HRnetGroup 2025 Results Announcement

Good morning everyone, welcome to our FY 2025 results announcement webinar. Thank you for taking some time from your schedule today to join us. My name is Fazlin and with me I've got our Group CFO and Executive Director Jennifer, our Executive Director and Chief Corporate Officer Adlin, So Jennifer will start things off by sharing with you the financial part of our results announcement. So over to you, Jennifer.

Good morning, happy Lunar New Year. Let's start with the happy news, the Hong Pao of the day. 2025 was a strong year for HRNetGroup. Net profit after tax grew 14.3%, and on the back of that, the board is proposing a higher dividend of 2.2 cents a share, which is 10% higher than the interim dividend paid last September. This brings the full year dividend to 4.2 cents a share. Over time, as you can see from this chart, we have progressed from paying dividends once a year to twice a year, and over the last 4 years consistently paid 4 cents a share. So this 4.2 cents is a clear step up. At yesterday's share price, the dividend represents a yield of about 5.6 to 5.7% and 78% of our profits, 79% of free cash flow, reflecting a strong cash position and our confidence in the business. We see 4 cents as a strong and sustainable base. When the business performs well and value is unlocked from our investments, we intend to share more with shareholders, as we have done this time. For those of you who are hearing our story for the very first time, we operate 2 core business segments. Professional recruitment, commonly known as headhunting or executive search, is a cyclical business that performs well during economic upswings when companies are hiring actively and the demand for talent exceeds supply. In 2025, we helped organizations hire 4,766 talents across all levels—PMETs, white-collar, blue-collar, senior executives. Flexible staffing. Many people know us as the employer of contractors that work on-site with our clients, whom we supported an average of 16,421 contractors every month, and in a year, 46,130 unique headcounts. We pay our contractors their salaries, and our clients pay us a margin on top of that. This model is seeing a structural shift. More individuals are open to contract and gig work, and companies value flexibility when business demand is uncertain. Together, these two engines balance growth and stability, giving us a natural hedge across economic cycles. 2025 was a better year even though market conditions were not easy. Revenue grew 3% to $584 million, and both flexible staffing and professional recruitment contributed to the growth. Gross profit was stable at about $123 million, and for professional recruitment, Gross profit increased for the first time since 2021, helped by stronger senior executive search activity. Net profit after tax rose 14.3% to nearly $53 million, helped by a $6.9 million increase in other income and effective cost control. Let's see how this compares with market expectations. The group's recent share price of 74 to 74.5 cents is at or above the target prices of 2 out of 4 analysts. 2025's results were broadly in line with market expectations. The revenue of $584 million came in within a narrow range of analyst forecasts. Net profit after tax was in line with or above expectation of most analysts. Now we take a look at our performance in a longer-term perspective. Over the last 33 years, the Group has operated through multiple crises, including the AFC, dot-com crash, SARS, GFC, COVID-19, and recent geopolitical pressures. We are not immune to economic cycles. But our earnings have been more resilient and we recovered faster than peers, as you will see in the slides later. In 2025, our revenue uptick and the net profit improvement marked another recovery phase. Let's now look at more recent history. Here, we compare with global recruitment peers over the past 8 years. By rebasing our numbers at 2017. This slide— this part shows the revenue, where the orange line for HRNetGroup is smoother, with shallower dips across cycles. Several peers experienced steeper declines and slower recoveries, such as the three lines at the bottom of the chart. By comparison, HRNetGroup's revenue has turned up again in 2025, while some peers have yet to recover. Looking at NPAT, the pattern is familiar. Our performance has been more stable, less volatile, and quicker to recover. In 2025, our earnings line turns up while some peers, such as the maroon dotted line, have yet to recover. Looking at industry and PAT growth, HRNetGroup grew profits by 14.3%, but most global peers saw profits fall sharply and some reported losses. Conversion. Refers to net profit after tax divided by gross profit. This looks at how much profit we keep from every dollar of gross profit generated. In 2025, HRNetGroup converted 43% of gross profit into net profit. A key reason is cost discipline, supported by our co-ownership model where business leaders behave as owners and manage costs very carefully. Therefore, more money flows into profit. Singapore remains our largest market at 63% contribution to the revenue and 52% of gross profit, but Singapore's share continues to moderate. North Asia now contributes 31% of revenue and 43% of gross profit, reflecting stronger growth outside Singapore. This broader Asian mix reduces concentration risk and gives us a wider growth runway as different markets recover at different speeds. 