Highams
Highams have just announced their figures for the year ended March 31st – 6 months after their year ended.
It's niche is providing technology talent in the financial services industry.
That's a red flag already.
According to the company:-
This has been a demanding year and Highams has not been immune from the various challenges faced by others in our sector, which has had a negative impact on our financial performance.
“In the financial year, Highams embarked on an extensive revitalising of the brand with a view to seeking new clients and winning higher margin business in its chosen market sector. The Group also realised that it needed to engage on a turnaround programme to effect significant cost reduction.
“The revitalising of the Highams brand and our business operations through a range of initiatives,which include, among other things, the opening of a London office at the iconic 'Gherkin' and close to our core insurance customer base; the establishment and growing influence of bluefuse, our online business network created to promote and support IT professionals in the Insurance sector and a range of other initiatives, have helped to secure the winning of a substantial number of new and higher margin clients”.
Falling Revenues
Highams' revenue fell by 16.6% to £13.6m – and that was in a growing market.
They had decided to cut a lot of their low-margin, presumably PSL business.
The Group loss before tax and impairment was £851,000 and after impairment it was £1,922,000.
They have Net Liabilities of £129,000 compared to Net Assets of £1.8m last year.
You get the Net Assets / Liabilities by adding up every asset they have including cash and buildings and subtracting their debts.
When you do that for Highams it comes up as a negative.
Raised Money
We looked at Harvey Nash the other day and saw they had Net Assets above £50m.
This gives them something to fall back upon in hard times.
However, Highams has nothing to fall back on.
In fact they had to raise money by a placement of their shares in order to keep going.
That share placement was at a big discount to the market price at 1.75p per share.
Bad Sign
The fact that they took so long to bring out their report isn't a good sign either.
Presumably they were waiting so that they could announce the share placement at the same time, otherwise shareholders would have been extremely worried about the hole in their finances.
However, they can't do that every year.
And they can't continue to make losses like they did this year every year, in fact, they probably can't afford to do it this year – and this year is half over for them already.
Hopeful Signs
There are hopeful signs.
According to the Board:-
“As the Group advised on 8 July 2008, we expected to see our major investments of the first half of the financial year start to make an impact in the second half, but with the benefit of the investment becoming more clearly evident in the current financial year.
“While there is some solid improvement seen in the Group's performance in the second half of the financial year as evidenced by the improvement in the gross margin percentage achieved, the Board recognised that it must continue to 'attack' costs, drive sales and deliver better quality earnings as a result of the focus on higher margin business.
“Losses have been reducing substantially quarter by quarter and that progress has continued into the new financial year with a first quarter loss of £42,000 in comparison to a loss of £160,000 in the first quarter of 2007”.
Badly Hit
That's better news for their contractors and shareholders but they are still losing money – although at a more manageable rate.
However, that was the news up to the end of June.
Since then then the financial sector has been badly hit and the biggest company in the world in their niche sector insurance, AIG, almost went bust.
Highams would be very vulnerable to any downturn in the economy and any problems in their niche insurance sector.
Our Advice
Our advice to IT Contractors who are currently being placed by Highams is to have a watching brief.
They don't look as if they are just about to fall over but they can't continue making losses like they have been doing – especially as they have no assets to fall back on now.
It will be very interesting to see what their six-month figures are.
That period is now over so they should be reporting in a month or two.
Warning Sign
As with all agencies, IT Contractors should keep an eye out for any problems in getting paid.
That is usually a first warning sign for an agency about to go under.
As I said, Highams don't look to be in immediate danger, and they do seem to be getting their losses under some degree of control.
However, they haven't been doing well in a good market and any downturn in the market for contractors in the insurance sector might see them struggling even with their new strategy.
We will definitely not be having them, like Harvey Nash, in our Healthy Agency section on our Contract Search page.
IT Contractor has Umbrella Companies, Personal Service Company and IT Accountants directories as well as a Limited Company Set-up facility, IR35.
