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

Good morning, and welcome to the Staffline Group plc half year results investor presentation. [Operator Instructions] Before we begin, I'd like to submit the following poll. And I'd now like to hand over to Albert Ellis, CEO. Good morning, sir.

Thank you, and good morning, everybody. We're delighted to be here this morning. We've released our results. As you know, a very resilient set of first half results in what I would call a very challenging market. I don't think that's news to anybody. But most importantly, we've got some tremendous customer wins and extension of our market share that we've announced, and we've also announced a buyback. While the macroeconomic backdrop has been challenging, the group's first half profits have been in line with expectations. We've increased market share in many of our customers. All three divisions have remained profitable. Daniel, here with me, is going to go through the highlights and the main headlines of the RNS. So with that, over to you, Daniel.

Thank you, Albert. Good morning, everyone. Good to present to you again today for our half 1 2023 results. So I'm just going to take you through the financials and the headlines as we have them. And as Albert just mentioned, we believe the result shows resilience in a challenging market as the headline on this slide says. With, for us, a key factor being the fact that net debt has reduced by GBP 6.2 million. And revenue starting at the top has been broadly flat despite the decline in the market and our underlying operating profit for H1, although below prior year, is in line with the expectations -- the market expectations as well as we're projecting for the full year at an underlying operating profit level as well. All 3 of our divisions profitable again in this challenging market. And as I said, one of the key -- the key results of H1 is that our cash at the end of June 2023 is better than expected, with cash generation or net debt reduced by GBP 6.2 million. That leaves net debt at GBP 3.5 million at the half year. As some of you recall, we had net cash at the end of December '22. It's -- that's the seasonal reality of our cash and debt, so improvement year-on-year. And very critically, banking facility headroom of GBP 58.7 million. That's improved by GBP 12 million from GBP 46.7 million last year. All those factors that I've just outlined have enabled us to launch a share buyback program this morning of GBP 4 million, which we believe is an opportune moment to do this. And then, of course, regarding People, we've got very appropriate and focused attraction and retention plans in place to ensure that we're keeping talent in what is a very, very competitive market. So a set of headlines there that I think represent a resilient half of the year. Now moving on to some of the financial result details. Gross sales value, which represent everything of all our delivery across the group. That's up 4.5% to GBP 496.4 million, again driven by new wins in our managed service provider division of Recruitment GB. Revenue, as I've already said, broadly flat with the full half year of our BMW contract in H1 '23, compared to H1 '22 when that contractor just started towards the end of the half in Q2 2022, and that has offset some of the reduction in hours in our consumer-facing customers, which Albert will talk to a little bit later on. Gross profit has been impacted by softer permanent recruitment that, as many of you would have read, is in line with the wider recruitment sector, along with some of our higher-margin employability contracts just terminating at the end of H1 last year. So those haven't flown through this year. And underlying operating profit down from GBP 4 million to GBP 2.4 million. I would emphasize at that GBP 2.4 million includes GBP 0.6 million of losses attributable to our Skills business within PeoplePlus. And as Albert will reference later, we've made the decision to close the in-person section of that business for appropriate tight labor market regions and Albert will go through that a little bit later. So just moving on to where we see activity going forward and the headline here, we look forward to economic recovery with some reduction in inflation and many of us would have already seen lowering of energy costs with the price cap having been adjusted at the beginning of July. So we do believe that Staffline Group is excellently positioned for opportunities going forward in the market. To remind you of our strategy, and this has started to manifest and we've announced that this morning a focus on organic growth, expansion of market share with existing major customers, existing contract expansion and winning new business. And you would have seen in the RNS this morning, that we've been giving 14 new distribution centers with GXO, one of the largest, if not the largest logistical player in the world as well as the renewal of our M&S contract and now sole supply, an increase in that supply. We would joint supply AM Fresh, one of the largest producers of fresh produce in the country in the U.K., and we'd now sole supply at that customer, and that's been announced in the RNS as well. Of course, in these times, we've got a laser sharp focus on transformative reductions in costs, and that's across our entire group. It's really, really laser focused on that. At the same time, investing in one of our key strategic pillars in Ireland, specifically in the Republic of Ireland, but also including Northern Ireland, where we do see opportunities as the governments have said, the Windsor Agreement means that Northern Ireland is perfectly positioned with open access to the U.K. Union as well as the European Union. So having over 20% of the market there positions us well there. But as we've said before, we're also looking to expand into Republic of Ireland, and that has borne some fruit and offset some of the softening in permanent recruitment across the island of Ireland