandemic, the isolation, the the the furloughs, etcetera, keeping people

29:37 away from work, constraining them either through illness or through self isolation and other measures like furlough. Now that needs and will rise. We're expecting, you know, that to rise over the next six months, and our own temps are telling us that they want to work more hours. They want more consistency. Our our staff are telling us they want longer hours. They want extra hours. They want to work, and they want to increase their take home pay. So there's the willing and there's the opportunity, and for us, there's the future upside from expected increase now. Because as if you don't know, our hours is the way we we base our revenues, that's how we derive, that's a driver, a key driver of revenues, and therefore, income in our business. And finally, this is just a, you know, a snapshot in time, of course, 953,000 vacancies in July. And as all of you will know because you're all well read, I'm sure, and have seen the news this morning that that has passed to 1,000,000 in August.

30:33 So the most recent job and this is unprecedented. Right? You that that that slide goes back some years. It's an unprecedented demand for labor. So, you know, listen. A good market like we're seeing here in these statistics

30:46 is is is really beneficial to recruiters. You know? So there's one law law in recruitment and that is you want a strong market, you want strong demand, you want a growing market of employed people, and actually a tight labor market is beneficial. It reminds customers of why we're necessary to help to help them with their staffing their staffing challenges. Of course, when when the the the labor market gets too tight, it can be detrimental. You've seen the stories about HGV drivers and sort of milk and groceries on the shelves, not not not you know, gaps in the shelves in the supermarkets, all of that. We we'll the cut the companies will solve those problems. It'll take them some time, and I suspect some of the issues in terms of furlough and others will help the labor market overcome that. So that's us our our our sort of facts and figures for the day. I wanted to just turn to current trading and outlook, and I know that, you know, all of you and all of us always are very interested in what the outlook is like. And, obviously, it's a confidence it's a measure of our confidence based about what we see.

31:55 And just to reiterate, we see a very, very strong market. We see a market that actually is demand is outstripping supply. Candidate shortages just are exacerbated and are are coming through, being reported widely across the sector that's actually supportive to a good market. And then finally, you know, this

32:14 is really important, but Ireland finally released from lockdown and easing its restrictions. That will give us a little bit of a boost going into the autumn. And we're seeing, you know, as you know, that our Christmas peak is critical for us to, you know, to deliver the numbers and, you know, if over overachieve if that's possible, it'll all be around the Christmas trading. And you could if you remember last year, the the outlook was much, much worse than we're seeing now in terms of, you know, we didn't have the vaccine rollout. In fact, the vaccines weren't a feature at all of last year's market. And, also,

32:46 many parts of the economy were completely shut like travel and hospitality, but also, you know, we we we saw that retail was shut down with with with lockdown over Christmas. So it's bound to by just the law of logic that that that this year is going to be much better. I just want to end on the training business where employability is obviously strong. The in person training now should come come back to us. We should see the the trickle of learners actually, you know, going to material numbers that will improve results. And then finally, as I said, it's really early days on restart. We've mobilized only six weeks in now. Those early targets have been achieved. Now now we're looking to see the delivery on those on that contract. But, of course, it won't take it won't be in this year. We won't see any impact from restart until the back end of next year and possibly 2023.

33:42 So the group, you know, we're confident it's trading in line with its revised upwardly increased market expectations in the last two two two months, as I said, for the full year. And with that, maybe, Daniel, you you you would like to make some comments too on the outlook and the current trading. Yes. Thank you, Albert, very much for that. Just to conclude before I just pass back to Albert for final conclusion, Just in terms of in the context of everything we've presented, we do see that analyst market estimates have increased twice over the last number of months. Once in April from 6 to £8,000,000, and this is for underlying operating profit. And secondly, at the end of July, from 8,000,000 to £9,000,000. And and that's what we see analyst market estimates as having increased to on on the back of what they they no doubt see in terms of the the economy, the sector, etcetera, etcetera. So, yeah, just passing back, Albert, for you to finally conclude, then we'll take some q and a.