84% of revenue comes from the private sector, providing us upside when hiring recovers further. Bit by bit, our public sector contribution has been inching up—14% in 2023, 15% in 2024, and 16% in 2025. This is important because servicing the government means zero credit risk and typically provides large stable volumes, supporting cash flow and deployment during slower periods. And we serve the government sectors in Singapore, Hong Kong, Taiwan, and mainland China. Let's look at the industries. IT and tech makes up 24% of our business, and that includes digital hiring. 12% of IT and tech is AI-related. Financial and insurance contributes about 21%, reflecting steady demand in core financial services. Healthcare, life sciences, and retail and consumer are each around 14%, providing balance and resilience. The key point here is diversification. We are not dependent on any single sector, and that helps to smooth performance across cycles. The next layer of resilience comes from the strength and diversity of our customers. Our top clients, 5 clients, have been with us for an average of 18 years, showing long-standing relationships built over many years. We are not dependent on a few clients. The top 5 contributed 17.2% and the top 10, 25.9% of group revenue. Our gross profit remained well balanced between our two engines. Flexible staffing contributed $63.8 million, or 52% of group GP. Volumes grew 5.6%, driven by higher contractor numbers, although unit GP eased due to pricing pressure as markets scaled in Taiwan and Indonesia. Hence, GP was broadly stable. Professional Recruitment contributed $55.6 million, or 45% of group GP. Placement volumes increased 4.6%, and despite some unit GP pressure, total GP still rose 1.3%, marking the first GP growth since 2021. From this slide, it is clear that volume growth is returning, and as we work on improving the unit GP, or what I call pricing, GP certainly has room to improve further. We have talked about volumes holding up and our focus on improving pricing. This slide shows you where the pricing is coming from for professional recruitment. And here is the recruitment pyramid. At the top is senior executive search— lower volume, highest unit billing value. At the base are job placements. Higher volume, lower unit billing value. And in between is permanent placement. Across the industry, growth has been uneven. Executive search had modest growth. Permanent placements were down double digits. Job placements were also weaker, with single-digit declines. For HRNetGroup, the shift is clear. Senior executive search grew over 7% in volume and over 8% in billing value, driving what you see here, 16.2% growth, and lifting the GP contribution from 29% last year to now 34%. Permanent placements are still down, but only single digit, far less severe than peers. Job placements saw only minimal decline, again outperforming the industry. We clearly have the ability to pivot the middle part towards higher billing value executive search while minimizing downside at the base. This improves quality, earnings quality, and positions us well for further recovery. Let us now zoom in on our flexible staffing business, which forms the defensive core of HRNetGroup. Flexible staffing delivers a predominantly recurring revenue and gross profit base. Importantly, this recurring GP gives us baseline visibility at the start of every quarter. It effectively assures that our internal employee costs, some 1,000 headcount, are already covered. And that provides us operating stability, especially during uncertain market situations. While professional recruitment moves with the cycle, flexible staffing continues to generate steady volumes and cash flow. This is a key reason why we want to keep increasing recurring revenue streams and add on more products like Optimate, which Anthony will share more later. Overall, average monthly contractor headcount increased 5.6% to 16,421 in 2025. Flexible staffing growth is increasingly coming from outside Singapore. Contractor volumes grew strongly in international markets, with Taiwan up 21% and Indonesia up 40%. Singapore remains a stable and mature market. Contractor headcount declined slightly by 6%, but we stay selective. And prioritising contracts that kept the pricing firm with 2% increase. With Singapore as a solid base, we will keep scaling volumes in faster-growing markets. Cost discipline remained tight at HRNetGroup. SG&A increased by only $1 million year-on-year. This was due to higher employee costs of about $1.1 million with increased headcount, incentives, and bonuses, as well as $1 million of foreign exchange losses coming from a stronger Singapore dollar. These were partly offset by $1.4 million reduction in facilities and depreciation costs following office consolidation and lease optimization that took place in 2024. Other income increased by $6.9 million to $22.3 million last year. We had fair value gains of $9.3 million on financial assets and gold, $2.3 million of government grants, largely from prior year receipts under the Singapore PWCS, and an $800,000 gain from the disposal of financial assets. These were partly