Staffline Group PLC (OSU.F) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Staffline Group plc interim results investor presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company will review all questions submitted and published responses where it's appropriate to do so. These will be available via your Investor Meet company dashboard. And we notify you by e-mail when they're ready for your review. I'd also like to remind you that this presentation is being recorded. Before we begin, we would like to submit to the following poll. And if you'd be so kind as to give that your attention, we would be most grateful. And I'd now like to hand over to Daniel Quint, CFO; and Albert Ellis, CEO from Staffline. Good afternoon.

Good afternoon, everybody. And my name is Albert Ellis. I'm the CEO of Staffline Group. And I have as the presenters just said Daniel Quint with me. We've both been in the recruitment industry for many years. I think it's over 30 years between us. We have lots of experience. But we've been with Staffline now just under a year in terms of our experience here. And these are our maiden results after the equity raise that we did in the last couple of months. The next slide is just really giving you a heads up in terms of the topics that we want to cover. Strategy, this presentation is not going to do a deep dive. It's an interim. It's an update, but it's going to focus on the financials. This is the detail that Daniel is going to be presenting as CFO. And as you can see, it will have also some discussion around the operational review, what happened in the business in the last 6 months. And I'll refresh, if you need it, your memories around our brands and our services. But before we do that, we've got 4 key elements to our strategy. The first one is capitalize on our market leadership. And for many of you that know Staffline, you'll know that we have a very, very dominant market leadership in the blue-collar recruitment industry in both the UK and also the island of Ireland. And we have a position of scale that whilst I was optimistic during the pandemic, I've really seen the evidence of the edge that we have as we've been going through this period in terms of how our clients have seen our brand and our market leadership as a huge plus to helping them deliver recruitment and labor. So I'm going to talk a little bit more about that later on in the slides. But the first point -- almost our most important point, which is capitalizing on this dominant position as we're in a very tight labor market, its companies with dominant positions that are going to benefit in the longer term. We also have a strategy to broaden our portfolio, and I will talk about that very briefly. But this is more to do on this. You know we have a white collar recruitment business. Permanent recruitment has not been a feature of the group historically. But actually, it's cash generative, it's higher margin. If you know Robert Walters and Michael Page, you'll know that permanent recruitment is a great driver of cash and a great driver of value, and that's an opportunity for the Staffline Group. PeoplePlus is our third strategic initiative. This business has had its ups and downs in the past. Most recently, made a loss in the early part of the pandemic. We've turned that loss into a profit for the 6 months. And I think that's one of our most outstanding, as a team, I would add, actions that we can report today is turning this business into a profitable business. And finally, last but not least, the Republic of Ireland is an area where, from our base in the North, where in Belfast, our head office commands 20% of the market leadership in that geography. We can quite easily expand in the south in the Republic, where we have a good brand, we have track record. And actually, the Republic of Ireland and the North of Ireland, there's been a sort of an economic resurgence between the 2 geographies as the pandemic has hit. And as we've had the Brexit, there's been a sort of a resurgence in trade between the 2 areas. And it's just a great platform for us to grow our market share. Of course, it's a highly attractive market. It's smaller, but it's less competitive. And actually, it has better pricing. On to the highlights, which I'm sure that you might have read, I wanted to just pick out 3 important bullets. The first one is the refinancing. The transformation of the group's balance sheet has been absolutely key to us being confident in the group's prospects. Really Staffline came with a little bit of a health warning 12 months ago in terms of its financial condition, as you well know. This was reflected actually in conversations with customers, in conversations with our stakeholders in the government. And actually it was always a challenge, which just created background noise and unnecessary friction in all of our interactions and not only with our customers but also with staff and talent. And you know that people will work for businesses that are well capitalized with good prospects. So the transformation of the group's balance sheet has, in essence, also transformed our prospects as our customers have reflected back to us, how delighted and how pleased they are and how reassured they are that our position is now in an attractive one. We have new working capital facilities, and we've had some equity, which Daniel will talk about. The other 2 points is, one is, we've actually exceeded expectations for the first half of the year. It -- maybe the messaging gets a little bit muddied sometimes and people don't quite know the detail. But first of all, I think in April, but then also on the 28th of July, we upgraded our expectations twice in terms of trading and the market actually revised upwards those estimates. So we've had a very strong 6 months, and it's only been 6 weeks since the last upgrade. And the final point I want to make is that the business's turnaround has been achieved, and there's no doubt about it. And what we want to do is take you through some of the details, some of the financials that will actually reveal the levers of power and the sort of metrics that we can use to drive more efficiencies and a better performance in the future. So with that, over to Daniel.

