Japan – Recruit Holdings Q1 revenue increases 8.2%, HR Technology segment drives growth

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Japanese staffing firm Recruit Holdings (6098: JP) reported revenue for the first quarter ended 30 June 2018. Revenue increased 8.2% year on year to JPY 567.2 billion (USD 5.1 billion). EBITDA grew 9.5% to JPY 78.7 billion yen, and EBITDA margin was 13.9%.

Despite being a very acquisitive company, Recruit does not provide organic growth numbers in its results unlike other international staffing firms. The growth numbers reported, therefore, may not be indicative of market performance.

The increase in the group’s results was mainly driven by the HR Technology segment which continued its strong rate of growth.

(JPY billions)
Q1 2018
Q1 2017
Change
Q1 2017 (USD millions)
Revenue
567.2
524.3
8.2%
5.1
EBITDA
78.7
71.8
9.5%
0.7
EBITDA Margin
13.9%
13.7%
N/A
N/A
Operating Profit
67.8
56.3
20.4%
0.6
Profit attributable to owners of the parent
47.3
40.2
17.8%
0.4

Operating income increased 20.4% year on year to JPY 67.8 billion (USD 611.6 million). This was mainly due to an increase in EBITDA, and a non-recurring gain of JPY 6.3 billion resulting from the sale of subsidiaries in Overseas Marketing recorded in the Others sub-segment of Marketing Solutions in the Media & Solutions segment in Q1 2018.

In April, Recruit Holdings acquired the website and assets of major Canadian job site, Workopolis.com through its subsidiary Indeed.

In June, Recruit Holdings also completed the acquisition of Glassdoor, Inc. Recruit will operate Glassdoor as a distinct and separate part of its HR Technology business segment, aligning Glassdoor and Indeed as sister companies and bringing changes to the job board landscape. Profits and losses from Glassdoor’s operations will impact the consolidated results from July 2018.

Glassdoor was consolidated as at the end of Q1 2018, resulting in an increase in goodwill of JPY 132.4 billion (USD 1.19 billion) in the consolidated financial statement. Recruit Holdings plans to complete the classification of intangible assets and goodwill related to the acquisition during Q2 2018, based on the fair value. The group added that one-time costs of JPY 1.19 billion (USD 10.8 million) associated with the Glassdoor acquisition were recorded in the consolidated financial statement in Q1 2018.

Despite increased competition from Google for Jobs, the company reported that its leading job site, Indeed, attracts more than 200 million unique visitors per month and continued to extend its traffic leadership position, achieving double digit traffic growth year on year in Q1 FY2018. Indeed’s resume database also grew year on year with over 120 million resumes uploaded to its platform.

Revenue by segment was as follows.

(JPY billions)
Q1 2018
Q1 2017
Change
Q1 2017 (USD millions)
HR Technology
71.1
46.4
53.0%
0.6
Media & Solutions
173.5
165.2
5.0%
1.5
Staffing
329.1
318.0
3.5%
2.9
Eliminations and Adjustments
-6.4
-5.3
N/A
(-57.7 million)

In the HR Technology segment, growth was mainly due to new customer acquisition and expanding spend from existing customers against the backdrop of a favorable economic environment and strong labor market. Profits and losses from Glassdoor’s operations will impact the HR Technology segment’s results from July 2018.

Within the Media & Solutions segment, the HR Solutions sub-segment revenue increased 10.9% year on year.

In the Recruiting in Japan sub-segment, the professional recruiting businesses saw particularly strong performance supported by the continued favorable business environment in the Japanese labor market. Revenue in Recruiting in Japan of HR Solutions was affected by two one-time factors. The first factor had a negative impact on revenue due to the transfer of the recruiting assessment business, which was previously managed in the Recruiting in Japan sub-segment, to the Others sub-segment during the first quarter. The second factor positively impacted revenue due to the transfer of the placement business for the medical industry to the Recruiting in Japan sub-segment, which was previously recorded in Corporate Expenses / Elimination (renamed this quarter to Eliminations and Adjustments) in Media & Solutions. Excluding these one-time factors, revenue increased 8.6%.

The Others sub-segment in HR Solutions increased 76.9% due to the transfer of the recruiting assessment business to this sub-segment.

Within the group’s Staffing segment, Recruit said the Japanese staffing market continued to expand as evidenced by the continued strong demand for agency workers and the number of active agency workers remained at a high level. In this environment, the Japan operations focused on extending new and existing staffing contracts. There was also the positive impact of investment to attract more agency workers in Q4 2017. As a result, revenue in the Japan operations increased 7.9% year-on-year. Overseas staffing fared less well with a small 0.6% increase.

Looking ahead the group forecasts revenue of JPY 2,302.2 billion (USD 20.7 billion) for the full year 2018.

In trading today Recruit Holdings shares closed at JPY 3,035.00 (USD 27.38), down 1.40% on the day and 6.07% below its 52-week high of JPY 3,231.00 (USD 29.14), set on 19 July 2018. Based on its current share price the company has a market value of JPY 5.18 trillion (USD 46.7 billion).

Source:: http://www2.staffingindustry.com/row/Editorial/Daily-News/Japan-Recruit-Holdings-Q1-revenue-increases-8.2-HR-Technology-segment-drives-growth-47031

      

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