Controversial Sports Direct labour agency Transline hunts new backers

The controversial employment agency which staffs Sports Direct's largest warehouse is hunting new financial backers as it faces fresh pressure from MPs (BSE: MPSLTD.BO - news) to overhaul the working practices it imposes across its operations.

Sky News has learnt that Transline Group, which was founded in 1989, has appointed advisers - thought to be KPMG - to raise new capital for the business.

The circumstances behind, and reasons for, the hunt for new investors were unclear, although analysts pointed to the declining margins on which Transline operates, and disclosed in the company's most recently filed accounts.

The labour agency has become one of the most notorious names in corporate Britain after it emerged that it operated a brutal regime at Sports Direct's Shirebrook warehouse characterised by zero tolerance and zero hours contracts.

The sporting goods retailer controlled by Mike Ashley, the billionaire tycoon, has been at the centre of controversy over its treatment of staff as well as its lukewarm commitment to corporate governance.

At Shirebrook, where thousands of people are employed, Transline operated a 'six strikes' policy which left workers fearing for their jobs if, for example, they took toilet breaks deemed to have lasted too long.

Mr Ashley has pledged to oversee the election of a workers' representative to Sports Direct's board in an attempt to improve the company's image.

News of Transline's search for new investment comes just hours before the agency's finance director Jennifer Hardy is due to appear before MPs on the Business, Energy and Industrial Strategy select committee.

Ms Hardy, who will answer questions as part of the committee's 'Future World of Work' inquiry, has given evidence in parliament before, although her previous appearance drew criticism from MPs.

In a statement issued to Sky News on Monday evening, a Transline spokesman said: "Transline will always consider options that would allow us to drive our business forward.

"We are committed to building the scale and size of our business."

Transline recently lost part of a contract to work with the internet retailer Amazon in the UK, although it was also unclear whether that loss was connected to a potential search for new investors.

Last year, Iain Wright, the committee chairman, led his colleagues on a surprise visit to Shirebrook - a meeting which ended in farce with the MPs alleging that a private discussion had been spied on.

Mr Wright has urged Sports Direct to sever ties with Transline, although the request appears to have fallen on deaf ears.

Little is known about Transline's current finances and the company's spokesman declined to comment on its ownership structure or shareholders.

The Guardian reported last year that Transline's co-founders - Paul Beasley and Jonathan Taylor - each own 5% of the company, alongside another executive, Mark Elms.

The remaining 85% of the equity in the business is held by another director, Colin Beasley, the newspaper added.

The latest accounts filed at Companies House, which relate to Qualitycourse Limited - the name under which Transline is registered - show that it made just £919,000 in operating profit on turnover of nearly £230m.

Gross profit margins fell from 11.2% in 2014 to 10.1% the following year, which the company attributed to "difficult trading conditions caused by increased competition in the sector and increasing wage costs".