… and the new ‘meaning of life’ for AIM-listed IT recruitment-cum-consultancy firm ReThink Group (RTG) will be as a ‘Talent Management-led services business’. If you are interested, you should read the back story (start here and work back), but in brief, RTG started out as a hybrid IT recruitment and BI product value-added reseller and then it all went horribly wrong.
After much searching of hearts, restructuring and board shuffles, RTG – IMHO – now has every opportunity of seeing things go even more horribly wrong. The board has decided to turn the business into a different sort of hybrid, combining body shopping with a projects and consultancy business. It’s a formula that history has proven rarely works – the projects business usually eats away at the margins of the staffing business. But at least it looks like they are probably going to ditch their barely profitable BI activities.
For the record, RTG’s revenues for the 6 months to 30th June soared 27% to £56.2m but gross profits barely budged at £10.5m taking 5 points off gross margins, now 18.6%. Restructuring brought down SG&A so that operating margins inched up from 1.0% to 1.2%. Meanwhile cash is a problem so management has boosted invoice discounting.
The only diversification that IT recruitment companies should ever think about is into ‘adjacent’ skills and (perhaps) ‘adjacent’ geographies. They should leave ‘real’ IT services to ‘real’ IT services companies. I can’t see that RTG will prove itself to be the exception to his rule.