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Business intelligence for recruitment and resourcing professionals

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INCORPORATING Recruitment  Matters 

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RECRUITER HOT 100 COMPANIES 2016

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2016 – a year of turbulence 2016 WAS A YEAR that will

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live long in our memories.

DOMINIC MORLEY Managing director, Head of Corporate Advisory and Broking at HOT 100 sponsor Panmure Gordon

It started with a wobble in China, ended with a Trump victory and had Brexit thrown into the mix for good measure. During what has been a turbulent and

uncertain 12 months, the UK recruitment industry has however remained resilient. This is testament to the quality and strength of the businesses featured within this year’s Recruiter HOT 100 and is cause for significant optimism during 2017. Panmure Gordon is a leading mid-market corporate adviser. Like many of the businesses within this year’s HOT 100, we have built our reputation on long-term relationships and exceptional levels of service. We have deep expertise in the recruitment sector acting as the trusted adviser to leading names such as Penna, Harvey Nash and InterQuest. With our strong relationships, from large international players to specialised privately-owned organisations, we have built up a wide network and broad understanding which has enabled us to become one of the leading voices in the industry. Teaming up with Recruiter has allowed us to extend our network within the sector and we look forward to following the progress of the many exciting businesses within this year’s Recruiter HOT 100 through 2017 and beyond. WWW.RECRUITER.CO.UK 19

06/12/2016 14:43


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RECRUITER HOT 100 COMPANIES 2016

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2016 marks the official 10-year anniversary of the Recruiter HOT 100. To celebrate, we’ve added 10 bonus companies to our list – so welcome to the 2016 Recruiter HOT 110. Hopefully, the 10-year bonus brings a little cheer at a time when it would be all too easy to sink into a ‘glooms-day’, if not doomsday, mentality.

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RECRUITER HOT 100 COMPANIES 2016

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The entry threshold for this particular HOT 100 stood at £86,910 – a full 6.2% or £5,700 below last year’s group of companies still evolving, all the better to identify the best managed ‘people organisations’ which are developing the most productive companies – together these factors exemplify the recruitment industry success story. Yet this year’s report heralds a change – the bar for entry has fallen. The entry threshold for this particular HOT 100 stood at £86,910 – a full 6.2% or £5,700 below last year’s group of HOT 100 companies. Aggregated average productivity growth of this HOT 100, like for like, only fell slightly. Employee expansion was more cautious than last year, reflecting the uncertainty in the air, yet sales and gross profit (GP) still were unable to keep pace. Some big names that dropped out last year have returned, with SThree, Hays and Pertemps all in the lowest quartile of the HOT 100. This, by nature of their size, had the effect of reducing the aggregate average GPH, compared with that of last year’s HOT 100. Yet the results still

6 O 6 %

Average sales growth for HOT 100 companies in this year's survey

spanned individual growth ranging from +41% to -36%. Calendar 2015 proved a year of only slight growth on average across the whole UK recruitment industry with its sales value rising by just 3%, according to the Office of National Statistics, despite incorporating all those additional employer costs, duplicated reporting of managed services’ growth and pay rate inflation. Comprising mainly calendar 2015, the 2016 HOT 100 list grew its sales at 6%, but individual company sales growth ranged from +68% to -27%. Among the specialisation HOT 10s, Public Sector was the strongest performer, followed by IT. The HOT 10 Professional recruiters together posted GP growth of 8% following its 18% bounce back last year. Conversely, HOT 10 Technical recruiters managed just 1.1% growth, as the oil & gas downturn offset gains in other construction & engineering business.

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panning the General Election, political leadership changes and last summer’s round of unexpected happenings, 2015 and 2016 have seen nearly two years of intense political upheaval and considerable uncertainty in the UK, capped by the present prospect of Brexit negotiations into the foreseeable future and geopolitical concerns heightened by the recent US election. Yet UK industry has continued to generate economic growth and jobs, ably assisted by a recruitment industry increasingly equipped to match the right people and skills with the right companies. Over the past decade, the HOT 100 has outlined leading trends and by analysing the collective and individual performances of the most productive recruitment companies in the UK. The single key performance indicator (KPI) of gross profit per head (GPH) encompasses so much about how a company operates measuring its ability to extract, sustainably, the optimum performance from its own people. This year we take it a step further: from these 110 companies, we have singled out the companies achieving the top 20 percentage gains in productivity. This gives an insight not only into the companies that have stayed at the top consistently but also into new entrants and those with evolving business models or successful efficiency programmes. While long-term of ng-term membership m the HOT 100, 00, as featured last year, remains a strong in indicator that a company is doin doing a lo lot of things right, examining this in tandem with productivity uctivity improvements imp vements paints an n even more rrounded view w of their success. also reflects that uccess. It als these companies do not simply mpanies d mply rely upon a high value specia specialisation ion to propel their success. cess In short, this report is itself elf

Agile Intelligence Agil igen has Agile Intelligence Int compiled the HOT 100 Report compile eport on behalf beha of Recruiter to determine which companies determi p are bes best at leveraging g their intellectual assets. ellect asset measuring By m suring the gross ross profit fit (net (n fees) es) per p employee this indicates ind s how ho effectively ctively organisation an or ation usess the own people to skills of o all its ts ow generate a prof profitable return ene n for stakeholders. lders

