A decline in spending on corporate diversity programmes has triggered a slump in revenues at the executive training business owned by old Etonian Octavius Black.
MindGym, a workplace training company hired by FTSE 100 and S&P 100 companies, said that its performance was affected by a “material decline” in clients spending on diversity, equity and inclusion initiatives.
Shares slumped by as much as 32pc in early trading on Monday, wiping £11m off its market cap.
The company said a “change in priorities” among its clients contributed to a 18pc decline in revenue to £44.9m during the year to March, with its US operations particularly impacted.
MindGym, which has included Microsoft, Unilever and GSK among its clients, was co-founded by Mr Black, who attended Eton with Lord Cameron, now Foreign Secretary.
Company bosses are increasingly questioning the value of diversity initiatives as soaring wage bills and other costs focus attention elsewhere.
In March, a report by Inclusion at Work Panel, an independent group of private and public sector experts, found that many of so-called environmental, social and governance (ESG) practices, including diversity training, had little to no tangible impact in increasing diversity or reducing prejudice.
Kemi Badenoch, the Business Secretary, who commissioned the report, said that many of the diversity and inclusion initiatives had been “counterproductive” despite millions of pounds spent by businesses.
MindGym on Monday also blamed its poor performance on increased caution around how human resources departments (HR) spend their budgets.
Mr Black said: “Business leaders are giving greater scrutiny to HR investments which has extended buying cycles and in some cases recalibrated overall spend.
“For example, during the year we won a number of large projects only for our HR client to then discover that their budget had been altered and so the scope needed to be reduced or the programme postponed.”
MindGym noted that businesses now require more stakeholders to sign-off HR budgets and want to see more evidence about the feasibility of projects before signing off on them.
The entrepreneur also said that MindGym is now operating in a more “crowded market” for its consultancy services after record investment in HR platforms and technology.
Mr Black said: “While clients are increasingly disenchanted with the low employee take-up and negligible impact of many of these new platforms, this temporary growth in new offers increased competition for HR budgets.”
MindGym said that it was required to launch a “significant cost reduction programme” as a result of its revenue slump, cutting annual spending by £11m.
This included stopping spending on its digital products, which led to an impairment charge of £6.6m during the period.
This helped narrow losses and restored the company’s balance sheet during the second half of its “challenging” financial year, according to accounts published on Monday.
MindGym reports £12.1m losses
MindGym swung to £12.1m in losses in 2023-24 from £3m in pre-tax profits in the previous year. Its gross profit margin dipped by 220 basis points to 86.2pc.
Mr Black is now executive chairman of MindGym, having been replaced as chief executive in April by Christoffer Ellehuus, former Korn Ferry boss.
Mr Ellehuus said that it will “take time” before MindGym sees the benefits of its new strategy, which will include simplifying its offering to clients.
The company, which uses 300 self-employed coaches worldwide to deliver its training programmes, uses behavioural science to help companies to improve how they operate.
Disclaimer: The copyright of this article belongs to the original author. Reposting this article is solely for the purpose of information dissemination and does not constitute any investment advice. If there is any infringement, please contact us immediately. We will make corrections or deletions as necessary. Thank you.
