Large listed Nordic consultancies downsizing to maintain profitability

Large listed Nordic consulting firms have faced a mixed quarter, according to analysis by Cinode, with frontrunning firms enjoying strong growth, but those trailing however seeing contraction in both revenues and profitability.

Cinode’s quarterly analysis of consulting firm performance tracks the development of key financial and operational metrics for 24 publicly listed players, shedding light on how the large cap segment of the industry is developing, and how top performers stand out from the rest.

In a market which is described as challenging but still rife with opportunities, Cinode found that average growth in the second quarter amounted to 3.1%. “That is notably down on the 7.5% booked in the same quarter last year,” explained Mattias Loxi, co-founder of Cinode, “but also a step in the right direction considering the negative growth in the first quarter.”

The variation in performance is large, with some firms enjoying strong growth in revenue and profitability (measured by EBIT), headlined by Sweden-based technology players Combined X and Addnode, while others have seen contraction in both dimensions.

Source: Cinode

“Demand remained weak in the consulting industry during the second quarter. IT consultants, in particular, have had the toughest time, with a surplus of roles like system developers. However, there is significant variation in the market. Sectors such as energy, defense, cybersecurity, and certain parts of the industry remain stable,” said Loxi.

Cinode’s analysis found that while aggregate profitability remained relatively stable, that was mainly maintained through personnel cuts. “The number of layoffs in the industry continues, and 70% of consulting companies have reduced their number of employees. Operating margins have primarily been maintained through personnel cuts.”

“More than half of the consulting firms we track in our analysis now have fewer employees compared to the beginning of the year. That has helped them downsize to match current levels of demand.”

Source: Cinode

Looking ahead, Loxi said that the outlook reported by consulting firms in their financial statements hints at a more positive outlook for the coming two quarters. “We believe that the major cuts are behind us. Companies are likely to start hiring and acquiring businesses again towards the end of the year when the market turns around.”

Headquartered in Denmark, Cinode is a leading SaaS platform for consulting firms. Its platform is used by consultancies across Northern Europe for areas such as sales and business development, CV management, resource planning, and network of contingent workforces such as freelancers.