in H1. And of course, growing profitability in all 3 of our divisions and fundamentally generating cash to further strengthen the balance sheet, as we have done over the last few years, and I will illustrate that in a slide in a moment. And finally, as I've already alluded to in a previous slide, retaining our talent and management absolutely fundamental to the future delivery of the group. Just moving on to half 1 to half 2 directions and themes that we see as important that underpin why we're holding underlying operating profit in line with the market expectations. Organic growth, GXO Logistics, again, the item has already been announced, the 14 new distribution centers with the prospect of 2,000 new additional workers and 100 drivers and the sole supply at AM Fresh, those are 2 pieces of evidence that our strategy is starting to bear fruit. And of course, it's been a challenging H1, but with the peak naturally occurring in H2 in Staffline Group, especially in our Recruitment GB division, we see those 2 new pieces of additional work with current clients -- significant additional work is very important, not only for H2 of this year, but of course, beyond 2024 and afterwards. So we -- as I've just mentioned, the traditional seasonal peak uplift in H2, and we're hoping that benefits. We've already seen a little bit of benefit by the various World Cup events going on in the remainder of this year. And as well as that, in PeoplePlus, the exit from the in-person skills business will contribute towards a restructuring plan that will deliver a GBP 1 million worth of cost upside. Some of that's starting to come through in the second half of this year. And as I've already mentioned, the hope that inflation continues to decline as well as the energy costs, which many of us have hopefully already seen in a reduction in our costs coming through from July. So important underpins to the movement from our results in H1 through to the full year by delivery in H2. Just moving on to a few further more detailed financials eventually onto the balance sheet. Net finance costs, although up, I would remind you that we are protected by our interest rate cap, and therefore, that GBP 0.6 million increase in interest cost is being kept protected at that level. And into to the -- extended to Q4 in 2024 when that's how far our interest rate cap goes through to. And obviously, we'll be working to manage those numbers as we go through the rest of this year. At the loss after tax of GBP 3.2 million, as I've mentioned, includes the provision for the exit from the Skills business. And on a post-tax basis, that includes a one-off provision of GBP 1.7 million, pretax GBP 2.3 million, post-tax GBP 1.7 million within that GBP 3.2 million. So the movement year-over-year isn't as significant as it seems based on that one-off movement. And finally, very importantly, net debt from the 30th of June last year 2022 to this year 2023, has improved by GBP 6.2 million on a pre-IFRS 16 basis, so down from GBP 9.7 million to GBP 3.5 million. And 3 very important KPIs from a financial perspective -- financial covenant perspective. I've already mentioned that our banking facility hedging has increased by GBP 12 million to GBP 58.7 million, but our leverage financial covenants with our lenders at 0.5% at the half year, and that's versus a covenant maximum of 4x. So really a significant amount of headroom there. And in addition to that, interest rate cover at 4.7x versus a covenant max of GBP 2.25 million. So -- covenant minimum should I say, GBP 2.25 million. So really great position to be in. And just on this next slide here, you'll see how we delivered the net debt improvement of GBP 6.2 million, very much underpinned by strong underlying EBITDA, and this is over the last 12 months. Just to emphasize that, this is not 6 months of H1, but it's the June 30 to June 30 movements for 12 months, GBP 13.8 million of EBITDA. And also just to point out here, a really strong focus on just what's really adding value from a capital expenditure perspective. Tight control on interest paid even in an environment where interest rates have increased from 1.25% at the 30th of June 2022 to now 5%, we've been able to keep a lid on our interest costs as a result of the interest rate cap and then tight control on working capital, allowing us to deliver that GBP 6.2 million of improvement in net debt. And finally, from me, just the last slide here, a bit of background to the launch of our share buyback program that was announced this morning of GBP 4 million, we believe there's been 3 drivers -- there are 3 drivers as to why we're launching that this morning. You'll see here, firstly, that we've generated GBP 32 million of cash over the last 3 years, GBP 40 million of EBITDA, within that GBP 18 million of working capital efficiency since Albert and I joined, and that's obviously offset by GBP 11 million of CapEx and GBP 15 million of net finance costs, but that's delivering a net GBP 32 million worth of cash generated over 3 years. Secondly, 2 years already of consistent profit generation with underlying operating profit in line with market expectations, which would therefore deliver a third year of that in 2023. And finally, as I've mentioned already, GBP 58.7 million worth of banking facility headroom improved by GBP 12 million versus last year. We believe those 3 pillars underpin our share buyback program, and we firmly believe in that. So just to conclude, before I hand over to Albert for the operational review. We believe a resilient set of finances. It's a tough market out there, but we've got the plans in place for a good H2. Of course, that is subject to all the various consumer trends. I've spoken about inflation and energy costs continuing to decline in appropriate levels. But we're absolutely laser-focused on that as well as ensuring that the cost base of the business is absolutely efficient and delivering for shareholders. So with that, I will hand back to Albert.