34:44 Thanks, Daniel. Look, we we haven't gone into a lot of detail in terms of the the the governance of of of of the company, but the governance has been dramatically overhauled. The there's a new board. There's a new exec, and we've got an experienced team below us. Daniel has refreshed the finance teams. We've had, you know, we've had a we've had an overall of the compliance environment, and this has been this has given us a strong base. We've had double digit revenue growth. We've had market share gains. With our edge in mark in our market has been demonstrated through evidence, through customer wins, through feedback that we've got. The margins have improving.

35:27 Loss making divisions have been turned into profits. All three divisions are making profits. Cash has exceeded expectations. As you know, Daniel pointed out the extra headroom we now have for growth. We're well capitalized. There's a strong jobs market. Vacancies are a record high. We're tight labor market. So these are sort of the the perfect greenhouse conditions for growth with a blue chip customer base, you know, and and a world class delivery, delivery that, you know, many people beyond just the confines of STAFFLINE and our staff know that they were capable of and the reason why the STAFFLINE GROUP has prospered during the pandemic, notwithstanding, some of the some of the issues it had on its balance sheet. So with that, this concludes the presentation. Thank you so much for listening. Hope you stay on for some some q and a, and I'll hand and hand you back to the presenter. That's that's brilliant. Albert, Daniel, thank you so much for updating investors this afternoon. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the right hand corner of your screen. But just while the company take a few moments to review those investor questions submitted already, I'd like to remind you that the recording of this presentation,

36:37 along with a copy of the slides and the published Q and A, can be accessed via your Investor Meet company dashboard. I'd also like to remind you that your feedback is important to the company. And immediately after this presentation has ended, we'll redirect you for the opportunity to provide feedback in order that the company can better understand your views expectations. Albert, Daniel, obviously investors have submitted a number of questions through today's presentation. So firstly, thank you to those investors that have submitted questions. Perhaps I could hand back to you guys, if I could ask you to, where appropriate, read out the question and give a response, and I'll pick up from you at the end. Well, I'm gonna let Daniel answer the question on the share price yesterday. But before I do that, I can can I just talk to the competition? Someone's asked us, you know, thank you for the congratulations on progress.

37:25 They've asked us about competition, what differentiates us, and how we defend our position in the market. One of the one of the key differentiators in the blue collar recruitment business is actually scale and reach because it is a numbers game. You know? When when you saw the announcement this morning from a leading retailer that they were gonna hire thousands of temps for the Christmas period, that that's what differentiates us. We can cope with volume. We can cope with scale. The other differentiator is the brand because a lot of the interaction with candidates and potential labor in this market is done on apps. It's done very quickly on jobs boards and and on our own databases. And we have technology that that that that waves all the various systems and and feeds together, and we believe gives us a competitive edge in terms of timing, in terms of access, in terms of the the the size and scale of the database we have. So it's all about your size and scale. And one final little point, we we actually reach into parts of the country where there are no competitors.

38:31 It's it's it's where customers are based where they might not be or they might be poor poorly served by public services. We actually provide transport in certain conditions in certain parts of the country, and so we will do a full service in hard to reach areas where they're critical distribution hubs, but actually, they're poorly served by by transport links or or or certainly, they're not near major conurbations. So though it's really just a geographical reach at scale, it's about technology. So I'll hand you I'll hand you over to Daniel to talk a little bit about what why in in your words, you said the message, whilst good, was poorly received by the market yesterday. Sure. Thank thank you, Albert. Thanks very much.

39:16 Yeah. The question was asked well done for the improvements now yesterday. Why, in your opinion, was it so poorly received by the market? Well, I think that's probably, excuse me, twofold. The first reason is the share price has had a has had a good run.

39:30 As you know, we raised money in June at 50 p. So current share price today is still more than 50% ahead of that and had and had reached up to $92.93 p. So I I think that's probably one reason. But potentially, additionally, is that I think people are expecting the company to openly talk about upgrades, etcetera, etcetera. As I pointed out just at the end of the formal presentation, I believe and we've seen analyst expectations upgraded twice this year by the analysts. As I said, once in April from 6,000,000, they started the year to 8,000,000, and then the analysts made a further upgrade of expectations from 8,000,000 to 9,000,000 at the end of July.

