24 April 2009
The SmartCompany Dun & Bradstreet Industry Growth List for the recruitment industry shows that employment services are suffering under skyrocketing unemployment, but are surviving by changing their focus.
While businesses are hesitant to hire, and retrenched workers are facing an increasingly competitive job market, successful recruitment companies are growing by focusing and sticking to a particular niche, such as government, infrastructure and information technology.
The SmartCompany Dun & Bradstreet Industry Growth List for the recruitment industry includes a wide range of companies, from listed giants such as Skilled Group and SEEK through to smaller specialist firms and not-for-profit organisations. The total revenue of the 50 companies on the list was $12.2 billion, up 32% from 2007. The average revenue of the companies on the list was $243.3 million.
But conditions in the recruitment sector have become increasingly difficult in the since late 2008 and it remains to be seen whether this growth will continue into 2009.
Prins Ralston, the chief executive of the top ranked firm, Employment Services Holdings, isn't confident the economy will recover during 2009, and expects positive signs to appear early next year.
But Ralston says the year won't be without casualties.
"The recruitment industry will shrink and will start to consolidate. There are a number of providers who have joined the industry in a boom time, so they've never seen a recession," he says.
"Those providers have grown used to having significant margins, and they are going to find it tough, if not impossible, to survive these sorts of changes that we're seeing."
Ralston says that the best providers - those with "diverse customer bases as well as good client services" - will survive.
"We've got three hard quarters to go and they will present challenges. But due to the fact we have 100 offices ranging from recruitment to training, I think we've diversified our risk profile well. That'll stand us in good stead."
The company's revenue grew jumped from $3 million in 2007 to $190 million the following year, mainly due to the acquisition of PVS Workfind and IPC Employment.
Ralston says the acquisition of these businesses has helped ESH broaden its product offering, and this diversification will be crucial during the downturn.
"Our business model is built on having both a temporary recruitment place in the marketplace as well a permanent recruitment role. That mix has certainly held us in good stead.
"Now we are concentrating on that, we ensure our existing clients grow. Governments are still recruiting, so that has held that area up quite well. The other areas of our business in terms of training...but as unemployment climbs that sector has seen significant business."
But despite the intention to grow the business, Ralston says he is trying to keep the business lean by not replacing workers who have already left the company.
"There has traditionally been a level of turnover in the recruitment industry, but those roles have been harder to find and fill. We haven't cut staff but we haven't actively replaced those as we might have done before."
Working with clients
Managing director of mining recruiter SmartWorker, John Cooling, says his company noticed the industry was hitting a downward trend during mid-2008 and started working with several of his clients to make sure the company was giving them the services they needed.
This has helped reshape the business. Instead of relying on providing full-time workers, Cooling says the company has now nearly switched entirely to providing contract employment.
"Even though people cut staff, to address that they'll engage contractors on a repeat basis. So we changed our focus in our business last September to focus on contracting specialists who get more efficiency in a job.
"We've positioned ourselves to where we think the market is and therefore we don't anticipate recruiting very many permanent staff for the mining business."
The company recorded $800,000 in revenue in 2007, but then experienced 188% growth and posted $1.5 million in revenue for 2008. Cooling says he expects that figure to grow by over 50% for the current financial year.
He says that even though the industry is suffering, smart companies will have steps in place to ensure they can get through hard times.
"Managing cash is a key component. We run a fairly lean business and we haven't had a huge bench of people working on permanent recruitment.
"But our experience helps with some of the clients who are only experienced in bull markets. We've been able to explain what's happening and what's worked in the past."
But even though SmartWorker is surviving, Cooling says the rest of the relatively young industry isn't doing so well and are only "bull market experienced".
"You need to be a rifle shot rather than a shotgun. You need to focus on a niche, develop a high level of competence and then work with one or two clients in that space. You've got to be seen as someone who adds value by providing good background information."
Cooling admits he has no idea when the downturn will hit the bottom, but says some of his clients are already saying an upturn for the industry may be on the way.
"I've been in the sector for 20 years and I've seen busts before, but our clients are still asking us for people for projects and we've still got lots of jobs to fulfill projects.
"Some of our clients are in management levels, a number of which were fairly nervous about their own position and have in fact survived restructuring and are starting to be a bit more optimistic."
Positive signs
Skilled Group chief executive Greg Hargrave also says he is seeing signs that declines in the job market are starting to slow.
"I think the rate of decline is certainly slowing and we're beginning to see signs of stabilisation. We're starting to get customers in the water again across the board," he says.
"People went hard and fast and cut their cost base in preparation of the downturn, and now there's a bit more ongoing business. I'm not calling an end to the recession, but the rate of the decline has certainly slowed."
Nevertheless, Hargrave says the company has had to take some drastic measures to ensure it records another year of growth. Skilled Group, which ranked 18th on the list, recorded $1.38 million in revenue in 2006-07 and grew 39% to record $1.92 million for 2007-08.
"The first quarter was fine, but in the second quarter things started to get very, very tough. In the last week of October the auto industry just hit the wall and progressively since then very few sectors have been left unscathed."
Unfortunately, Hargrave says the company isn't immune and has been forced to lay off workers to survive.
"We started to reduce our cost base as a start. We got out talking to our clients and understood their issues and we've made some significant redundancies in the business with overall cost cutting.
"We talked to clients and understood what pressures they're feeling. You've got to work with your clients through this type of period because the reason we're feeling it is because they're feeling it first."
But Hargrave says the business has survived the past few months because it has already focused on contract recruitment rather than fulfilling full-time employment roles.
"The permanent side has never been a big feature of our business, so that's cushioned us in the early part of the impact when hiring freezes were put on. That was a tough time for a lot of people who were heavily exposed to full time recruitment."