All in-house employees workers or ((excludess temp w contractors) are included c tors) ar – not just in the calculation alcu fee-earners; fe ners; this is a standard senior management eme key performance indicator ndic or (KPI). Notwithstanding ng wild w cards, companies emerging strongly strongly, c anies emerg especially featuring e ially if featu g rregularly, rly, are primarily pri ily those that operate the at op he most productive set-up, balancing pr alancin

and the need for f well-trained l-tra the motivated stafff against ag costs. need to minimise mi ise c companies derive Which co panies deri most ‘added de value’ from om their own employees e ployee (before before allocating overheads) rhea heads) yet stilll engender the he right atmosphere overr the long a ong term erm to encourage enc profitable and sustainable s sales approach? roach Take a look at the 2016 HOT 100 016 HO 0 chart. cha WWW.RECRUITER.CO.UK WWW.R R.CO.U 21

06/12/2016 12:35


RECRUITER HOT 100 COMPANIES 2016

At least 73% of companies had the potential to mitigate temporary margin erosion with increased permanent fees

76% Increase in workforce for HOT 100 companies

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productivity was achieved by only 29% of constituents, compared with 49% last year, indicating that the full benefits of previous expansion have not yet been achieved. The continued headcount growth in this year’s HOT 100 has compounded that factor and constrained productivity for several companies. The underlying demand for recruitment services is dependent upon a buoyant labour market, and the latest signals suggest a slowdown both in absolute jobs growth and churn activity. 2017 could require good quality training and considerable tenacity if all those recently hired recruiters are to reach their full potential.

KE Y FINDINGS 2016 HOT 100 group sales turnover rose 6.3%, above the whole recruitment industry sales turnover growth of just 3% reported for calendar 2015 by the Office

of National Statistics. This year’s HOT 100 accounts for more than one third of ‘real’ industry sales turnover estimated from official data by Agile Intelligence. Like for like, comparing this group against their own figures for the previous year, overall headcount was increased by a solid 6.9% and this translated into a commensurate 6.2% rise in GP with productivity not quite holding par as GPH fell marginally by 0.6%. Gross margin was unchanged. Like for like: ● The 2016 HOT 100 firms collectively reported an increase from their previous year in latest available sales of 6.3% to around £16.1bn. ● HOT 100 combined GP reached £3.1bn, a gain of 6.2% versus their prior year. ● HOT 100 companies’ in-house headcount rose 6.9% to total 31,661 employees. ● Productivity (GP per employee) for this group of HOT 100 companies fell by 0.6% over the year to an

On aggregate, the 2016 HOT 100 saw widespread individual growth (in the 2015 or 2016 reporting yearend it represents) as 73 companies posted a rise in net fees. The average size of the 2016 HOT 100 member firms jumped to 317 employees with the re-entry of the largest players, and a massive three-quarters of constituents oversaw some net organic expansion of their internal workforce. While the gross margin held steady within the HOT 100, analysis of the wider industry indicates further modest erosion. As mentioned, gross margin, aggregated across the whole of the HOT 100, was flat. With the permanent market estimated to have outperformed the temporary market this does suggest some, albeit unquantifiable, loss in temporary margin. However, at 46%, just below half of the HOT 100 still reported an actual rise in gross margin. Examining closer, 27 – compared with 26 last year – of the 2016 HOT 100 earns gross margin below 15%, indicating almost entirely temporary activities. This means at least 73% of companies had the potential to mitigate any temporary margin erosion with increased permanent fees. Tellingly, the dream growth combination of both employees and

Methodology The data has been rigorously filtered by turnover, gross profit and employee numbers; details available on request. The companies featured in this edition employ almost 32,000 in-house staff and generate £16.1bn of industry sales revenue; many more were evaluated as part of the overall analysis. Latest available accounts have been used – dated 2015 or 2016 for all companies – a few companies are excluded 22 RECRUITER

p20-27 Hot 100.indd 22

due to filing timings. Companies filing abbreviated accounts and not providing their full figures separately are excluded. Increasingly, with the internationalisation of many UK recruitment firms, group accounts are now used for UK corporations where these prove more up to date — examples would be Hays, Harvey Nash, Robert Walters, PageGroup and several IT recruiters. Companies operating primarily overseas have been excluded, although

UK engineering specialists placing talent worldwide are included. The UK operating companies of overseas-based groups eg. Adecco, Randstad or Hudson may be included. Two prominent exclusions from the analysis are Manpower and Reed due to accounting differences which invalidate comparisons. Furthermore, companies combining temporary employees in their employee count are not included as this

grossly underestimates their performance. The most specialist of search, or headhunters, are omitted for a variety of reasons: incomplete disclosure, overseas business, incompatibility and a shortage of data for peer group comparison. • Disclaimer: while every effort has been made to ensure accurate reporting and analysis no guarantees are made regarding the information portrayed in this document.

JANUARY 2017

06/12/2016 12:35


Company/ trading n ame

190,858

171,312

SSQ

21.6

16.1

Legal

182,813

130,000

Green Park Interim & Executive

5.9

4.6

Public sector, charity/social enterprise, retail, HR, financial services

3

174,537

178,670

Sheffield Haworth

22.7

20.2

Financial services: executive search, interims

4

N

173,375

135,086

Falcon Green Personnel

3.5

2.3

Construction

5

172,150

170,682

TRS Staffing Solutions

3.4

3.8

Engineering/technical into oil & gas, rail, transportation, construction, energy

6

162,312

146,651

LA International Computer Consultants

16.6

14.8

IT

7

156,375

148,628

Mayday Healthcare

24.9

21.1

Healthcare

Parent gro (where d up if name) ferent

Gross pro per emp fit previousloyee year (£)

1 2

Gross pro employe fit per latest yee ar (£)

