Chief Executive Officer’s Review
This has truly been a year of two halves. After a strong H1 when we delivered Net
Fee Income (“NFI”) growth of 8%, the slowdown in the economy had a significant
effect on our second half performance, with H2 NFI falling 23%. In the face of these
conditions, we took proactive action on our cost base, as a result of which we have
posted solid results for the year as a whole.
Business Review
The year started strongly and despite the market softening in Q2, we delivered solid
contract NFI growth in H1 of 12% and permanent fee growth of 2%, resulting in growth in
NFI and Profit before tax of 8% and 7% respectively.
In line with the overall UK recruitment sector, H2 became increasingly challenging.
Demand for our permanent recruitment services was particularly hard hit, with H2 NFI of
£3.1m compared to £5.2m in H1. Our contract business was more resilient to the
downturn as we would expect, and here we saw the number of contractors on assignment
falling by 5% from 4,760 at the start of the year to end the year at 4,500. All sectors have
seen pressure on margins and reductions to contractor pay rate, reducing our average
timesheet value by 8%, in July 2009 compared with July 2008.
Due to the decline in permanent revenue, our business mix has shifted towards contract
recruitment in the period which now represents 73% of the Group’s NFI (2008: 67%).
During the period our top 50 clients accounted for 42% of the Group’s NFI compared to
54% last year. VT Group (including its joint ventures Flagship Training and bVT Surface
Fleet) (6%), Mouchel Group (3%) and Transport for London (including Metronet) (4%) were
our three largest clients. Our Master Vendor contract with Mouchel Group was extended for
a further three years and our largest contract win was a Master Vendor agreement with a
new client, Invensys Process Systems.
We have been efficient in managing our cost base with the changing environment. The
Group’s remuneration strategy from sales consultants through to management remained
strongly biased towards variable over fixed remuneration. Our IT technology continued to
deliver operational efficiencies and our proven single site strategy ensured our costs
remained under effective control.
At the start of H2 we were proactive in reducing our headcount in response to a difficult
trading environment. Staff numbers have been reduced by 20% from a peak of 330 in
December to 263 at the year end with reductions in both sales and support staff. Whilst
we will continue to manage our headcount closely, we are committed to ensuring we do not
cut into the muscle of the business thereby hampering our ability to bounce back strongly
as and when markets recover.