Good afternoon, everyone. I'm now going to take you through the key financials of the first half of the year. You may have seen some of them in the RNS. But I'll take you through the key items from our perspective. Firstly, we focus very much so on gross profit, but it is obviously the case that revenue has increased GBP 430 million to GBP 451 million from half 1 last year to this year, so a healthy increase. But very importantly, the fees that we earn as represented through gross profit has increased to GBP 39 million, and that's an increase of 14% compared to last year. Very healthily, the margin gross profit margin has increased 0.8% to 8.7% from 7.9% last year, a really, really good performance across the divisions, and I'll come on to that in a subsequent slide. And additionally, conversion to underlying operating profit significantly improved to 11.8% compared to just 0.3% last year, showing and illustrating the actions that we took on the overhead cost base really coming to fruition. And then all that combined to be able to deliver an underlying operating profit increased to GBP 4.6 million from just GBP 0.1 million the year before. And further to that, we also, therefore, as part of our balance sheet activities, were able to reduce finance costs by a 1/3 to GBP 1.4 million. And on the balance sheet, we have, for the first time in 2 or 3 years, net cash of GBP 20.9 million, which is up GBP 57.1 million to really delivering a successful position at half year. That's majoritively driven by the GBP 46.4 million equity raise, but I'll come onto further reasons for that in a couple of slides' time. But when you stand back and look at those numbers for H1 2021 and consider the journey that the group has been on over the last 24, 36 months, I think that's a really good position and a good platform for the remainder of the year. Now a bit more about those gross margins; so gross profit margins, I've divided this over the 3 divisions on the first 3 sets of columns on the table on the left. And I've just given you an indication on the right-hand side of the proportion of group revenue and group gross profit that each of the division represents. So with Recruitment GB, they've increased their gross margins by 0.3 percentage points. That's coming as a result of a slight rebalancing remix of -- between the food supply chain customers, which, of course, did very well in the pandemic and non-food supply chain customers, which are slightly higher margins. And as we came out of COVID in H1, especially in Q2, we saw those margins improve. You can also see in Ireland next division along, 9% to 10.1%, a 1.1% improvement, very, very tight margin control during COVID, ensuring that the customers we were delivering for were good work customers delivering good margin for the group. And finally, PeoplePlus improved from 19.7% to 23.2% gross profit margin, driven by last year being at the beginning of COVID when we received government support, but only on a cost basis. And as we've returned to our cost-plus margin commercials as we exit from COVID, we've seen the improvement over last year towards this year. That, of course, totals to given the improvement 7.9% to 8.7%. So all-in-all, in total, a really healthy platform of margin growth year-over-year, which bodes well for the second half of the year. In terms of underlying operating profit, where did that growth from 0.1% to 4.6% come from? So I've illustrated this by dividing this into the 3 divisions. You can see the first vision there, Recruitment GB delivered GBP 1.9 million of that improvement, both through volume and margin improvement, as we've seen on the previous slides. We've also been able to invest in our governance and our regulatory infrastructure. In what is a very intensely regulated environment, whether it's National Living Wage or workers, et cetera, all needing to be regulated very importantly. And this is an area that the group was a little fragile on a couple of years ago and when it came a little unstuck. And we have turned it around, put a really strong governance and infrastructure regime in place and now not only maintaining that, but enhancing it so hence, that investment. Recruitment improved on operating profit year-over-year marginally. That was because Q1 2020 was a stellar quarter for Recruitment Ireland, and therefore, the comparative was very difficult in Q1 this year. But in Q2, in the recruitment part of Ireland, we've seen 35% increase actually in gross profit, so really a good end to the half, which bodes also very well for H2. And finally, the biggest divisional turnaround of the group, PeoplePlus, which has delivered GBP 3.1 million of the improvement in operating profit across all areas, both volume margin and overhead cost savings, as you can see, 0.6% there, where there was a cost base that needed to be made more efficient towards the end of the first half last year, which we've delivered over the last 12 months, and I'm really pleased with that. And finally, for a group that hasn't paid out senior corporate bonuses for the last few years, it's appropriate as we've turned the group around to provide for potential bonuses as long as targets are hit, and hence, the GBP 0.5 million part of the bridge there at the end. So that is the journey that we've gone on from last year to this year in terms of underlying operating profit. Final P&L slide. And this also is an illustration of the improved health of the group. So this is non-underlying costs. And you will see that in H1 '21, the only non-underlying costs we had were noncash and were the amortization of intangible assets on business combinations. And the point I made by this slide is that we've removed all non-underlying cash costs only with a noncash amortization charge. And if you look at the prior year and the year before that, you'll see the level of noise that was going through the P&L on a non-underlying basis. And it is Albert's and mines and the group's intentions to drive the group forward operationally, but also reportingly on a clean basis, and here is the first illustration of that. To move on to net debt. What I've done here is illustrate net debt but also adjust for a couple of anomalies that allows one to look at net debt on a like-for-like basis across the last 4 half reporting points. So I've adjusted for 2 items. The first is normalizing for deferred VAT. You'll all be familiar with the -- as a result of COVID, the government allowed VAT due between March and June 2020 to be deferred to this year, and we've started paying that back in June, and those payments go through to January 2022. But it is appropriate if comparing on a like-for-like basis, to add that back in as though it would have been paid last year and hence, add it to the net debt. And secondly, we previously had an element of off-balance sheet debt, which as a result of our debt refinancing in June, alongside the equity raise has come back on to the balance sheet. But because that was off-balance sheet in the 3 previous reporting have, I've added that back in so that you have a like-for-like presentation. And what you can see here is that the normalized adjusted net debt of GBP 95.9 million in June 2020, is now down to GBP 19.7 million, which is an improvement of GBP 76.2 million. I fully recognize a large portion of that, of course, is as a result of the equity raise, but of course, additional elements, such as improvements in trading, operational profit, cash collections, et cetera, have added to that GBP 46 million to make that move downwards of GBP 76 million. So we're really, really pleased with that position. And just to move on to the next slide, giving an illustration of some of the key items moving from the reported net debt of GBP 36.2 million last year to the reported net cash. So this is not normalized or adjusted as I did on the previous slide, but it's the actual reported amounts. These are the key movements throughout the end, and I'll just go through those top 5. So the first one is the item I mentioned on the previous slide, GBP 17.8 million of off-balance sheet debt that was brought on balance sheet during our debt refinancing. That's item one. Item two, strong underlying EBITDA of GBP 13.7 million. Item three, circa GBP 25 million worth of trade receivable improvement and reduction and cash collection optimization. There is a circa GBP 15 million if we estimate of timing in that, but it's a really good result nonetheless and sets us in a really good balance sheet position. And second to last, corporation tax refunds from HMRC. We've recovered GBP 5.9 million. My group finance team has done an excellent piece of work in terms of going back through the years to ensure that we have recovered all the amounts that were overpaid as a result of non-underlying charges and losses, et cetera, and recovered that to-date. And finally, of course, bookending on the right-hand side, the GBP 46.4 million equity raise. And that takes you on a full journey from the net debt of GBP 36.2 million in June 2020 to the net cash of GBP 20.9 million at the 30th of June 2021. And final finance slide from me is some productivity KPIs here. Firstly, in the top left corner, the recruitment businesses combined, gross profit per fee earner, which was up 25.4% compared to H1 2020 last year at GBP 37,500 comparing to that GBP 29,900 last year. And on the top right-hand side, PeoplePlus' total revenue against total employees, again, up 30.6% compared to H1 2020 at GBP 30,700 versus last year's GBP 23,500. So 2 productivity measures that are positive as a result of 2 things: firstly, growing gross profit and increasing revenues in PeoplePlus, but also as a result of the headcount reduction, which I illustrate there at the bottom of the slide, and I show the arrow from June 2019 to June 2021 this year of a reduction of 520, as I've just explained there on the bottom right of this slide, a decrease of a couple of hundreds in Recruitment GB. We delayered that division to optimize its operating efficiency in Recruitment Ireland, a general reduction in central overheads, headcount as well as frontline as a result of the pandemic. And then also driven mostly by the pandemic, but not totally, PeoplePlus' reduction of mainly lower tutor numbers and then when we see our skill centers and prisons continue to reopen, those numbers are easily flexed upwards and in line with revenue and gross profit growth. So that's the end of the finance section of the presentation. I will hand back to Albert to take the presentation forward.