Rank

Change

Gross pro latest ye fit ar (£m) Gross pro previous fit year (£m) Sector coverage

RECRUITER HOT 100 COMPANIES 2016

Fluor Corporation

8

154,188

133,127

SystemsAccountants

5.6

4.1

Finance systems, finance transformation, EPM, BI, ERP

9

152,598

134,452

WA Consultants

3.7

3.8

IT & technology

10

149,457

145,462

Morgan Law

9.0

7.3

Healthcare, public sector, charity/not-for-profit, education, Housing Assocs

11

145,599

145,935

Vector Resourcing Holdings

5.4

5.4

Technology

12

145,344

130,301

Euroforce People Solutions

3.3

2.6

Skilled staffing, textile & automotive manufacturing sectors

13

144,341

119,099

Rullion IT Plus

10.8

8.9

IT & telecoms, business change & transformation

14

142,836

126,040

The Bridge (IT Recruitment)

3.3

2.8

IT

15

140,235

160,616

Interact Medical

7.3

6.9

Locum doctors including niche technical skills

16

137,778

140,091

NES Global Talent

84.6

82.4

Technical/engineering, power, infrastructure, chemical, life sciences

17

132,415

149,974

Odgers Intermediate*

70.4

69.7

Executive search, interim managers

18

131,681

116,806

Resource Solutions Group

28.4

22.3

IT, business change, financial services, public sector

19

131,615

146,874

Penta Consulting

12.2

12.9

IT & telecoms

20

130,375

132,457

The SR Group

32.1

27.3

Legal, compliance, HR, marketing, tax, treasury & executive search

21

129,327

140,458

Walker Hamill

6.7

6.7

Accountancy & finance, debt & structured finance, private equity and M&A

22

128,366

124,504

Elite Associates Europe

4.6**

4.4

Luxury retail, temp beauty & fashion, retail ops, head office, senior exec

23

126,115

158,431

NRL

9.8

12.0

Technical, construction, oil & gas, petroleum & energy

24

125,704

136,780

GatenbySanderson

13.3

11.9

Executives in health, education, government

25

124,843

125,010

CMA Financial Recruitment

4.0

3.9

Accounting & finance, executive, HR

26

124,219

108,220

Randstad Technologies

4.0

4.4

IT, telecoms

27

N

122,434

108,065

Minstrell Recruitment

2.4

2.2

Civil engineering, mech & electrical, trades & labour, rail, facilities management

28

119,413

101,373

PSR

5.0

3.9

Construction, building, civil engineering & infrastructure, residential

29

119,137

103,149

Redrock Consulting

5.0

4.7

IT & telecoms

30

119,020

182,182

Options Resourcing

4.6

4.0

Construction,building services,maintenance,tech,engineering, office, sales

31

116,762

98,340

Cognitive Group

2.3

2.1

Microsoft Dynamics Technology

32

116,026

123,511

Investigo

18.9

18.3

Accountancy, finance, change management, property, procurement

33

114,719

99,144

Henderson Scott

4.4

3.5

IT and sales & marketing

34

113,584

132,532

People Source Consulting

5.6

5.7

IT & technology

35

113,534

103,537

The Rethink Group

36

110,855

107,879

Randstad Education

37

110,523

105,500

38

109,663

115,719

39

109,041

98,615

Modis International

40

108,414

127,255

Caritas Recruitment

Rullion

Randstad Holding NV

19.5

Business & tech, executive, life sciences/pharma, engineering & commercial

18.4

17.8

Education

Shorterm Group

12.3

10.3

Engineering, aerospace, auto, constr, rail, power, logistics, supply chain

Coyle Personnel

15.9

14.9

Tech, constr, medical, rail, highways, energy, pub sector, comm,industrial

Adecco SA

10.7

10.3

IT - dev, SAP, infrastructure, aerospace, defence & engineering, digital

nGAGE Specialist Recruitment

7.6

6.5

Social care into public, voluntary & private sectors

41

N

107,143

108,751

Airswift (pro rata)

90.0

93.2

Oil & gas/energy

42

N

106,635

99,511

Advantage Resourcing UK

22.4

21.9

Technical

43

106,165

103,068

Next Ventures

7.8

7.2

SAP, digital,oracle

44

105,684

121,655

McGinley Support Services (Infrastructure)

13.3

16.1

Construction/infrastructure

45

N

105,050

116,743

William Alexander Recruitment

2.7

2.3

IT & business change

46

104,890

109,256

Randstad CPE

Randstad Holding NV

29.6

26.9

Construction, property, engineering

47

104,327

108,023

Badenoch & Clark

Adecco SA

32.9

32.8

Finance, accountancy, banking, legal, IT, HR & marketing

48

103,709

105,570

La Fosse Associates

9.1

7.3

IT, technology, digital at all levels including executive search

49

103,499

104,265

Goodman Masson

14.3

12.7

Finance,banking,commerce, compliance, public sector, audit

50

102,830

121,587

G2V Recruitment Group

12.9

12.2

IT, engineering, oil & gas

Key:

Up

p20-27 Hot 100.indd 23

Down

– Unchanged

N New

formerly Odgers Group until May 2016

19.8 Randstad Holding NV

WWW.RECRUITER.CO.UK 23

06/12/2016 12:35


Gross pro latest ye fit ar (£m) Gross pro previous fit year (£m) Sector coverage

51

102,509

92,632

PPF

9.3

9.4

52

102,240

111,196

Oil Consultants

5.1

5.2

Oil & gas

53

N

102,210

122,349

Resourcing Group

10.2

10.2

Built environment, public sector

54

101,899

105,585

Orion Electrotech

5.3

5.3

Technical, aerospace, construction, oil & gas

55

101,821

110,353

Oakleaf Partnership

5.3

4.9

Human resources

56

N

101,674

78,048

First Call Contract Services

5.7

5.3

Print & mail, food-packing, processing; warehouse & logistics

57

101,653

134,249

Interim Partners

3.7

4.4

Interim executives

58

101,605

121,585

CPS Group (UK)