40:19 So so those have been made and, you no no Daniel, that's that's EBIT, isn't it? Sorry. Yeah. That's underlying operating profit. Correct. Underlying operating profit EBIT. So I'm I'm guessing that those are two reasons combined and blended probably. Of course, as a company, we are are not short term thinking. We're medium to long term strategists and wanting to make the best value for shareholders over the over the medium to long term. So, I'm not too, concerned at, the trends that took place. Yes. So that would be my explanation. Now thank thank you. Thank you, Daniel. I'm just gonna pick up on a a few more questions as they're rolling in if you don't mind.

41:07 You know, how is m and a playing part of, playing part of the future growth now that we've turned around the business? Really good question. M and a is integral in my view to, you know, any public company seeking to grow its markets and and market share. If you've got if you've got excellent delivery, why not buy businesses and and and expand your market share and accelerate your growth? As look. As there there's been quite a bit of m and a in the more in the more recent past before Daniel and I joined the board. And, those businesses we've not seen in Omega and in Datum and all of those those businesses that were acquired, their true potential yet. We we want to see them them coming out and and and actually realizing their true potential. So in the short term, I don't think you'll see you'll be seeing any m and a from us. I would never rule it out, but I don't think you'll be seeing it. We have an organic growth strategy mainly, and so that's that's the easy answer to that question.

42:07 And then on the next question, I see, are you planning on repaying any received furlough monies to the government? You know, well, look, we we weren't a huge beneficiary of of furloughs. We did have some furloughs that were mainly in relation to our our customers, staff on our customer sites. We were requested, you know, so so that that that was part of that. And, you know, we we wouldn't we would I can't comment on whether our customers have any intention. But, you know, in terms of our own our own support, the main support we got, which we were very, very clear about, was the VAT support, which was the VAT relief. And, you know, Daniel, maybe you can just comment on on on how that's playing out. I think you've mentioned it in your in your slides, but if you could just be clear that we certainly are we're in actively repayment of that.

42:59 Absolutely. We received the benefit of a deferment of approximately £46,000,000 at June 2020, and we have just started to repay that. We the first installment was repaid to government in June, and and there's a repeat installment payments all the way through to January 2022. And then that whole £46,000,000 will be paid back. So fully fully refunded back to government. Just another question we've got on HRNet's interest and shareholding. I see on the message boards that's a that's a sort of ongoing topic. So I will, you know, I will raise it in terms of that that, you know, that we can't comment on and we shouldn't comment on shareholders' interest. We don't know what their interests are and and how things will play out in the medium term. But what we can tell you is that our shareholders in general and individually are very happy, more supportive, and express those that support actively to us, and we have strong relationships with them, which is critical.

44:01 I think in in in a business, you know, in a fast moving climate that we're in, that we're communicating regularly. And I think that, you know, the recent equity raise has rebalanced the shareholding portfolio that we have, has made us I believe more liquid and of course has has introduced some really strong global brands in terms of investors, long term funds, and pension funds into the into the opportunity. And so, you know, we're very, very confident about what what's happened with that equity raise. We're really pleased with the outcome. Just looking to the next one, the rates for drivers. I'll I love talking about drivers. I've learned more about driving in the last six months than than almost anything.

44:49 Well, you know, the current driver shortage was you know, if I can just reduce your question to to to, you know, the issues around the shortage. First of all, these are really existential challenges in terms of a combination of Brexit. Something that's little talked about, which is the r 35 changes that happened in April, they did impact drivers because drivers certainly in the sort of high the the higher classes, heavy goods classes, are mainly self employed or generally self employed. So those tax changes created some short term sort of headwinds and turbulence in the market. But it's been a range of things, not least of which testing centers were closed. And, you know, we we need to see, you know, twenty, thirty, 40,000 drivers come onto the market, and, of course, during COVID, that was severely curtailed.

45:42 So that's the sort of thing we we're looking at. In fact, we're having dialogues with the government, even even today and with our large clients about how the the the the government can help the the industry and how they can help driving. It's really about training, and it's about making it accessible. The cost of HCV driving is quite prohibitive. There's lots of things the government can do, and we're we're talking to them even today, as I've said, with our clients about how that can help. And that helps STAFFLINE. You've asked the question, does it help or does it hurt us? Well, of course, if we don't have drivers that we that we can place, we miss out on margin. That's the short term impact. But, you know, all businesses have pluses and minuses, so let's not get this out of out of context, but we love the engagement it brings us. It means it brings us very close to our clients, and our clients are reminded that we are a necessary and integral part of the supply chain. So, you know, that's my comment on driving.

