(Adds analyst's comments, share movement)
Nov 5 (Reuters) - Human resources firm Gevity HR Inc's posted a surprise loss, hurt by a drop in professional services fees due to fewer people employed with its clients, sending shares down more than 17 percent.
For the third quarter, the company reported a loss from continuing operations of $1.8 million, or 7 cents a share, compared with income of $3.2 million, or 13 cents a share, in the year-ago period. The latest quarter results included pre-tax cost alignment charges of 3 cents a share related to consolidation of certain branch offices and reduction of staffing levels.
The company saw some layoffs at the customers' side that reduced their earnings, analyst Jim MacDonald of First Analysis Securities Corp said by phone.
"We were predicting that the company would shrink and that, in fact, has happened," MacDonald said, adding that workside employees were down 26 percent.
Revenue for the quarter fell 14 percent to $125.1 million, while professional service fees fell 21 percent to $27 million.
"During the quarter, we took a number of actions to better align our costs, which when coupled with the effects of the challenging economic environment, led to a loss for the period," Chief Executive Michael Lavington said in a statement.
The analyst said Gevity, which has about 50 percent of its business in slowdown-hit Florida, had reduced the number of branches to 32 from 43 a year earlier.
The company said bad debt expenses rose $800,000 from the prior quarter as a result of the current economic environment.
MacDonald said Gevity is not just having to deal with the downturn, but has also seen a softening in the workers compensation business in the last two years as prices are going down and profitability is getting squeezed.
In the latest quarter, revenue from workers' compensation fell 29 percent to $15 million.
Shares of the Bradenton, Florida-based company were down 7 percent at $4.18 in afternoon trade on Nasdaq, after hitting a low of $3.70 earlier in the day.

(Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Anil D'Silva) Keywords: GEVITY/ (bhaswati.mukho@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: bhaswati.mukho.reuters.com@reuters.net)

COPYRIGHT

Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.