UK recruiter Staffline (STAF:AIM) has issued a statement saying its revenue will be below £1bn for 2017.

The company issued a statement in July last year stating it was confident of its prospects of hitting the £1bn revenue target set back in 2013.

The slogan ‘burst the bubble’ was the brainchild of chief executive (CEO) Andy Hogarth and while the company might not have breached the £1bn figure yet, it says its results will be line with ‘market expectations’.

The failure to meet its own target had a marginal impact on the share price, down 1.5% to 995p.

Staffline provides temporary staff and also provides welfare-to-work via its PeoplePlus division. The latter business was known as A4e and was weighed down by controversy in 2012 over fraud allegations. In March 2015 former employees received jail sentences for defrauding the taxpayer.

Staffline Group  STAF    Share Price   Shares Magazine

Although PeoplePlus is not mired by the same problems as A4e (which Staffline acquired), investment bank Berenberg says its outlook looks ‘challenging’. The bank expects cost cutting to support margins and falling revenue in the division.

Staffing going strong

Speaking to Andy Hogarth last year, he said that Brexit had little impact on his business and this seems proven by the strong demand for the company’s staffing solutions. For the half year to 30 September the division’s revenue was up 10% to £370m.

While not breaching that symbolic £1bn revenue figure for 2017, the company says it will still come in around 9% higher at £882.4m on a year-on-year basis.

This company could be viewed as a bargain looking at its valuations. It trades on 8.2-times 2018’s 121.5p of earnings while paying a 2.7% dividend yield using Berenberg’s estimates.

This is at a decent discount to the recruitment sector which trades on an average of 12.4-times earnings.

However, for a company with contracts with government there are always risks. Berenberg says ‘The move into government contracts has met with headwinds in recent years and the lack of absolute growth at Staffline at present is disappointing after the growth seen in the 2010-16 period. However, we believe the business is cheap, cash-generative and offers the platform for future M&A in staffing’.

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Issue Date: 03 Jan 2018