Declan Rowan

Are you getting a sense the level of demand is bouncing back after the GFC?

Yes certainly. For us we would have seen from October last year it has bounced back to basically pre-GST levels and we have every indication that it should continue to grow. So we’d be ahead now of where we were before it all decided to go pear shaped.

Is there a bit of a skills shortage in the recruitment sector? Are good recruiters hard to get?

I don’t think that’s really an issue just yet. I think there are still enough people that have left the industry and probably many that don’t want to come back to choose from. And in our case we tend to take people from the industry. We quite often look at people that have experiences let’s say professional or healthcare or industrial background and then give them the training to make them recruitment consultants.

What are the biggest challenges in the business?

I think it’s having the good leaders from a branch management point of view. So we’ve got a branch network and each one of our branches other than our Adelaide office has only what I would call income producing people in it. That’s basically the branch manager and the recruitment consultants and everything else is centralised back here, so all of our administration for around Australia and also New Zealand comes back here.

So a key driver for success is ensuring that we’ve got strong and successful branch managers in each location who also are tapped into the local market. So our focus is very much on growing a national network, but at each branch level we want to have what we call a living large locally focus, where it’s all about Albury or all about Marion or Mawson Lakes or Moorabbin or whatever branch we’re focusing on. So from a people point of view, the branch manager is first step.

And speaking of Moorabbin that’s where you’ve opened an office more recently, what are other areas would you like to get in?

In terms of timing I would say between now and the end of the financial year, and I think it’s probably going to be in the second half of the financial year, we’d look at one or two new offices. And we’re looking in terms of location I’d say in Sydney would be one and maybe one in Perth. It just depends on what opportunities there are at the time. But we’ve got one in Sydney already but we don’t have one in Perth just yet.

I imagine the Perth market is pretty competitive given the mining boom.

It is and there is a big issue I see in our industry where people really go for top line growth. So there are many $100 million-$200 million type companies out there and lots in between and they do that at a huge sacrifice to the gross margin.

Whereas for us, top line growth is an interesting measure but we want to ensure that each branch has a successful mix of temporary and permanent business and that spread allows us to have a larger gross margin rather than if we were just all industrial or just all mining or just all health for example.

Does that happen in recruitment, where is just becomes a race to the top?

It doesn’t look at a lot of the listed companies – so there’s roughly 10 companies in our space and if you add up those 10 companies’ top line revenue for the last financial year, it’s roughly $3.6 billion and I think their gross profit is around $21 million. I mean, why would you bother? The interest costs alone in those 10 businesses is about $45 million.

Scale is important, we don’t shy away from having growth, but we don’t chase a client to be their national supplier because they’ll want a low margin. Instead, we’ll want to hit a national client up and be their local supplier where our branches are, if you see what I mean. Approach them on a case-by-case basis.

Is the top-line-versus-gross-margin message sometimes hard to get through to the branch guys?

No, because we only report to them gross margin figures. We talk about what their gross margin is and they see that literally by 2pm every Wednesday. It’s transparent and people can say that’s their targets; their budgets are gross margin targets.

That’s different to a lot of industries where people get the dollars in the door and let the rest of it sort itself out later.

Bottom line profitably, that’s something as a business owner or manager we control and manage. So from a branch point of view they don’t have a lot of direct control over that and if we keep people’s eyes focused in the right areas, it tends to work in the better way.