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In its broadest hint yet, Stepstone says it can "see a need for further capital before the company reaches profitability".

Looking at its cash burn (after a restructure), one can see why: the company only has EUR46.9m left in the bank - enough to cover maybe four months of losses at the current rate.

Stepstone's operating expenses in Q2 were E47.8m, against revenues of E17.1m. In Q1, the company announced plans to trim E20m a quarter by Q3 from operating expenses, which were then 48m a quarter. Accordingly headcount - mostly from back office rather than the sales floor - has been trimmed back from
1,258 in Q1 to 1,078 in Q2. Stepstone says it will cut back even further, reducing staff numbers to 850 (does this make it an anti-recruitment company?).

It will need to do rather more than this, if it is to avoid extending the begging bowl to its shareholders.
With the slowdown in recruitment across Europe, Stepstone will not find it easy to trade its way out of losses - it will simply not win enough market share quickly enough. And with operations in 15 countries its cost base is far greater than that of most rivals.

The online recruitment firm cites current recruitment market conditions for its need for a fresh capital injection. But equity market conditions will mean that any rights or new share issue will get away only at a deep discount.

Stepstone expresses confidence in the future - it
says it has the full backing of its three biggest shareholders and that it remains on course to turn cash positive in 2002.

The company turned cash positive in Germany in Q2, 2001 and reports that its Danish operations have been profitable - before interest - for the third quarter in a row. ®

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