HRnetGroup AGM 2022 Highlights

Good morning, owners of PageNet Group. I'm Adeline, the Executive Director and Chief Corporate Officer of the company, and I've been invited by the Board of Directors to assist the Chairman, Mr. Peter Sim, to lead the proceedings of this Annual General Meeting. On behalf of the Board of Directors, I welcome you to the 5th Annual General Meeting of HRNet Group Limited, and thank you very much for taking the time to join us this morning. So before Jennifer goes into a detailed explanation of the numbers, let me get to the heart of the matter and share with you where we are as a company right now. Last year, we When I said that we would be doing better in the year of vaccinations, I didn't expect we would break all records and have the best year ever in our history. But that's what happened. We cracked S$70 million to clock in net profit of S$70.3 million, which is the highest net profit we have reported in our 30-year history. And— okay, I'm letting the cat out of the bag a bit— now that you have voted in favor of it, we will be paying a total of SGD 40.1 million in dividends to our 2,199 shareholders. The good news, apart from the dividends, is that the prevailing business environment is conducive to our work. The uncertainty is in favor of our flexible staffing business. The need for speed and to show growth means the smart thing to do is to work with great recruiters, some of whom are on this call, who are specialized in your area. In order for any business to grow, they need to hire. The tech companies in particular require a lot of manpower. The even greater news is that HRNetGroup is well set up to take advantage of the favorable business environment when there's both greater demand for talent and higher salaries on which our fees are based. We have both the network of over 1,100 recruiters and the technical infrastructure to partner clients who need to hire in a hurry. Most importantly, we have the hunger and the desire to keep doing better. Working with 54,000 contractor employees in a year, placing 7,794 candidates, and partnering over 4,000 clients takes work. A lot of work, but we're very happy and very excited to do it. We want to do more. We really do believe that our clients should focus on their core products and what they're good at whilst we supply all the talent and the manpower which powers them. We often get the question as to why we keep cash in the company. And the 2021 numbers explain it beautifully. When the flexi-staffing market surged and drove our per-day contractor employee numbers up from 14,000 to 19,000 every single day, we needed S$112 million to fund the payroll at any point in time. So for example, right now in Shanghai, there are staffing companies who have to continue paying salary but who have problems issuing FAPR to their clients because everyone's under lockdown. And the nature of our industry is that we simply cannot delay payments to our contractor employees. It's illegal to do so even if clients are unable to pay us. So holding cash is a good, it's a safe thing. Apart from that, we will also continue investing both in companies within our space as well as in ourselves. We'll be expanding our offerings this year, moving more strongly into RPO, attacking the senior search market, and growing our network. Over the past 5 years, we have also been relentlessly building up our technology backbone, and we are working towards the Ease app being the first port of call for anything work-related. You spend money on all other apps you find, but you make money on ours. So these are exciting times, and we're very grateful for your belief in us. To give you even greater confidence, let me get our Group Chief Financial Officer, Jennifer, to give you the quantitative reasons why it's a terrific idea for you to buy even more shares in our company.

