Staffline shares tumble after dividend scrapped
The firm has been dealing with historical minimum wage underpayment.
Shares in recruitment group Staffline have slumped after the firm said it would scrap its dividend and was looking into raising £37 million to cut its debt.
The company said on Monday that its annual results for 2018 would show exceptional costs of £32.6 million.
It also increased an estimate for the amount needed to pay for historical non-compliance with the national minimum wage between 2013 and 2018. It will now set aside £15.1 million, up from £7.9 million.
Shares dropped 31.3% in early trading on Monday.
According to Staffline, the discrepancy mostly relates to payment for preparation time, which is generally used by workers to change into workwear.
The shortfall relates to a small number of food production facilities, where Staffline said it was complying with its clients’ procedures for clocking in and out.
However the cost cannot be recovered from customers, meaning Staffline has had to dip into its own pockets.
Staffline also said it was in discussions with investors about placing new shares to raise about £30 million, with the goal of reducing its debt pile.
If the raise goes ahead, the firm will also launch an open offer for another £7 million to enable more shareholders to take part.
Due to the ongoing discussions, the board has not recommended a final dividend for the 2018 financial year. The move will save the company £7.2 million.
The group’s full results will be published towards the end of the month, following a delay as it worked through the minimum wage issues.
Last month the company warned adjusted earnings are now expected to be between £23 million and £28 million for the current financial year.
This compares with analyst estimates which had forecast £42.7 million.
The firm said ongoing Brexit uncertainty had led to many employers transferring their temporary workforce to permanent employment.
Its accounting issues had also deterred some clients from signing new contracts with the company.