Huntsworth share price drops 20% on announcement of £4m revenue cuts

Huntsworth saw a fifth wiped off its value in trading this morning after its interim management statement revealed the cancellation of more than £4m of client project fees.

Lord Chadlington: Huntsworth CEO
Lord Chadlington: Huntsworth CEO
Sally Withey, chief operating officer, said: ‘We have recently experienced the cancellation of more than £4m of scheduled year-end projects due to global economic uncertainty. The timing of these cutbacks coming so late in the year will not enable us to reduce costs accordingly. We therefore expect to fall short of management profit expectations by £4m.
 
‘In the UK and Europe - geographies that together account for 62% of Huntsworth revenues - these cutbacks are in fast moving consumer goods, consumer durables, environmental and CSR programmes and, in the USA, nervousness in the pharmaceutical industry is slowing spending decisions and delaying new business starts.
 
‘On the assumption that these client cutbacks are further signs of a lasting economic downturn in our primary European markets, we have taken the decision to reduce our cost base to ensure that, within six weeks, at the start of 2012, we will have returned the group to its historic operating margins.’
 
The company did not provide additional details of this cost-cutting drive. If, as seems likely, this results in headcount cuts at the group, Hunstworth will join Chime Communications in trimming staff due to the unforeseen cancellation of key contracts. Earlier this month, Chime announced it was to cut staff and property costs after losing its lucrative work with the US government.
 
At the time of writing, the value of shares in Hunstworth had dropped by more than 20 per cent on the back of the statement.
 
Overall, like-for-like revenues grew by 7% in the third quarter year on year. Citigate reported 15.5% growth, Grayling 5.2%, Huntsworth Health 3.7% and Red 15.6%.
 
The company also said that Grayling, Huntsworth Health and Red had recorded seven-figure international and multi-office business wins in the third quarter that would come online in the first quarter.
 
Whitney added: ‘The group strategy is to win two and three-year global and multi-office contracts. The pipeline for these larger mandates is good and following our brand rationalisation, our success in winning them has considerably improved in the third quarter.’

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