RTC Group PLC shares plummeted on Monday after the recruiter reported a reduced profit in 2021 on higher costs and warned that its profit for the first half of 2022 might be hurt due to substantial changeover costs stemming from its Network Rail contract.

Shares in RTC were down 22% at 27.30 pence each on Monday mid-morning in London.

In 2021, the London-based recruitment company posted a pretax profit of £114,000, down 87% from £870,000 in 2020.

RTC blamed this on substantially reduced support from the government to £300,000 versus £2.5 million the year before. Administrative expenses also rose to £11.9 million from £11.7 million, due to its new contract with Network Rail Infrastructure Ltd that required it to change all its areas of contract labour supply.

Revenue dropped 2.5% to £77.7 million from £81.4 million. RTC attributed this to the Covid-19 pandemic ‘significantly’ hurting client demand.

‘Candidate reluctance to change employers and careers given these turbulent times and workers self-isolating as a consequence of either directly contracting Covid-19 or being contacted through NHS notification also impacted revenue, especially in our energy and rail businesses,’ the company said.

RTC suspended its dividends for 2021 and said it was ‘unlikely’ that there will be a return to payments in the near future.

Looking ahead, RTC said that it remains confident that the ‘present global medical emergency will eventually be put behind.’

However, it noted that the requirement from its client Network Rail to change all its areas of contract labour supply is still causing substantial changeover costs and disruption to the ‘smooth running’ of its Rail division. RTC said that this has continued into this year and is likely to have a ‘material effect’ on its profit in the first half of 2022.

‘RTC like many other companies had an extremely challenging year in 2021. The Covid-19 pandemic continued to significantly impact client demand across many markets and where requirements for contract labour remained strong this was accompanied by higher operational costs to ensure the safety and wellbeing of our workforce,’ Chief Executive Andy Pendlebury said.

‘Although for many reasons we are all naturally very disappointed with the way the year played out for us, and also mindful of the fact that there are still many geo-political events and micro-economic challenges threatening the domestic and international landscape, we believe our positioning across a broad range of markets, sectors and industries, give us every reason to be optimistic about our ability to deliver long term sustainable value to all our stakeholders,’ he continued.

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