Staffline, the UK-based staffing and employability organisation provided a trading update today issuing a warning on profits due to the ongoing uncertainty surrounding the UK’s decision to leave the EU.

The group said it downgraded its forecast and expects to deliver adjusted EBIT in the range of £23 million to £28 million for the financial year ending 31 December 2019. Analysts had expected Staffline to earn £43 million on this adjusted basis.

“The ongoing Brexit uncertainty is impacting the UK labour market and led to a number of customers transferring a significant volume of their temporary workforce into permanent employment to mitigate the risk of that labour market tightening,” the company said in a statement. “Typically, this reaction to uncertainty tends to reverse over time, but we expect it will continue to impact temporary worker demand throughout the current year.”

“A proportion of these "temp to perm" transfers have occurred in the higher margin driving sector, resulting in an overall margin dilution,” Staffline added. “In addition, we are seeing further challenges in the higher margin automotive sector and associated supply chain where reductions in demand have been greater than expected.”

Staffline added there had also been a slowdown in new contract momentum in the current financial year, which it largely attributed to the impact of the delay in publication of its 2018 annual results.

“The key outstanding matter in finalising the results relates to the group's historical compliance with National Minimum Wage Regulations 2015,” Staffline stated. “This is a complex area and management, in conjunction with HMRC and supported by an independent advisor, are assessing the significant amount of historic data and transactions, which will then be subject to audit.”

In January 2019, the group launched an investigation in conjunction with auditors PwC relating to concerns over invoicing and payroll practices within its Recruitment division. In an update last month, Staffline said there was nothing further to report over the payroll allegations.

Staffline highlighted that its PeoplePlus division’s performance in 2019 will be affected by continued delays in Apprenticeship new starts.

“Sectors such as retail for example, are delaying Apprenticeships whilst store restructure programmes are completed, however management remains confident that this market is attractive, notwithstanding this timing effect,” the company stated.

Staffline said that it maintains a positive outlook for its PeoplePlus in 2020 under its new operating model.

Following the profit warning, Staffline Group set a new 52-week low during today's trading session when it reached £374.00. Over this period, the share price is down -60.30%. Staffline shares last traded at £397.00, down 52.63% on the day. Based on its current share price the company has a market value of £234.17 million.