It would have otherwise been quite a respectable year for AIM-listed IT recruitment company InterQuest Group if it weren’t for its ‘Trojan Horse’ acquisition of Contract Connections Ltd (CCL) last June (see here). Little did they know that one of CCL’s major clients was soon to hit them with an alleged fraud claim (see here). To cut the long (but not yet over) story short, Interquest took a near-£3m hit on the P&L to try to clear up the mess.
Meanwhile, Interquest’s revenues for the year to 31st Dec. 2011 increased by 8% £120.1m, of which half the growth was due to CCL. Gross margins expanded from 13.1% to 13.8% as the balance of services skewed more towards permanent recruitment, though contractor margins also improved from 9.6% to 10.8% (excluding Interquest’s 2%-margin payroll services business). Operating margins improved by 40bps to reach 2.5% but all the good work was undone by the CCL hit which left Interquest with a net £1.1m loss (2010: +£1,8m).
Interquest brought on board a couple of ITSA (IT staff agency) heavyweights, in the guise of Mark Braund as CEO (see here) and, more recently, Gary Goldsmith (ex-SThree – arguably Interquest’s role model) as COO. Not a bad role model to aspire to, with SThree's 36% gross margin and 5.5% operating margin (see here)!