Servoca reports strong growth but shares fall

Profit before tax rose 30% to £1.33m on revenue that was 22.5% higher to £34.44m.

Chief executive Andrew Church said despite issues facing the education and health care markets such as continuing school budget constraints and a shortage of candidates to meet demand, the company continued to see strong demand for its services.

The well-publicised lack of funding in the social care sector and rising costs of supply also meant Servoca was managing costs tightly in that area, the company said.

Nevertheless, Church went on to say: “As indicated in our recent trading update, continued growth has helped the group to deliver results significantly ahead of the same period last year.

"Full-year profitability will benefit from the pivotal September period for our Education recruitment business and the group is well placed to deliver against full-year expectations."

Basic earnings per share for the period to 31 March 2015 increased 28.8% from 0.66p in 2015 to 0.85p.

The company's net debt was lowered from £1.60m as of March 2015 to £1.30m in March 2016.

Servoca said it was continuing with its share buyback program and currently holds about 1.1m in Treasury shares.

Shares were down 9.46% to 25.35 as of 11:33 BST.

Finncap analyst David Buxton said: “Interim results showed considerable progress versus the prior interims across its recruitment business, resulting in improved margins and a decent reduction in debt.

“The results were accompanied by an upbeat outlook, with management confident of achieving FY market expectations. The shares have reduced from December peaks and therefore offer good value, with growth continuing as trading remains on track to achieve our expectations.”