But unlike SmartWorker, Hargrave says focusing on a niche industry won't help them get through the downturn.
"That works if you're a small player, but it's too late for us. That having been said, there is more interest in some sectors such as government and infrastructure, so we've increased our interest there."
Hargrave says that the company is communicating with clients to ensure they're the first to know when business picks up.
"Well know straight away when they start hiring," he says. "I think we're going to see when the upturn starts first, and traditionally recruitment is a good predictor of business confidence."
"Hopefully that'll occur in the next year or so."
SmartCompany Dun & Bradstreet Industry Growth List - Recruitment
| Rank | Company | 2008 Revenue | 2007 Revenue | Change |
| 1 | Employment Services Holdings | $190,933,000 | $3,872,000 | 4831.1% |
| 2 | Total Staffing Solutions | $26,986,297 | $614,164 | 4294% |
| 3 | Reed Personnel Services | $11,108,000 | $2,897,000 | 283.4% |
| 4 | Smartworker | $2,300,000 | $800,000 | 187.5% |
| 5 | Paxus Australia | $1,086,326,000 | $422,376,000 | 157.2% |
| 6 | Rubicor Group | $367,350,000 | $156,457,000 | 134.8% |
| 7 | AngusKnight | $7,268,317 | $3,154,302 | 130.4% |
| 8 | Ambit Group | $290,273,000 | $139,163,000 | 108.6% |
| 9 | Resourcing Solutions | $450,556,000 | $245,765,000 | 80.3% |
| 10 | Skilled Rail Services | $74,786,615 | $41,475,571 | 80.3% |
| 11 | ARA Jobs | $4,500,000 | $2,500,000 | 80% |
| 12 | Aboriginal Employment Strategy | $9,270,856 | $5,367,468 | 72.7% |
| 13 | Bridgeworks Personnel | $4,147,575 | $2,657,718 | 56.1% |
| 14 | On-Q Human Resources | $110,610,640 | $7,247,142 | 46.4% |
| 15 | MTM (WA) | $5,908,321 | $4,154,042 | 42.2% |
| 16 | Nexus IT Resources | $4,500,000 | $3,200,000 | 40.6% |
| 17 | KCO | $549,189 | $390,968 | 40.5% |
| 18 | Skilled Group | $1,929,530,000 | $1,384,811,000 | 39.3% |
| 19 | QPL | $27,264,304 | $20,363,368 | 33.9% |
| 20 | Spectrum Employment Services Co-operative | $15,113,067 | $11,343,578 | 33.2% |
| 21 | SEEK | $211,488,000 | $158,897,000 | 33.1% |
| 22 | New Horizons Enterprises | $26,781,315 | $20,616,145 | 29.9% |
| 23 | Hays Specialist Recruitment (Australia) | $1,051,409,000 | $834,539,000 | 26% |
| 24 | Navitas | $345,438,000 | $282,710,000 | 22.2% |
| 25 | Wise Employment | $31,152,838 | $25,573,147 | 21.8% |
| 26 | Enterprise & Training Company | $9,459,668 | $7,884,910 | 20% |
| 27 | Mindworx | $9,000,000 | $7,600,000 | 18.4% |
| 28 | Topgold Enterprises | $8,500,000 | $7,200,000 | 18.1% |
| 29 | Cairns Region Group Apprentices | $24,453,325 | $20,942,912 | 16.8% |
| 30 | Brite Services. | $2,631,015 | $2,263,960 | 16.2% |
| 31 | Ross Human Directions Group | $406,455,000 | $354,200,000 | 14.8% |
| 32 | Integrated Group | $224,192,000 | $196,390,000 | 14.2% |
| 33 | Enterprise Recruitment | $33,200,250 | $29,220,868 | 13.6% |
| 34 | Sarina Russo Job Access (Australia) | $69,717,732 | $61,865,818 | 12.7% |
| 35 | Jobs Australia | $5,354,929 | $4,753,567 | 12.7% |
| 36 | The Australian Institute Of Training And Development | $1,050,971 | $939,127 | 11.9% |
| 37 | CareerOne | $3,153,000,000 | $2,849,000,000 | 10.7% |
| 38 | Jobfind Centres Australia | $35,000,000 | $31,692,536 | 10.4% |
| 39 | Downing Teal | $35,000,000 | $32,000,000 | 9.4% |
| 40 | Ready Workforce | $849,406,000 | $777,492,000 | 9.2% |
| 41 | Peoplebank Australia | $149,950,000 | $137,908,000 | 8.7% |
| 42 | Fairfield Community Resource Centre | $5,156,391 | $4,789,489 | 7.7% |
| 43 | Staff Solutions Australia | $4,014,133 | $3,728,642 | 7.7% |
| 44 | ITIM Australia | $8,705,589 | $8,133,703 | 7% |
| 45 | Skills Training Employment Program Inc | $4,900,000 | $4,700,000 | 4.3% |
| 46 | L&H Group Services | $790,000,000 | $766,000,000 | 3.1% |
| 47 | Watson Wyatt Australia | $39,230,591 | $38,044,217 | 3.1% |
| 48 | Access Industries For The Disabled | $13,202,781 | $12,839,472 | 2.8% |
| 49 | Link Recruitment | $95,353,000 | $95,222,000 | 0.1% |
| 50 | Hillside Church Inc Welfare Fund | $1,300,000 | $1,300,000 | 0% |
Compiled by Dun & Bradstreet using information from its commercial database of more than 2.7 million companies.
For further information please contact:
Danielle Woods
D&B PR Manager Australia & New Zealand
(02) 8270 2926
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