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Staffline to scrap dividend, raise capital as wage rule breach costs rise

By BFN News | 07:14 AM | Monday 17 June, 2019


Recruitment and training company Staffline Group said it would scrap its dividend and raise £37m from a share issue to cut debt, as it upped the expected costs associated with an historical breach of UK wage rules. The company said it expected to release its results for the year through December on 27 June following a lengthy delay. It had been assessing its historical compliance with national minimum wage regulations, relating to a six-year period from 2013 to 2018. A provision for liabilities associated with compliance had been increased to to £15.1m, up from £7.9m , marking the second time the estimate had risen. Additional exceptional costs of £1.8m would be booked relating to extended audit procedures, taking total non-recurring exceptional charges for 2018 to £32.6m. The non-compliance related to 'a limited number of food production facilities and the payment for preparation time, which is generally the time spent donning workwear', the company said. Staffline had warned in May that it was also facing headwinds in both its training and recruitment divisions. 'As a consequence, the board expects the group to require a waiver of possible future breaches to the leverage covenant in its lending agreements,' Staffline said. 'The group continues to operate within its facilities and is expected to do so into the foreseeable future.' 'Constructive discussions with the group's lenders are ongoing.' The company said it had also started talks with investors regarding a share placing to raise around £30m to cut debt, plus an open offer for an additional £7m. 'In light of these discussions the board will not recommend a final dividend for the 2018 financial year,' the company said. Underlying profit for 2018 was still expected to be in line with expectations, with underlying Ebit expected in the range of £23m-to-28m. 'Whilst the time taken to announce our 2018 financial results is frustrating, we look forward to posting these results at the end of June at which point we expect the business to return to normalised trading,' chief executive Chris Pullen said. 'Staffline continues to enjoy a unique position in its markets and once this episode is behind us we are confident of a return to future growth.' Story provided by StockMarketWire.com

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