17th Sep 2019 10:08
(Alliance News) - Shares in Staffline Group PLC fell on Tuesday after saying it will not pay any dividend for 2019 and 2020, as its cash headroom is expected to remain limited amid difficult trading conditions.
Shares in the recruitment firm were 22% lower at 120.88 pence on Tuesday.
For the six months to the end of June, Staffline reported a pretax loss of GBP7.7 million, compared to a profit of GBP10.5 million the year before.
The swing to loss was mainly due to exceptional expenses, including the amortisation of intangible assets arising from business combinations, plus reorganisation costs and professional fees.
On an underlying basis, pretax profit was down 90% at GBP1.5 million, from GBP15.0 million a year prior.
Gross profit was down 16% to GBP45.0 million from GBP53.6 million, as a change in the sales mix between Staffline's Recruitment and PeoplePlus divisions resulted in a reduced gross profit margin at 8.4% from 11.1%.
In addition, total overhead costs rose to GBP41.3 million from GBP37.3 million the year before, as a result of acquisitions made during 2018.
These same acquisitions fostered growth in Staffline's total revenue by 11% to GBP534.6 million from GBP481.0 million the prior year. However, lower activity in all the group's divisions caused organic revenue to fall by 12%.
Staffline said it has experienced trading headwinds across its divisions, with Brexit uncertainty causing several customers switching a significant volume of their temporary workforce into permanent employment to lessen the risk of a skills shortage.
As it expects cash to be in limited supply during 2019 and 2020, Staffline will not pay a dividend for those two years. For the first half of 2018, Staffline paid an interim dividend of 11.3 pence per share.
Looking ahead, Staffline said trading has remains challenging, and it expects an adjusted operating profit of GBP20 million for 2019, below the group's previous expectations of GBP23 million to GBP28 million announced in June.
"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," said Chief Executive Officer Chris Pullen.
"As a consequence of this and the transformation of PeoplePlus, 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," Pullen added.
PeoplePlus helps unemployed people into work, while also providing skills training and apprenticeship programmes.
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