Shares in recruitment and training group Staffline (STAF:AIM) slide 30% to a new low of 168p after it revises up the negative impact on its 2018 and 2019 results due to non-compliance with the National Minimum Wage (NWM) Regulations, scraps its dividend and asks investors for more cash.
Staffline shares were suspended at 670p the end of January after losing a third of their value in a day as the firm delayed the release of its results. The delay was down to ‘concerns relating to invoicing and payroll practices’ in its Recruitment business.
The shares were re-admitted to trading in mid-March and jumped 28% to 860p after the company said it had identified the problem and taken provisions for potential non-compliance with the NWM rules.
The key issue was ‘potential underpayments relating to a limited number of food production facilities and the payment for preparation time, which is generally the time spent donning workwear’.
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At the time, Staffline was following its end-customers’ operational procedures for clocking in and clocking out, but it turns out these were wrong. Also, the underpayments went back five years to 2013 and weren’t confined to 2018.
Today, following extensive audit work and consultation with HMRC, the firm has increased its 2018 charges to £32.6m and is taking an extra £15.1m of charges this financial year. Frustratingly, the costs relating to historical non-compliance with the NWM rules are not recoverable from its customers.
Given the size of the charges and the fall in the share price, which puts the firm’s market value at just £70m, the board has scrapped the dividend and asked the banks to waive its debt covenants until it can raise around £30m of fresh capital from investors so as to keep its leverage ratio below two times.