Thanks, Daniel. Right, so just before we get into the operations, just a reminder that we have 3 divisions and 2 brands. We've got 2 services really, recruitment and training, and we have 3 divisions in the way we manage the group. The UK, England, Wales and Scotland under the Staffline GB brand and then Ireland is managed separately, and then PeoplePlus represents the training business. What I wanted to do though is also just show that under the broad Staffline brand, we also operate Omega, engineering and technical white collar recruiter and Brightworks, which is Scotland's largest recruiting. In fact, the nearest rival to Brightworks and Staffline in Scotland is only half the size. And then finally, we have Datum, our consultancy, niche consultancy and not a recruiter, but actually a recruitment process and procurement outsourcer, mainly in the construction industry, but a really good little business, plenty of opportunity facing them into the future as well. So just a summary of our brands and our services, which hopefully demonstrate that we've got quite a broad spread, and we can actually leverage all the growth in those various different markets. I'm going to start with the Recruitment GB business, which is essentially the UK, Scotland and Wales. And I'm going to just talk a little bit about the growth and where it's come from. We've actually increased revenue, as you can see there, quite substantially, and gross profit has followed that increase in revenue and recruitment businesses notoriously struggle to increase their gross profit in line with revenue. Price is always under pressure. And this is a key measure for mainly investors to see that we're keeping and maintaining our pricing. And we're also are improving our mix so that our gross profit is actually growing strongly. Now we've had growth in the food, as you can imagine, you've seen our previous RNS statements in the food, the online meal kit deliveries, the Goustos and the HelloFreshes of this world. Our particular client that we've won and secured has really grown strongly over the pandemic, spurred on by the fact that people delivering everything online and procuring online. And then finally, the logistics sector, which has been really a proxy for online, and we've seen high demand, and you've read about the demand for drivers, for HGV drivers and for staff in the supply chain. The travel and hospitality sectors have been, as you would expect, subdued for the entirety of this period under review because, of course, lockdown only ended after our June 30 interim cutoff. I'm not going to talk too much right now about the candidate shortages. I've just noted them there. There's candidate shortages across the board. But as I've said, probably at the top of this presentation, we're facing into a strong market and candidate shortages are inevitable. And they're not seeing -- they shouldn't be seen as a bad thing necessarily, but they can hold back the growth of the business. We've just got to work with our clients in terms of resolving and helping them through that and actually being creative and innovative in terms of finding those candidates. We also expect that the public policies, mainly in relation to further, but also in relation to job centers and claimants and welfare. We expect those policies to flex and begin to help assist easing those shortages with the end of furlough, in particular, at the end of the month. Look, the business has had a great 6 months. It's the largest business in the group. It's delivered. It's tripled its profits. And actually, the restructuring has given it a much better conversion ratio. And as you know, if you're a recruiter or you follow recruiters, conversion ratio is your acid test in terms of whether your gross profits are converting the right amount of profit to the operating profit. So we've doubled that from 6% to 13%, really pleased with that. Then we're on to Ireland now. And of course, Ireland is much -- it's a much smaller business, but it's perfectly formed. It has some great stats. And you can see the shape of it, 21% conversion ratio, 2.5% to 2.4% net EBIT over revenue. This is a good business that actually has never made a loss, has got a very capable management team. Now of course, the first thing that perhaps that will strike you is that the numbers are broadly similar to the prior year. And I just want to reiterate something that Daniel picked out, which was that actually Ireland lags the UK by 3 to 6 months. It certainly lagged the UK and going into the lockdown last year. So it had a very strong first quarter. And actually, if you've been following the news, you'll know that the Republic, in particular, has had one of the most severe lockdowns in the world, possibly with the exception of Australia and New Zealand. And that, of course, has hampered our ability to hire train and actually exploit permanent recruitment. It's been the same for everybody. So those are the reasons why the numbers on the face of it looks similar to the prior year. The underlying trends are very strong and as Daniel has pointed about, the quarter 2 numbers versus quarter 2 last year, up in double digits growth coming through very nicely. Mainly Ireland is also a white collar business, white collar recruitment business focused both in the public sector and the private sector. The public sector also tends to lag the private sector slightly, just the nature of the business. And so you get a double lag there. And so we're really expecting Ireland to deliver a strong second half and into the first half of next year, see some really good performances there. Once again, a really tight cost base under tight control, excellent conversion ratio. One little point I'll make is that we want that conversion ratio perhaps to ease and float down slightly because we want to improve the headcount and invest in fee earners. And actually, there's a trade-off between conversion and growth. And we need to grow a little bit more, particularly into next year, and that will be at the expense of the conversion ratio just slightly going into next year. And then finally, last but not least, our PeoplePlus and Training business. This is a market-leading business, well-known in the sector for excellent delivery, always scores high in any tender that we're involved with. And as most recently secured 3 contracts. They're called Restart and they're about the government's initiatives post furlough to put people back into work to reskill them as the economy has shifted and moved and adjusted. And it's actually -- we're at the forefront in many areas, particularly in places like Wales and other areas like the Northeast and Kent, where we will be delivering those Restart contracts on behalf of prime suppliers, so a business that it's grown its revenue. You can see they're from GBP 35 million to GBP 40 million and its gross profit. And it's got a really nice shape around its figures. This has been driven by employability. The business has 2 core sectors: employability, which is about taking people who are not in work and putting them into work or putting them into their own business, something that if you explore the PeoplePlus website, you'll