InterQuest has warned that net fee income and earnings for the year ending 31 December year will be below market expectations.
A trading update says that following a period of under-performance in the company's London based digital division of ECOM it has been necessary to restructure the division and revise the sectors the business focuses on. This change is to counter lower than expected volume of work from the agency sector, which has reduced significantly from the end of Q2 and beginning of Q3.
InterQuest says it has implemented significant annualised cost savings and restructured ECOM London to meet the challenges of this lower level of activity in talent acquisition.
It says: "The performance of ECOM London remains weaker than initially forecast but is showing continued improvement since the summer period.
"In addition to the under-performance by ECOM, there have been lower levels of demand in the public sector compared to 2015 and a small number of large value placements have been delayed into 2017. As a consequence the Company now expects that net fee income and EBITDA for the current financial year will be below market expectations.
"Looking forward the underlying technology markets that the Company serves should deliver structural growth in the medium to long term. As a result of taking action, InterQuest has seen an improvement in profitability since August and the acquisition of RDW, a permanent search business, in August 2016 has immediately contributed to profits and generated cross selling opportunities."
The company say it has seen an improvement in average permanent fees and margins on professional contractors have also increased since 2015. The Company's Recruitment Solutions business has added one further managed service client and remains robust.
Non-executive chairman Gary Ashworth said: "I am pleased with the progress that the new management team has made in restructuring underperforming divisions of the Company but acknowledge the challenges the business has faced this year. We continue to focus on building InterQuest to be the market leading "digital transformation" recruitment business."