THE ENTERPRISE AWARD 2017 HRnetGroup COMPANY PROFILE HRnetGroup is a homegrown company that has been around for 25 years. It has come a long way from its beginnings as a small outfit of just four persons. It was founded in 1992 by Peter Sim, who worked out of a unit on the eighth floor of Orchard Shopping Centre. Mr Sim was 38 when he started the firm, having previously been a Human Resource Director at multinational corporations such as Thomson Consumer Electronics and Honeywell. The company was then known as HRnet One and one of the first few clients was beverage giant Coca Cola. In 1994, HRnet One opened its first overseas office in Kuala Lumpur, and shortly after that another in Hong Kong. Later, in 1996, in order to do flexible staffing, a new brand, Recruit Express, was born. Today, the group does both executive search and flexible staffing, and is the largest Asia-based recruitment agency in the Asia-Pacific excluding-japan. According to Frost & Sullivan, it is the largest recruitment player by revenue in Singapore, with a market share of 20.5%. With 11,300 contracted staff at any one time, more than 8,200 permanent placements across the region per year, HRnetGroup has expanded to 10 cities, 10 brands, 25 business units with over 800 full-time consultants. The group also has "no secretary, no driver, no researchers across all its offices. It has "at most four layers" of hierarchy in all of its business units. Its recruitment consultants - who are salespeople, make up about 85 per cent of all employees. The Group does deep specialisations, for example - financial institution is split into front office, middle office and back office. It's that level of specialisation that sets the Group apart from its competitors. Its recruiters have to meet at least 10 candidates in their area of specialisation, send at least 10 candidate profiles to their clients and arrange at least three interviews per week. "We realised that if you do this, you are very likely to bring in sales in excess of three times of your payroll costs every quarter, said Ms Adeline Sim, Executive Director and Chief Legal Officer. To incentivise its recruiters, the Group does not pay commissions but instead uses profitsharing. The group is not afraid of technological disruption because they embrace it as part of their work process. They know that ultimately, getting a candidate to fall in love with a client you still need the human element, Ms Adeline Sim was quoted as saying. The Group serves over 2,000 clients, including 104 Fortune 500 companies, as part of its client base. It includes Samsung Page 1
Asia, Master Kong Holdings, Bundwealth, Seibu Holdings, Olympus, Fubon Bank, Gardens by the Bay and Acer. HRnetGroup is the first recruitment agency to list on the SGX's mainboard in June 2017. In its initial public offer (IPO), it issued 193.4 million new shares at 90 cents each which raised $174 million. Due to overwhelming investor response, the 85.7 million placement shares in the IPO were 13.17 times subscribed, while the 3.8 million shares in the public tranche were 68.34 times subscribed. More than half, or about 103.9 million shares, went to cornerstone investors. Cornerstone investors include Aberdeen Asset Management, Affin Hwang Asset Management, FIL Investment Management (Hong Kong) and Meiji Yasuda Asset Management. Strategic investors include TechnoPro, one of Japan's largest technology-focused staffing and service companies, as well as Jasdaq-listed recruiter en-japan inc. Heliconia Capital, a unit of Singapore investment firm Temasek Holdings, has been a shareholder since October 2016 and holds about 1.95 per cent post-ipo. The share price rose as much as 6.7% to $0.96 on the morning of its first day of trading. It opened at $0.95 and eventually ended the trading day at $0.925, 2.8% above its IPO price. Some 17.5 million shares changed hands, landing it among the top 20 most active counters on the bourse. This IPO will be an inflexion point for the group, as up to 404 additional employees will become co-owners whose interests would be to drive our growth to the next level and achieve profit leadership in every city we operate in said Ms Adeline Sim. As at 30 December 2017, HRnetGroup had a market capitalisation of $773.7 million. It is the 130 th biggest company on SGX. COMPANY - BRANDS The 10 brands are representative of over 25 years of organisation building. HRnetOne HRnetOne was founded in 1992 with the vision to revolutionise the headhunting industry, emphasising process and quantitative methods to improve and accelerate the hiring process. 26 years later, it is evident the formula works. We are now one of the leading executive search organisations in the region, covering all major industry sectors across 10 cities. HRnetOne is renowned for developing customised solutions for its clients, based on a keen understanding of their needs and great expertise in talent acquisition. We don t commence looking at a search ground when a client authorises a search, we curate a comprehensive proprietary talent landscape for a client s unique needs. RecruitExpress Recruit Express has been the dominant staffing solutions provider in Singapore for more than a decade. Established in 1996, it is the go-to partner for companies seeking to quickly and Page 2