3.0

2.7

IT, ERP, engineering

59

N

100,667

n/a

Parity Professionals

6.0

n/a

IT

60

N

100,015

92,545

Nigel Wright Consultancy

6.7

6.1

FMCG, industrial, manufacturing

61

99,971

94,469

Venturi

2.9

2.4

IT: business intelligence, development, infrastructure, quantitative analytics

62

99,322

98,591

Oliver James Associates

21.1

15.8

Finance services/commerce & industry, actuarial, ARC, change management

63

99,262

101,766

Randstad Care

8.3

7.8

Social care, nursing, allied health professionals

64

99,197

106,224

Red Commerce

15.6

16.1

IT

65

N

99,032

91,268

Prime People

12.3

10.2

Construction, built environment, energy, environmental, insight, analytics

66

98,906

97,767

GCS Recruitment Specialists

7.7

7.2

Technology, financial services, engineering

67

N

98,643

101,517

Gattaca

73.0

54.8

Engineering & engineering technology, IT, professional, education

68

98,264

104,657

Hallam Medical

5.3

3.6

Primary care & community nursing

69

98,139

98,110

Harvey Nash

90.3

84.9

IT, finance, interims, executive search

70

97,735

103,791

Aspire

8.5

8.6

Media, marketing, communications including digital, graduates, editorial

71

97,543

102,681

Phaidon Holdings

25.7

21.7

Financial services, professional services, energy, STEM

72

97,323

98,415

PageGroup*

556.1

532.8 Financial services, legal, eng, IT, retail, sales , energy, HR, construction

New Street Group

Randstad Holding NV

Drivers

73

97,275

100,263

Portland Resourcing

3.1

3.4

IT, SAP

74

96,959

98,067

PSD Group

23.4

23.4

Executive, finance, engineering, hospitality, HR, IT, supply chain, retail

75

N

96,924

92,569

Morson Group

64.9

60.0

Engineering/technical, IT, scientific

76

N

96,847

77,367

Angela Mortimer

10.7

10.1

Executive and office support

77

N

96,125

82,314

Permanent Futures

2.4

1.6

Education, care, manufacturing perms

78

95,867

116,535

Montash

3.8

4.2

IT: BI, data & analytics, security, ERP, CRM, scientific technologies

79

N

95,437

84,199

RIG Medical Recruit

6.9

4.6

Radiography, occupational therapy

80

N

95,197

84,742

Jenrick Engineering

2.2

2.0

Engineering

81

N

94,941

81,739

Experis

40.0

34.7

IT, finance & engineering professionals

82

94,563

116,985

Fircroft Engineering Services

60.5

68.1

Technical/engineering into oil & gas, automotive, mining, energy, commercial

83

N

94,410

92,235

Premier Group UK

6.1

5.5

IT, media, engineering

84

94,384

111,844

Petroplan Holdings

10.6

11.7

Oil & gas, energy

85

N

93,761

126,847

Kintec Group

6.8

7.0

Technical (engineers) & geoscientists into oil & gas, built environment & rail

86

93,510

93,795

CD Sales Recruitment

3.9

3.8

IT sales, software sales

87

N

93,363

91,435

Tangent International

6.3

6.0

Professionals into IT & telecoms, engineering

88

92,518

96,439

Cornwallis Elt

89

92,494

110,250

Eden Brown

nGAGE Specialist Recruitment

90

92,490

105,372

Rullion Engineering

Rullion

91

90,333

97,062

IPS Group

92

89,502

93,942

IDPP Holdings

2.6

93

89,390

104,542

Contract Scotland

94

89,112

93,736

Finegreen Associates

Accountants in Demand

95

88,640

93,743

Ajilon (UK)

Adecco SA

12.1

14.2

IT, other professional sectors

96

N

88,383

87,745

SThree

235.7

218.2

Banking & finance, energy & nat resources, IT, pharma & biotech, public sector

97

N

87,572

86,615

Hays

810.3

764.2 Finance, construction, health, pharma, educ, IT, legal, oil & gas, professionals

98

N

87,498

90,430

Pertemps Recruitment Partnership

57.5

53.4

Multi-sector

99

87,256

136,806

Eames Consulting

11.4

8.9

Actuarial, audit, broking & underwriting, change, compliance, risk, technology

100

N

86,910

85,915

Office Angels

30.1

30.4

Secretarial, admin & office staff

Key:

Up

p20-27 Hot 100.indd 24

Down

– Unchanged

Manpower

Cavey Dale Group

Adecco SA

3.1

3.1

Technology, change management within banking, insurance, digital & media

15.5

14.1

Built environment, public sector

7.9

8.0

Engineering/technical

5.8

6.1

Underwriting, risk, insurance, broking

2.8

IT & telecoms, executive, technical sales, interim

3.4

3.1

Technical/professionals into construction & engineering

1.8

1.9

Public/private healthcare

formerly Michael Page International

Parent g (where droup if ferent name)

Gross pro employeefit per latest ye ar (£) Gross pro per emplofit previous yee year (£) Company/ trading n ame

