StepStone UK sinks

StepStone: Having trouble raising new funds

StepStone, the Norway-based online recruitment agency, will cut more than 525 jobs from its 876-strong workforce and has informed its UK subsidiary that it will no longer support it financially.

"In the UK, the company will be put into liquidation" and 135 people will lose their jobs, spokesman Bob Gregory told BBC News Online.

The announcement spells bad news for Channel 4 Sport in the UK, which has been sponsored by StepStone in a deal reported to be worth £7m-8m per year.

Internationally, StepStone's aggressive expansion during the past two years will be reversed as the company prepares to face a serious cash crunch.

In a bid to become a profitable company, it will narrow its geographical spread and focus on Belgium, Denmark and Germany - its three most successful markets.

Cash call

StepStone is also actively trying to convince investors to boost their financial backing of the group.

That may prove difficult, even though its widely recognised brand name should be worth something.

StepStone's share price has fallen sharply on the Oslo Stock Exchange ever since it hit a peak in March 2000 of 62 Norwegian kroner.

At the time, the market valued the company at more than 10bn kroner.

Following the latest announcement, the company's stock slipped to 0.30 kroner.

The fall in the company's market value was accompanied by a growing realisation among investors that making money from a dot.com recruitment operation is difficult at the best of times.

It has not been made easier by the current economic gloom where companies are slashing jobs rather than boosting recruitment.

Cash crunch

StepStone's losses before tax, debts, depreciation and other factors narrowed to 16.7m euros in the third quarter from more than 40m euros a year earlier.

The losses are large compared with the company's fast shrinking cash pile, and StepStone is burning cash fast: It is spending twice as much as it is earning.

StepStone's cash reserves shrunk to 22.5m euros (£14m; $20m) by the end of September from 46.9m euros at the end of June.

"If you look at what's left and you look at what we get through in a quarter, you'll see that we would be hard pressed to survive beyond the fourth quarter," Mr Gregory said.

"The results were worse than expected even though expectations were not very high," said one analyst.

Fund raising

The company hopes the reserves should be just about enough to carry it over a difficult patch until it can raise fresh cash from investors.

"The fund raising process is now at an advanced state. Advisors have been appointed and commitments are being gathered from current and prospective investors," StepStone said.

The details of its plan to raise fresh funds will be revealed at an extraordinary general meeting in a few days, the company said.

"Investors are disappointed because StepStone is saying little about how it will raise new cash to keep going," the analyst said.

StepStone's results had been delayed by a week, and then by a further day, as the company pushed for commitments from investors on new funding.

New chief

StepStone has appointed Colin Tenwick - formerly of RedHat - as chief executive to oversee a major restructuring that will involve "looking at options to reduce the operating losses being incurred" in the 17 countries where it operates.

"The company cannot sustain the current level of investment across Europe," StepStone said.

In addition to Belgium, Denmark and Germany, "operations will be maintained to grow its businesses in Norway, Sweden, Finland, the Netherlands and Luxembourg," the company said.

StepStone will retain its headquarters in Norway.