effectively grow its talent resource, and has a reputation for being able to attract and supply candidates and contractors who are cream-of-the-crop. With over 400 consultants from various professional backgrounds and disciplines across 4 cities, Recruit Express is the market leader forging ahead, who candidates know can help them find jobs even within a day. Recruit Express Services Recruit Express Services Pte Ltd (RESS) is the industrial and international recruitment arm of the Recruit Express Group. RESS focuses on hiring skilled and semi-skilled workers for clients in the Logistics, Manufacturing, F&B, Retail, Hospitality, Events, and Oil & Gas industries. RESS administers payroll and statutory contributions, provides insurance and Work Injury Compensation coverage, and gives HR support. RESS is also an approved and licensed employment agency for international recruitment and assists clients in the work permit application process. PeopleSearch / PeopleFirst PeopleSearch has always been about success. Spun-off in 2000 with the mandate to be a success-based brand, PeopleSearch is structured into deep specialisations, and services only growth industries and functions in each city. With over 15 years of industry experience, PeopleSearch is equipped with market insights and in-depth knowledge of industry trends. It ensures that clients are equipped with talents who have the capacity to develop a competitive advantage for their businesses by creating a talent pipeline and sourcing for the best candidates. The eight areas PeopleSearch specialises in are: Banking and finance, consumer, industrial and chemical, hospitality, IT, corporate functions, electronics and semiconductors, healthcare and life sciences. In Malaysia, PeopleSearch operates under the brand name PeopleFirst. Recruit Legal A specialist brand within the Group, Recruit Legal was established in 2004 to focus on legal, compliance, and company secretarial recruitment. It is focused on facilitating the success of their clients, whilst enhancing the career opportunities of our candidates. Clients of Recruit Legal span from leading international banks, financial institutions, Fortune 500 multinational companies, to global law firms, and their Right Fit approach has given them an enviable placement success rate of 98%. SearchAsia Launched in 2005, SearchAsia is an exceptional company which was recognised by DP Information Group as one of the 50 Fastest Growing Companies in Singapore in 2016. Page 3
Headquartered in Singapore with a network of offices in APAC, where it is well positioned to secure the best talents and take clients businesses to the next level. SearchAsia is one of the foremost names in professional recruitment known for its strong work ethic, They are a trusted partner to clients who know that they will go out of their way to ensure they get the perfect addition to their team. The industry-based practices are: consumer and retail, banking and financial services, oil and gas, energy and engineering, real estate and construction. The function-based practices are: brand and communications, finance and accounting, human capital management, information and communications technology, manufacturing and supply chain, legal and compliance, sales and marketing, strategic and corporate planning. RecruitFirst RecruitFirst is the new kid on the block which has already made a splash in the staffing space in Singapore and Hong Kong. Run and staffed by millennials, it surpasses market standards with delivery which is far above the norm by simplifying the recruitment process using technology. Its large network of consultants enables RecruitFirst to provide all kinds of human resource services, including temporary staffing, contract staffing, executive search, payroll services, global placement or management consultancy. YoungTalent Specialising only in Taiwan, the career counselling platform is specially designed for the younger generation. Through interviews with the industry, mock interviews, working, dispatching and further internships, the younger talents can get to know more about the industry they wish to join in future. This is to ensure that following their graduation, they will move directly and smoothly into the workplace. Started in 2014 in Taiwan, YoungTalent was developed with a very specific objective to create a platform for millennials to launch and grow their careers. The focus being on candidates, our dynamic consultants take on the role of peer advisor to connect on a deeper and more personal level. Together with our extensive network of partner schools and clients, we create exclusive programs and other opportunities for growth such as interview consultations, careers fairs and seminars. YesPay! Based in Singapore, YesPay! offers world-class, hassle-free HR and payroll solutions across industries using a robust technology and system infrastructure. Its proprietary platform provides a unified one-stop service created with 2 key objectives - Structure & Security. Services provided include: time and attendance managed services, payroll outsourcing, Page 4