46:39 I would encourage people considering driving, you know, if they think that HCV driving was poorly paid or a week per hours, it's improving dramatically. Last last I heard it was up 30% in terms of average pay and, you know, terms and conditions are improving. So and we need we need HGV drivers. So that's the driving market. And as you know, we're we're the market leader in driving, and we do expect to improve in this in the next six months. Possibly, there you know, it's gonna be tight around Christmas as you'd expect, but the retailers are super, innovative and creative and and and, you know, we've got one of the best retail sectors in the world in this country, and I'm sure that they can that they will come up with solutions. And we're gonna do everything in our power to get drivers into the into the economy. I know that is a long answer, but driving is, something that's occupying a lot of people at the moment.

47:32 Right. Daniel, may maybe you want to you you just wanted to maybe just answer the question about the EBITDA margin targets, you know, talk about yeah. There's a question here about time frames and and margins and targets. And and, actually, we've been quite open with our with with what we believe is good, what good looks like. Maybe you could talk about conversion ratios perhaps. That those are a little bit more relevant. Performance and and delivery. We published numbers in November 2020, excuse me, just regarding gross profit margins and conversion rates. So gross profit margins heading up to towards 8% and then 28% for recruitment, 20% for people plus.

48:23 And we see a trajectory through to that. And then conversion rates from gross profit to operating profit of 15% in recruitment and 20% in people plus. I think the comments this is obviously a a high volume industry in this particular company and sector. And talking about circa 1% of operating profit margin. Clearly, we're moving we're looking to improve that significantly over I would, you know, look to add a percentage point above that to return to some former times in into an extent. And the conversion rate that we've seen in h one moving from 0.3% to 11.8% this year is is part of that journey as as you would have seen on the gross profit margins as well. So I think the comments made about profitable growth, that is all what we're about. We have there's one particular customer which we have reexited from which was particularly low margin for high working capital investment, which we we didn't deem acceptable.

49:32 So we exited from there and with an intention of improving bottom line margins and return on investment from a working capital perspective. Thank you, Daniel. Question on permanent recruitment. Yes. Really, really relevant. I think permanent recruitment if you just have to look at Robert Walters as a really extreme example, I think, of how a business has used permanent recruitment to generate, you know, lots of cash and growth. And, of course, in the professional market, pro permanent recruitment is is more valid than even temporary or contract recruitment. In the professional market, the the the large contract recruitment is obviously IT recruitment, which is which has a lot of contracts, a lot of project managers, and and and and are self employed individuals.

50:23 However, in the professional markets, it's about perm. So, you know, that's the that's that's the nature of the of the game there. In the blue collar recruitment market, it's it's an hourly and shift based, method of work. Pee people are flick they're they're generally flexible. Many are part time, and they want to work on their own terms, and and and all the feedback we get is they like the the the flexibility, and they like the the the sort of the the the nature of the work. So permanent recruitment is really not as a key funk key feature of of the blue collar market. Where we're actually starting to look and execute on our permanent recruitment strategy is that our brands, Omega and Brightworks and TechSearch, they are business they they are services that would naturally lean to permanent. We have the consultants and the expertise to deliver on that perm. And in Ireland, we've got a very large proportion of our business, which is permanent recruitment because it's naturally, it's a white collar recruitment business. And so, you know, in Ireland, we we we we see the permanent recruitment numbers climbing quite strongly.

51:31 So we're executing it where say where it's safe. We're not taking you know, we we're not plunging investment into areas where permit recruitment doesn't automatically fit. But we're also asking our clients where we've got temporary and where we've got labor that that that's on hourly hourly basis. We're asking those clients if we can help them with their permanent recruitment, and we're getting very positive feedback. But we're in early stages of executing on the strategy in relation to perm. But as you know, I'm a fan of perm. It's a it's a it's a cash rich service. It doesn't absorb more working capital, and it increases your margins. The only downside with perm, of course, has got very limited visibility as you know. You've got six weeks max. If you're an executive business, you might have up to three months, but with your retained assignments, the permanent recruitment is a sort of four to six weeks visibility.

