(Reuters) - Britain’s Staffline lost more than half of its market value on Friday after a Brexit-led scramble by companies to secure workers for permanent positions hit the recruiter’s margins and led it to cut its annual profit forecast.
Staffline, which specialises in temporary blue-collar industrial recruitment, said temporary worker demand would be slack throughout 2019, adding that there had been a slowdown in new contracts in the current fiscal year.
The company also attributed that slowdown to a delay in publishing full-year results due to an assessment by UK tax authority HMRC and an independent advisor into whether it had historically complied with minimum wage regulations.
“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,” Staffline said.
Staffline, which operates in Britain, Ireland and Poland, cut its annual adjusted operating profit forecast to a range of 23 million pounds to 28 million pounds ($29 milion-$36 million), from a prior estimate of 42.7 million pounds according to the company’s compiled consensus.
“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,” the company said in a statement.
“A proportion of these ‘temp to perm’ transfers have occurred in the higher margin driving sector, resulting in an overall margin dilution,” it said.
Uncertainty around the final Brexit outcome has also seen a reduction in the number of EU citizens coming to the UK and an increase in those returning to their homelands, the company had said in its 2018 annual report.
Shares in the company, which rose over 22% in 2018, dropped 53.4% to 377.9 pence by 0800 GMT.
At Friday’s stock low of 374 pence, Staffline was valued at 104.5 million pounds, wiping nearly 130 million pounds off its market capitalisation since Thursday’s close at 838 pence.
“Q1 was even weaker than normal... and trading in April confirmed that Staffline was unlikely to deliver year end estimates,” Liberum analysts said in a note. They cut their target on Staffline’s stock price to 800 pence from 1,320 pence on Friday.
The company helps about 1,500 private sector clients hire more than 60,000 staff daily across industries including agriculture, drinks, driving, food processing, logistics and manufacturing.
Staffline said performance at its PeoplePlus business, which generates almost half of its profit, will be hurt this year by delays in new apprenticeships in Britain due to slow adoption of its Apprenticeship Levy Scheme and political uncertainty.
The levy, a 0.5 percent payroll tax on all employers with an annual wage bill above 3 million pounds, is designed to address chronic skills shortages, but businesses have been sceptical about it since it was introduced in 2015.
The share of temporary employees as a proportion of all British workers struck a 10-year low of 5.5% in recent months, according to official data published on Tuesday.
($1 = 0.7821 pounds)
Reporting by Sangameswaran S and writing by Noor Zainab Hussain in Bengaluru; Editing by Bernard Orr, Emelia Sithole-Matarise and Jan Harvey