StepStone Publishes Q2/2004 Results

Highlights

Generally positive progress in Q2

oSales up 10 per cent on same quarter last year

oRevenue increases for 2nd successive quarter

oCosts remain tightly controlled ñ unchanged on Q1 2004

oCompany loss continues to decrease

Business prospects continue to be impacted by differing country market conditions

The company continued to make progress in the second quarter but results were mixed across the countries in which we operate. Whilst there were encouraging improvements in Germany and Sweden, results in other markets were broadly similar to Q1 2004. Overall Sales (being Invoiced Sales of OLR and Contracted Sales of ERS) for Q2 2004 were up 10 per cent compared to the same quarter last year (Q2 2003). For the second quarter in succession both total group revenue and OLR revenue increased when compared to the previous quarter.

Online Recruitment Division
OLR revenue increased for the second successive quarter, rising from Ä4.2m in Q1 2004 to Ä4.4m in Q2 2004.

In the report for Q3 2003 we announced that OLR was to carry out a series of focussed marketing campaigns to run through the latter part of Q3, Q4 and into Q1 2004. The objective was to increase awareness and boost traffic levels from the average quarterly level of 9.4m user sessions in the first six months of 2003. These campaigns have been extremely successful and user sessions have grown strongly. In Q2 2004 they amounted to 12.5m and in the first half of 2004 recorded a gain in excess of 30 per cent over the first half of 2003.

We continue to attract new job seekers and our CV database stood at 1,244,827 candidates at the end of June. Both listings and vacancies increased during the quarter to 12,969 and 21,188 respectively.

We signed a number of new client agreements and renewed important contracts during the quarter. These include: Dell Computer, Danisco, Coloplast, Telenor, Statoil, Microsoft, Tandberg, American Express International, Google, Amazon, Toyota Motorsport, Sun Microsystems, MAN Turbomaschinen, 3M Deutschland, Pfizer, Total Fina, Atlas Copco, De Post, Euroclear, AMI Semiconductor, Reuters, AGA, Tandberg, Esso Norge, Tele2, Versatel and Corus.

Enterprise Recruitment Solutions Division
The ERS division continued to build momentum during the quarter. In Q2 2004 we signed 6 contracts, two for the Hire.com product and 4 for OneStep.

Since its introduction to the marketplace a little over a year ago, 21 customers across seven countries have chosen the OneStep product. In Q2 2004 a further two new customers, Belgiumís Passage Fitness First, Europeís largest health club chain, and in store s.r.l., Italyís retail marketing agency, were added. In recognition of the value that OneStep has delivered, two early customers, DíIeteren, the Belgian Volkswagen/Audi importer, and WoonWerk, the Netherlands trade organization, committed to long-term renewals of 3 and 4 years respectively.

Two new contracts for the StepStone Hire.com enterprise recruiting solution were signed during the quarter: ARVAL PHH, Europeís leading fleet, fuel and accident management service, working with Hudson Global Resources, and a leading online retailer both selected StepStone.

Across our ERS product lines we saw 12 new customer sites go live during Q2, with further customer sites to be launched early in Q3.

Other Developments
During Q2, the Company rolled out its new pan-European platform on schedule to StepStone operations in Denmark, Netherlands, Norway and Sweden. This programme continues in Q3, with the upgrade of Germany to the latest release and the roll out of the new platform in Italy. The Company also introduced an upgraded version of its OneStep product, providing numerous usability enhancements, and this has been rolled out to all customers. In Q2, the Company also completed its hardware upgrade programme for the StepStone Data Centre in Belgium.

Outlook
Whilst improved over 2003, the sales momentum across our European markets continues to be impacted by differing market conditions in our operating countries. Following a strong Q1, results in April and May were slow, but regained momentum in June. We continue to see prospects for growth, but at the same time the company is constantly reviewing its operating cost base in line with conditions in each market.

The summer is traditionally our quietest period but the Board remains optimistic that the Companyís overall performance will continue to improve on a year-on-year basis in the second half of the year.