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Although headline growth for AIM-listed IT recruitment-cum-consultancy company, ReThink Group (RTG), raced ahead by 28% in the first half of the year to £44.1m, an unexpected hiatus in permanent recruitment placements in July and August has forced the company to issue a profit warning. RTG CEO Jon Butterfield advised that trading has since returned to expected levels, but they will not be able to catch up on lost business by year’s end.
RTG had substantially boosted headcount during the first half of the year anticipating continued growth, which dragged operating margins down from 1.6% in H1 2011 to 1.0%. As a result, pre-tax profit plummeted 30% to £297k though a lower tax burden limited the EPS decline to 21% (2.4p).
Like peer InterQuest (see Mixed story at InterQuest), RTG does not have sufficient scale and diversity to mitigate downturns in parts of the business. Its fledgling enterprise content management/business intelligence consultancy, Aiimi (see ReThink aiming high with Aiimi) is also struggling for profit, with adjusted operating margin slumping from 13.8% to 7.5% on revenues of £2.3m (H1 2011: £1.8m).
RTG share’s are down 20% on the news, to 7p, now 30% below its June 2008 IPO price.
