Recruiter Staffline swung to a near £8m loss in the first half of 2019 as it warned of a slowdown in new business contracts, sending its share price crashing.
Staffline blamed a series of “unfortunate challenges” as well as Brexit uncertainty for falling to a £7.7m loss, down from a £10.5m profit this time last year.
Revenue rose 11 per cent to £534.6m year on year, despite a 19.5 per cent decline in People Plus revenue to £41.4m, as the division undergoes a transformation.
Meanwhile net debt more than doubled to £89.2m from £36.9m a year ago under the weight of a spree of acquisitions in 2018.
Shareholders suffered a loss per share of 22.4p, a 168.3 per cent nosedive from last year’s 32.8p earning per share.
Staffline opted not to pay any interim dividend.
Why it’s interesting
Aside from blaming Brexit uncertainty, Staffline admitted a delay in publishing its last set of annual results “created uncertainty” among customers. Auditor PwC resigned shortly after.
Today it said that situation was made worse by a difficult hiring environment.
The firm warned that “trading remains challenging”, saying it will only deliver £20m in operating profit.
“Since the publication of the 2018 full year results, weak consumer confidence has weighed on our end customers, particularly in food and retail, which has had a direct impact on demand for Staffline’s services,” the recruiter added.
Staffline also acknowledged investor anger after it issued new shares in July to raise £37m to tackle debt, with the result that it diluted existing shareholders’ stakes, including activist investor Cat Rock.
Staffline’s share price sank 20 per cent in early trading to 123p as the results proved worse than investor expectations.
But Liberum said the recruiter’s investment in employee engagement would yielf benefits “when markets recover”.
The broker added: “People Plus should return to profitability in H2 given the changing mix and cost savings. The macroeconomic environment remains challenging and there is continued uncertainty over Brexit.”
What Staffline said
CEO Chris Pullen said:
The first six months of 2019 presented a number of unforeseen challenges for Staffline. The delay in the publication of the 2018 final results created uncertainty, which has been compounded by a challenging trading environment.
As a consequence of this and the transformation of People Plus, this year’s result will be more heavily weighted than usual towards the final quarter.
Brexit has become the source of unprecedented uncertainty for our end customers and is increasingly weighing on consumer confidence. The performance of our end customers in food and retail has a direct impact on the demand for our services.
Despite this, we remain convinced that the challenges the group is currently facing are short-term and that the business is sufficiently differentiated in its service proposition to return to future growth.
We have developed an excellent platform as a result of the strategies we have put in place, and look forward to continuing to further enhance the leading positions we have in each of our core markets.