Highlights
Online Recruitment Division EBITDA positive for 5th consecutive quarter with operating margin increased to 10% despite decline in revenue
Enterprise Recruitment Solutions Division gaining momentum with 7 sales of OneStep recruitment management solution since product release in March
Continued reduction in operating costs to EUR5.8m (before reorganisation cost) following move to divisional structure and single IT platform
Additional EUR1.6m of cash expected by year end on completion of the liquidation of former UK subsidiary
Q2 loss for the period was EUR468,000 (including EUR1.6m from UK liquidation) against EUR1.9m in Q1 2003
Cash of EUR8.1m at 30 June 2003
The recruitment industry across Europe, as widely reported, remains extremely challenging. In spite of these trading conditions the Online Recruitment Division increased its profitability at the EBITDA level.
StepStone continue to believe that talent management represents an enormous opportunity for the company and investment in the Enterprise Recruitment Solutions Division, which was established at the start of 2003, has continued in Q2. They are beginning to see a return on that investment with 7 sales of their new OneStep product by 30 June 2003 and an increasing pipeline of prospects for the Hire.com product.
Online Recruitment Division
Overall revenue have declined to EUR4.5m from EUR5.3m in Q1 2003. However, operating expenses fell sharply by just over EUR1m. This reduction in costs resulted from the creation of a two divisional structure, the move to a common European platform and a number of management initiatives taken over recent months. In Q2 the Online Recruitment Division reported a positive EBITDA of EUR465,000 - more than double the EBITDA of the previous quarter. Moreover the Online Recruitment Division has now generated a positive EBITDA for the past five quarters. The operating margin, EBITDA as a percentage of revenue, was 10% - the highest in the Company''s history. Online recruitment is a volume driven business and management''s expectation is that there is significant scope for this margin to improve further as the employment market recovers.
Careerportal, thier innovative candidate exchange solution for recruitment agencies, was launched in Germany in June with ten founder agencies. These include Bernhard Keller Personalberatung, Causalis Unternehmensberatung, Bergner & Partner GmbH and Ursula Berger Unternehmensberatung GmbH.
Their total CV database continues to grow and at 30 June amounted to 1,060,850 compared with just over 1m at the end of March. Vacancies were 20,371 against 22,597 at the close of Q1 2003 with listings amounting to 12,436 compared with 12,215 at the end of the preceding quarter. User sessions were again strong at 9.3 million for the quarter against 9.6 million in Q1 2003.
They continued to attract quality customers to our sites and during the quarter they signed agreements with a number of new clients or renegotiated important renewals. These included the following companies: United Services Group, Intel International, Proffice, Carlsberg, CSC, Danisco, Lundbeck, La Poste, PWC Deutsche Revision, Peugeot Deutschland, European Patent Office, SAP, Santander Direkt Bank, Aeon, Electrolux Home Products and Dynea.
Enterprise Recruitment Solutions Division
The focus of the Enterprise Recruitment Solutions Division during Q2 has been on strengthening the ERS sales team and building the pipeline of opportunities. Earlier this month StepStone were pleased to welcome Matthew Parker as ERS European Sales Director. Matthew brings with him three years of talent management experience at i-Grasp.
They are also pleased with the launch of the new StepStone OneStep solution, which allows companies to deploy simple but effective privately branded online recruitment sites. So far they have concluded 7 sales of this product with 5 taking place in Q2. These have a combined sales value in excess of EUR100,000 and generated revenue in the quarter of EUR21,000. New clients this quarter include WoonWerk, the Association of Home Furnishing Companies in the Netherlands, Carrefour Belgium and GSO, the German Scholars Association.
In the Q1 Report they stated that we considered the ERS division to be an investment in an emerging, and potentially very large market. We are continuing to focus on building a pipeline of Hire.com business opportunities and although still in its early days of development they are encouraged by the progress that this division is making. Reflecting the nature of our investment in the ERS division we produced a negative EBITDA of EUR591,000 for the quarter.
Outlook
StepStoneís OLR business is heavily dependent upon the overall number of job vacancies in the markets in which they operate. However, the underlying fundamentals such as demographics and the cyclical nature of economies all point to future skill shortages and increased employment opportunities. In the opinion of management, the StepStone OLR business model is now in excellent shape to benefit from any increased demand for employees with the impact flowing directly to the bottom line of the Profit and Loss Account.
Until then the OLR business continues to focus on maintaining market share, seeking new customers, improving efficiency and controlling costs.
The Enterprise Recruitment Division is progressing in accordance with the Company''s plans but, as they have stated previously, this is a business with longer sales cycles than the traditional OLR business. Customer acceptance of the OneStep product has been good but we do not expect to see significant sales of the Hire.com product until Q4 2003.
The current quarter is traditionally our quietest with the summer holidays impacting business right across Europe. However, we believe that, with the improvements made by the management team at the operational level in the OLR division over the last six quarters, the continued cautious investment in the ERS division and the ongoing reductions in corporate costs, the company is well positioned to continue making progress in the second half of the year.
StepStone publishes Q2/2003 results
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