Thank you, Daniel. And really good bridge there on the cash flows over the last 12 months and also the detail since the beginning of COVID. Moving on to the operational review now. I'm not going to repeat the points that Daniel has made, but I will pick out just a few elements of the results, which are relevant and important to note. The hours are down 12% in core food retail. I mean, this is a market that has to survive because people have to eat, people have to live. And therefore, it just shows you the pressure on the consumer, particularly in the first quarter of this year, in the middle of winter with all of the inflationary pressures bearing down. So hours have been down. That's a productivity measure that affects our revenues and our profits mainly in GB, the largest business. But of course, because of our win at BMW, we were able to [indiscernible]. Now looking at Ireland, Ireland is really more white collar than blue collar. The proportion of white collar has been rising in line with our strategy. And so therefore, you'd expect permanent recruitment to be affected as it has right across the sector. However, that 10% across the group is really quite respectable when you look at the wider sector. But in Ireland, it's a little bit more in Northern Ireland where the public sector has been really in a sort of stagnated situation with all of the politics and the problems of the Stormont Assembly. We've seen, however, that the Republic of Ireland has really delivered some real growth and some stability in the permanent side and shows that it's a very attractive market. So Ireland has been mainly affected by a reduction in permanent recruitment, mainly in the North but also, we've been investing in Ireland and in the Republic to make sure that we have capacity for when the recovery comes. So that's really important to understand why the Irish results are what they are. This is a strategic decision by us taken to keep our infrastructure and our capability for when the recovery comes. And then finally, on PeoplePlus, Daniel has picked up on the skill side. Look, the market is tight for labor at the moment. It's easing, yes, but it is tight. And therefore, people don't want to be -- they don't present themselves training. The volumes are down, So Skills, and I'll go into that in more detail just in a moment or two, is not viable in this scenario. But we've had in line with the comments that we've made on our organic expansion, we've actually extended the Prison Education contract or the Ministry of Justice has extended that contract with us. In a number of prisons, we've got good market share there. And we've moved from CostPlus, which was the COVID model, to a full commercial contract. So whilst it has its downside and its penalties, potentials, it also has the potential for us to improve margins. So we see that as a positive. So all in all, this is a set of resilient results in a very challenging market. Yes, profits are down, but there are operational and strategic reasons for that. Just wanted to go through the 3 names that I think are most important in terms of what it says about what our business, particularly in blue collar is doing. First of all, GXO Logistics is a $9 billion U.S. listed global logistics firm. It's one of the largest pure play in the world, and we have been granted an additional 14 sites. They are growing in the U.K. very, very strongly through acquisition and through organic growth. And as their lead partner, we can grow with them, and this shows the power of excellence in delivery and strengthened customer relationships. We will be possibly one of their most important suppliers going forward and we look forward to those revenues coming in, in the next 6 months. Of course, it's not -- doesn't all come in at once. We have started the process of moving temps across onto our payroll, but that will continue right up until October. Looking at AM Fresh. This is one of the U.K.'s largest fruit and fresh flowers business, supplying into Marks & Spencers and Tescos; a really, really large business base just outside Peterborough. And based on the solutions and the partnership approach that we've had and our one-to-one strategy sessions that we've been able to have with the management, we worked out a sole suppliership which will benefit both parties. It's a win-win, shows the confidence they have in us meeting their labor requirements and also shows our commitment to that group in terms of delivery. And then last but not least, Tesco is a wonderful client of ours; many, many years. We've got extremely good KPIs and stats to support our fulfillment there. Tescos are demanding, but fair customer and they've given us another 3-year contract extension, which was hotly contested. Certainly, nothing was taken for granted, and I'm delighted in the management teams in what they've achieved there with Tesco. We also have been offered additional market share. This is unlikely to affect this year, but we look forward to making those gains in the first quarter or the early part of 2024. Now, I'll promise you some more detail on the Skills Business. And essentially, we're looking at an annualized cost saving of over GBP 1 million, just over GBP 1 million. We've closed our Skills operation from the 31st of July. That is, from yesterday, it officially is closed and we're pivoting to what is a very compelling service, which is digital and remote learning. Learners are not interested any longer in face-to-face. It's very difficult to generate volumes. They're attracted by jobs. The cost of living crisis has driven lower volumes in in-person, classroom-based traditional training. And of course, digital is the only way forward. It's very flexible, as you would expect. And therefore -- and it's cost -- and the cost of digital is slightly different. So looking at the background and rationale, you might remember the European Social Fund -- Social Funding ceased in March and the successor program, which has been announced, really, we don't have too many details. It's not come on stream yet. It's highly fragmented. It doesn't represent the scale and the opportunity that the European Social Fund