For Immediate Release |
27 April 2015 |
STAFFLINE GROUP PLC
('Staffline' or 'the Group')
Acquisition of A4e and Trading Update
Staffline (AIM: STAF), the Staffing services, outsourcing, training and Employability organisation, providing people and operational expertise to industry, is pleased to announce today that it has agreed to acquire A4e Limited ("A4e"), a leading provider of welfare to work and skills training services across the UK, on a debt free/cash free basis for a total consideration of £34.5 million (the "Acquisition").
Highlights
· The Acquisition represents a highly complementary fit with Staffline's existing Employability division, accelerating the Group's growth strategy and bringing a number of strategic benefits and revenue synergies.
· Staffline has agreed to acquire A4e's entire issued share capital for £23.5 million and will assume A4e's net debt of £11 million. The consideration of £34.5 million represents a multiple of 2.5 times the A4e unaudited EBITDA for the year ended 31 March 2015.
· The cash consideration is being funded through increased debt facilities provided by the Group's existing bankers. The Group's facilities will now comprise a £35.0 million term loan, £20.0 million loan notes and increased existing working capital facilities of £30 million.
· A4e is a profitable, cash generativebusiness expected to deliver revenues of approximately £140 million, EBITDA of £13.8 million and profit before tax of £10.2 millionfor the year ended 31 March 2015. The Directors expect the Acquisition to be significantly earnings enhancing and to increase underlying diluted earnings per share for the period ended 31 December 2015 by approximately 26%.
· Following the Acquisition, Staffline will become one of the largest Work Programme providers in the UK in terms of the number of jobseekers supported and contracted regions serviced, with a Work Programme presence in nine CPAs (regions) as a prime contractor and six further regions as a sub-contractor. This is a key long term growth initiative for theGroup.
· The Group will have the greatest geographical reach of all Work Programme providers covered by over 150 locations nationwide, which will offer employer engagement and partnership opportunities with Staffline's established OnSite presence throughout the UK.
· The combined Group will be able to provide a wide range of services across the sectors of Employability, Skills and Justice, including access to financial advice as well as to health, social and relevant advisory services.
· The increased scale and scope of services and the Group's proven track record of results will position the business strongly for the future and enable Staffline to maximise opportunities in the Employability, Skills and Justice sectors, creating significant shareholder value.
· The Group has seen a strong start to the new financial year, with Staffing Services securing a record 28 OnSites in Q1 (taking the number of OnSites to over 260) and the new business pipeline remaining excellent.
Andy Hogarth, Chief Executive, Staffline commented:
"We are delighted to be announcing today the acquisition of A4e. This is an exciting milestone in Staffline's growth, considerably expanding the size and geographic reach of our Employability offering and will result in the combined business being one of the largest Work Programme providers in the UK.
The significant strengths of both businesses will be united and we are confident that our leadingposition will be a strong platform from which to develop our strategy, services and innovation.
We look forward to creating a winning team and business, and delivering significant shareholder value."
Andrew Dutton, Group CEO, A4e commented:
"We are today starting a new chapter in the history of A4e. Staffline is exactly the right fit for us: its ambitions, robust financial position and its people and business values will all support the combined business as we grow together and build on our position as a leading Work Programme provider in the UK.
A4e is now in the perfect ownership to both develop our customers and support our employer relationships and I wish the combined business every success in the future."
For further information, please contact: |
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Staffline Group plc |
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Andy Hogarth, Chief Executive |
07931 175775 |
Diane Martyn, Group Managing Director Phil Ledgard, Group Finance Director |
07771 944578 07432 554437 |
Liberum Capital Limited |
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NOMAD & Broker |
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Steve Tredget Richard Bootle |
020 3100 2222 |
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Buchanan |
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Richard Oldworth Sophie McNulty Gabriella Clinkard Jane Glover |
020 7466 5000 [email protected] |
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Conference call and presentation
A conference call for analysts and investors will be held at 8:30 a.m. this morning. For dial-in details please contact Buchanan.
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The Acquisition
A4e is a leading public service provider, serving tens of thousands of people in the UK and Australia and currently employs over 2,000 people. The services it offers represent a highly complementary fit with Staffline's existing Employability division, including employment and welfare, training, education, and financial advice. Furthermore, its geographic footprint opens up five new Contract Package Areas ("CPA") in addition to Staffline's four current CPA's, with no overlap in territory.
