UK-based specialist recruitment services provider Nakama Group (NAK:LSE) announced its half year report for the six months ended 30 September 2019 with revenue down 40.6% when compared to the previous year.

Net fee income was down 42.5% when compared to the prior year.

Nakama reported permanent placement revenues of £1.0 million (2018: £1.7 million, while contractor revenues were £3.7 million (2018: £6.3 million.)

The group reported operating profit of £27,000, down from £211,000 during the prior year. Profit for the period stood at £12,000, down from 162,000 the year before.

“The main challenge that the group inherited from 2018 related to employee engagement and, as a result of several factors, we made some key decisions relating to staff,” the group said. “We have replaced both Managing Directors of our London and Hong Kong offices in the first three months of H1 and furthermore, with the implementation of a robust performance management program, we have seen several staff exit the business due to underperformance.”

Nakama said that overall headcount decreased year-on-year as it continues to manage the cost base in line with revenues to ensure the business returns to profitability.

Nakama said progress was made towards gaining financial stability and winning new business by leveraging client relationships. Furthermore, Nakama said progress was made to making the business more stable, particularly from a personnel perspective.

Earlier this year the company published its full year results with revenue of £13.4 million, down 20.2% when compared to the previous year.

“Overall, the business has seen many challenges in H1 but compared to H2 2018/19, we have gained stability in personnel, greater leverage of our client base and communication between offices and a renewed focus on our core markets,” Nakama said.

Robert Thesiger, Chief Executive Officer of Nakama Group, commented, “The first half of 2019/20 has seen numerous challenges across the group. However, I am encouraged with the results and resultant relative stability that the business is now displaying compared to H2 2018.”

Looking ahead the company said the UK remains a particularly challenging recruitment environment with the general election, Brexit and proposed changes to IR35 all combining to produce an uncertain outlook for the group. Nakama added that the political unrest in Hong Kong remains a concern but, as yet, “we have not seen this have a material impact on trading”.

Nakama’s Board said it is considering restructuring options.

In trading on Friday Nakama shares traded at £0.85, down 29.1% on the day. Based on its current share price the company has a market value of £1.00 million.