Staffline sees loss before tax of £7.7m in H1 2019
Staffline has released its unaudited interim results for the six months ended 30th June 2019.
The first six months of 2019 presented a number of unforeseen challenges for Staffline. This uncertainty was primarily borne out of the delay in the publication of the 2018 final results. The associated extended audit procedures lasted until June 2019 (as described in the 2018 Annual Report) and impacted the perceptions surrounding the Group. All of the issues identified, and concerns raised during this process, have now been rectified and Staffline is able to move forward with complete confidence in the procedures that the Group has in place.
Chris Pullen, chief executive officer, commented, “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 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. 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.”
Group sales in the period grew by 11.1% to £534.6m (H1 2018: £481.0m). Group organic revenue, excluding business acquisitions in the past twelve months, declined by 12.4%, with recruitment falling by 10.3% and PeoplePlus falling by 29.5%.
Gross profit decreased by £8.6m, or 16.0%, to £45.0m (H1 2018: £53.6m). A change in the sales mix between the two divisions has had an impact on the Group’s gross profit margin, with a reduction from 11.1% in H1 2018 to 8.4% in H1 2019. Recruitment, at a gross profit margin of 7.2% (H1 2018: 7.8%), represented 92.3% of sales this year (89.3% H1 2018), whereas sales fell at its higher margin PeoplePlus division (H1 2019 margin: 22.5%, H1 2018: 39.5%). Gross profit in Staffline’s recruitment division grew by £2.4m (7.2%), which was more than offset by the reduced activity in PeoplePlus where revenues decreased by 19.5% and gross profit decreased by £11.0m to £9.3m. Underlying overhead costs were higher at £41.3m (H1 2018: £37.3m), due to the full period effect of acquisitions made during 2018.
Underlying profit reduced by 90% to £1.5m (H1 2018: £15.0m). On this basis, underlying diluted earnings per share from continuing operations also fell, by 88%, to 5.6p (H1 2018: 47.2p). Statutory declared loss before tax decreased by 173% to £7.7m (H1 2018: profit before tax of £10.5m), due to the trading headwinds in both divisions, and the transition of the PeoplePlus division to a skills and training business, as described above.
Net assets decreased by £6.7m to £84.3m during the period (31 December 2018: £91.0m), attributable to the loss after tax for the period and the impact on the brought forward profit and loss account balance of the transition to IFRS 16 Leases. The main balance sheet movements during the six months also related to the transition to IFRS 16, as well as working capital movements and increased borrowings. Total assets fell by £13.2m (3.8%) whilst total liabilities fell by £6.5m (2.6%).
The Group’s net debt position, including unamortised transaction fees, of £89.2m increased from the 2018 year-end position of £63.0m. This increase has been primarily driven by the payment of deferred consideration on 2018 acquisitions, a reduction in VAT and payroll tax liabilities (timing issue) and the settlement of certain non-underlying costs provided for as at 31st December 2018.
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