Staffline Group (STAF: LSE), the UK-based recruitment and training organisation provided a trading update for the year ended 31 December 2022 as well as the outlook for 2023.

The group said its full year results were marginally ahead of market expectations. Revenue was up by 0.4% during the FY 2022 period. The growth was driven by new client wins, including BMW, during the year and also a full year contribution from the Restart contract (Department for Work and Pensions Restart programme), offset by softening demand from customers who had benefited from Covid-19.

Gross profit saw an increase of 0.5%.

“Staffline is pleased to report that trading across FY 2022 remained solid, particularly in the second half, with underlying operating profit marginally ahead, and cash flows substantially ahead of market expectations,” the group stated.

The group noted that gross profit from Recruitment businesses was up 4.7% offsetting reduction in the PeoplePlus segment.

Staffline’s Recruitment GB division successfully implemented a major customer win, BMW Group, while also generating strong organic growth in two existing customers. The division also began recruiting for the travel sector as it recovered from the pandemic, although security clearance and constrained customer capacity to onboard new employees delayed any additional contribution to the FY 2022 results.

Datum RPO, the group's managed services business, underscored the trend for customers to consolidate their recruitment supply chains using an independent expert and reported record results. Omega, the group's technical and engineering recruiter, also posted strong increases in its permanent recruitment fees, which across the division were up circa 80% on FY 2021, representing a circa 179% increase over the last two years. The division continued to control overhead costs tightly, increasing its gross profit to operating profit conversion rate from 14.0% to 16.0%.

The Recruitment Ireland business is more dependent on the permanent recruitment market and less dependent upon temporary placements than the Recruitment GB business. A 45% increase in permanent recruitment fees drove Staffline's Ireland recruitment business to deliver the division's strongest results since 2019, as well as a record trading performance in the Republic of Ireland.

A pivot to white-collar recruitment in the Republic of Ireland, the opening of a new office in Limerick, and the retention of key public sector contracts in Northern Ireland, all contributed to growth across 2022 for Recruitment Ireland.

PeoplePlus reported a solid performance in FY 2022 but was held back by lower revenues in Skills training. Meanwhile, certain funding claims made by PeoplePlus for services delivered in 2020 and earlier years are now the subject of a dispute. The group commented, “While we are vigorously defending our position and the final outcome is uncertain, we have decided to provide £2.5 million which, based on the legacy nature of the item, has been recorded through reserves”.

Looking ahead, the group said it expects the macroeconomic headwinds to persist.

“Low unemployment will continue to constrain volumes in PeoplePlus' Skills and Restart businesses,” the group stated. “While we expect to grow market share in the competitive temporary labour market, the Recruitment divisions will not be immune to the broader short term market challenges, where data is showing that demand for permanent recruitment is weakening.”

“In the context of current expectations for the UK economy, the Board has adopted a cautious approach to FY 2023,” Staffline stated. “However, the strengthened balance sheet, experienced management team and healthy pipeline, mean the group is well placed to capitalise on the considerable market opportunities which lie ahead.”

Albert Ellis, Chief Executive Officer of Staffline, said, "We are pleased to report a solid trading performance across the group in FY 2022, which is a testament to the outstanding dedication and commitment from all our employees and partners. These results not only reinforce Staffline's position as a market leader in terms of organic growth, but underscore the clear benefits of its highly cash generative business model.”

“As the UK cost of living crisis deepens and the much-publicised global macro headwinds continue to swirl, there is no question that our core markets have become more challenging,” Ellis said. “While we are mindful of the challenges ahead, we firmly believe Staffline, supported by our sizable market footprint, sector diversity, and unrivalled track record in service delivery and innovation, remains well placed to capitalise on considerable market opportunities and further grow our market share."

Staffline set a new 52-week low during today's trading session when it reached £31.50. Over this period, the share price is down -45.00%. The company has a market cap of £54.70 million.