Thank you, Adeline. Good morning, everyone. Today I will report and share with you what we have delivered up to 2021 and answer some further questions that we received from shareholders. Exactly a month ago, the 28th of March this year, was our 30th anniversary of Patronite Group. 30 years, 40 offices, 32 business units, We set up some 1.2 new BUs a year through a variety of brands with various specializations, helping organizations find better talents and helping talents find better jobs. For the first 26 years, we grew organically, meaning we started up every single business unit from scratch. And then in 2018, through M&A, we welcomed 3 brands and businesses: Rimbone in Indonesia, Reforce in China, and Centerpoint Personnel in Hong Kong. Our integration has been great as we saw a CAGR of 47% in net profits and ROI of 41% from these acquired businesses over the last 3 years. Post-acquisition, the co-owners continued their entrepreneurship journey with us, and we have new JVs and brands in Jakarta and soon in mainland China as well. This is the combo effect of organic and inorganic growth. With our latest addition of our Reforce Chengdu branch, We now have 6 cities of operations in mainland China, totaling 14 growth cities in Asia: Singapore, Jakarta, KL, Taipei, Shanghai, Beijing, Guangzhou, Shenzhen, Suzhou, Chengdu, Tokyo, and Seoul. Our various businesses are like trees in the ecosystem of a tropical forest growing together with roots that intertwine amongst each other. We have common systems, shared services like HR, IT, finance, legal, and digital communications. We have a common lingo, common memories, and a common desire to do well. At our 2017 IPO, we impressed investors with our success story of not merely having survived 5 crises, but we did well with each crisis, be it AFC, the dot-com crash, September 11th, SARS, and GFC. We emerged even stronger Not many people know that in the last 29 years, every year we reported a profit, except in the AFC that we suffered a small loss. And here we are, having walked through the COVID-19 crisis of the last 2 years. Once again, our record results of 2021: 36% growth in revenue, 35% growth in gross profits and 41% growth in net profit is a testament of our enduring spirit and sustainability as an organization. Our two business segments, twin engines as we call it, have the natural hedge effect of the cyclical nature of labor movements alongside economic peaks and troughs. At the professional recruitment end, our corporate clients pay us a fee when we help them with a permanent hire, based on a percentage of the annual remuneration of the successful candidate. This business contributes 54% of our gross profit with nearly 100% GP margin. Sensitive to economic swings, The reopening of borders and resumption of business activities is good for us. Last year we did 7,794 permanent jobs, and now we are looking to surpass our pre-COVID heights. For our flexible staffing, our clients pay us a recurring margin on top of The monthly payroll of our contractors. This has been on a steady upward momentum every year, especially during economic uncertainty where companies turn to contingent workforce for the ease of upsize or downsize as required. Certain specialized roles were needed on short-term basis to fill in gaps in hiring for evaluation before companies convert to permanent hires. In a survey published by humanresourcesonline.net this month, the highest adoption of continuum workforce was above 60% in Indonesia, Hong Kong, Malaysia, and Singapore. All are places that we have flexible staffing businesses in. IT, sales, admin are the most common skills needed. Almost half of the respondents of that survey were utilising contingent workforce of up to 10% of their workforce and planning to expand to 15% in the next 2 years. Singapore's labour market is seeing increasing proportion of contract employees, up from 6.4% in 2016 to 8.4% in 2021. And casual employees from 3% to 3.4%. Clearly, the gig economy that the whole world is trending to, especially post-COVID, reflects an acceptance of flexible contract work as a norm, and that simply pushes up our total business volume to nearly 54,000 contractors to come through our payroll cycles last year. Singapore contributes 56% of gross profit, while North Asia 41%. Singapore will continue to grow, and we expect North Asia to grow even faster than Singapore. One analyst friend noted that our international business jumped 3 times between 2017 and 2021. How could we have done so? Here are 4 avenues in 4 years that I'm going to report to you. Avenue number 1 was M&A. In 2018, we made 3 acquisitions. PTH Harnett Rimbun brought us back to Jakarta. Refox added power to our presence in Shanghai. Beijing and Guangzhou and increased our footprint to Suzhou and recently Chengdu. And the acquisition in Hong Kong paved the way for a new line of business, government contracts. Avenue number 2, organic. In 2019, we set up RecruitFirst, our flexible staffing brand, in Shanghai, KL, and Taipei. And in 2020, we set up HRNetOne Shenzhen. Avenue number 4— sorry, number 3: combo. Combo of organic with inorganic. In 2020, we set up RecruitFirst Indonesia. In 2021, reforce Chengdu, with the co-owners of our acquired units who felt the positive difference as part of HRNetGroup. This is the best testimony of our successful business integration and partnership, that we join hands and multiply. Avenue number 4: Fresh sparks. You must have seen the recent announcement on the admission of new co-owners. We have done very well at some of our mature units such as HRNetOne Taiwan. People Search Taiwan and People First Malaysia. Mark my words, more will be announced. Your confidence in this company is assured by the vested interest of our employees who power the business as owners. We are PHDs— passionate, Hungry and disciplined. At the listed company level, through our share ownership schemes and the continuous investment by our people, we have 225 employees who now hold the shares of HRNetGroup. At the operating units level, we have 35 co-owners who invest in the businesses they operate. Building