offset by lower interest income of $2.7 million, reflecting lower yields and balances, and the absence of $2.3 million of trade-related accrual reversals that were reported in 2024. Our strategy is to keep a strong balance sheet so that we can stay resilient through cycles and take market share from weaker competitors, or pursue meaningful M&A when opportunities arise. Zero borrowings. Our cash mode is made up of 3 parts: cash, safe and highly liquid assets such as T-bills, DBS Credit Link notes, and gold. These instruments are low risk and can be converted back to cash quickly. And here is how we think about deploying the cash moat. $130 million of working capital Running a large flexible staffing business, we typically set aside about 3 months of cash to cover internal and contractor payrolls. Cash is swept regularly into interest-yielding instruments. This explains why, even though interest rates were down by more than half between 2024 and 2025, Our interest income only declined about one-third, reflecting active cash management rather than passive cash balances. $40 million reflecting our intention to pay dividends of 4 cents or more as long as business conditions allow. $10 million for share buyback, which we will deploy opportunistically when share price trades below our view of fair value. $156 million earmarked for M&A and organic growth. To put this into perspective, I'd like to give you an example of a meaningful acquisition. Say we get a business generating about $31 million of net profit. If we acquire at 10 times PE for a 51% stake, that would imply a consideration of $156 million. This would be well within our financial capacity while retaining the optionality to take on debt if it enhances returns or accelerates growth. In short, our cash moat gives us defence, flexibility, and optionality, supporting dividends, enabling buybacks, and allowing us to act decisively when the right opportunities arise. I've come to the end of the financial update, and before I end, let me just look back to the topic of dividends that we started. Our AGM will be on the 21st of April to approve the dividend payout. Ex-div will be around 28 April, and payment around 7 May. I'll pass the time to Adeline.

Thanks, Jennifer. So moving to 2026, you know, in terms of our business focus, I think what we fully intend to continue to do really is to intensify our focus on senior executive search. And those of you who were with us in our earnings call, you know, the previous half year would know that we talked about the phenomena where It's the senior level that actually is seeing action. The middle ground has actually been quite stagnant, like what Jennifer showed. So we are continuing to do that. I think our clients can really appreciate the fact that, you know, across the region, we actually do give them very good value, unlike maybe some of, you know, the known names who won't get out of bed for anything less than $50,000. We actually offer very good value at superior quality. So that's where we're saying we're fully intending to eat further into the pie of senior executive search, um, and at the same time expanding our flexible staffing offering across the cities. We already have one shareholder who has asked about Indonesia and whether we are ramping up flexible staffing work there, that's totally the case. I think, you know, beyond Singapore, we do fully intend to push flexible staffing, whether in Indonesia or in Taiwan or in some of the other cities as well. The third thing that which, you know, we intend to do is to continue to cultivate recurring revenue streams. So this can be in the form of flexible staffing, which you already know, but also I think in more recent times we see our work workforce management app, Optimate, actually picking up speed. So you may have seen some of the announcements coming up about how Sentosa Development Corporation is actually— has come on board, you know, the Outbound School, Gardens by the Bay. These are all known logos who are now using Optimate to manage their workforce. So that's something that we continue to invest in and work on because We really like the recurring revenue stream model. To jump in on what, you know, everyone in Parliament is talking about really would be AI, the usage of it. To us, the way we see it is you either use AI or be used by it, right? If today someone's a delivery rider, effectively they're being used by AI. They're just following the instructions. So how do you ensure that you are using it instead? And here we see that clients are actively asking us for candidates with AI fluency. That's a fact now, right? In terms of when there's scorecard practice for a candidate, they'll tell us, they'll ask us to show, you know, what tools has this person used and how have they actually created real value beyond just trying it out. With the tech candidates, I think quite a common question is, is your AI agent coding as you sleep? That's a question that they'll have to answer interviews. And internally, and as well as with quite a number of our clients, the next question would be, are you talking to Claude every day, right? So even for a role like payroll processing, I mean, using Claude for Excel, it's something that is expected now, which will allow you to generate reports