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Staffline will fall a little short of its target of £1bn in revenues for 2018

Although results should be "in line", the recruiter will fall some £40mln shy of its ambition to clock up £1bn in annual revenues
Meeting room
The group said it achieved excellent growth in the number of "OnSites" this year

Recruitment and welfare-to-work specialist Staffline Group PLC (LON:STAF) said results for the year just ended were in line with market expectations.

Revenues will be slightly below the group's £1bn target but should be some 9% above 2016's £882.4mln.

Demand in the staffing division remained strong through the second half. PeoplePlus, the employability, skills and justice division, has also made good progress, Staffline said, continuing to win new contracts as well as benefiting from its focus on improved margins, helping to offset reduced activity from the run-off of the Work Programme.

Broker comment

Broker finnCap said it would be making no changes to its forecasts on the back of Wednesday's announcement, and reiterated its 'buy' recommendation.

“With a 2017 P/E of only 8.7x, Staffline is valued at the lower end of both the recruitment sector (average 2017 P/E12.4x) and the outsourcing sector (average 2017 P/E 15.1x). The group’s strong growth track record to date and balance sheet suggest a combination of future contract wins and/or investment in growth through acquisitions are likely to surprise on the upside against the share price’s very modest expectations,” finnCap's Guy Hewett said.

House broker Liberum said it was a “reassuring trading statement”.

It is forecasting £950mln in revenues for 2017, which equates to 8% year-on-year growth, which is a little below the “circa 9%” indicated in Staffline's statement.

“At Staffing, we continue to expect 11% growth in the number of OnSites from 357 in FY 2016 to 395. At PeoplePlus, the business continues to win new contracts, like the Scottish equivalent of Work and Health, and margins are benefiting from cost savings. There is no comment on the financial position, and we maintain our FY net debt estimate of £18m or 0.4x EBITDA. We expect management to set out their growth plans at the FY results on 24th January,” said Liberum's Joe Brent.

Not surprisingly, the house broker rates the shares as a 'buy', saying that a projected price/earnings (P/E) ratio of 8.8 based on its 2018 earnings forecast is “attractive given the track record of growth”.

Shares in Staffline fell 1.5% to 995p on the trading update.

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