Rank

Change

RECRUITER HOT 100 COMPANIES 2016

N New

06/12/2016 12:48


Gross pro latest ye fit ar (£m) Gross pro previous fit year (£m) Sector coverage

Parent g (where droup if ferent name)

Gross pro per emplofit previous yee year (£) Company/ trading n ame

Change

Gross pro employeefit per latest ye ar (£)

Rank

RECRUITER HOT 100 COMPANIES 2016

101

N

86,856

78,249

Extrastaff

5.5

4.5

Driving & industrial

102

N

86,665

73,138

Forrest Recruitment

5.4

4.6

Office & commercial staff

103

N

86,494

79,119

Champion Employment

4.1

3.9

Office, industrial, drivers, accountancy, technical, sales, catering, HR, IT

104

N

86,279

85,161

InterQuest

23.8

23.2

Information security, analytics, digital, IT & telecoms

105

N

85,738

83,331

Gravitas Recruitment

8.7

6.9

IT, actuarial

106

85,681

89,018

Randstad Financial & Professional

9.7

10.1

Finance, accounting, legal, interims

107

N

85,449

90,944

Teacheractive

7.4

5.4

Education

108

N

84,601

85,716

Robert Walters

234.4 215.3

Finance, legal, HR, IT, sales, marketing, support, supply chain, tax

109

N

84,327

86,970

Eximius

6.2

5.6

Energy, financial, law

110

N

84,275

96,904

Education Placement

9.2

9.1

Education

O

recruiters, continuing the theme of diversity evident throughout the HOT 100. Across the HOT 100 companies, a massive 76% expanded their workforce either organically or by acquisition, compared to 67% saw growth combination in previously. This signals a much employees and broader spread of organisations productivity choosing to grow headcount. However, only 47% increased GPH versus last year’s 73%, the lowest for some years. Furthermore the dream combination of expanding workforce and rising productivity was achieved by just 29% of the 2016 HOT 100, versus 49% last year and 35% the previous year. Two-thirds of these 29 firms employed over 50 people, reflecting the profile of the HOT 100 companies, with the honours evenly split like last year, as similar percentage representation is seen in both camps.

29%

The breakdown was: ● Nine (29%) of the 31 firms had less than 50 employees ● 20 (29%) of the remaining 69 firms employ above 50 employees ● Margin distribution of 2016 HOT 100 versus previous issues suggests the battleground is in the middle ranging from 15% to 40% margin with the number of companies either side of this range just slightly ahead. Versus last year, constituents increased sharply in the 15% to 20% range at the expense of 20% to 40% margin earners. The long-term trend on the chart shows strong rises in low margin (<15%) almost exclusively temporary/contract players and in the 15% to 20% range where a small permanent market presence is also common. Higher margin (>50%), driven mostly by perm, is little changed but the bands from 20% to 50% have all lost ground.

aggregated average £98,568 to stand almost 10% below last year’s HOT 100 group average. However, a simple average of each of the GPH figures, negating the lower quartile high-weighted skew by those large employers, stood at £110,092 – just 2.2% below the 2015 HOT 100. ● HOT 100 average gross margin was unchanged for these companies at 19.4%, with any shift in the business mix towards permanent fees offset by temporary margin pressure. ● This HOT 100 group in the past year added £182m in net fees, with an additional 2,035 staff at an incremental gross margin of 19%, making an incremental £89,400 additional GPH. ● Whilst still solid, this is a weaker performance than we reported last year when the incremental margin was clearly driven by permanent fees and this incremental GPH, especially, is substantially below recent years. ● Entry level GPH (ranked 100) to the 2016 HOT 100 was £86,910, standing £5,700 below the prior year threshold for the ‘cut’ which was at £92,632. Examining the extended HOT 110 the ‘cut’ was £84,275, indicating the closeness of the ‘following pack’. ● That following pack of 10 bonus companies comprises three generalists, two technology, three professional and two education

Randstad Holding NV

Calculations Gross margin is the gross profit [GP] (or net fees) as a percentage of sales turnover. GP is a combination of permanent fees (at virtually 100% margin) plus the profit on temporary supply after subtracting payroll and other ‘temp’ employment costs.

The mix of business between temporary and permanent placements influences the level of gross margin as does the trend in temporary pricing and employment related costs. With larger contract

business notoriously competitive compared with SME or ad hoc placements, the type of business and delivery model/cost structure play a crucial part both in determining temporary margin and also bottom line profitability. WWW.RECRUITER.CO.UK 25

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RECRUITER HOT 100 COMPANIES 2016

● 4% of the HOT 100 are almost exclusively permanent recruiters but around nine companies are regarded as permanent specialists, and a further five firms have a highly predominant permanent mix. The strategic expansion into the Interims market, highlighted last year, appears now to have stabilised. ● Permanent market showed growth during much of 2015, increasing its share of the business mix as temporary market growth eased. However by late Q3 and into Q4 there was ample evidence from several quarters that the permanent market itself was faltering amid economic and political uncertainty. ● Most represented group (24 companies) has moved down a band to those companies with margin between 15% and 20%, ie. substantial temporary but mostly with a modest presence in permanent fees. ● Biggest losers: again the 30% to 40% margin band shed more companies in the HOT 100 – from 11 down to just eight constituents; five years ago there were 20 in this band.

● Most gains: the 15% to 20% margin band gained the most for reasons provided above. ● 27 agencies now achieve gross margin below 15% with still 11 of these below 10%.

