Specialist IT staffing firm InterQuest Group (ITQ: LSE) reported revenue for the year ending 31 December 2016 of £143.6 million, a decrease of 9% from £158.6 million in the previous year.

According to InterQuest, the primary cause of the group’s decrease in revenue during 2016 was a reduction in contractor numbers. The revenue resulting from contract recruitment decreased by 15% during the year with the most significant impact being felt in the Public Sector, ECOM (Digital Recruitment) and IQ Financial Markets (reported within Enterprise).

The group’s permanent revenue increased by 4%, compared to last year, which was positively affected by the acquisition of Rees Draper Wright in August 2016. 

Gross margin for the full year improved slightly to 15.1% from 15.0% the previous year.

Last year, InterQuest made a number of restructuring changes which included reorganising its digital division of ECOM. The group says that in 2016, ECOM’s business model was significantly challenged as the demand from agency clients decreased. “This change in buying behaviour reflects the evolution of the agency market with a number of large end user clients deciding to build up a strong in-house capability instead of relying on agencies to deliver their digital assets,” the company said.

As a result ECOM’s London business saw a 41% decrease in NFI. Action was taken to address this through changing the leadership team and refocusing the business towards end user clients while retaining the agencies that had an on-going demand. This has resulted in a pick up in contractor numbers towards the end of the year and offers a stable base from which to grow in 2017.

“2016 has been a challenging year of transformation for the InterQuest Group,”

Gary Ashworth, Chairman of InterQuest, said. “Following a change in executive management at the beginning of the year, an operational review of activities was undertaken and the future vision for the company outlined. All of our service offerings are now clearly focused on assisting our clients overcome the challenges of digital transformation and being able to support them at each stage of that process.”

"Financial performance in 2016 reflects the changing nature of how our clients seek to address their staffing challenges," Ashworth said. “The leadership team have taken action to address underperformance and ensure that the group's specialist staffing brands now address markets that are growing.”

“During the course of the year, we have significantly developed our recruitment process outsourcing business, IQ Solutions, through designing and delivering high value resourcing solutions,” Ashworth said. “The acquisition of Rees Draper Wright (RDW) in the latter part of the year, has allowed the group to pursue its strategy to have greater impact at the senior level, offering executive search and interim management solutions. RDW have a rich history of delivering excellence at board and senior levels in both the professional services and private sectors.

“The acquisition also offers an opportunity to further develop the US platform that RDW have in place and broaden the group's geographical reach,” Ashworth said. “Looking forward, the group intends to follow a path of organic growth, continuing to invest in our staff and developing the well established brands that we have in place while focusing on paying down debt. We are cautiously optimistic about 2017.”

“The 2016 results for the group reflect a year of significant change and development,” Chris Eldridge, CEO of InterQuest said. “The group continues to focus on supporting our clients in identifying the talent they need to drive their businesses forwards through the use of technology. We have addressed the areas of the group that have underperformed during the year and developed our service offering both in the UK and in the US following the acquisition of Rees Draper Wright. The group enters 2017 with a clear vision and tactical plan to develop our specialist brands and capitalise on our ability to service our clients’ recruitment needs at all stages of the digital transformation life cycle. On behalf of the board I would like to thank all of my colleagues for their ongoing hard work and support throughout 2016.”

In trading today, Interquest Group PLC traded at £34.75, down 2.46% on the day and 31.13% above the 52-week low of £26.50 set on 1 December 2016. Based on its current share price the company has a market value of £13.37 million.