learn more about. And it's a little known fact that we're the largest provider of support and government support for people who want to start their own businesses. And we've seen that at record levels in the last few months. On the skills side, as you'd expect, the read across here is, of course, schools and universities, where actually -- the contagion from COVID has been really quite challenging. So the skills has been impacted by -- skill centers have been impacted by COVID. This remains the case. We've had the first 6 months of locked down, obviously constraining. And then we've had in-person training being introduced over the summer. But really, training doesn't really get going until the autumn. So the first 6 months has reflected that constraint. And finally, I just want to make a really big point about the turnaround from GBP 1.1 million to a GBP 3 million profit. That's been a tremendous achievement by the very talented team that we have at PeoplePlus, really one of the stunning turnarounds and highlights of this 6 months. Of course, that will fade slightly as the other 2 businesses generate profits. And actually, they bounce off comparators that are profitable into the second half of the year. So expect all businesses to grow into the second half of the year. And so that's PeoplePlus, really good results. We're delighted that it's in profit. Of course, we also disposed the Apprenticeship business towards the back end of last year. So quite a lot of restructuring there, but we're seeing that coming through on the conversion ratio, moving up from 15% to 20%. Now I thought I'd talk a little bit about the -- this is not the most recent stats. They've actually -- the August stats have been just released in the last 24 hours, but these tell the same story and August is just a continuum of that. These are the July job market stats. And they're not a press release from some -- from a recruiter in the industry, anecdotal evidence and surveys. These are actual figures taken from the HMRC and other areas. And what you can see is that payrolled employees, which is actually the size of the formal employment market. So that is the size -- that's the total size of our market, with 29 million because I think there's been another 200,000 added since the stats, 29 million people on payrolls who will move jobs at some point and who will also come to seek opportunities. So that's the total market. It's always good to have a market that's growing. And of course, we have a tight labor market as well. And as I've said, it's beneficial to recruitment. Now why I've picked out hours is actually, you've heard a lot about productivity, about how the British economy, in terms of its productivity has been lagging, some of its neighbors and competitors. Now this is a good example of that, that actually that pandemic has made this somewhat worse. And actually, the good news is it's bouncing back, but it hasn't got back to pre-pandemic levels here. There's a lot of reasons for this, not least of all the so-called pandemic, the isolation, the furloughs, et cetera, keeping people away from work, constraining them either through illness or through self-isolation and other measures like furlough. Now that needs and will rise. We're expecting that to rise over the next 6 months. And our own temps are telling us that they want to work more hours. They want more consistency. Our staff are telling us they want longer hours, they want extra hours. They want to work and they want to increase their take-home pay. So there's the willing and there's the opportunity and for us there's the future upside from expected increase now. Because if you don't know, our hours is the way we base our revenues. That's how we derive. That's a driver, a key driver of revenues and therefore, income in our business. And finally, this is just a snapshot in time, of course, 953,000 vacancies in July. And as all of you will know, because you're all well-read, I'm sure, and have seen the news this morning that, that has passed to 1 million in August. So the most recent job and this is unprecedented, right? That slide goes back some years. It's an unprecedented demand for labor. So listen, a good market, like we're seeing here in these statistics is really beneficial to recruiters. So there's one law in recruitment, and that is you want a strong market, you want strong demand, you want a growing market of employed people. And actually, a tight labor market is beneficial. It reminds customers of why we're necessary to help them with their staffing challenges. Of course, when the labor market gets too tight, it can be detrimental. You've seen the stories about HGV drivers and sort of milk and groceries on the shelves, not gaps in the shelves in the supermarkets, all of that. The companies will solve those problems. It will take them some time. And I suspect some of the issues in terms of furlough and others will help the labor market overcome that. So that's our sort of facts and figures for the day. I wanted to just turn to current trading and outlook. And I know that all of you and all of us always are very interested in what the outlook is like. And obviously, it's a confidence -- it's a measure of our confidence based about what we see. And just to reiterate, we see a very, very strong market. We see a market that actually is -- demand is outstripping supply. Candidate shortages just are exacerbated and are coming through -- being reported widely across the sector. That's actually supportive to a good market. And then finally, this is really important, but Ireland finally released from lockdown and easing its restrictions, that will give us a little bit of a boost going into the autumn. And we're seeing, as you know, that our Christmas peak is critical for us to deliver the numbers. And it overachieved, if that's possible, it'll all be around the Christmas trading. And if you remember last year, the outlook was much, much worse than we're seeing now in terms of -- we didn't have the vaccine rollout. In fact, the vaccines weren't feature at all of last year's market. And also, many parts of the economy were completely shut like travel and hospitality, but also we saw that retail was shut down with lock down over Christmas. So it's bound to by just the law of logic that this year is going to be much better. I just want to end on the Training business where employability is obviously strong. The in-person training now should come back to us. We should see the trickle of learners actually going through material numbers that will improve results. And then finally, as I said, it's really early days on Restart. We've mobilized only 6 weeks in now. Those early targets have been achieved. Now we're looking to see the delivery on those -- on that contract. But of course, it won't take -- it won't be in this year. We won't see any impact from Restart until the back end of next year and possibly 2023. So the group, we're confident it's trading in line with its revised upwardly increased market expectations in the last 2 months, as I said, for the full year. And with that, maybe, Daniel, you would like to make some comments, too, on the outlook and the current trading.

