Glotel plc
Address:
The Quadrangle
180 Wardour Street
London W1V 4AE
United Kingdom
Telephone: 44 (0) 20 7734 7722
Fax: 44 (0) 20 7734 9684
http://www.glotel.com
Statistics:
Public Company
Incorporated: 1989 as Comms People
Employees: 254
Sales: £98.35 million ($155.5 million) (2002)
Stock Exchanges: London
Ticker Symbol: GLO
NAIC: 561310 Employment Placement Agencies; 541512 Computer Systems Design Services; 551112 Offices of Other Holding Companies
Company Perspectives:
Glotel is a human capital solutions provider focusing on the global telecommunications networking and technology markets. The company has built a reputation for quality, service and excellence and its progressive and innovative approach has resulted in the rapid achievement of its objectives. Glotel will continually endeavor to maximise value for its stakeholders through delivering an unparalleled service, which meets and exceeds customers' expectations, while developing the Group both organically and through acquisition and partnership opportunities.
Key Dates:
1989: Les Clark and Andy Baker found Comms People, a recruitment firm specializing in the telecommunications sector, in London.
1992: Comms People opens its first foreign subsidiary, in Amsterdam.
1993: The company launches its first U.S. office in Atlanta and changes its name to Comms & PC People as its focus expands to include broader high-technology markets.
1994: Revenues top £8 million.
1995: The company opens its first office in Australia.
1997: Revenues near £50 million.
1999: The company changes its name to Glotel and goes public on the London Stock Exchange.
2000: Revenues reach a high of £165 million (for the year ended March 2001) and the company's network expands to 24 offices.
2001: The company restructures, shutting down five offices and reducing staff as telecommunications and high-technology markets slump.
2002: Clark and Baker announce pay cuts and stock option incentives as a means to reduce costs.
Company History:
Glotel plc provides a full range of recruitment services, meeting temporary and permanent staffing requirements, as well as providing headhunting and executive placement services. The London, England-based company has long focused its efforts on the telecommunications and high-technology markets, becoming the leading U.K. recruitment company for those industries. At the same time, Glotel has expanded internationally--at the height of the 1990s high-technology boom, the company operated 24 offices throughout the world, nearly half of which were opened in the United States. Europe and Australia are also important markets for the company, and Glotel has been building a presence in the Asian markets as well. The United Kingdom accounts for slightly less than half of the company's total revenues, with the United States representing nearly one-third of Glotel's business. With the collapse of both the global telecommunications and high-technology markets at the turn of the century, the company has pared down its branch network to just 19 offices. Glotel also has responded to the shrinking demand in its core markets by expanding its range of services and by extending into other markets. Hit hard by the bankruptcy of two of its major U.S. clients which forced Glotel to write off more than £1 million in bad debt, sinking the company into losses, cofounders Les Clark, chairman, and Andy Baker, CEO, took the unusual move of giving themselves and other executives temporary pay cuts. These moves have enabled the company to avoid reducing its own staff as it waits for the high-tech staffing market to rise again. Glotel is listed on the London Stock Exchange. At the end of its 2002 fiscal year (in March 2002) the company posted sales of £98.35 million ($155.5 million), down from a high of £165 million the year before.
Riding the High-Tech Boom in the 1990s
Les Clark had already built a career in the recruitment business when he joined with Andy Baker to launch what was to become Glotel. Clark had risen to become managing director at the recruitment arm of Hestair, a diversified U.K. company that was acquired by BET at the beginning of the 1990s. Working under Clark was Andy Baker, then still in his early 20s, who worked as a sales director at the Hestair recruiting subsidiary. When Clark was made redundant in the late 1980s, he and Baker decided to join together to create a new recruitment company, Comms People, in 1989.
From the outset, Comms People, as its name implied, targeted exclusively the telecommunications sector, which was just then becoming one of the most vibrant and fast-growing industries. Clark and Baker reasoned that the increasing specialization of the various branches of the high-technology market would step up the demand for growing numbers of qualified staff. At the same time, companies operating in the sector would require more assistance in locating temporary and permanent staff with the appropriate qualifications.
Clark risked his Hestair payoff package, as well as the mortgage on his home, to set up Comms People. The business operated as a partnership, however, with both Clark and Baker holding a 50 percent stake in the company. The two-man firm rented a small office, and with a single telephone began drumming for business. While Clark kept a tight rein on spending--the company car was a former pizza delivery van, complete with heated seats--the ambitious Baker began building up a pool of consultants for a growing number of telecommunications clients.
