The agility to meet the ever changing demand of the economy has allowed HRnetGroup to stay profitable over the years. And that competency should help them in their growth journey as they strive to become a 100-year old company.
Since listing in June 2017, this is the first time HRnetGroup is having their AGM at their office in Ngee Ann City. The group has been there since 1993.
It is an interesting concept with the board of directors and key personnels sitting around the centre table of meeting room, while shareholders sat around benches (with cushion) that lined the walls of the room.
It was a cosy setting that allowed a more casual interaction. I estimated about 30 shareholders can fit inside the room. Those of us who came later sat outside but we could still view the meeting through the glass wall and hear the conversation through the speaker.
Being in the people business, the staff is sensitive to people’s need. It was a nice gesture when they served beverages to those of us who were not in the room. Yes, they literally served us – by asking what we wanted and brought the beverages to us.
Revenue, Net Profit and Dividend
I thought this is a good time to compare the pre and post pandemic data. It does show the resilience of the business, with both top and bottom lines growing over the five years.
The compounded annual growth rate (CAGR) for revenue over the 5 years is about 6.2%, while net profit’s CAGR is around 4.8%. The number is nothing to crow about but for a supposedly sunset industry, it speaks volume of the group’s capability/business model.
They have also shown that they are willing to share the profit with shareholders. Dividend has grown from $0.28 for FY2018 to $0.40 in the latest year. That’s a CAGR of 7.4%.
One could argue that dividend has stagnated since FY2021, but maintaining the dividend this year despite the lower profit is an indication of the willingness.
Breaking down into segments and sectors
As mentioned in my post My 5-star dividend machines Venture and HRnetGroup, for the first time since their listing, Flexible Staffing’s (FS) gross profit is more than their Professional Recruitment (PR) segment.
If I heard correctly, Chief Corporate Officer Adeline said that there were talks about removing the lower margin FS segment from the business when they were preparing for listing. Fortunately, they decided to keep it and FS has grown into a segment that is well suited for the current business environment that is a lot more uncertain.
The sharing on top sector is interesting to me. As seen from the image, the top sectors depends on economy flavour. And with generative AI being the buzz words, they have been doing placement of data scientists, machine learning and computer vision engineers since last year.
This again shows the agility of the group.
Snippets of questions asked during the meeting
I could not catch some of the questions asked as the microphone in the meeting room could not quite pick up the sound from the shareholders who were seated further away from the microphone.
These are some snippets that I picked up.
- There isn’t any particular plan to boost PR segment. Both PR and FS segments complement each other.
- On retaining younger staff. The churn is probably at the first one and two years. Typically those who are still around by third year will continue to stay.
- On 4-day work week impact. This is part of the evolving environment. HRnetGroup will remain agile and deal with it.
- Flexible staffing is capital intensive. So it is a competitive advantage for HRnetGroup.
- China situation (answered by ID Wallace in Mandarin and translated fluently by CFO Jennifer). Short term (at least for first half of 2024) continues to be challenging. However, he is long term positive as China is transiting from low cost (world factory) to competing in higher quality product/services.
You can read their uploaded Responses to Questions from Shareholders document for more Q&A.
You can also access the full AGM presentation deck with management’ comments in this uploaded document Our Growth Story
I am holding on to my current stake.