Yes. Thank you, Albert, very much for that. Just to conclude before I just pass back to Albert for a final conclusion. Just in terms of in the context of everything we've presented, we do see that -- analyst market estimates have increased twice over the last number of months, once in April from GBP 6 million to GBP 8 million, and this is for underlying operating profit. And secondly, at the end of July, from GBP 8 million to GBP 9 million, and that's what we see analyst market estimates as having increased, too, on the back of what they no doubt see in terms of the economy, the sector, et cetera, et cetera. So yes, just passing back, Albert for you to finally conclude, and then we'll take some Q&A.

Thanks, Daniel. Look, we haven't gone into a lot of detail in terms of the governance of the company, but the governance has been dramatically overhauled. There's a new board, there's a new exec, and we've got an experienced team below us. Daniel has refreshed the finance teams. We've had an overhaul of the compliance environment, and this has been -- this has given us a strong base. We've had double-digit revenue growth. We've had market share gains. Our edge in our market is being demonstrated through evidence through customer wins through feedback that we've got. The margins are improving -- loss-making divisions have been turned into profits. All 3 divisions are making profits. Cash has exceeded expectations. As you know, Daniel pointed out, the extra headroom we now have for growth. We're well capitalized. There's a strong jobs market. Vacancies are at a record high, but tight labor markets. So these are sort of the perfect greenhouse conditions for growth with a blue-chip customer base and world-class delivery, delivery that many people beyond just the confines of Staffline and our staff know that they were capable of and the reason why the Staffline Group has prospered during the pandemic, notwithstanding some of the issues that had on its balance sheet. So with that, this concludes the presentation. Thank you so much for listening. Hope you stay on for some Q&A. And I'll hand it back to the presenter.