represented. So we've looked at the way that it's been evolved and the fragmentation of these awards. And really, there's no economies of scale. Participant volumes are much lower than expected. And then on top of that, because it's classroom-based, skills training requires infrastructure like offices and tutors and inflation in energy costs due to heat and light and offices and also the cost of attracting tutors is really much higher than the general index -- the general level of inflation. Unfortunately, none of the commissioners have recognized inflation-linked indexation in these contracts. So it's simply not viable. We will push on and focus on our digital delivery, which we have 2 very strong offerings, Way-Out TV and our Prison Services and, of course, Learning Plus which is an online digital delivery system. So our strategy is really a focused approach to an annuity business with diverse revenues but focused on employability and prison education. I'd like to just touch on some of the stats coming out of the market. You've heard about -- you've read the headlines, and you've heard about the dooming gloom in the recruitment market, no doubt. However, there's still 1 million vacancies out there, and that is well above pre-pandemic levels. It's -- the problem is, as Michael Page and also Robert Walters pointed out is that candidate confidence has been much more subdued. Candidates are concerned about moving, whereas before in the COVID -- in the dynamics that we saw in COVID -- in the job dynamics, candidates are moving and had confidence and there was the so-called great resignation going on. That has somewhat cooled and candidates are accepting offers to stay or counter offers and there's a lot of friction in the system. So what you get is a sort of extended period of an appointment of a hire, which then obviously affects productivity. But if you look at payroll figures, they're above the GBP 30 million, well above pre-pandemic levels. And this is good because the pie is larger, it gets larger every month and every quarter. Productivity, however, remains relatively flat. And if you actually take the productivity, the number of hours and you divide it out through the payroll, you'll see that on average, people are working less hours at the moment. So that sort of supports our results. But I will say the labor market is easing. My conclusion is, let's have a Goldilocks labor market, where we do have demand, there are vacancies, there are 1 million vacancies. But actually, the supply is getting easier and recruiters need candidates to generate revenue. We've picked out some points on the competitive landscape, just to sort of remind you why we have announced such a good set of organic wins. And firstly, competitors in our sector, particularly in blue collar, are largely weak. They don't have the sufficient scale and reach or they have major compliance issues. The quality of service and fulfillment we constantly hear is not as good. But what we've heard increasingly in the last 6 to 12 months is that there are a number of players in the private sector who are reporting cash shortages, who are asking customers for payroll -- advances on payroll. Well, that's not sending the right message. And of course, they will also be affected by higher borrowing costs. So this is the competitive landscape. It's a landscape that Staffline can take advantage of. There's a flight to quality, no doubt. Customers are streamlining their labor chain. We've talked about why Datum is important to us. Datum is our managed service brand. And we talked last year about Sainsbury's, for example. Sainbury's Argos, taking on Datum to help them with transparency and high levels of compliance audits in their labor supply chains. Essentially, customers want people. They want labor delivered on time and excellence in delivery with high performance stats. But ultimately, they're also focusing on pricing, on wage growth and on inflation, and we're helping them as their strategic partner to solve these challenges. So the competitive landscape, I would say, is much more beneficial for large companies like Staffline, we've got strong balance sheets and have got a transparent operating model. And now finally, just on to the outlook. I don't want to repeat the background. I mean it's quite clear that these headwinds will be with us for the rest of '23. However, we've got some real stepping stones in this challenging market. Mainly it's the organic growth, none of which has really played out in terms of operating profit in the first 6 months yet. We've had costs in implementation incurred in the first 6 months. So we will see the value coming in the second half. We've also got cost, as Daniel said, a cost reduction program, of which we'll see the bulk of it in PeoplePlus and Skills division. That will come through in the second half as the business is closed and separated out, and therefore, we will see, as Daniel said, upwards of GBP 600,000 or GBP 0.5 million of cost savings just in the first half and more to come in the second half, and we will set out that in our full year. We're not ignoring costs across the rest of the business, whether it's Ireland or the Mainland that there's a strong focus on costs and ongoing focus on operational streamlining to improve performance. We're a performance business. The worst is behind us, I believe, in Ireland in terms of their term fees. The first 3 months of this year was typical in terms of a bad market. Customers sitting on their hands, roles being put on hold. But we are starting to see in Ireland, particularly in the North, a slight thawing of that situation. I think it's cyclical and it's temporary. I think we'll see a flattening of that towards the second half of the year. But I believe the worst is behind us. So with those sort of stepping stones, the Board is confident that our full year results should be in line with market expectations. So with that, thank you for listening. As always, Daniel and I are delighted to be able to answer any questions. We've got a couple that have preceded the [indiscernible] this morning and we might go straight into those, Daniel, if you like.

