Revenue at Staffline Group (STAF: LSE), fell by 0.9% for the six months ended 30 June 2023 when compared to the previous year. The UK-based recruitment and training organisation’s revenue totalled £434.1 million in its unaudited interim results today.

Albert Ellis, chief executive officer of Staffline, said, "The business has delivered a resilient first half performance amidst a challenging market environment for the recruitment industry.”

“Our management team has demonstrated exceptional leadership by securing new business wins, implementing significant structural and cost changes across all businesses, and strengthening customer relationships with a focus on service delivery,” Ellis said.

“These actions have underpinned the board's confidence in full year trading being in line with expectations (underlying operating profit), alongside implementing a £4 million share buyback programme,” Ellis continued.

Gross margin was slightly down due to changes in mix. Underlying operating profit declined by 40% as expected, on the back of a slowdown within the retail sector, reduced hours worked in its top customers and weaker demand for permanent recruitment, particularly in the first quarter. However, all three divisions remained profitable on an underlying basis over the period, generating better than expected positive cashflows, with tight control of costs and debtor days. 

Staffline operates across three divisions including Recruitment GB, Recruitment Ireland, and PeoplePlus which provides employment support, skills training, independent living, prison education and support for starting a business.

Revenue by division

Within Recruitment GB a combination of macro-economic headwinds and lower levels of consumer spending impacted volumes of permanent recruitment, particularly in the first quarter, as well as also affecting client demand for temporary labour. This led to reduced hours across the blue-collar market, alongside lower staff numbers in the automotive sector.

Staffline added that Recruitment GB continued to gain market share with their major customers securing multiple renewals in the period, including a renewal with GXO Logistics, a three-year contract extension with Tesco, as well as with a number of other major logistics customers, the majority of which will come on stream in H2 2023. 

Mixed results from specialist recruitment saw Omega report good results as the engineering and defence sectors faced acute skills shortages, but Datum saw lower levels of activity from its construction clients and the Driving business remains well below historical levels.

Staffline’s Irish operations have been affected by both the wider economic headwinds as well as the ongoing power sharing impasse at Stormont (Northern Ireland’s government). These factors have contributed to the weakening permanent recruitment market, particularly in relation to public sector clients in Northern Ireland. The prior year comparatives benefitted from exceptionally strong demand for permanent recruitment. The division produced solid results from customer on-site locations and ongoing growth across the Republic of Ireland, which partly mitigated against the shortfall in permanent recruitment.

While revenue in PeoplePlus was up, the group noted that operating profit is down 25% due to the change in mix, with a greater proportion of higher margin employability and self-employment activity in the prior year comparatives. Additionally, H1 2023 includes the losses resulting from ongoing market headwinds in relation to the demand for in-person Adult Education support (Skills). 

The company said tight control of costs, including the restructuring of the Skills business within PeoplePlus, continues and the streamlining of operations across the group is a key priority to improve overall performance.

Looking ahead, Staffline said it remains well placed to capitalise on its market leadership, bolstered by additional market share gains during the first half and a pipeline of solid opportunities expected to come on stream in H2 2023, particularly in Recruitment GB and Ireland.

 While Staffline's Northern Irish business has been impacted by the decline in demand for public sector permanent recruitment, new staffing opportunities in H2 2023 look promising, it added.

On the UK mainland, increasing demand for temporary staff for the pre-Christmas peak trading period, and a number of global sporting events in H2, underpin its expectations of increased profits in the remainder of the year. In addition, the group's ongoing cost reduction programme, specifically the closure of in-person Skills training in PeoplePlus, will benefit the second half.

Ellis said, “We anticipate better trading conditions in the second half of the year with improved consumer confidence stimulating growth. Whilst the outlook for permanent recruitment is more subdued, a number of new temporary staffing contract opportunities are currently in the pipeline, in addition to the seasonal boost expected in the final half of the year including the Women's Football and Men's Rugby World Cups.”

“There is no question, the broader economic environment in the UK and Ireland will continue to dominate headlines,” Ellis said. “However, with the increasing return to work of many classified as economically inactive in the most recent ONS labour market report, we are cautiously optimistic that the tight labour market is starting to ease and this will support the economy going forward."

Staffline Group shares last traded at £27.40, up 7.66% on the day and 9.12% above its 52-week low of £25.11, set on 4 July 2023. The company has a market cap of £41.34 million.