That's brilliant. Albert, Daniel, thank you so much for updating investors this afternoon. [Operator Instructions] But just while the company to take a few moments to review those investor questions submitted already, I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can be accessed via your Investor Meet company dashboard. I'd also like to remind you that your feedback is important to the company. And immediately after this presentation has ended, we'll redirect you for the opportunity to provide feedback in order that the company can better understand your views and expectations. Albert, Daniel, obviously, investors have submitted a number of questions through today's presentation. So firstly, thank you to those investors that have submitted questions. Perhaps I could hand back to you guys. If I could ask you to, where appropriate, read out the question and give a response and I'll pick up from you at the end.

Well, I'm going to let Daniel answer the question on the share price yesterday. But before I do that, can I just talk to the competition? Someone's asked us, thank you for the congratulations on progress. They've asked us about competition, what differentiates us and how we defend our position in the market? One of the key differentiators in the blue-collar recruitment business is actually scale and reach because it is a numbers game. When you saw the announcement this morning from a leading retailer that they were going to hire thousands of temps for the Christmas period, that's what differentiates us. We can cope with volume, we can cope at scale. The other differentiator is the brand because a lot of the interaction with candidates and potential labor in this market is done on apps. It's done very quickly on jobs boards and on our own databases. And we have technology that waves all the various systems and feeds together and we believe gives us a competitive edge in terms of timing, in terms of access, in terms of the size and scale of the database we have. So it's all about your size and scale. And one final little point, we actually reach into parts of the country where there are no competitors. It's where customers are based where there might not be or they might be poorly served by public services. We actually provide transport in certain conditions in certain parts of the country. And so we will do a full service in hard to reach areas where they're critical distribution hubs, but actually, they're poorly served by transport links or certainly -- they're not near major conurbations. So those -- it's really just a geographical reach of scale. It's about technology. So I'll hand you over to Daniel to talk a little bit about why -- in your words, you said the message, whilst good was poorly received by the market yesterday.

Sure. Thank you, Albert. Thanks very much. Yes, the question was asked, well done for the improvements now yesterday, why in your opinion, was it say, poorly received by the market? I think that's probably twofold. The first reason is the share price has had a good run. As you know, we raised money in June at 50p. So current share price today is still more than 50% ahead of that and had reached up to an, I'd say, 93p. I think that's probably one reason. But potentially, additionally, is that I think people are expecting the company to openly talk about upgrades, et cetera, et cetera. As I pointed out, just at the end of the formal presentation, I believe, and we've seen analyst expectations upgraded twice this year by the analysts as I said, once in April from GBP 6 million where they started the year to GBP 8 million. And then analysts made a further upgrade of expectation from GBP 8 million to GBP 9 million at the end of July. So those have been made and no.

Daniel, that's EBIT, isn't it? Sorry.

Yes, that's underlying operating profit, correct, underlying operating profit EBIT. So I'm guessing that those are 2 reasons combined and blended probably. Of course, as a company, we are not short-term thinking. We're medium to long-term strategists and wanting to make the best value for shareholders over the medium to long term. So I'm not too concerned at the trends that took place, yes, that would be my explanation.

Thank you, Daniel. I'm just going to pick up on a few more questions as they're rolling in, if you don't mind, how is M&A playing part of the future growth now that we've turned around the business? Really good question. M&A is integrally, in my view, to any public company seeking to grow its market share. If you've got excellent delivery, why not buy businesses and expand your market share and accelerate your growth. Look, there's been quite a bit of M&A in the more recent past before Daniel and I joined the board. And actually, those businesses, we've not seen in Omega and in Datum and all of those businesses that were acquired, their true potential yet. We want to see them coming out and actually realizing their true potential. So in the short term, I don't think you'll be seeing any M&A from us. I would never rule it out. But I don't think you'll be seeing it. We have an organic growth strategy, mainly. And so that's the easy answer to that question. And then on the next question, I see -- are you planning on repaying any received furlough monies to the government? Well, look, we weren't a huge beneficiary of furloughs. We did have some furloughs that were mainly in relation to our customers, staff on our customer sites. We were requested. So that was part of that. We would -- I can't comment on whether our customers have any intention. But in terms of our own support, the main support we got, which we were very, very clear about was the VAT support, which was the VAT relief. And Daniel, maybe you can just comment on how that's playing out. I think you've mentioned it in your slides, but if you could just be clear that we certainly are -- we're in actively repayment of that.

