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HRnetGroup Ltd’s Third Quarter of 2018 Net Profit Grew Strongly

Recruitment firm, HRnetGroup Ltd (SGX: CHZ), delivered another strong set of results for the third quarter of 2018. With revenue and net profit after growing by a healthy clip, there were many things for shareholders to be pleased about. Here’s what investors should know from its latest earnings announcement.

What’s behind the numbers?

Source: Author’s compilation of data from HRnetGroup 2018Q3 earnings report

As you can see, there were strong growths in both the top and bottom line.

HRnetGroup splits its business into two segments — professional recruitment and flexible staffing. Management cited there was strong performance in its professional recruitment segment from existing business units in North Asia, particularly China and Hong Kong, and in Singapore.

Gross profit for this segment also increased (resulting in higher gross profit per professional recruitment), up 10.5% to S$11,415 per placement.

Revenue and gross profit from its flexible staffing segment grew 3.4% and 5.7% respectively.

Overall gross profit margin improved to 38.0% due to higher contribution from the professional recruitment segment, which has higher margins.

The chart below shows the group’s revenue contribution by segment:

Source: HRnetGroup Ltd 2018 Q3 Earnings presentation

Cost efficiency

In addition to growing revenues, HRnetGroup has been looking to improve its cost efficiency by incentivising sales staff to hit higher sales targets. Since listing last year, the group has developed a co-ownership scheme with its sales staff that has worked wonders in increasing sales-per-employee. This quarter, the percentage of staff who achieved their target of three times their payroll of gross profit increased to 71.6% from 68.6% exactly a year ago. Although revenue per employee dipped slightly this quarter, gross profit per sales employee increased by 4.0%.

The group also increased its permanent headcount by 107 to 925 this quarter, of which 84.8% were sales staff.

Looking ahead

HRnetGroup said, “Our M&A activities announced previously are now beginning to bear fruit. We added Suzhou and Jakarta to a total of 13 cities of coverage in Asia. The results are (however) not expected to be material in contribution this year.”

In addition, it said that the organic expansion engine has also started to rev up as it prepares to set up flexible staffing business in Shanghai and new specialisations, such as artificial intelligence, in China.

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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.