Yes, sure. So a couple of questions that we received pre presentation this morning. First question is how much debt is left to pay and why has share price gone down? So -- a 2-part question. So in terms of debt left to pay, so as you saw, we have pre-IFRS 16 debt of GBP 3.5 million. But you recall at year-end, we actually had net cash of GBP 5 million. So we've oscillated during those periods between small amounts of net cash, a small amount of net debt. Remember, our net debt there is driven by a receivables facility, so it's very much a working capital facility of debt. I expect us to be ahead of where we were last year from a net debt perspective at the end of the year. So very small amounts of net debt, and that moves on a daily basis because it's a moving receivables facility. Second part of the question, share price going down. You'll see there have been other sector results published this morning. And the wider sector, obviously, is Fund, has had a very challenging time in the last 6, 12, 18 months. So our share price has gone down in line with the rest of the sector, and I think that's the general direction for that.

If I can just add to the question on debt, I can see where that's coming from. We've announced a share buyback. And I just wanted to ensure that the message landed that we're buying these shares out of trading cash flow, not out of debt. We have a working capital facility, which oscillates as Daniel said, positive, negative over the year. Seasonality is a big driver of that, but it's simply working capital facility. We are using our trading cash flows when determining the amount of the share buyback, the scale and the duration. We're using our expected trading cash flows to use for that. So I just wanted to make sure that, that was well understood.

