Whitehead Mann looks to staff to back cash-raising

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The Independent Online

Whitehead Mann, the struggling headhunting group, is exiting the US, trading down to the junior stock market and asking senior managers to invest a total of £1m in the company as part of a fundraising plan to shore up its stricken finances.

The group has put its ailing US business into Chapter 11 bankruptcy protection in a round of measures that are designed to give the company a "fresh start".

Chris Merry, the chief executive, said Whitehead Mann had failed to properly integrate a number of businesses it had bought over the past few years, and had then struggled with costs while the recruitment industry hit a slump.

"We are trying to draw a line under what has happened to the company," Mr Merry said. "The funds raised will strengthen our financial position and also give us working capital to hire consultants and implement a new strategy." With the costs of closing down its US business, the company is on track to post a £20m loss this year.

Whitehead plans to raise £13m through the offer and the placing of 32.6 million shares at 40p each, an 18 per cent discount to its closing price on Tuesday. The company has warned that if it does not get the go-ahead for the fundraising from shareholders, it will have to secure alternative funding or find a buyer.

Of the £13m placing, a group of senior executives will invest a total of about £1m as a sign of their commitment to the group. The senior team has also been given a package of share awards, some at 40p per share and some free of charge. These can be cashed in only if the company meets certain earnings and share price targets over a three-year period.

Mr Merry and Jonathan Baines, Whitehead's senior headhunter, have also agreed to reduce their basic salary by 12 and 20 per cent respectively in exchange for higher performance-related bonuses. All of Whitehead's executives will be paid a salary of £200,000, but will be able to earn up to 150 per cent of their salary in performance bonuses.

To cut costs, Whitehead is moving its business into a single London office and is moving to London's junior AIM market, where the regulatory burden and the costs of listing are lower.

In February, Whitehead saw more than 30 per cent wiped from its stock market value after it issued what was the latest in a string of profits warnings. The company said its performance during the crucial month of January had been disappointing, and so it would not meet the City's earnings forecasts. It also warned that the outlook for February and March "remains uncertain". In November, the company halved its dividend.

Whitehead's shares closed down 1.15p at 43p yesterday.