First quarter results Heidrick & Struggles are in. Bloody hell.

In previous posts I casted doubt about the "patting ourselves on the back" optimism press-released from the Executive Search heavy weights Heidrick & Struggles and Korn Ferry.

The results for Heidrick are in, and it is now officially Heidrick & Struggling. The average earnings estimate, predicted by analysts of 3 cent per share turned out to be a whopping  loss of 115 cent per share, going far below the most pessimistic assesment.

How does this translate in real figures?

• A loss of 18.9 Million USD compared to a profit of 7.1 Million USD for Q1 2008. The loss includes restructuring charges.
• A drop of 41.8 % in revenues, most of it in the US (40%) and Europe (46.9%). Consolidated net revenue for the quarter was 89.1 Million USD, down from 153.1 Million USD compared to Q1 2008.
• A drop of 38.4 % in search assignments
• Productivity-billing per consultant dropped significantly, from 1.5 Million USD to 900K USD

One particular alarming item on the balancesheet is how the trend is reflecting in liquidity: Cash and equivalents at March 31, 2009 were 96.4 Million USD, compared to 234.5 Million USD at December 31 2008. Ouch! In one quarter cash reserves dropped roughly 60%.

The average fee also dropped, but not significantly, from 106.700 USD to 98.900 USD - which seems Heidrick is not cutting prices to pull in more searches.

The company already cut expenses by 15% to 126.1 million USD for the quarter, and is now forced into more aggressive cost-cutting initiatives for the rest of the year. Heidrick cut its work force with 11% in January, plans to cut headcount by an additional 8% to 10% in May, and will trim base salaries by 5 percent through a combination of salary cuts, unpaid days off and reduced working hours. As a result the company expects to run another restructuring charge up to 10 Million USD for the next quarter.

My take is that Heidrick will post another loss of the same magnitude the next quarter. I will look into that in more detail tomorrow.