General Employment looking for turnaround
As Derek Dewan becomes CEO of General Employment Enterprises Inc., the Jacksonville executive is not only taking on a company looking to grow but also a company looking for a turnaround after three years of losses.
General Employment, a Naperville, Ill.-based staffing company, agreed two weeks ago to buy Jacksonville-based Scribe Solutions Inc. As part of that deal, Scribe Solutions Chairman and Chief Executive Dewan will become chairman and CEO of General Employment.
General Employment is a staffing agency that traces its roots back to 1893, but its future has been in doubt recently.
According to its annual report filed last week with the Securities and Exchange Commission, the company recorded a net loss from continuing operations of $1.1 million, or 5 cents a share, for the fiscal year ended Sept. 30. That was its third consecutive yearly loss.
“There can be no assurance that the company will not incur losses in the future. Although the operating expenses have decreased, there are no assurances that the company will be able to generate sufficient revenue to meet its operating expenditures or operate profitably in the future,” the report said.
Revenue fell 14 percent in fiscal 2014 to $39.8 million. The report said the decrease was due in part to Hurricane Sandy-related work which increased 2013 revenue, but also due to the closing of some offices in 2014.
General Employment discontinued an agricultural staffing business in July that had produced $6.8 million in revenue in 2013. However, that division was losing money.
“The agricultural staffing service was considered a niche business that required a high capital reserve to cover the weekly payroll,” the annual report said.
General Employment’s main business is temporary staffing for light industrial clients, which accounted for 63 percent of its revenue last year. It also provides staffing services for information technology, engineering and accounting professionals.
Scribe Solutions will add the field of medical scribes, who provide documentation services for physicians.
Besides General Employment, the company operates under trade names Omni One, Business Management Personnel, Ashley Ellis, Triad Personnel Services, Triad Staffing, Generation Technologies, BMCH, and BMCHPA. It has 18 branch offices in nine states.
The company has 140 employees, not counting workers that are placed through its staffing services, according to the annual report.
General Employment’s headquarters is in a 5,000-square-foot office outside of Chicago with a lease that runs until 2018, the report said.
Dewan told the Daily Record that no decisions have been made about moving the headquarters office to Jacksonville once he becomes CEO. In addition to Dewan’s appointment, Scribe Solutions President Alex Stuckey will become president and chief operating officer of General Employment after the merger.
Dewan will be General Employment’s third CEO in the last two years. Michael Schroering, whose investment firm controls 63 percent of General Employment’s stock, was named CEO in January 2013.
In March of this year, Andrew Norstrud became CEO, a year after he joined the company as chief financial officer. Norstrud will return to the CFO role after the merger with Scribe Solutions.
During the last two years, General Employment’s stock has been threatened with delisting twice by the NYSE MKT exchange. The NYSE MKT is the New York Stock Exchange’s market for small cap companies, which basically evolved from the former American Stock Exchange.
The annual report said General Employment was first threatened with delisting in 2013 because of delinquent financial reports but after the company caught up, it was threatened with delisting again because its equity level was below $4 million.
The company had $2.1 million of equity on its balance sheet as of Sept. 30 and was facing a deadline of Dec. 6 to increase its equity to $4 million. However, the annual report said the company had not received any additional notices from the NYSE MKT and it continues to trade on that exchange under the ticker symbol “JOB.”
The stock had been trading below $1 a share for several years but has been rising steadily since the Scribe Solutions deal was announced, going above $1 last week. It closed at 21 cents the day before the Scribe Solutions announcement.
The annual report expressed confidence that General Employment is on the right track.
“Management has implemented a strategy which included cost reduction efforts as well as identifying strategic acquisitions, financed primarily through the issuance of common stock and convertible debt, to improve the overall profitability and cash flows of the company,” it said.
General Employment plans to acquire Scribe Solutions by issuing convertible preferred stock valued between $6.4 million and $7.9 million.
Dewan, of course, has experience in growing a staffing company. He joined AccuStaff Inc. as CEO 20 years ago as that Jacksonville-based staffing company was preparing to go public. He then helped that company grow from less than $500 million in annual revenue when it went public in 1994 to more than $2 billion in revenue when the company, then named MPS Group Inc., was acquired by Adecco Group in 2010.
That track record is likely the reason for General Employment’s recent stock surge, as Wall Street is familiar with Dewan.
The major difference is that with AccuStaff, he took over a company that was solidly profitable under founder Delores Kesler. Based on its recent history, Dewan may be facing more of a challenge with General Employment Enterprises.