4 O 4 %

of HOT 100 firms are almost exclusively permanent recruiters

13%

O

of HOT 100 firms employ 20-30 staff

Company trends: productivity (GPH) growth less certain as recent years’ expansion policy not paid off The bar for success this year dropped sharply to £86,910 GPH, as previous expansion failed to deliver sufficient return before further headcount increases were undertaken during the 2015 reporting period. The number of constituents gaining in productivity also fell to 47% (73% last year), while only 29% of companies achieved both headcount and productivity growth, versus 49% last year. Of these 29 firms, IT has gained relative ground against the other key sector groups but all sectors saw a marked reduction: Professional’s eight this year was roughly half of last year’s 15; Technical was down to five from 10; Public Sector also down to five from 10; and IT down to 10 from 13. The remaining company still being the same blue collar skills specialist.

Among the leaders, the top HOT 10 sees six companies achieve productivity growth, while simultaneously expanding headcount, led by SSQ, newcomer Falcon Green ranked 4th, LA International, Mayday Healthcare, SystemsAccountants and Morgan Law. Exploring this theme further, several companies deserve special mention for being included in both the top 20 of the HOT 100 and the new Productivity Growth top 20 table. Combined, this suggests a considerable achievement. Green Park, Falcon Green, Rullion IT Plus, SystemsAccountants, WA Consultants, The Bridge (IT) and Resource Solutions Group all achieved strong productivity growth either to maintain their position in the top HOT 20 or to join it for the first time this year. These indicate companies that are moving forward quickly from their present position. Office or industrial recruiters such as First Call Contract Services and Angela Mortimer have also displayed exceptionally strong improvements in productivity and feature highly in the new growth table.

H O T 1 0 0 C O M P A N I E S B Y G R O S S M A R G I N B A N D (in accounting year)

30 2007 2008

25

2009 2010

20

2011 2012 15

2013 2014

10

Source: Company accounts

2015

5

0 less than 10%

10% to 15%

15% to 20%

20% to 30%

30% to 40%

40% to 50%

more than 50%

Gross market band range 26 RECRUITER

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RECRUITER HOT 100 COMPANIES 2016

Job type profile The HOT 10 profile still retains a good mix of permanent and temporary recruiters without any of the major multi-sector or generalists. SSQ and Sheffield Haworth are now the only two near exclusively permanent recruiters. TRS, LA International and WA Consultants are all mainly contractor-based models with the others offering a mix of both permanent and temporary business. Size profile Among the large corporate groups in the HOT 100, where it makes sense to separate out the UK subsidiaries these have again been listed individually – Randstad and Adecco again have five and four listed respectively. The nGAGE (formerly HCIG) stable again has three companies in this year’s HOT 100. Overall, 21% of HOT 100 companies employ more than 200 staff compared with just 14% last year, while those employing from 100 to 199 staff stood at 21% (20%) of constituents. A further rise was seen in the very smallest firms with 13% employing between 20 and 30 staff versus 11% last year. Conversely, the

30–49 band fell sharply to 18% (29%) and the employee band 50 to 100 rose just slightly to 27% from 26% last year, sustaining last year’s decline. This all points to a productivity push from some of the UK’s largest recruiters, reentering the HOT 100, countered only by the very smallest, often emerging companies. Office/Industrial/Trades/General Staffing This ‘sector’ has sprung a surprise in the 2016 HOT 100. Rumours of its demise were clearly exaggerated. Several re-entries are seen, helped by the lower entry threshold this year producing six companies in the main HOT 100 and a further three in the anniversary bonus 10. At 12th sits Euroforce, specialising in sourcing skills tradespeople from across Europe into furniture, textile and automotive manufacturers in the UK. Drivers specialist PPF at 51st, First Call (packaging, processing, logistics, print & mail) reached 56th and office specialist Angela Mortimer returned at 76th. Pertemps (98th) and Office Angels (100th) then followed while Extrastaff, Forrest and Champion

21%

O

of HOT 100 firms employ more than 200 staff

18% of HOT 100 firms employ 30-49 staff

O

stood at 101st, 102nd and 103rd respectively. The reasons for inclusion were varied; Euroforce expanded its GP faster than its employees, while others saw a mix of efficiency drives to reduce headcount and business model streamlining (PPF, First Call & Angela Mortimer) or simply benefitted from the lower entry threshold – despite the trend in many of their core sectors towards commoditisation and volume delivery models. Six out of the nine drove gross margin up through a variable combination of increased perm mix, higher margin temporary client mix and disciplined pricing but in all cases it is the improvement in people productivity that has catapulted them into the HOT 100. Whether their presence is sustainable in future years is likely to depend on the extent of any return of the HOT 100 entry threshold back towards last year’s heightened level. It may well be that now the generalists have led the way other sectors must follow in order to remain competitive in the fast changing world of work in the UK.

Conclusion and outlook Confidence in the recruitment industry faltered as the year progressed best illustrated by a lowly 3% growth in official industry sales turnover. Last year we suggested that the industry might take a break from hiring and that a slowdown in expansion rates could well result; this trend is evident in our 2016 HOT 100 report. Headcount growth slowed, the productivity average of the HOT 100 actually fell, and the threshold for entry was lower. The benefits of the prior year’s headcount expansion did not quite fulfil expectations as new fee-earners presumably matured yet productivity still shifted backwards. The response was muted

with activity levels later in the year affected by a sharply weakened oil & gas sector together with the uncertainties surrounding the political process and economic outlook. Initially, business mix adjusted to a maturing cycle, subduing top-line sales growth, as permanent fees picked up across several sectors during the first half of 2015. Yet a late slowdown in permanent hiring and some likely erosion of the temporary margin cancelled out any overall rise in the HOT 100 gross margin, as was seen the previous year. For the wider industry, analysis suggests a further drop of at least 50 basis points in gross margin totalling around a third of all margin over the past 10 years.

