Spring Uncoiled

Less than six months after Spring launched their share option scheme for IT contractors in a blaze of publicity, the Group was back in the papers again last week reporting a pre-tax loss of £6.4million. The option scheme was hailed by Spring as a step change in the agent to contractor relationship, with contractors who worked through the agency for a set period being offered share options at an attractive price of 190p. However after last week's loss announcement, Spring shares were trading at just under 135p.

When the option scheme was announced in January, Spring was much fancied by City bankers and financiers, who now seem to have placed their faith elsewhere and rather less with those who recruit to make the dot com revolution happen. Perhaps investors have woken up to what many contractors recognised at the time:

1. Contractors who are running their own business, do not want to be tied in. They want flexibility, exciting new projects and a chance to develop their skills. IR35 puts further pressure on independent contractors to move away from the 'tied in' model.

2. The Internet was actually encouraging new agencies at the time, creating more competition for Spring. Meanwhile the company changed name to spring.com, to show how e-friendly they were.

3. To complete the revolution Spring needed to do much more than add dot com. This is proving expensive for an existing "bricks" site to add "clicks". New players have since changed not just where things are done but how things are done on-line. For the latest and best e-cruitment companies, the internet is much more than an efficient channel to market.

Last week Spring announced that the company was concentrating on becoming a meaner and leaner 'clicks and bricks' agency, selling off non-core businesses to focus on e-cruitment. The company explained that the loss was caused by a £12m investment in the e-commerce website, re-organisation costs of over £3m and of course, a general market slow-down after Y2K projects. However, Spring's new chairman (Karl Chapman announced he was stepping down a few months before these results were posted) reported that on-going reorganisation will cost the group another £15million – almost as much as the £14.8m profit made by the group in the previous year.

So what can Spring report to contractors who signed up to the options scheme?

A small fall in turnover

A £21million swing from profit to loss in 12 months

A drop in the value of their options

Further investment in e-cruitment after others have blazed a trail.

However the news is not all bad. The company expects to be back in profit next year.

Is this a case of Spring uncoiled? UKTECH would be interested to hear the views of contractors who rejected the share option offer from Spring.com as too restrictive, from those who are expecting to earn shares and from those who started out on the program but who subsequently gave up. What are your views on contractors owning equity in the agencies?

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Mark Roderick