Absolutely. We received the benefit of a deferment of approximately GBP 46 million at June 2020, and we have just started to repay that. The first installment was repaid to government in June. And there's a repeat installment payments all the way through to January 2022. And then that whole GBP 46 million will be paid back, so fully refunded back to government.

Just another question we've got on HR, it's interest and shareholding. I see on the message boards, that's a sort of ongoing topic. I will raise it in terms of that we can't comment on, and we shouldn't comment on shareholders' interest. We don't know what their interest on and how things will play out in the medium term. But what we can tell you is that our shareholders, in general and individually, are very happy or supportive and express those that support actively to us, and we have strong relationships with them, which is critical. I think in a business -- in a fast-moving climate that we're in, that we're communicating regularly. And I think that the recent equity raise has rebalanced the shareholding portfolio that we have has made us, I believe, more liquid and, of course, has introduced some really strong global brands in terms of investors, long-term funds and pension funds into the opportunity. And so we're very, very confident about what's happened with that equity raise. And we're really pleased with the outcome. Just looking to the next one, the rates for drivers. I love talking about drivers. I've learned more about driving in the last 6 months than almost anything. Well, the current driver shortage, what -- if I can just reduce your question to the issues around the shortage. First of all, these are really existential challenges in terms of a combination of Brexit, something that's little talked about, which is the IR35 changes that happened in April. They did impact drivers because drivers certainly in the sort of the higher classes, heavy goods classes are mainly self-employed or generally self-employed. So those tax changes created some short-term sort of headwinds and turbulence in the market, but it's been a range of things, not least of which testing centers were closed. And we need to see 20,000, 30,000, 40,000 drivers come onto the market. And of course, during COVID, that was severely curtailed. So that's the sort of thing we're looking at. In fact, we're having dialogues with the government even today and with our large clients about how the government can help the industry and how they can help driving. It's really about training, and it's about making it accessible. The cost of HGV driving is quite prohibitive. There's lots of things the government can do, and we're talking to them even today, as I said, with our clients about how that can help. And that helps Staffline. You've asked the question does it help or does it hurt us? Well, of course, if we don't drivers that we can place, we miss out our margin. That's the short-term impact. But all businesses have pluses and minuses. So let's not get this out of context, but we love the engagement it brings it. It means it brings us very close to our clients, and our clients are reminded that we are a necessary and integral part of the supply chain. So that's my comment on driving. I would encourage people considering driving -- if they think that HGV driving was poorly paid or week per hours, it's improving dramatically. Last I heard it was up 30% in terms of average pay and terms and conditions are improving. So -- and we need HGV drivers. So that's the driving market. And as you know, we're the market leader in driving. And we do expect it to improve in the next 6 months. Possibly, it's going to be tight around Christmas, as you'd expect. But the retailers are super innovative and creative, and we've got one of the best retail sectors in the world in this country. And I'm sure that they can -- that they will come up with solutions, and we're going to do everything in our power to get drivers into the economy. I know that is a long answer, but driving is something that's occupying a lot of people at the moment. Right, Daniel, maybe you want to -- you just wanted to maybe just answer the question about the EBITDA margin targets? Talk about -- there's a question here about time frames and margins and targets. And actually, we've been quite open with our -- with what we believe is good, what good looks like. Maybe you could talk about conversion ratios, perhaps? That is a little bit more relevant.

Performance and delivery. We published numbers in November 2020 just regarding gross profit margins and conversion rates. So gross profit margin is heading up towards 8% and then 28% including 20% PeoplePlus. And we see a trajectory through to that. And then conversion rates from gross profit to operating profit of 15% in recruitment, 20% in PeoplePlus. I think the comments, this is obviously a high-volume industry in this particular company and sector and talking about circa 1% of operating profit margin. Clearly, we're moving -- we're looking to improve that significantly over -- I would look to add a percentage point above that to return to some former times and to an extent. And the conversion rate that we've seen in H1, moving from 0.3% to 11.8% this year is part of that journey, as you would have seen on the gross profit margins as well. So I think the comments made about profitable growth. That is all what we're about. We have -- as one particular customer, which we have re-exited from, which was particularly low-margin for a high working capital investment, which we didn't deem acceptable. So we exited from there and with an intention of improving bottom line margins and return on investment from a working capital perspective.