This once again emphasises that the HOT 100 really are the outperformers. Looking ahead the outlook is trickier than ever to forecast. The prospect of Brexit has led to such uncertainty that most economic models cannot truly operate. Headlines across the industry still try to assume ‘business as usual’, and in some ways that is all that companies can do. However, the smartest are undertaking scenario planning while in the short term assuming that the job market will be affected by an economic slowdown and adapting accordingly. Longer term, some demographic and technology trends will shape the world of work stretching well beyond

the Brexit fall-out. Technology application continues to advance. Global skill shortages are well documented and underpin the demand for recruitment services. Nevertheless there are also risks as the people relationship model of recruitment is encroached by disruptive technology. With virtually unpredictable economic headwinds likely, HOT 100 companies will have ample opportunity to demonstrate their resilience as the industry meets the challenges ahead. The first task must be to ensure that newly hired consultants are well trained and prepared for a tough environment if overall industry productivity growth is to resume. WWW.RECRUITER.CO.UK 27

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06/12/2016 12:40


STARS IN THE LEGAL FIRMAMENT

Fresh from a rebrand, legal recruiters SSQ tell Colin Cottell how operating under their competitors' radar helps them thrive during boom times as well as when things get chaotic IM AGE | AKIN FALOPE

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RECRUITER HOT 100 COMPANIES 2016

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many other sectors, which go through regular cycles of boom and bust resulting in a roller coaster ride for recruiters, “the law is wonderfully cyclical in many respects”, says Shilton. The happy outcome for SSQ is that demand for lawyers remains constant through thick and thin. As Shilton explains, while economic booms spawn “enormous demand” for transactional lawyers, in tougher times the market shifts, resulting in more demand for employment lawyers and disputes lawyers. In bad times too, “there will be people forced to move upwards and downwards, and we can move them”, while “senior lawyers can move at any time”. “We thrive on boom, and we thrive on chaos, and the chaos that exists in several markets right now because of Brexit and because of America [the election of Donald Trump]. Out of chaos we can make serious money,” adds Quarry. While the unique characteristics of the legal market are undoubtedly factors in SSQ’s success, they don’t explain why it has consistently outperformed other legal recruiters who, after all, operate in exactly the same sector. “We create our own market,” says Quarry. “Rather than wait for a job fill order, we go to clients with propositions as to why you need these lawyers for business reasons.” A case in point was 2016, when SSQ provided the staff to launch two offices for clients in Germany. Quarry says: “We took these propositions to the clients because we are close to senior management and understand their strategy. Our approach was, ‘If you agree that this jurisdiction should be on your radar, here is the solution, here is a team’.” The firm also takes advantage of long-standing relationships with senior lawyers, who in many cases have entrusted their career moves to SSQ. “This gives us the ability to cascade the relationship down to our colleagues who are doing associate recruitment, for example.” In this way, Quarry says they can bypass HR. These an often o senior lawyers have clients who need lawye w r will also so ha lawyers, says. yer ers, s, he h say sa One erentiates itself from ne way w y SSQ SSQ diff ffer eren e competitors mpet p pe ors is th tthatt it it ssticks to legal. Itt ha hass never been to other such en tempted temp tem emp mp t stray tray r into ra into o oth othe e areas, e su suc c as finance “We knitting,” Quarry anc n e or or IT. T. “W W st stick ic ick c tto the ek n ng,” Qu says. Indeed, but a mi mile Indeed Ind eed,, the eed t term rm ‘an ‘an inch ‘a h wide w m i deep niche’ might well d wel elll have have been be invented n ed d for fo o SSQ, which across legal S SS ic ch provides provide rov ovide id s staff ff right i ro o the he e le leg g spectrum from paralegals and associates, up to spe sp p para aral ocia ciates te tes e ,u senior lawyers, partners and General Counsels. se s, pa part ar However, Qua Quarry has taken uarry rry r believes eves tthat SSQ ha en niche to division, o a new new level, lev l with h its interim erim er im div n,

n meeting Gareth Quarry and Nick Shilton at the London offices of legal recruiter SSQ (previously known as Shilton Sharpe Quarry), neither is wearing a tie. But this does not suggest a more casual approach to business for these two solicitors-turned-legal-recruiters. Remarkably, given the competitive industry in which they ply their trade, little else has changed since 2012 – except the recent rebrand of their corporate identity to SSQ – when the company topped Recruiter’s Hot 100 as the UK's most profitable staffing company based on gross profit (GP) per employee. Four years on – after taking top spot again in 2013, second in 2014 and 2015 – Shilton and Quarry and SSQ are back on top of Recruiter’s Hot 100, with each employee delivering an impressive £191k of GP or net fee income. Founded in 2003 by Shilton and Gavin Sharpe, another lawyer, before being joined by Quarry in 2005, SSQ has enjoyed relentless growth. Between 2010 and 2015, GP more than doubled to £21.5m. In 2016, the company opened an office in Dubai, bringing its international network of offices to 21. In the last four years staff numbers have grown from 75 to 120. “Most of our competitors just have no idea about the goldmine [that] legal is. We have been very fortunate that legal has been off most big players’ radars,” says Quarry, barely disguising his incredulity of how few others have realised how lucrative the sector is. Neither Quarry, SSQ’s executive chairman, nor Shilton, the firm’s CEO, who is in charge of day-to-day running of the business, have made that fatal error. With several thousand lawyers working g in London earning more than an a £1m a year, according to Shilton, ilton, and SSQ being remunerated mune u rat on the basis of 30% to 33% gross 333% of o first-year year ea ear a gr g os compensation, “we nsat we ccan trade extremely mely profitably”, bly” ly”,, says says Quarry some relish. Quarry with w h. If such fat margins are s re enough to makes ess other recruiters’ mouths rrec e ruiiter t s’ m hss water, h er,, th er tthere h are further herr reasons r nss for for or Quarry Quar Qu Qua and Shilton, hilt ilt lton, lt on n who firstt met at legal gal a recruiter Quarry Dougall back in ruiter rui t Qu ter the 1990s, Unlike 90s,, to 90s t be e cheerful. cheerr chee Unlik Unl ik

