Sturdy outsourced recruitment specialist Staffline has hit the acquisition trail again, snapping up DKM Labour Solutions from the administrators in a canny pre pack deal.Nottingham-based recruiter DKM fits in with ‘blue collar’ staffing specialist Staffline’s strategy of making selective, revenue-broadening acquisitions. Like Staffline, famed for managing the recruitment of its industrial clients at their own manufacturing sites via itsOnSite division, DKM has particular expertise in the relatively defensive food processing sector, and brings a complementary customer base with it.
Insisting that Staffline has had ‘a strong start to trading in the year’ in its core OnSitedivision and is ‘benefiting from the OnSites opened during 2009’, charismatic CEO Andy Hogarth says the company continues to scout for acquisitions, either of distressed ventures or thriving businesses, to supplement organic growth.
In March, 2009 financials from Staffline revealed an impressive pre-tax profits increase from £3.4m to £3.6m despite lower sales of £115m (2008: £120.8m). Strongly cash-generative, Staffline said net debt had been reduced from £6m to £5m last year, giving the board the confidence to lift the total dividend 7% to 3.1p.
As well as cost cutting and a reduced interest bill, profitability benefited from ongoing expansion in the number of OnSites by 7 to 119, whilst three acquisitions, bringing a combined £10m of annual sales into the fold, were integrated last year, namely Peter Rowley, La Gente and The Workplace.
Analysts see Staffline delivering £4.2m of profit and earnings of 13.3p (2009: 11.5p) this year, leaving the shares, originally backed by Growth Company Investor at 122p back in 2005, looking undervalued, since they sell for less than six times earnings and offer an attractive yield of around 4%. We remain enthusiastic about the group's medium-to-long term potential. Buy/hold.
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