Thank you, Daniel. Question on permanent recruitment, yes, really, really relevant. I think permanent recruitment, if you just have to look at Robert Walters as a really extreme example, I think, of how a business has used permanent recruitment to generate lots of cash and growth. And of course, in the professional market, permanent recruitment is more valid than even temporary or contract recruitment. In the professional market, the large contract recruitment is obviously IT recruitment, which is -- which has a lot of contracts and a lot of project managers and their self-employed individuals. However, in the professional markets, it's about perm. So that's the nature of the game there. In the blue-collar recruitment market, it's an hourly and shift based method of work. People reflect that they're generally flexible, many are part time, and they want to work on their own terms and all the feedback we get is they like the flexibility and they like the sort of the nature of the work so permanent recruitment is really not as a key feature of the blue-collar market. Where we're actually starting to look and execute on our permanent recruitment strategy is that our brands, Omega and Brightworks and Techsearch. They are business -- they are services that would naturally lean to permanent. We have the consultants and the expertise to deliver on that perm. And in Ireland, we've got a very large proportion of our business, which is permanent recruitment because it's -- naturally, it's a white collar recruitment business. And so in Ireland, we see the permanent recruitment numbers climbing quite strongly. So we're executing it where we [indiscernible] it's safe. We're not taking -- we're not plunging investment into areas where permit recruitment doesn't automatically fit. But we're also asking our clients where we've got temporary and where we've got labor that's on our hourly basis. We're asking those clients if we can help them with their permanent recruitment, and we're getting positive feedback. But we're in early stages of executing on the strategy in relation to perm. But as you know, I'm a fan of perm. It's a cash-rich service. It doesn't absorb working capital, and it increases your margins. The only downside with perm, of course, has got very limited visibility, as you know. You've got 6 weeks max. If you're an executive business, you might have up to 3 months, but with your retained assignments, but permanent recruitment is a sort of 4 to 6 weeks visibility. So we also -- we really like the visibility we have on our contract side and our temp side. A quick question on direct to buyers. Yes, we certainly put our hands in our pockets for the equity raise. And I know that you've catched your question here in the sense that, that's mandatory and given. And I sort of -- I can -- I totally buy and understand where you're coming from. It's having skin in the game. But actually, it was more than that. The executive management team and the board and people that report to us, all were very enthusiastic about the opportunity, and they've been rewarded. There's no doubt. So that was a good investment decision. But we're average people. We're not billionaires. Your question is around scale. I understand that and the sort of quantum of investment. We put in money that's material to all of us. I can say that for sure, and it's not tokenistic. So I think that's our sort of final answer on that one, is take it from us. It's not a token. We want to make money as much as you do. We've got skin in the game. Daniel, although we raise money and rode the VAT repayment, which was our way of taking support from the government. Actually, we didn't just raise money for VAT. We did a lot of self-help, which -- some of which you went through, but maybe you want to just describe that the -- the equity raise enabled the restructuring of our debt, which at that time was very complicated and onerous. And so actually, the equity raise was far more than just about the VAT release. Maybe you just want to make a few comments on that.

Yes. No, thank you, Albert. And yes, you're referring to the slide, the normalizing adjusting slide, which I presented during the presentation because clearly, there was additional debt. And actually, if we just take the headlines, GBP 100 million of net debt has come down to GBP 20 million of net debt. That's the headline of high-level numbers with a GBP 46 million raise. So there's clearly an additional chunk of activity and effort that's been put in alongside the equity raise, to the tune of GBP 30 million, GBP 35 million. So it's not just the equity raise that has paid the VAT off. It has certainly contributed to it. But I think you need to look at it in that like-for-like manner with the circle reduction from GBP 100 million to GBP 20 million in net-debt across the balance sheet from last year to this year alongside the self-help measures we've taken, which, from my perspective, leaves this group and company in a really solid platform to take advantage of the very changing labor market that we have before us, including also the skills and training market. So we're well positioned for that over the next number of months, which is going to be a very, very interesting time. And for me, thank you to all of you for all your support during the last period.

Yes. Thank you.

That's great. Albert, Daniel, thank you so much for updating investors this afternoon. I know investor feedback is particularly important, and I will shortly redirect investors to do so. I wondered before doing that, maybe, Albert, I could ask you just for a few closing comments before I just redirect investors, as I say, and thank you again to investors for submitting those questions today.

Yes. Thank you. Just reiterating the fact that all turnarounds are not necessarily complete after their first results. It's a work in progress. So Daniel and I are working hard, not just on the numbers you've seen and on the operational improvements you've seen. And indeed, with the KPIs that we've brought out for the first time, which all good recruiters are fair with. We want to continue the progress, and we think there's more opportunity and more to be done. Of course, the road is never straight, and we're expecting that, and that's part of our experience, 35 years in recruitment. We know what to do when the chips are down. We also know how to improve the business when the opportunities that we see right now, these benign market conditions, which we're facing into, this is the sort of market that really, really gets us going. So all of that opportunity, all of that good competitive advantage we're over the moon in terms of what's been achieved. Our teams and our people have done a fantastic job, but also thank you to the markets for supporting us. We've been conscious of the support. It's been visible. And of course, the equity raise was a great example of that. And so on that, I would like to thank you, and thank you for coming and attending our webinar.

That's brilliant. Albert, Daniel, thank you once again for updating investors today. [Operator Instructions] On behalf of the management team of Staffline Group plc, would like to thank you for attending today's presentation. That now concludes today's session and good afternoon to you all.