leave and claims managed services, contractor parking and consolidation, sales and incentives calculation, flexi-benefits administration. Solutions provided are: workforce administration, HR foundation, employee life cycle management, talent acquisition, performance alignment, talent development. COMPANY NEWS In July 2017, the HRnet Group entered into a Capital and Business Alliance Agreement with TechnoPro Holdings, Inc Japan s largest engineering staffing firm with a market capitalisation of approximately JPY 162 billion (S$2 billion). An alliance committee has been formed to plan for co-investments in other human resource related businesses across Asia, equity restructuring activities and potential joint-venture arrangements including any mergers, acquisitions or disposals of corporate entities, as well as the fostering of a closer capital alliance. The formalisation of both parties working relationship paves the way for the Group to achieve synergies while mitigating future M&A risks via potential joint investments. While the Group currently has a presence in Tokyo through its professional recruitment brands HRnetOne and PeopleSearch, this alliance opens doors for it to tap TechnoPro s established relationships with Japanese corporates and to deepen its commercial engagement with such clients. Given TechnoPro s plans of hiring additional engineering staff of approximately 2,600 in FY2018, the possibility of the Group providing hiring support to TechnoPro creates an additional revenue opportunity. In the longer term, the alliance could also look at collaborations on the development of the engineering outsourcing and placement business in Asia. The agreement provides for a cross-shareholding structure of up to 3% of the other party to align the interests of both parties. TechnoPro is currently a cornerstone investor owning 3% of the Group. Since IPO, the Group has also acquired shares in TechnoPro as its maiden use of proceeds. Expansion into Jakarta in 1Q 2018 In Nov 2017, HRnetGroup entered into a joint venture with PT Rimbun Job Agency in Jakarta which would acquire the professional recruitment business of PT Rimbun Job Agency and operate it under the brand name HRnet Rimbun. This marks the 11th city in the APAC region that the Group is expanding into. First Investment in Tech Start-up On 29th January 2018, Glints, the first graduate and young professionals recruitment platform in Asia, has received strategic investment from HRnetGroup Limited. This investment marks HRnetGroup s first investment into tech start-ups, since its successful S$174 million IPO in 2017. Page 5
FINANCIAL PERFORMANCE Over the last 10 years, HRnetGroup has grown revenues and earnings by a compounded annual rate of 12.8 per cent and 14.6 per cent, respectively. It has been in the black every year since it started operations, except for 1998. For the year 2017, the Group achieved four consecutive quarters of growth in revenue and gross profit. Revenue increased by 7.4% (S$26.9m) mainly due to flexible staffing business in Singapore registering strong growth throughout the year. Subcontractor expenses increased by 10.2% (S$23.6m) in tandem with 10.0% (S$27.5m) growth in flexible staffing revenue. REVIEW OF GROUP S FINANCIAL POSITION The Group s current assets increased S$196.5m from S$176.7m to S$373.2m, mainly due to a net increase in cash and cash equivalents amounting to S$183.0m, increase in trade receivables amounting to S$8.7m, and increase in marketable securities amounting to S$4.9m. The Group generated operating cash of S$35.2m, received net cash proceeds of S$176.1m from IPO, invested S$4.4m in marketable securities and paid out dividends of S$22.1m. Total current liabilities reduced by S$26.3m mainly due to S$23.3m reduction of other payables and accruals which comprised primarily dividends and loyalty fund provisions, and reduction of income tax payable. FINANCIAL SUMMARY Million $ FY2017 FY2016 Revenue 391,916 365,043 Gross profit 136,002 132,777 Page 6
Profit before Tax 56,914 59,287 Profit after Tax 46,447 48,434 EPS (cents) 4.59 NAV (cents) 30.90 Sectors that contributed at least 5% to its revenue during the period under review Sectors FY2017 (%) FY2016 (%) Financial Institutions 18 16 Retail and consumer 13 14 IT and telecommunications 19 14 Manufacturing 16 14 Healthcare Life Science 12 12 Insurance 7 7 Logistics 5 6 All Other Sectors 10 17 Total 100% 100% December 2017 Page 7