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RECRUITER HOT 100 COMPANIES 2016

"We thrive on boom, and we thrive on chaos, and the chaos that exists in several markets right now because of Brexit and because of America [the election of Donald Trump]" Nick Shilton COMPA NY

Founded 2003 by Nick Shilton and Gavin Sharpe; Gareth Quarry joins in 2005

Gareth Quarry 1982-86 trainee solicitor/solicitor 1988-2002 Quarry Dougall/The QD Group, founder and chief executive 2002-05 angel investor in various businesses after selling Quarry Dougall to TMP Worldwide 2005 – present executive chairman, SSQ – on expiry of restricted covenants from TMP Worldwide

Nick Shilton 1995-97 trainee solicitor/solicitor 1997-20022 oug /TM Worldwide Quarry Dougall/TMP 2003 – present EO SSQ, CEO 20155 20144 Gros 21.57m £16.1mm Gross profit £21.57m Prof 3m £4.5m Profit before tax £7.03m taf afff 120 staff

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which although launched back in 2012, is only now beginning to gain real traction. “I would now say ‘an inch wide and two miles deep’,” he says. SSQ recently placed “a bunch of interim lawyers and paralegals” in Shanghai. And Quarry believes this is only the start. He predicts that in 10 years, the split between interim/temp and permanent in law will be 50:50, compared to 95:5 in favour of perm today. “The law is decades behind pretty much every other sector in its use of temps,” adds Shilton. Not only does SSQ’s interim division allow it to cover every aspect of the “legal firmament”, it also is “a crucial counter-cyclical product in its armoury”, allowing it to cater for clients’ increasing demand to be able to flex numbers. Although the UK and London, where half its 70 consultants are based, remains its core market, over the years SSQ has built up its international business. Starting in Europe, its network includes offices in China, New Zealand, Russia, South Africa and Dubai. Shilton says the company carries out rigorous research of prospective markets, including talking to clients about their strategic plans, to generate legal recruitment ‘hot spots’. Then, there is the task of finding someone suitable from within SSQ or a local to open the office. Quarry says the fact SSQ is not beholden to a private equity house or a bank but funded entirely from the funds of its shareholders ent encourages this approach. “It is personal enc nal expenditure, so it means we are rigorous expe orous about testing it [prospective are testin ospective markets], and d then we ar very patient abo about how we grow it out,” he says. ery p says Recognising need to deliver a unifor uniform Rec ng the ne service across multiple servi tiple jurisdictions, risdictio s, means that tha recruiting the rightt staff itself is a priority re sta for itse for the company, Shilton. Compared to the mpany, says S ton. Co recruitment Shilton recrui nt sector as a whole hole Shil n says the process is “more deta detailed more rigorous”. proce d and mor i takes a “pretty Once hired, Shilton hilt says SSQ take patient approach”. “We We will llose money on pretty much every

consultant we hire in the first year,” he adds. However, such patience appears to pay off, with the churn rate for fee earners with more than a year’s experience hovering at around 10%. While Shilton expresses pride in the firm’s achievements, he is clearly a driven man. “The growth potential of the business is absolutely massive,” he says. “There are a whole bundle of interesting jurisdictions we have hitherto stayed out of.” In addition there are opportunities to exploit areas such as compliance that are closely linked to legal. The firm has its eyes set on the US – by far the world’s most important legal market, where SSQ already operates through a relationship with a US legal recruiter, although it has yet to set up its own office. “We will do the States,” says Shilton, where SSQ already operates through a relationship with a US legal recruiter, although it has yet to set up its own office. “There are several other jurisdictions post-Brexit under consideration in Western Europe, where we are in active discussions.” Shilton is also confident that the firm is well placed to take advantage of an expected wave of consolidation among law firms, a trend he expects to take decades. Shilton says he can see GP going well beyond £30m over the next couple of years, although “our ambitions go well beyond that”. “It’s a question of building the business nes out,” he adds. Although Quarry “took a step back from Alth business” two years ago, and n now plays a the b largely advisory role, he hass lost n none of what larg ‘entrepreneurial he describes as his ‘en neur insecurity’, nse says also drive drives Shilton something thatt he say hilton and SSQ’ss manag management team. “It the rest of S nt te It drives day. You are only as goo good as your next us every day re onl xt the minute you don’t have that fire deal, and th n’t h e you may as well business, y ell give up your bu ess, because you will start going bac backwards,” he says. With Shilton’s and Quarry’s ambitions rry’s am tions still unsated SSQ’s success, there seems litt little ated despite ite SSQ ccess, ther chance h nce of o that. hat ●

JANUARY 2017

06/12/2016 11:59


Recruiter Hot 100 - January 2017