Comms People itself began hiring, and by the early 1990s the group boasted 20 employees of its own. The company's early specialization also had given it a leading share in the U.K. market for recruitment in the telecommunications sector. Part of the group's success was its insistence on hiring staff with technical backgrounds; the company also provided intensive in-house training to keep its employees at the cutting edge of market developments. Before long, however, Comms People found its own focus had become too narrow, as the IT market in general began to boom during the decade. Comms People extended its reach into the broader IT sector, which led the group to adopt the new name, Comms & PC People.
The growing global nature of the IT business led Baker and Clark to begin to look beyond the United Kingdom. In 1992, the pair opened the group's first foreign office, in Amsterdam, which was to become the headquarters of a Europe-wide operation. The company also began expanding throughout the United Kingdom, opening offices in Manchester, Birmingham, Bristol, Edinburgh, and Newcastle through the mid-1990s. The company's telecommunications business in these markets was to gain steam with the roll-out of the next generation GSM mobile telephone network being developed across Europe.
Meanwhile Baker and Clark developed something of an expansion model--an existing employee with an interest in taking on a new challenge was sent to a new market, where the company replicated its own origins, renting a small office equipped with a telephone. The method provided a relatively low-risk and low-cost means of expansion. If after six months the office was to prove unprofitable, it could be closed easily with limited losses to Comms People.
In 1993, Comms People looked overseas to the United States, which had long been the motor for the IT industry. Baker and early employee Steve Moreschi, who also had worked with Baker and Clark at Hestair, traveled to the United States to scout locations. The pair settled on the fast-growing Atlanta market, seen as an important hub in the telecommunications sector. As Baker told the Independent: "Myself and Steve arrived on the Sunday, jet-lagged but excited, Delta Airlines economy," Baker says. "We asked people in a local bar where the good business district was and they said Buckhead. We found the tallest building there and set up an office, 10ft x 8ft with a desk and phone, only $700 a month, and we got a copy of the Atlanta Journal and took out a quarter-page ad in Communications Week."
The gamble quickly paid off--by the end of six months, the Atlanta office had hired its second employee. By the end of its first year, the U.S. operation had posted revenues of some $5 million. Moreschi was given the go-ahead to begin scouting locations for new offices as the company prepared to expand across the United States. The timing was right--the United States was just entering an extended economic boom driven by the high-technology and telecommunications sectors--and Glotel found its services in high demand. By the middle of the decade, Comms & PC People had opened offices in Dallas, San Francisco, Boston, Los Angeles, Reston (Virginia), Philadelphia, Phoenix, New York, and Silicon Valley.
The opening up of the telecommunications markets in Europe--most of which had long been dominated by government-owned telephone monopolies--and a massive consolidation effort among the industry's major players, which saw the creation of a number of globally operating telecommunications operators, combined to boost demand for Glotel's services. The company's business quickly spread beyond the Dutch market into Belgium, then into Germany and France as well. By 1994, the group's sales had topped £8 million.
The high-tech boom soon spread to other markets, particularly the fast-growing markets in Asia. In 1995, Comms & PC People moved into Australia, setting up the first office in what was to become its Australasian division. The company opened offices in Melbourne and Sydney, directing its foray into the Asian markets from its Australian base as it prepared to expand with the opening of new local offices. The economic crisis that swept through the region in the late 1990s put a halt, however, to the group's Asian expansion.
Nonetheless, Comms & PC People continued to grow strongly into the late 1990s. By 1997, the group, which now numbered some 150 employees, had posted turnover of nearly £50 million, more than half of which came from outside the United Kingdom. By the end of its fiscal year in March 1999, turnover had topped £100 million. The company's staff also had expanded to more than 250--with a database of some 100,000 consultants on call worldwide. Interestingly, Comms & PC People itself seemed to inspire the loyalty of its own employees--17 of the company's first 20 employees remained with the company. Until then, Clark and Baker had financed their expansion through a combination of bank debt and the use of confidential invoice discounting, an accounting vehicle that allowed the company to raise financing based on its future income. Yet the company's fast growth and its continued ambitions required a larger capital base.
Surviving the High-Tech Bust at the Turn of the Century
Clark and Baker decided to take their company public in 1999. The offering was a relatively modest one--raising just the £13.5 million the company needed to wipe out its debt and fund its immediate growth plans. Clark and Baker reduced their own holdings to just 26 percent each in a successful public offering that placed much of the company's free-floating stock with institutional investors. As part of the public offering the company changed its name to Glotel plc.
