Renrui Human Resources Technology Holdings Limited (“Renrui” or “the Company” and its subsidiaries (collectively, the “Group”), stock code: 6919.HK), the largest flexible staffing services provider in China, today announced its annual results for the year ended 31 December 2019 (the “year”).
Summary of Key Financial Performances for the Full Year 2019
- Total revenue of the Group amounted to approximately RMB2,287.6 million, representing a year-on-year (“yoy”) increase of approximately RMB671.7 million or 41.6%
- Gross profit reached approximately RMB 240.9 million, a strong increase of 55.5% yoy. Gross profit margin was 10.5%, up by 0.9 percentage points yoy
- Adjusted net profit* reached approximately RMB 134.3million, soared by approximately 98.3% yoy
- Adjusted net margin* increased by 1.7 percentage points from 4.2% in 2018 to 5.9% in 2019
- As of 31 December 2019, the cash and cash equivalents were approximately RMB1,029.5 million, representing an increase of RMB989.2 million yoy
- Net cash generated from operating activities was approximately RMB150.5 million, representing an increase of approximately 260.6% as compared to approximately RMB41.7 million in 2018.
Revenue Breakdown by Business Segments
- During the year, the Group’s revenue generated from flexible staffing, professional recruitment and other human resources solutions, accounting for 94%, 2.8% and 3.2% of total revenue respectively
- Revenue from flexible staffing was approximately RMB 2,151.0 million, up by 42.0% yoy. The number of flexible staffing employees increased by 29.0% from 19,464 as at 31 December 2018 to 25,118 as at 31 December 2019
- Revenue generated from professional recruitment amounted to approximately RMB63.5 million, representing a slight decrease of 7.1% yoy. Among which, recruitment revenue dropped 7.7% yoy to RMB57.6 million.
- Revenue generated from business process outsourcing (“BPO”) increased by 125.4% yoy to approximately RMB51.8 million
- Revenue generated from corporate training increased by 67.5% yoy to approximately RMB1.6 million
- Revenue generated from labor dispatch decreased 18.2% yoy to approximately RMB 7.1 million
Business Highlights for the Year 2019
- As at 31 December 2019, ranked first among all flexible staffing services providers in China in terms of the number of flexible staffing employees hired, with a market share of approximately 1.7%. Also, the largest flexible staffing services provider in China in terms of annual flexible staffing revenue, with a market share of approximately 2.9%
- The number of flexible staffing employees employed increased from 19,464 as at 31 December 2018 to 25,118 as at 31 December 2019, up 29.0% yoy
- The number of flexible staffing clients for new economy**company clients was approximately20,600, accounting for 82.0% of the total number of clients.
- In 2019, the average service premium rate of flexible staffing business accounted for approximately 11.0% of the total service fee, remaining stable compared to approximately 10.7% in 2018
- As of 31 December 2019, the number of registered candidates on Xiang Recruitment Platform was approximately 1,910,000, the number of newly registered individual users in 2019 amounted to approximately 540,000
- The conversion rate from offer to on-boarding of employees increased from 40% in 2018 to 54.6% in 2019
Mr. Zhang Jianguo, Co-founder, Chairman and CEO to the board of Renrui Human Resources Technology Holdings Limited, said, “Renrui successfully listed on the Main Board of the Stock Exchange of Hong Kong Limited on 13 Decemeber 2019 marking an important milestone for the development of the Group as it affirmed of our business strategy and philosophy and empowered the Company to further accelerate our development. Looking forward, we will continue to diversify and expand our client base to boost profitbility, and to innovate and strengthen our systems, platforms, artificial intelligence and data analysis technologies. We will also continue to expand the market coverage in China and around the world, as well as to expand our value-added services and enhance the user experience in order to consolidate our industry leadership and brand recognition, bringing strong returns to our shareholders and investors. ”
Financial Analysis for the Year 2019
- Total revenue of the Group was approximately RMB2,287.6 million, representing an increase of approximately RMB671.7 million or approximately 41.6% as compared to 2018. Revenue increase was mainly attributed to the increase in revenue generated from flexible staffing service and BPO service
- Revenue from flexible staffing business increased by approximately RMB636.0 million yoy, while revenue from BPO service increased by approximately RMB28.8 million. The increases were mainly due to the increase in the number of contract employees deployed to flexible staffing projects and the increase in the number of BPO seats.