a lot faster than you previously would. And these are very real examples of how, you know, whether candidates or consultants have to use AI. So if we go, you know, on from there, the logical conclusion that we are seeing is that in terms of companies, the revenue per headcount goes up. What it actually means is that clients are asking for better quality candidates. And if you think about the recruitment iceberg, right, the fact that only 10% of people maybe are actively looking for work in our job portals actively, and the whole 90% below, who are actually the talent who are doing very well, are not actively looking. This is when you see that people and companies are choosing to work with headhunters in order to access these talents who will help them increase revenue per headcount. I mean, this is why I think PM actually mentioned how he alluded to the fact that there's now a delinking of GDP growth from job creation. And this is because we are seeing this happen, right? That the amount of value that a candidate now or employee now has to create is expected to go up. For individuals, it really just means that AI intensifies work. It's become more intense, not less. So how is HRNS actually positioning ourselves to win in, in this macro environment? Ironically, the first thing is amping up being human. I'm sure many of you would have seen the interview with the president of Anthropic, who, you know, her degree, her major was in English Lit, and she's saying that's exactly where, you know, we should be sending our children now. Because the humanities, the people skills, being human is what matters. So we are amping up being human. Just 2 weeks ago, we were opening up our Jakarta office, and it's the first time that we actually acquired an office space and we invited over 70 of our clients to come in person to meet us, to engage in person. One advantage that we have really is the fact that we have boots on the ground in 18 cities. So if you look at the map of Asia, basically anywhere that, you know, where you are within Asia, we do have people on the ground who will meet you in person and assess candidates in person. That's another phenomenon that we're seeing, that clients are actually interviewing in person, right? So there was a whole time where you have candidates that just make it through entirely on virtual calls. That's not quite the case anymore. Many times, at least by the final interview, they do want to meet in person, and it really makes a difference that our consultants are not just flying in quickly. They are based there, they are based in KL, they are based in Bangkok, and they can, you know, basically give you very real feedback on the ground. On our end, we ensure that the incentives are aligned for people to work across the region collaboratively as a platform. So I think that's actually quite unusual. As far as we're aware, there are no global players who work like that. They tend to work in city where if you cross into each other's territories, you actually will have to, you know, reflect that in the sales allocation. But for us, that's not the case. We kind of ensure that it doesn't matter where you're based, so long as you work together, you actually will get that full sales allocation. So what you end up with actually is a HRNet that's uniquely positioned as a regional platform with our 47 co-owners across the 18 cities, right? That's something really, really powerful and unique about us. Finally, the point why we're positioned to win would be that we are supercharged by AI. It is the reality that for us, the first draft of all, uh, reports that go out to our clients are now drafted by AI. And when we had a recent, uh, presentation at SGX, I think one of our consultants shared that, uh, previously she used to take 3 hours to do something. Now it takes 45 minutes, like less than an hour, right? Because We are really working to make each person more effective and to supercharge them. So I think in short, we are positioning ourselves to win in 2026. Um, the tagline that we want to use for our annual report would really be HRNet for all HR, because the way we see it, well, in, you know, basically the 18 cities, we have many different verticals and products And at the end of the day, if there's any HR issue, we want to be there and work with our clients to solve for it. So therefore, you get HRNet for all HR.

Perhaps to give colour on what is the latest at this moment, based on what we see up to week 8 of Q1, we already have visibility of the pipeline for Q1 and Q2. I would say pipeline quality is improving compared to last year. Stability is what we see in Singapore, which is for us a very mature and stable market, whereas growth potential is concentrated in Taiwan and core ASEAN markets, supporting a selective and market-specific recovery into 2026. Um, North Asia— Taiwan continues to strengthen, we see some growth numbers. China recovery is still patchy Hong Kong and Japan remain weak. ASEAN, we have Malaysia. Malaysia is showing growth, showing strong consistent expansion. Indonesia continues to grow, and we have Vietnam which is in the second quarter of operation, still small but promising. That's a quick update of where things are at this moment, 8 weeks into the year. Thank you very much. Goodbye.