52:21 So we also we really like the visibility we have on our contract side and our temp side. Quick question on direct to buys. Yeah. We we we we certainly put our hands in our pockets for the equity raise, and the the you know, I know that you've you've you've you've you've catch your question here in the sense that that's mandatory and given, and and I and I sort of I I can I totally abide and understand where you're coming from? You know, it's having skin in the game. But, actually, it was more than that. The executive management team and the board and, you know, people that report to us all were very enthusiastic about the opportunity, and they've been rewarded.

53:06 That's of that, there's no doubt. So that that that was a good investment decision. But, you know, they we're average people. We we we're not we're not we're not billionaires. We your your question is around scale. I understand that. And and the sort of quantum of investment where, you know, we put in money that's material to all of us. I can I can say that for sure, and it's not tokenistic? So I think that's that that that's our our sort of final answer on that one is take it from us. It's not a token. We wanna make money as much as you did. We've got skin in the game. Daniel, although we raised money and wrote the VAT repayment, which which was our our our our way of taking support from the government, Actually, we didn't just raise money for VAT.

53:54 We did a lot of self help, which some of which you went through, but maybe you want to just describe that the v eight the the the equity raise enabled the restructuring of our debt, which at that time was very complicated and onerous. And so, actually, the equity raise was far more than just about the VAT relief. Maybe you just wanna make a few comments on that. Yeah. No. Thank you, Albert. And, yeah, you're you're referring to the slides the normalizing adjusting slide which I presented during the presentation because clearly there was additional debt. And actually, we just take the headlines, a 100,000,000 of net debt has come down to 20,000,000 of net debt. That's the headline. We're very the very high level numbers with the 46,000,000 raise.

54:40 So there's clearly an additional, you know, chunk of activity and effort that's been put in alongside the equity raise to the tune of $3,035,000,000 pounds. So it's not just the equity raise that has paid the VAT off. It has certainly contributed to it. I But think you need to look at it in that like for like manner with the SACO reduction from a 100 to 20,000,000 in net debt across the across the balance sheet from last year to this year alongside the self help measures we've taken, which, from my perspective, leaves this group and company in a really solid platform to take advantage of the very changing labor market that we have before us, including also the skills and training market. So we're well positioned for that over the next number of months, which is gonna be a very, very interesting time. And from me, thank you to all of you for all your support during the last period.

55:37 Yes. Thank you. That's great. Albert, Daniel, thank you so much for updating investors this afternoon. I know investor feedback is particularly important, and I will shortly redirect investors to do so. I wondered before doing that, maybe Albert, could ask you just for a few closing comments before I just redirect investors, as I say, and thank you again to investors for submitting those questions today. Yes. Thank you. I think the you know, just reiterating the fact that all turnarounds are not necessarily complete after their first after the first results. It's a work in progress. So, you know, Daniel and I are working hard not just on the numbers you've seen and on the operational improvements you've seen, and indeed with the KPIs that we've brought out for the first time, which, you know, all good recruiters are are are are affair with. We want to continue the progress, and we think there's more opportunity and more to be done. Of course, you know, the road is never straight, and we're expecting that, and that's part of our experience, 35 in recruitment. We know what to do when the chips are down. We also know how to how to improve the business when when the opportunities that we see right now, these benign market conditions which we're facing into, this is the sort of market that really really gets us going. So, you know, all of that opportunity, all of that that that that good competitive advantage was we're over the moon in terms of what's been achieved. Our teams and our people have done a fantastic job, but also thank

57:08 you to the markets for supporting us. We've we've been conscious of the support. It's been visible, and of course, the the equity raise was was was great was a great example of that. And so on that, I would like to thank you, and thank you for coming and attending our webinar. That's brilliant. Albert, Daniel, thank you once again for updating investors today. Can I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback order that the management team can better understand your views and expectations? This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of STAFFLINE GROUP PLC, we'd like to thank you for attending today's presentation. That now concludes today's session, and good afternoon to you all.