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(Alliance News) - Liberum maintained its full-year estimates for Staffline Group PLC on Monday, despite expecting macroeconomic headwinds for the recruitment and training agency to persist into the second half of 2023.
The investment bank kept its Staffline sales forecast for 2023 at GBP998 million and its underlying pretax profit from continuing operations forecast at GBP6.8 million. Staffline's trading update on Monday indicates it is trading in line with expectations and continuing to secure market share gains, Liberum said.
In 2022, Staffline's revenue totalled GBP940.5 million and its underlying pretax profit from continuing operations was GBP9.3 million.
Staffline on Monday hailed a strong performance so far this year, with its "strong recruitment pipeline" producing organic growth in the UK and Ireland.
The Nottingham, England-based firm said the growth was mainly due to existing logistics customers in its Recruitment GB division, and the renewal of a contract with retailer Marks & Spencer Group PLC - both of which it expects "to make a positive contribution" in the second half of the year.
As a result, Staffline said that it expects that trading this year will remain in line with expectations, with full-year revenue in the second half weighted in line with its historic trend.
"The group continues to enjoy substantial financing headroom and the benefits from its interest rate cap," the company said in a statement read at the AGM. "The board remains confident in the group's prospects in the medium to long term as we seek to further capitalise on our strengths by growing our market share."
Analysts at Liberum, however, noted two major headwinds for the firm moving forward: low unemployment in the UK and a slowdown in demand for recruiting.
Back in May, figures from the Office for National Statistics showed UK unemployment ticked. The UK jobless rate unexpectedly edged up to 3.9% for the three months to March. Market consensus had expected it to remain unchanged from 3.8% in the three months to February.
Despite the slight rise in the first quarter of the year, Liberum said that the overall low unemployment rate in the UK will continue to constrain volumes for Staffline's PeoplePlus' Skills and Restart businesses in the second half of the year.
It added that Staffline's Recruitment divisions will likely be affected by a "broader slowdown in demand" for permanent recruiting. Liberum said this was demonstrated by the cuts to guidance from recruitment peers Robert Walters PLC and PageGroup PLC earlier this year.
In April, Robert Walters reported a "slower" start to the year amid continued economic uncertainty. PageGroup warned that a tough market backdrop could see its full-year operating profit in 2023 fall by 29%.
More positively, Liberum noted recent press commentary that the UK government is looking to "tighten" the legislation around umbrella companies hiring temporary workers "to reduce tax exposure".
"We believe this will be positive for Staffline, who doesn't use umbrella companies, as it disincentives using companies to recruit staff that operate such schemes. This in turn should drive more volumes towards staffline," it said.
Staffline is a corporate broking client of Liberum. Liberum raites the stock a 'buy' with a price target of 60.0 pence. Shares in Staffline were up 0.1% at 34.99 pence on Monday afternoon in London.
By Heather Rydings, Alliance News senior economics reporter
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