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It’s just a lovely little business. And you know what? It may well grow into a lovely big business too. I’m talking about InterQuest, the AIM-listed ITSA (IT staff agency), originally modelled on its much larger, highly successful and diversified peer, SThree.
InterQuest has now topped £100m in revenues (£112m to be precise, up 15%), with gross margins up a tad to 13.1% and a 2.1% EBIT margin. They run a multi-brand business (16 at last count), of which five are ‘incubatees’ within its private equity arm, IQ Equity. These 5 are within a gnat’s crotchet of achieving sustained profitability.
I had a long chat with chairman and CEO, Gary Ashworth, and CFO Michael Joyce just now, and I believe they are doing all the right things to give them the best chance of reaching their aim to build a £10m EBIT business (and then, we presume, sell it). They have a fair ways to go, but they are taking a very entrepreneurial approach to moving into ‘adjacent’ markets. For example, they have recently started an executive search business and also a payrolling business. I was a bit surprised about the latter as payrolling other people’s contractors used to be seen by staffing firms more as a necessary evil. But Ashworth and Joyce clearly see it as an opportunity – albeit at low margins.
And perhaps following in SThree’s footsteps, Ashworth and Joyce are looking at moving beyond the UK into Asia/Pacific. Every recruitment firm we track is growing faster overseas than in the UK (see SThree on the up and up and over!), especially in emerging economies. It seems the opportunity is too great for InterQuest to let it pass them by.
Ashworth also told me he is to split his role and appoint a “sales-led” CEO to look after the established businesses while he and Joyce pick up again on the M&A trail that dead-ended during the downturn. We expect a CEO announcement sooner rather than later.
