Image may be NSFW.
Clik here to view.
After its very own 'annus horribilis' which saw profit warnings and the exit of its founding CEO (see ReThink rethinks CEO), AIM-listed IT recruitment-cum-consultancy firm ReThink Group (RTG) seems to be putting the worst behind it.
To be sure, its 2012 results were not a particularly pretty sight, with net losses of £1.1m on revenues 16% higher at £91.2m. This compares to a £2.2m net profit in 2011. Chairman John Sadiq attributed their woes to 'over ambitious' plans, 'over-stretched management' and insufficient 'rigour and accountability'. Clearly minds have been reset as interim CEO (and prior CFO) Steve Wright reports that RTG is now trading profitably.
RTG remains a business of two halves (well, two-and-a half really). Its core recruitment operations are split over two divisions, one which handles bog-standard IT contract and permanent placements, and the other handling recruitment managed services ('Talent Management'). The third division, Technology Services, houses its enterprise information management and business intelligence software and consulting practice (see ReThink rethinks Aiimi brand). The latter seems to be struggling, with operating profits almost disappearing, but in any event the division only accounts for 4% of group revenues. In contrast, 'Talent Management' seems to be flourishing with a near doubling of profit on revenues of £28.6m, 13% higher yoy. That said, that there has been a certain amount of cost reallocation between the divisions so the comparisons are not really like-for-like.
It's tough for smaller IT recruitment firms (e.g. see InterQuest misses again) and market conditions are not getting any friendlier. This means management really does have to focus on its core operations, which is why I remain concerned that RTG's Technology Services activities seem to be an unnecessary and unprofitable distraction.
