StepStone ASA - Results for Q2 2002

EBITDA loss continues to improve to ?1.13m - 43% reduction from Q1 loss
- Operating expenses further decline to ?9.0m - down 14% on Q1
- Significant cash balance of ?21m
- EBITDA loss in six months to June falls to ?3m from ?64m in first half of 2001
- On target to turn operating cash flow and EBITDA positive in 2002
Overall trading conditions in the quarter ended 30 June 2002 remained challenging, as indicated by the Chairman at the Annual General Meeting in May. However, in spite of this environment the company continued to make progress with a loss at the EBITDA level of just over ?1 million. This was nearly half the loss incurred in Q1 and at the end of the first half of the year the company is well on the way to achieving this year’’s key financial objectives of becoming operating cash flow and EBITDA positive in 2002.
Group Results
Reflecting the continuing difficult trading conditions throughout Europe, revenue declined 8 per cent on Q1 to ?7.9 million in Q2. Whilst disappointing, it is worth noting that the rate of decline has slowed considerably. The third quarter is traditionally slow because of the summer holiday season, but taking the first half of the year as a whole the Board remains of the opinion that the market is relatively stable and currently moving between fairly narrow parameters. However there is still no significant sign of any medium term increase in demand for online recruitment solutions and services given the current economic difficulties being faced across Europe.
Total operating expenses continued to fall in line with the company’’s expectations and at ?9.0 million were some ?1.5 million lower than in Q1. A further decline in operating expenses is expected in the third quarter.
In Q2 the company recorded a negative EBITDA of ?1.13 million compared with ?1.98 million in Q1. Both the Nordic and Central Regions were again EBITDA positive, with the Central Region more than doubling its contribution. Whilst the Northern Region was still negative, the gap narrowed significantly from ?644,000 in Q1 to ?149,000 in Q2.
The company continues to manage its cash conservatively in line with its business plan and at 30 June the company had cash or cash equivalents of ?21.0 million. A significant part of the Q2 reduction in cash was settlement of accrued reorganisation costs. Settlements will continue into Q3 and Q4 but at lower levels than in Q2.
The company’’s total headcount has now reduced to 362 (including 21 in India) compared to 400 (including 30 in India) at end of Q1. Although the total number of employees has declined, in line with the company’’s plans, a number of new appointments have been made. In this regard the Board is encouraged by the quality of personnel that the company is attracting at various levels of the business. A new Managing Director has been appointed for the Central Region, bringing significant leadership and business skills to this important market. In Norway a new Country Manager and a Sales Manager have both taken up their appointments.
Outlook
The beneficial effects of the significant organisational and management changes implemented by the company around the turn of the year are coming through strongly.
In the first half of the current financial year StepStone recorded negative EBITDA of ?3 million - a dramatic improvement over the loss of ?64 million in the comparable period of 2001.
The changes that have been made, including a number of key country appointments, inevitably had an effect on the business and its employees. In spite of the very difficult economic conditions the positive momentum in integrating the company to provide a comprehensive service to customers and candidates is progressing well. At the same time the company is examining a number of new business opportunities, both internal and external, and a number of interesting situations are currently being discussed with third parties.
Looking to the future, much clearly depends on the overall business climate in which StepStone operates. This continues to be extremely challenging, but morale is high throughout the company. Bearing in mind these factors the Board believes that the company is on target to be operating cash flow and EBITDA positive by the end of 2002.