Thank you, Albert. Second question was, would you be paying dividend soon? We've just launched share buyback this morning. We don't see paying dividends at the moment for the foreseeable future, and that's the current position on that. Third question, Albert?

Yes, the BMW contract is a very complicated contract. They have -- it's a large workforce, all manufacturing, particularly in automotive, is highly complex. And our team has done a fantastic job along with the HR team with BMW to effect a successful transition last year and also to iron out the inevitable challenges and unexpected issues that one faces in any transition of scale. But we're really pleased with where we've got to. I think we -- the BMW team will agree that, that process has now settled in and bedded in. And the only sort of -- the only sort of regret everybody has is that hours have been affected even in the automotive industry. And therefore, we await the upturn that should be coming from the current downturn that we're seeing, which will boost hours, and that's really important for everybody, for staff and for both our customer and ourselves.

Albert, next question for you as well?

So the question is, can you expand on the opportunity you see in the Republic of Ireland, which is of strategic importance? What investment is required here and why would you not consider expanding internationally? Well, I've been involved in all of my recruitment life with international businesses. And they had their benefits. And as an investor, that's the beauty of a market, is you can take your choice. What I believe in the situation that we're in now, we have tremendous opportunity to leverage our scale in the U.K. and the Republic of Ireland. And so therefore, that is my view that in the short to medium term, Staffline investors are best served with the additional incremental profit growth that comes from leveraging our immediate strengths, which is our market scale and reach and our geographic coverage. Why we like the Republic of Ireland is, it has a slightly -- it's on a slightly different lane in terms of economic growth, it's posting better growth figures than the U.K., still remains within the Euro zone, and therefore, benefits in some respects from what's happening in the core of the markets in the Euro zone. It's a great market for recruitment. It's a highly attractive market. It's higher margin, to be frank, and it's less competitive. So we're opening offices there. We're hiring consultants. We're winning customers and much of -- many of the customers that we mentioned this morning have Republic of Ireland operations, and we're helping and assisting them in that area as well. So the U.K. and Ireland is of great importance to us, our #1 priority. We've got plenty of market share to go for. Of course, we shouldn't forget Scotland where we're the #1 and the drinks industry, which is so port to Scotland and which has been a source of resilient trading for us too. So this is our market. It is our geographic strategic decision, is to stay within our lane here in the U.K. and Republic of Ireland. We would prioritize an expansion of organic growth with existing and new customers and indeed, expansion of our services -- managed services, engineering and automotive manufacturing, white collar business called Omega, and of course, our other sort of white collar recruiters across the Ireland divided. So yes, that's the short answer to the question. And as I said, we've got plenty to go for. In the Republic of Ireland, we've got very little market share.

