What a difference a year makes!

By Nigel Harse & Rod Hore

This month we have skipped our normal Q&A session to allow focus on the improving industry performance highlighted by the RIB Report.

The RIB Report collects financial data each month from 92 privately owned recruitment companies and we are pleased to share information from the 2009-2010 RIB Review (full report available for purchase).

Another reporting season is now behind us and a few positive boxes have been ticked, but the outstanding and most notable indicator of the past year’s performance was gross profit growth, or to be precise, the lack of it. The recruitment sector as with many other industry sectors has turned around and profits and dividends have started to recover but this has happened primarily on the back of cost and debt reduction.

Markets have clearly improved across the majority of sectors; however those companies that failed to address their lack of temp/contract market share are still feeling the pinch and this will again leave them vulnerable should the economy falter. As expected after any economic crisis the temp/contract sectors were the fi rst to recover and are now reaching levels that are the BEST since the RIB Report commenced. Chart 1 shows the RIB Average performance of both sectors.

With the heat off the perm market the demand for flexible temp and contract staff has returned once again. The RIB Average of Temp and Contractor Hours Processed per Income Producer during the year recorded a sensational 49% improvement in productivity (across all income producers).

RIB Average Gross Profit per hour has fallen in value by 18% compared to the prior year; a clear indication of lower pricing either through service mix or market pressure. Results over recent months suggest that this negative trend is continuing and that Average Gross Profit per hour is under pressure, but on the back of higher volumes.

How do you compare?

It’s good to see such healthy improvements in the volumes of business being conducted, however it’s important to reflect on the overall impact this has on the business. The RIB Average Temp/Contract Sales grew by 25% (that’s a huge demand on cashflow and collections), the hours processed grew by 31% while average charge rates fell 5% and gross profit fell to a 15.5% return. The outcome for all this additional work was an average 4% growth in Temp/Contract Gross Profit. The RIB Report Top Performing firms all achieved Temp/Contractor Gross Profit growth in excess of 40%.

The RIB Average was down 4% in the number of perm placements invoiced per participating firm for the year and is equal to volumes experienced back in 2004/2005. The improvement in performance in the second half of the financial year is very notable and a great sign of employer hiring confidence returning and this is clearly seen in Q3 and Q4.

The RIB Average value in perm sales fell by 4% on the prior year. The volume has dropped out of the market but the quality of the average placement fee has been relatively healthy and for some it’s softened the financial impact.
Productivity and efficiency

RIB Average Gross Profit returned for each $1 spent on TOTAL staffing (total package cost) for the year improved by 12% from $1.9 to $2.1 or, as some like to think of it, as a 2.1 multiple. Participants unable to achieve a return of more than $1.60 sustained a LOSS for the year. The RIB Report TOP PERFORMERS were at least 40% more productive than the RIB Average.

RIB Average Management and Staff expenditure was significantly reduced in volume and decreased from an unacceptable 60% to a more manageable 52% of gross profit.

RIB Average Profit before Tax for the 2009-2010 year increased by a staggering 258% on the prior year. 72% of participants achieved improved profitability, 14% recorded a decline in profitability and 14% traded at a loss for the year.

Curtsy: http://sites.thomsonreuters.com.au/recruitment-extra/

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