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HRnetGroup Ltd’s Earnings Soar 78% in the Second Quarter of 2018

Listed in June last year, HRnetGroup Ltd (SGX: CHZ) is Asia’s largest recruitment firm outside of Japan. The group has a stellar track record of growth in recent years and once again delivered a strong set of results over the three-month period from April to June. Here are some important numbers and updates to take note of from the latest results:

1. Revenue improved 10.8% year-on-year to S$108.0 million, up from S$97.4 million. Gross profit increased 17.2% to S$39.8 million.

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2. Profit after tax spiked 56.2% and profit after tax and minority interest (PATMI) increased 78.1% to S$13 million. Diluted earnings per share stood at 1.28 Singapore cents, up from 0.72 Singapore cents in the corresponding period last year.

3. Over the first half of 2018, revenue had increased 11.5% and PATMI was 58.4% higher at S$29.3 million. Diluted earnings per share for the six-month period was 2.89 Singapore cents.

Source: HRnetGroup 2018 Q2 Earnings Presentation

4. The group derives its income from two main business segments — flexible staffing and professional recruitment. The chart below illustrates its business breakdown according to segment and geography:

Source: HRnetGroup 2018 Q2 Earnings Presentation

5. As you can see, share of revenue from countries outside of Singapore grew to 45% from 41%. This is a positive for the company as it expands its reliance on the Singapore market.

6. HRnetGroup maintained a clean balance sheet of S$271 million in cash with zero debt, as of 30 June 2018. Net asset value (NAV) stood at S$318.1 million, up from S$312.5 million recorded on 31 December 2017. NAV per share was 31.48 Singapore cents.

7. Once again, the company generated positive cash flow from its operations. Operating cash flow before working capital was S$17.0 million, with net cash from operating activities at S$11.9 million. It spent S$640,000 in new plant and equipment, generating S$11.3 million in free cash flow.

8. The company has recently implemented a system to reward high performing sales staff with equity. This has worked well, increasing employee productivity — revenue and gross profit per sales employee increased by 15% and 21.6% year-on-year respectively.

9. There were also some exciting new developments in its business as it completed the acquisition of a 51% stake in REForce, which received its recruitment license on 26 July 2018, and is on track to commence operations in the third quarter. The group will also begin operations in Jakarta, following HRnet Rimbun earning its business license on 7 August 2018. The acquisition of Career Personal Limited in Hong Kong, which provides flexible staffing of approximately 130 contractor employees to government agencies, is expected to cutover on 2 October 2018. The latter two acquisitions will give HRnetGroup greater presence internationally.

10. The group is also looking to expand its operations to Shanghai and Shenzhen and expects to commence operations in 2019.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Jeremy Chia own shares in HRnetGroup Ltd. The Motley Fool Singapore has a recommendation on HRnetGroup Ltd