Thank you, Albert. Next question is the new contract extension is very welcome, but what's the underlying gross margin trend up or down relative to the average Recruitment GB percentage? So 2 parts to my answer to that question. Firstly, we just need to remind ourselves, and I think I mentioned that a few times that gross margin percentage is affected by pay increases. So national living wage increases and therefore, any other pay increases because the salaries of our temporary workers, the pay of our temporary workers goes through the revenue line. Our fees go through the gross profit line. And therefore, because we charge pounds per hour, et cetera, and not necessary percentage of base salary. Then when there has been an extremely high increase in National Living Wage, which therefore drives wages generally. And we have seen it in the news over the last 6 months that wage increases have been at least 7.3%, 7.5%, in fact, probably in our world, 8%, 9%. I think National Living Wage was up 9% in April '23 versus April '22. That naturally depresses the GB percentage margin a little bit. But my second answer to the question is in terms of these new contract wins is that gross profit as a quantum and by that, I mean, our pound signs, that will drive forward and that is what generates the cash. So you've just got to differentiate sometimes between the gross margin percentage and the actual quantum of gross profit. It's driven by that mathematical calculation when pay rates are exceptionally high as we know they have been in the last year. I would also add the gross margin percentage is affected where we have a strong permanent recruitment. So over the last year, we've seen growth in our gross margin percentage because gross -- because permanent recruitment has grown. Obviously, I've mentioned like other recruiters, we've seen a softening in H1. That has also slightly lowered the gross margin percentage. So hopefully, that helps with the answer to that question. Next question is, are there any other blue collar areas you are targeting to expand the Recruitment GB business?

Yes, I mean, we announced that we were pushing into permanent recruitment. We've had lots of interest from many of our customers, Amazon being one of them. The business did a great job of fulfillment on the Amazon sites just before Christmas and the last peak, and I'm sure that we will be doing that for them again in the next 6 months. So permanent recruitment is important in blue collar. And so that's important. In terms of our engineering, it's actually been very interesting to see that automotive -- sorry, aerospace, which we've actually mentioned in the statement, has been gearing up for the post-pandemic world and there's a backlog of work and projects in that sector. Defense is very firm. I mean, Omega hasn't seen any softening of demand of engineers and the sort of white collar recruitment that they do. They're moving into some IT. And so, we're looking at IT as a sort of adjacent market. So we feel that the world is our oyster in that sense. We've got a strong brand. We've got tremendous market capability, reach and geographic spread. So we feel that the services can be expanded. In terms of other areas, we are actually putting quite a big effort into aviation, which is actually based around the airports. But it is slow. The processes have been challenging, tight labor market, all of the things that you've heard, DBS checks, et cetera, there's lots of friction in the system. And so we're pushing forward with that. But we haven't seen the return that we were hoping for, but I'm sure that, that is only a matter of time. Overall, one of our strategies is to go into medical and health care. And we're trialing this in Ireland, in the North and the Republic in the second half of this year. We're ensuring that we're on the requisite framework and we're preparing the way for initially health care professionals, including nurses and also consultants. And so we're looking forward to that. So we are expanding all the time, both our services and also our markets.

Thank you, Albert. Next question is, what is the LTIP requirement for new shares in the next 6 to 12 months? I think I wouldn't add too much more detail on that apart from seeing what we've announced previously in previous LTIP schemes will be replicated. We believe in real democratization amongst our management and incentivizing our top senior management to really delivered over the last 3 years. That GBP 32 million worth of cash generation has been significantly delivered by them. And therefore, the principles and the structures already exhibited in previous LTIP schemes, 2 of which were announced over the last 2 years, will continue. I think that's the best answer to that. Next question, are there M&A opportunities to widen your customer base from within your U.K. peer group?

That's a good question. We get asked regularly and quite right, too. As you've seen, our capital allocation part is very disciplined. Our Chairman is the -- is our largest shareholder. And so we have a really, really good owner culture on the Board and capital allocation is one of the disciplines that the Board as a culture has adopted very much. So. And so, we've made the decision in favor of buybacks at this time. We feel that customers are relatively not easy, but in terms of moving customers from one supply to another, is relatively straightforward at the moment. Customers are open to new opportunities to new strategic partnerships and they want solutions. And so, we feel that organic growth is the best way forward for our shareholders to be frank. Organic growth is the most valuable in terms of shareholder value. That's science and that's a fact that's been evident. So -- but that doesn't mean that if we don't come across a real opportunity where, and it's all based on cost synergies where revenues and customers can be best served through a larger organization and there are some significant cost synergies and the numbers work. That doesn't mean to say we're not -- we're going to ignore them. We'll do our due diligence. But it'll be within the framework -- tight framework of a strong balance sheet, strong trading cash flows and a capital allocation policy that's highly disciplined.

