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Staffline Makes Selective Acquisition

Staffline Makes Selective Acquisition

Staffline, a leading provider of outsourced HR services to industry, is pleased to announce the acquisition of Peter Rowley Limited (Peter Rowley), a training provider. Peter Rowley, the principal of the company, will remain committed to Staffline for a minimum period of two years.

The acquisition is in line with Stafflines strategy of making selective acquisitions to broaden its revenue streams, thereby positioning it more as a provider of value added business services in the human resource arena.

Peter Rowley has 36 employees and, in the year ended 31 July 2009, it achieved revenues in excess of 2 million per annum and a pre-tax profit of 0.5 million, with a net asset value of 0.8 million.

The consideration comprises an initial cash payment of 1 million, payable from Stafflines existing bank facilities, deferred cash consideration of 0.5 million, payable in January 2011, and two further cash payments payable up to an aggregate maximum of 1.0 million based on 50% of the profits achieved in excess of 0.5 million during the two financial years following the acquisition.

Commenting, Andy Hogarth, Stafflines Chairman and Chief Executive, said:

We are delighted to welcome Peter Rowley and his company to the Group, bringing a highly complementary offering to our existing operations. Together our two organisations will provide a platform for further growth in our core operating areas.

We continue to look for similar acquisition opportunities, in addition to other smaller industrial recruitment businesses in order to enhance shareholder value.

Altium Securities - STAFFLINE has acquired Peter Rowley Limited, a private training company specialising in lean manufacturing into the food processing industry. The consideration amounts to 1.5m, with 0.5m deferred until January 2011. Two further deferred payments may become liable dependant upon profitability in the two financial years following completion. The business is complementary in that it augments STAFs existing training activities and allows the combined group to bid for larger government funded schemes, particularly those aimed at the long-term unemployed. We expect the acquisition to enhance FY 2010E EPS by a short 10%, resulting in an increase in our target price to 122p (111p) and a reiteration of our BUY recommendation.

Staffline has announced the acquisition of Peter Rowley Ltd (PRL), an established provider of government funded training to NVQ stages 2 and 3 and Skills for Life in the area of business improvement skills. The acquisition will be immediately earnings enhancing and also provides excellent opportunities for cross-selling between the respective customer bases in the food processing industry. It provides an additional channel of revenue for Staffline and supports the groups strategy to expand within the broader definition of human capital services. We expect the acquisition to contribute an additional 0.4m to our recently upgraded 2010 adjusted PBT of 3.9m making a total of 4.3m and EPS of 13.8p. Once again Stafflines valuation is looking exceptionally attractive and we strongly reiterate our Buy recommendation. We are also taking the opportunity of raising our target price from 78p to 90p which would put the shares on a PER of 7.2x upgraded 2010 earnings.


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