- The selling and marketing expenses were RMB42.9million, accounting for approximately 1.9% of total revenue, representing a decrease of 0.7 percentage points yoy (2018: 2.6%). The decrease was primarily due to the high renewal rate generated from recurring clients and improvements in sales efficiency.
- In 2019, the gross profit margin of flexible staffing service increased from 7.5% in 2018 to 8.9%. Gross profit margin of professional recruitment services decreased from 45.4% in 2018 to 35.5%, the decrease was mainly due to the Company’s efforts to launch a headhunting business in 2019, which is still in its early stage of building headhunting revenue. The gross profit margin of other HR solutions increased from 33.1% in 2018 to 35.9%, mainly due to the significant expansion of BPO services in 2019
Business Review and Outlook
In 2019, the growth rate of the macro economy in China slowed as a result of the US-China trade war. Business development became more conservative in terms of companies expanding their businesses and labor demand. However, economic condition for the new economy clients recovered in the second half of the year and labor demands subsequently increased, leading to stronger growth in the flexible staffing and recruitment business.
During the year, the drop in the turnover rate of flexible staffing employees was mainly due to the formation of a flexible staffing senior consultation team in September 2019. By communicating with customers, summarizing gains and losses, and providing solutions, customer satisfaction of outsourcing flexible staffing recruitment service improved greatly.
Professional recruitment business segment consists of professional recruitment and paid membership. During the year, revenue generated from professional recruitment decreased, mainly due to the decrease in recruitment demand under the impact of slowing macro-economic growth in the first half of 2019. In response, the Group formulated measures to deal with the reduced recruitment demand from clients, and actively explored high-value clients and high unit-price job positions.
Other HR Solutions
Business Process Outsourcing Services
Revenue generated from BPO recorded a significant increase in 2019 as compared to 2018, which was mainly attributable to emerging business opportunities in BPO by long standing clients who engaged us for flexible staffing services, especially those in the new economy and internet sectors.
The Group provides training and development courses which are tailored to the specific situations and needs of clients. As of 31 December 2019, the total revenue generated from corporate training increased by 67.5% yoy.
Looking at flexible staffing, labor dispatch services are not high value and will not be a principal business for future development. As of 31 December 2019, the total revenue generated from labor dispatch decreased by 18.2% yoy.
Other Miscellaneous Services
Other miscellaneous services include HR services consultation, talent assessment and tailor-made employee management solutions, all of which were initially offered to clients during the year. As of 31 December 2019, revenue generated from other miscellaneous services amounted to RMB12.7million.
Research and Development (R&D)
The Group is pursuing developing technology-driven HR services and therefore invested more than tens of millions in R&D for its information system. The proprietary recruitment software, Xiang Recruitment Platform, has been further optimized to assist job seekers. In addition to providing job seekers the ability to have direct conversations with recruitment personnel, a group chat function was added to allow candidates to interact and share desirable job positions with each other. For corporate clients, the Group developed an interview system to manage potential candidates based on the client’s feedback. Upon initial short listing, candidates’ profiles and interview results are directly sent to clients’ HR department. The system automatically puts candidates in order based on short listing results. It also invites and reminds the candidates to attend a second interview at clients’ companies. This technology platform effectively integrates the interview process from initial screening to final interviews, which also extends to on boarding. The additional features to the system strengthen the Group’s recruitment capabilities as it enhances the Group’s services and ability to meet the rapid growing demand for flexible staffing employees.
The outbreak of COVID-19 in the early 2020 impacted the growth of recruitment business and flexible staffing business. However, in the mid-term and long-run, the Group believes its client’s loyalty and recognition of its strategic value in providing flexible staffing will result in continued growth in the future.