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World – Heidrick & Struggles sees weakness in Asia Pacific offset by growth elsewhere

26 February 2014

Chicago-based international executive recruitment firm Heidrick & Struggles (HSII: NASDAQ) reported revenue of USD 122.9 million for the fourth quarter ending 31 December 2013, a year-on-year increase of +13.1% from USD 108.7 million in Q4 2012.

The company achieved an operating income of USD 1.1 million during the three month period, compared with an operating loss of USD 471,000 last year. Heidrick & Struggles reported a net income of USD 2.4 million for the fourth quarter, compared with a net loss of USD 3 million for the same period a year ago.

On an annual basis, the company reported revenue of USD 462 million, a year-on-year increase of +4.1% compared with USD 443.8 million in 2012. Heidrick & Struggles achieved an operating income of USD 15.6 million, a fall of -20.4% from USD 19.6 million a year ago. The company reported a net income of USD 6.4 million for the 12 months ending 31 December 2013, an increase of +28% from USD 5 million last year.

Tracy R. Wolstencroft, Heidrick & Struggles' newly appointed President and Chief Executive Officer said: "Our fourth quarter and full-year 2013 results reflect year-over-year improvements in revenue, adjusted EBITDA margin, and productivity. The need for talent and leadership has never been greater, especially in a global economy that is growing increasingly more complex. With the calibre of this firm's brand, people and relationships, I see opportunities to create increasing value for our clients, our shareholders and our colleagues."   

During the fourth quarter, revenue from the Americas was USD 63.8 million, a year-on-year increase of +10.4% from USD 57.8 million in Q4 2012. Improvements in the company’s consultant productivity and average revenue per executive search, as well as revenue growth in the Consumer Markets, Industrial and Global Technology & Services Search practices, drove the increase in revenue, partially offset by declines in the Financial Services and Healthcare & Life Sciences practices and lower consultant headcount. Operating income grew to USD 15.8 million during Q4, up by +27.3% from USD 12.4 million last year.

On an annual basis, across the Americas revenue rose by +0.9% to USD 256.7 million from USD 254.4 million in 2012. Annual operating income in the region increased by +13.1% to USD 69.6 million up from USD 61.6 million last year.

European revenue increased by +7.7% during the fourth quarter of 2013 to USD 25 million up from USD 23.3 million in Q4 2012. Fourth quarter revenue growth in the Industrial Search practice and Leadership Consulting, as well as an improvement in consultant productivity, were partially offset by a revenue decline in the Financial Services practice. The region reported an operating loss of USD 1.8 million during the quarter, compared with an operating income of USD 100,000 last year.

On an annual basis, European revenue fell by -9% to USD 90.1 million from USD 99 million in 2012. The company achieved an operating income of USD 3 million in 2013, a significant improvement from an operating loss of USD 10.2 million last year.

Across Asia-Pacific, Heidrick & Struggles reported revenue of USD 22 million in Q4 2013, a fall of -3.9% from USD 22.8 million in Q4 2012. Growth in the Global Technology & Services Search practice was offset by revenue declines in the other practices. The company reported a worse operating loss during the fourth quarter of USD 500,000 compared with an operating loss of USD 100,000 in Q4 2012.

On an annual basis, revenue across Asia-Pacific remained unchanged, year-on-year, at USD 90.4 million. Operating income across the region increased by +44.2% to USD 5.5 million from USD 3.8 million in 2012.   

In January 2013, Heidrick & Struggles acquired Senn-Delaney Leadership Consulting Group for USD 53.3 million. The function of the business is to provide corporate culture shaping services, which includes changing the behaviour of individuals and teams. During the fourth quarter, the culture shaping business reported revenue of USD 7.2 million. On an annual basis, revenue derived from Senn-Delaney was USD 24.8 million.  

Looking forward to the first quarter of 2014, the company is forecasting revenue of between USD 110 million and USD 120 million. Mr Wolstencroft added: “I have met or talked to hundreds of people at Heidrick & Struggles in my first three weeks as CEO. What I’ve learned to date has reinforced my belief that there is a considerable amount of strength within the company and potential for growth. My initial focus will be on attracting and retaining exceptional talent as well as fostering collaboration and teamwork across our global platform. Achieving profitable long-term growth will be driven by our ability to deliver unparalleled expertise and service to our clients.” 

In trading yesterday, the company’s share price increased by +0.75% to USD 17.39, an increase of +32.4% compared with a year ago. Based on its current share price, the company has a market value of USD 315 million. 

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