the business for longer-term growth, and this includes the new co-owners I just mentioned. Many of our colleagues are here today as shareholders. Thank you for the excellent performance of 2021 that we are able to deliver record returns to our shareholders, a dividend yield of more than 5% an ROE of 18%. We had shareholders personally thanking us for the good show, and we are just so happy to celebrate the achievement. Going forward, we will continue to be guided by the dividend practice of at least 50% net profit after tax, after adjusting for any one-offs and exceptional items. And we have declared more than 50% before. If you remember, 53.7% for 2018, and now we are proposing to declare 57% for 2021 today. We fully intend to maintain a progressive track record of dividend payout, and we will consider ramping up dividend in accordance with performance. Q&A. We have answered 17 questions from the Share Investor and our shareholders on the 22nd of April, as published on the SGXNet. There are 4 more questions that shareholders posted between then and now. I'll take time to provide the responses to these 4 questions. The first one: Please elaborate on your UK and Hong Kong investments and, and how these investments synergize with human recruitment business. Now we have strategic investments in Staffline PLC in the UK and Bambus Healthcare in Hong Kong. Allow me to explain what these investments are about. Staffline, as a blue-collar staffing business, was established since 1986. And formed its first on-site business in 2002. As the recruitment industry in Asia is relatively young and evolving, we draw inspirations and parallels from how businesses in mature markets such as the UK— we look at how they evolve with the dynamics of demographics, sectoral shifts, policy changes, economic cycles. What about Bambooz? Bambooz is in the business of healthcare staffing, including 24-hour private nursing for home care and institutional healthcare, such as ward relief for hospitals and nursing homes, temporary healthcare manpower for social service organizations, clinics, pharmaceutical companies. Bamboozle is a profitable business with good margins. Now this is a lucrative sector and we have so much to learn from them. Question number 2: Please give us an update of the investment in Staffline some time ago. What was the objective of investing in this company? What is the average cost, as the price chart looks worrying? And going forward, what is the investment objective of this investment? Our investment, our initial investment in Staffline, was an opportunistic move as the share price then was depressed due to a payroll event back in 2019. We take a long-term strategic view of this investment. And we believe it will eventually pay off. Although our average cost is above the current price of 55 pence, we do not worry about the price chart because we have treated substantially our stake as fair value to other comprehensive income, and that related market valuation movements have no impact on the P&L. Question number 3. Q: Does HRNet expect this year's profit to be greater than last year's? And our response is, based on current performance and barring any unforeseen circumstances, we are optimistic of this year's profit delivery. Some investors ask us which sectors the growth is coming from. I can safely tell you that Nearly half of our sales force are specializing in the 4 key growth sectors: the semiconductor in China and Taiwan, and across Asia, IT and tech, engineering, and healthcare life science. What are the growth prospects of the company in the next 3 years? Our sustainable internal processes, people, and digital infrastructure have set us all ready to benefit from the growth and recovery in the external environment. The analysts covering us have all projected the revenue and profit numbers on an upward trajectory. 2022 is looking to be a good year once again. Shareholders can look forward to benefiting from a rise in salaries along with an active labour market. We will do well. That's all for the additional Q&A. In conclusion, HRNetGroup is a company with solid fundamentals that competitors find it difficult to beat. We are all set for the continued growth through both organic and inorganic paths. Our 1,000-people-strong business, 32 business units, 40 offices in 14 Asian growth cities, 12 brands. We own not just the ingredients but the secret sauce for sustainability before it even became a buzzword. We will have more new things coming up to repeat success. Did you see last Friday's release of the Chinese version of our letter to shareholders? It says, zhong zhong ru sha da you kuei. Meaning our business is flourishing and prospering. Very promising. Now, after the approval by shareholders at this AGM, we will proceed to have the final dividend of S$30 million paid out middle of next month. And a commemorative $30 NTUC voucher will be sent out via registered post to those of you who submitted your valid proxy form and gave us a Singapore postal address.

Happy shopping!

We hope you are happy with the goodies that we have prepared for you, and thank you once again for your support. I look forward to reporting to you again in August. For our first half 2022 results.

Thank you. We shall now proceed to the second item on the agenda. I think the only item that everyone is very excited about, and that is to approve the declaration of a final tax-exempt one-tier dividend of 3 Singapore cents per ordinary share for the financial year ended 31 December 2021. So the Scrutineer has verified to provide the poll results, and once again, we have 100% of the total valid votes voting for Resolution 2 and 0% voting against. So based on the results shown on the screen, I declare the motion carried. We have now concluded the businesses set out in the agenda, and no notice has been received for any other business that may be transacted at this meeting. I therefore declare this AGM closed. So thank you very much, and thank you all owners of HRNetGroup for joining us today. I think it's really good to get to see you and to share more about the company with you. Thank you.