A4e is a profitable, cash generative business expected to deliver revenues of approximately £140.0 million, EBITDA of £13.8 million and profit before tax of £10.2 million for the year ended 31 March 2015. Gross assets total £30.1 million, including fixed assets of £14.0 million.
Strategic Rationale
Over the past four years, Staffline has been building its presence in the Welfare to Work, Skills and Justice markets as part of the Group's defined growth strategy. The Acquisition represents a significant further opportunity to accelerate growth plans in this area and brings a number of strategic benefits and revenue synergies.
The combination of Staffline's Employability division and A4e will create one of the largest Prime Contractors of the Work Programme in the UK, operating in nine CPAs and six sub-contracted CPAs. It also positions the Group as a market-leader in the skills sector and has strengthened the Group's services in Justice too.
In addition, the combined business will benefit from:
· An extensive geographic reach across the North West, the North East, South Yorkshire and Humber, West Midlands, East Midlands, Thames Valley, London and the South East;
· The greatest geographical reach of all Work Programme providers, offering nationwide employer engagement and partnerships, as well as supporting local businesses and national organisations;
· An enlarged range of services across the sectors of Employability, Skills and Justice, including a range of services to provide access to financial advice, access to health, social and relevant advisory services;
· A greater choice of career opportunities for jobseekers, learners and employee / team members;
· A combined scale which builds credibility, reputation and market position, creating a strong platform for Work Programme Plus and the ability to support both the national and local contract decision making agenda;
· An experienced management team together with in-depth expertise at all levels of the organisation, enabling best practices, knowledge and ideas to be leveraged across the enlarged division; and
· A greater capability and provision of offering; extending from pre-employment training through to placing people into work and then onto post-employment vocational training and support.
The Combined Entity
On completion of the Acquisition, A4e will be integrated with Staffline's existing Welfare to Work business, Avanta. Rod Jackson, currently Avanta's Managing Director, will lead the combined business which will be rebranded 'PeoplePlus' over the coming months.
Andrew Dutton, the current A4e Chief Executive Officer, will work with the Staffline team for an initial period to assist in a smooth transition before stepping down to pursue other interests. Sir Robin Young, A4e's Non-executive Chairman and the other Non-executive Directors, Neil Macdonald and Sarah Anderson, will step down from their roles with immediate effect.
The enlarged division will service the Work Programme CPAs from a network of over 150 locations nationwide, helping it to grow embedded relationships with national employers and supported by over 260 Staffline OnSite client locations.
In addition to the Work Programme contracts the combined entity will have a number of contracts within the Employability, Skills and Justice arena including:
· Skills Funding Agency - managing the Offender's Learning and Skills Service ("OLASS 4")
· The Money Advice Service ("TMAS")
· Independent Living Services
· New Enterprise Allowance scheme - supporting people to become self-employed
· Steps to Success in Northern Ireland
· Ministry of Justice, West Mercia and Warwickshire Transforming Rehabilitation
· Suffolk County Council MyGo centre supporting youth employment
Staffline believes that following the Acquisition, the increased scale and scope of services and the Group's proven track record of results will position the business strongly for the future and enable us to maximise opportunities in the Employability, Skills and Justice sectors.
Staffline Trading Update
Staffline is also pleased to confirm that the current financial year ending 31 December 2015 has started strongly. In particular, Staffing Services has had its strongest ever start to a year, with 28 OnSite wins in the first quarter. The need to drive efficiencies, especially amongst retail customers, is generating good opportunities and although the overall trading climate remains demanding, the Group is still enjoying an excellent new business pipeline across both new and existing customers.
Additional detail on A4e
A4e was founded in 1991 to deliver pilot programmes for unemployed people in South Yorkshire. Today it is a leading public service provider, serving tens of thousands of people in the UK and Australia and employs over 2,000 people.
The aim of A4e is to:
· Support people to find and keep jobs, and help others set up their own businesses
· Deliver skills and training to ensure people can access the right employment and enhance their career prospects
· Reduce the risk of reoffending by tackling the root causes of crime and offending
· Provide access to financial advice
· Improve access to health, social and relevant advisory services
A4e also works with a wide network of over 2,000 employers, from large multi-nationals to small and medium sized companies, helping them recruit and train staff at all levels.
In 2011 the company investigated allegations of fraud by some employees on a small contract based in the Thames Valley. In March 2015 a number of ex-employees were convicted by the Crown Court and sentenced. The company has been audited numerous times since 2011 and has demonstrated that there has been no other instances of fraud. In addition, a significant investment has been made in the company's IT infrastructure, compliance and back office functions in order to strengthen internal controls.
