StepStone Publishes Q4/2005 Results

Highlights
- StepStone declares Profit for the period
- Strong growth in revenues
- Operationally cashflow positive
- Underlying EBITDA of Ä0.6m
- Record number of new contracts for StepStone Solutions
- Q4 2005 compared with Q4 2004
- Revenue - Ä10.1m up 81%
- Deferred Revenue - Ä9.2m up 33%
- Cash - Ä18.8m up Ä8.5m

The Group continued to show improving results in Q4, The Online division again increased its profit and cash generation. Revenue and profitability in the Solutions division rose substantially on prior quarters.

In November 2005 the Board completed a private placing of 8.9m shares at a price of NOK 8.20 per share. This resulted in gross proceeds of Ä9m. The offering, which was significantly oversubscribed, was placed primarily amongst existing institutional investors. The proceeds of this issue further strengthened the companyís resources whilst allowing it to continue to actively pursue strategic opportunities.

StepStone Online
StepStone Online operates one of Europeís largest online classified recruitment advertising businesses.

The division made consistent progress during 2005. Revenue in Q4 2005 grew by 32% compared to Q4 2004 and the division has declared an EBITDA margin of over 20% for the last two quarters.

The number of listings carried on our websites continued to show steady growth and at 31 December 2005 amounted to 27,850. This was more than 10,000 or 63% higher than at the end of 2004. Vacancies increased by 44% from 26,761 at the end of 2004 to 38,455 at the end of 2005. User sessions rose 25% in Q4 2005 to over 15m - an increase of some 3m over the last quarter of 2004.

Customers signing new or renewed contracts during the quarter included Manpower, Randstad, Actief Interim, Glaxo Smith Kline, Citibank, AXA, Thales, Nestle, Fortis, Cargill, Vedior, KLM, Kuwait Petroleum, Nordea Bank Denmark, Kelly Services, Citroen Norway, Aker Kvrner Consultants, Continental, Deutsche BP, Thyssen Krupp, Dresdner Bank, Alfa Laval, Mercuri Urval, Proximus, Getronics and Fortis.

In December 2005, the division acquired 90.1% of HR JobbSverige AB for an initial consideration of Ä1.7m, payable in cash. StepStone will acquire the remaining shares in 2008, at which time a further consideration may become payable dependent on the achievement of financial targets for 2006 and 2007.

JobbSverige is a fast-growing and profitable online recruitment advertising business focused on the Swedish market. It has built a strong reputation with recruiters and candidates alike, in particular for management roles and young professionals. In addition, JobbSverige powers the online recruitment sites of Dagens Industri, the leading Swedish business newspaper, and Shortcut, Swedenís leading career network for young professionals.

Revenues for StepStone Online in Q4 2005 compared with the corresponding quarter of 2004 increased 32% or Ä1.6m to Ä6.8m. Operating expenses were Ä5.4m, an increase of Ä1.0m on Q4 2004. In the quarter the company embarked upon a programme of increased investment, particularly in country specific sales and marketing.

EBITDA improved by 78% to Ä1.4m from Ä0.8m in Q4 2004.

StepStone Solutions
StepStone Solutions offers on demand hosted and managed e-recruitment solutions and has rapidly established itself as the clear European market leader.

Customer demand for these solutions has increased consistently throughout the year and in Q4 2005 the division achieved a record quarter with over 60 new customers across Belgium, France, Germany, Italy, the Netherlands, Norway, Sweden and the United Kingdom.

The divisionís main product offerings are i-GRasp and EasyCruit.

i-GRasp now powers e-recruitment solutions for over 150 customers in 11 languages across 30 countries. Significant new customers for i-GRasp in the quarter include Royal Mail, one of the UKís leading employers, Fiat in Italy and EDF-GDF in France. Bank of America has extended its use of the i-GRasp solution to cover all parts of its UK business, as well as adding all internal recruitment to the system. Other new customers in Q4 include Elan who will implement i-GRasp for temporary and contractor management at Reuters, and Hudson to support recruitment for Ericsson in the UK.

EasyCruit now powers over 200 customers in 10 languages across 14 countries. New customers for EasyCruit in Q4 2005 included Citibank in Belgium, Sony Ericsson in Sweden, Oticonin Denmark, Securitas Direct in Norway, Tecnimount in Italy, Enteo in Germany and Sun-Guard for pan-European recruitment. In addition, Statoil, an established user of EasyCruit in Norway, has signed a further contract to roll out the solution to its retail organisations in Sweden, Denmark, Poland, Estonia, Lithuania, Latvia and Russia.

StepStone Solutions continued to win new contracts for its managed recruitment solutions across Europe as well as in the USA and India for a number of blue-chip employers including Amazon, SAP, Irish Life & Permanent, SAIC, Microsoft, HBOS and BP.

Revenue for StepStone Solutions in Q4 grew strongly to Ä3.3m. This compares to Ä2.8m in Q3 2005 and Ä0.4m in Q4 2004. EBITDA increased to Ä0.3m compared to Ä0.1m in Q3 2005 and a loss of Ä0.4m in Q4 2004.

Group Results
Group revenue increased 81% to Ä10.1m compared with the same quarter last year.

Total operating expenses in Q4 2005 were Ä9.8m. Significantly this included a one-off charge of Ä0.4m to terminate a 20 year property lease in Ireland entered into in early 2001. Excluding this one-off charge the underlying EBITDA profit was Ä0.6m. This compares to an EBITDA loss of Ä0.8m in the corresponding quarter last year

Depreciation and amortization was Ä0.3m compared to Ä0.5m in Q4 2004.

Net financial expense was Ä0.3m arising primarily from the requirement under IFRS to accrete interest on deferred consideration for acquisitions. This compares to Ä0.1m in Q4 2004

The company recorded a tax credit of Ä0.4m during the quarter.

Overall StepStone delivered a profit of Ä33,000 for the quarter.

The group was operating cash flow positive in Q4 2005 and had cash and bank deposits at 31 December 2005 of Ä18.8m compared with Ä10.3m at end December 2004.

Deferred revenue at the end of the quarter was Ä9.2m, up 33% from Ä6.9m in the comparable quarter in 2004.

Outlook
Throughout 2005 the Group has delivered consistent growth quarter on quarter. Both StepStone Online and StepStone Solutions are profitable and growing. In addition the Group is benefiting from the operational synergies that it is able to leverage between the two divisions.

The Boardís focus continues to be on growth, both organically and by selected acquisitions. The programme of country specific sales and marketing investment embarked on in Q4 2005 is expected to continue under current market conditions.

The Group enters 2006 with optimism as the move from traditional recruitment methods to online gathers pace. Moreover StepStone with its breadth of products and market coverage is uniquely positioned to benefit from this move.