Thank you, Albert. Next question. Why is it that net debt went down by GBP 6.2 million, but finance costs went up by GBP 0.6 million. Hopefully, a relatively simple answer to this question. I've mentioned before that we have our interest rate cap, but that protects approximately against 2/3 of our debt exposure against interest rates. So with interest rates haven't gone up from 1.25% to 5%. We still are exposed to a little bit of that activity. So even though net debt went down, the underlying reality of net debt was exposed to higher interest rates, and therefore, that did drive a bit of an increase in finance costs. Next question on the new -- on the 3 new contract wins: GXO, AM Fresh and M&S, when do they start to generate revenues? Well, GXO has already started to be introduced in the last 6 weeks to 8 weeks, albeit it's on a growing projection into Q3 and Q4. M&S is a renewal. So that's a continuation. And AM Fresh, the sole supply started -- is starting, I would thought in H2, 2023. So -- but these should very much, especially GXO and AM Fresh being ready to deliver for what many of you will know is our core peak trading season from September to December of this year. Next question, do you expect to open elsewhere in the EU?

Short answer is no, except for Ireland, of course. Republic of Ireland is in the EU. So we'll continue our investment there.

And even Northern Ireland is with [indiscernible] perfectly positioned in being open to the U.K. and EU unions. Next, it looks like potentially a final question. If the wage cost has increased by 8% or 9%, is the that sort of revenue growth you need to maintain our market share? I don't think the revenue growth in terms of market share is not -- sorry, in terms of the wage increases, is not necessarily either an indication of the driver of market share. I think the fact that we've spoken about a circa 12% reduction in hours and is a key factor in our sector and Albert's comments on flight to quality, compliance, regulation, scale delivery, I think those are going to be the key drivers behind market share. I think the best illustration of growth in market share is that a company either a world leader or the world's leading logistics company, GXO, has transferred to us from another supply of 14 distribution centers. I don't think there's any better sign of market share growth in that. And with that, I think that's the last question. And therefore, the last answer, and we will end the presentation there. Thank you for listening to us.

Albert, Daniel, thank you very much. I think you actually managed to address every single question from investors. And of course, the company will review all questions submitted today and we'll publish those responses on the Investor Meet Company platform. But just before redirecting investors to provide their feedback, which you know is particularly important to yourself, Albert could I just ask you for a few closing comments.

Yes. Just remember, we've been through this before, Daniel and I have got over 30 years of experience in the sector. Investing in recruitment is about timing and the recruitment sector is a cyclical sector. And the time to look at recruitment in a very interesting way is when the market is actually down and when the cyclical and the economics are adverse or not in favor. And that's when good recruitment companies can keep their staff, attract new staff, look at the overheads, look at the costs, transform the business and actually then position themselves extremely well for the recovery. And when the recovery comes, there are fewer players. The players that are left have been, in some ways, gone through a tough time. So if you actually prospered through that time, you can be well ahead of your competition in terms of gaining market share. So I would only just say that good recruit -- recruitment business always prosper and improve during downturn so that when the recovery comes, they're in excellent shape to benefit from it.

Albert, Daniel -- thanks once again for updating investors today. Could I please ask investors not to close the session as you can be automatically redirect to provide your feedback in order that the management team can better understand your views and expectations. It's going to take a few moments to complete which I'm sure will be greatly valued by the company. On behalf of the management team, the Staffline Group plc, we would like to thank you for attending today's presentation, and good morning to you all.