Trading has deteriorated for IT recruitment specialist InterQuest at the same time as its profits have been squeezed by investment in expansion. For recruiters, the combination of rising headcount - InterQuest's fee-earner headcount is up from 169 to 194 employees in the first half - and falling demand is truly horrid. But the nature of the company's recent investments means it may not prove to be quite as noxious a cocktail as it first seems.
The investment, which has contributed to a 42 per cent fall in underlying EPS to 2.2p, has been focused on generating more higher-value work in niche markets and overseas. Indeed, InterQuest opened its first overseas office in Singapore during the half as well as creating an International division. So, while revenues are down due to lower levels of lower-margin contract work, its all-important net fee income actually rose 6 per cent to £8.3m, which is encouraging.
However, trading has been getting worse both in the UK and the Far East, particularly in the second quarter. This is especially bad in the finance sector where Interquest generates a quarter of its fee income.
Despite a cash outflow in the first half and a £900,000 increase in net debt, InterQuest says it remains committed to a progressive dividend policy, although the payment was static last year.
House broker finnCap forecasts full-year pre-tax profits of £2.2m and EPS of 4.9p (2011: £3.5m/7.8p).
| InterQuest (ITQ) | ||||
|---|---|---|---|---|
| ORD PRICE: | 37p | MARKET VALUE: | £12m | |
| TOUCH: | 35-39p | 12-MONTH HIGH: | 63.5p | LOW: 31.5p |
| DIVIDEND YIELD: | 6.8% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 60p* | NET DEBT: | 32% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Div per share (p) |
|---|---|---|---|---|
| 2011 | 59.1 | -1.67 | -5.6 | 0.5 |
| 2012 | 55.8 | 0.51 | 1.2 | 0.5 |
| % change | -5 | - | - | - |
Ex-div:19 Sep Payment:26 Oct *Includes intangible assets of £15.9m, or 48p a share | ||||