Glotel's share price, which debuted at 140 pence, gained quickly as the high-technology boom went into overdrive at the end of the decade. By the end of 1999 the company's share price had topped 323 pence per share--and went on to near 830 pence at the height of the high-tech boom. The company continued to expand its office network, opening in Brussels and Chicago and bringing its total to 24 offices by 2000, as its sales continued to soar, climbing from £132 million by the end of its fiscal year in March 2000 to £165 million by March 2001.
Yet by then Glotel had been caught in the turmoil of the high-technology market. The telecommunications industry had gone into a tailspin, marked by the spectacular collapse of a number of formerly high-flying players, such as Worldcom. The Internet-driven high-technology market followed quickly, and by the beginning of 2001 Glotel had already issued the first of what was to become a series of profit warnings.
Glotel's share price plunged as investors worried that the company had expanded too fast into the United States, leaving it vulnerable to the increasingly fragile market. Indeed, the company was hit especially hard when two of its major customers in the United States declared bankruptcy, leaving the company with more than £1 million in bad debt.
Glotel began fighting back and in 2001 began moving to reduce its reliance on the telecommunications sector--previously that sector alone had accounted for more than 60 percent of the company's activity--targeting other business markets, particularly the financial sector. The company was able to win business from such heavyweights as J.P. Morgan and the Bank of America. Yet the financial market was struggling as well--a situation exacerbated by the September 11 attacks of that year.
Glotel was forced into defensive mode. The company began cutting back on its staff, particularly by eliminating a layer of middle management and requiring directors to return to hands-on management. Glotel also began shutting a number of hardest hit offices, including its office in Los Angeles. By the beginning of 2002, Glotel had scaled back to just 19 offices. By then the company's sales reflected the difficult economic conditions as Glotel's revenues slipped back to just £98 million for the year.
In February of that year, Clark and Baker announced an unusual step in the company's effort to keep its head above water. The company instituted what it dubbed its "thin cat" solution, in reference to a series of so-called "fat cat" scandals that had swept the United Kingdom over the high salaries paid to executives by a number of money-losing companies. Instead, Clark and Baker announced their intention to take pay cuts. The founders also put into place an incentive scheme among other top executives, offering up options on their own stock--which had slumped to barely more than 30 pence--to executives who agreed to accept temporary pay cuts. The move was expected to help the company save more than £100,000 per month, enabling it to wipe out its bad debts.
While the European market had resisted the worst of the economic difficulties being experienced in the United States, Glotel continued to face into a slow hiring market at the end of 2002. As the company waited out a return to expansion in its core technology markets, it began expanding its range of services--to include headhunting and executive placement services--in order to provide a broader revenue base. After Clark and Baker had ridden high during the technology boom, the team showed their determination to guide Glotel through the high-tech bust as well.
Principal Subsidiaries: Global International Ltd.; Glotel, Inc. (United States); Glotel Managed Services Ltd.; Glotel Pty Ltd (Australia); Glotel Accounting Systems PLC; Glotel BV (Netherlands); Glotel GmbH (Germany); Glotel Holdings Plc; Contract Accountants PLC; Global Telecommunications Resource Ltd.; Glotel IT Ltd.; PC People Ltd. (Dormant); Comms & PC People Ltd. (Dormant).
Principal Competitors: Adecco SA; AdVal Group plc; CareerBuilder, Inc.; Corporate Services Group plc; Corporate Staffing Resources, Inc.; Fusion Staffing Services, LLC; Michael Page plc; HotJobs.com, Ltd.; jobpilot AG; Lorien plc; Manpower Inc.; Marlborough International PLC; Penna Consulting plc; Robert Walters plc; Select Appointments (Holdings) Limited; Spherion Corporation; Spring Group plc; Vedior NV; World Careers Network plc.
Further Reading:
- Curry, Lynne, "Big Business in a Nutshell: Start Small and Move Fast," Independent, September 23, 1997.
- "Glotel Optimistic Despite Further Job Cuts," Investors Chronicle, May 25, 2001, p. 46.
- "Glotel Shares Fall on Downbeat H1 Results," FT Investor, December 10, 2002.
- Hanney, Brian, "Glotel Hit by Lay-offs in US," Express, July 3, 2001.
- "Recruitment Agencies Hit Hard by Falling Markets," Investors Chronicle, July 6, 2001, p. 43.
- Trapp, Roger, "Buoyant Glotel Tempted to Float," Independent, August 24, 1997.
- ------, "Floating into Uncharted Waters," Independent, June 27, 1999.
- White, Dominic, "Glotel Resorts to a Whip-Round," Daily Telegraph, February 9, 2002, p. 30.
Source: International Directory of Company Histories, Vol. 53. St. James Press, 2003.
