Recruiter HOT 100: HOT 10 technical/engineering

Over the past 10 years, Recruiter, in conjunction with Agile Intelligence, has produced the HOT 100 list of top-performing recruitment firms in the UK.

Thu, 8 Dec 2016

Over the past 10 years, Recruiter, in conjunction with Agile Intelligence, has produced the HOT 100 list of top-performing recruitment firms in the UK.

Within this year’s 2016 HOT 100, in Recruiter’s January 2017 issue (out 14 December) and sponsored by Panmure Gordon, Recruiter has picked out four of the most significant sectors to focus on.

Today we look at the technical/engineering recruiters.

There are 24 engineering/technical specialists included in the 2016 HOT 100 compared with 23 last year, plus several more that include engineering or energy as their additional specialisations. 

Their presence continues the growth of recent years despite the weakness of the oil & gas sector since late 2014. It covers a range of manufacturing and supply industries, and includes the following among its sub-sectors – infrastructure, marine, defence, energy including oil & gas and nuclear power, aerospace, automotive and rail. 

This broad sector also includes substantial overseas placements and some project solutions operations, although the latter are avoided in this report where possible.

Construction is the standout sector in this HOT 10, with at least five companies for whom it is their single largest speciality, and was relatively strong through the reporting period but, more recently, has suffered from the uncertainty following the Brexit vote.

However, there seems to be renewed political impetus with much talk of infrastructure and residential housing developments, which could underpin future demand. The presence of margin-busting managed services also appears to be relatively limited in the construction recruitment marketplace.

Oil & gas has been a major driver of technical demand over the past several years but this has now seen considerable retrenchment, more especially in the North Sea. While there are some prospects looking ahead when decommissioning in the North Sea eventually gathers pace, the substantial cutbacks both in contract and permanent staffing across both the operators and the wider supply industry have seen many recruiters cutting offices and even exiting the sector. This was predicted in last year’s HOT 10 commentary. 

The HOT 10 now comprises just two very large firms (both predominantly oil & gas/energy) – NES Global Talent and a pro-rata of the merged entity Airswift – plus two large and six smaller ones. Internal employee numbers range from 20 to 840.

The oil & gas ‘majors’ have slipped further – Fircroft dropped down the HOT 100 and out of the HOT 10 and, while NES remains strongly positioned in the HOT 10 it is now accompanied not by an independent Swift but newly combined with Air Energi, forming Airswift, a merged entity pro-rated from their 2015 accounts. This combination provides tremendous operational and geographic synergy during a very challenging market environment. 

Elsewhere in the broader engineering sector the benefits of long-term projects and order books, when entering an uncertain economic period, are tangible. Slow to be affected, although also potentially slow to exit any eventual downturn, this makes the engineering sector, excluding oil & gas, an out-performer at this stage of the latest expected economic cycle.

The Chancellor’s plans for infrastructure expenditure appears to be positive. HS2 looks to be going ahead offering long-term demand for infrastructure suppliers. Other rail and road programmes are also planned. The nuclear power project with EDF and China now has the go-ahead (again) and more major power projects are expected if opportunities continue in a highly successful automotive sector.

Furthermore, although some defence spending may possibly head overseas, certain marine projects appear to be ringfenced within the UK and, all together combined. This appears to bode well for the UK technical engineering sector. Life sciences too remain strong for those recruiters agile enough to adapt to changing research ‘ownership’. Across almost all technical disciplines the overseas export of contractor expertise also remains solid. 

HOT 10 2016 engineering/tech

•The 2016 HOT 10 Engineering/Technical represent £1.88bn sales turnover, marginally down by 0.7%, generating around £232m in gross profit (GP), ahead by just 1.1%, reflecting the year-on-year slowdown in the oil & gas market offset by some growth from other engineering recruiters. 

•GP (net fees) rose by 1.1% year on year, but GP/head fell 2.1% as headcount expanded by 3.3%. Average GP/head totalled £120,072. 

•Falcon Green has emulated what TRS did last year – going straight into pole position in its first year of entry. As a small emerging player in the construction market, its core offering of temporary placements is complemented by an expanding permanent fees business. It was closely followed by second placed Fluor subsidiary TRS which, counteracting the challenges of oil & gas, continues to develop its engineering business to third clients across the wider rail, transportation, power & renewables and construction sectors.    

•NES moved up to third place with gains across sales, GP and employee numbers, although productivity fell slightly. NRL eased back to fourth, again servicing several sub-sectors, including oil & gas through Petrolic, acquired when that market was buoyant. 

•Newcomer in fifth place Minstrell is an example of a company that may benefit from any further government infrastructure plans as it extends its business. PSR and Options Resourcing are closely behind – all three Construction market specialists. Technical engineers, Shorterm and Coyle (more multi-sectored), bring up the lower positions along with Airswift.

•There were five exits comprising Kin-Tec, McGinley Support Services, Fircroft, Randstad CPE and CBSbutler.

•While seven companies posted some growth in GP and five out of the HOT 10 increased their GP/head, only three increased both employee numbers and productivity simultaneously. Seven firms expanded their headcount – only TRS, Minstrell and Airswift were either flat or slightly contracted. 

Gross margin trends: 

  • Average weighted gross margin for the 2016 HOT 10 rose 20 basis points to 12.3%. Only two of this HOT 10 now have gross margin below 10%, compared with four in last year’s HOT 10. 
  • Five of this HOT 10 reported increases in gross margin – NRL, PSR, Options, Shorterm Group and Coyle Personnel. Two saw flat margin with three posting a decline.
  • There is evidence of some temporary margin erosion masked by increasing permanent recruitment at several companies although the sector remains predominantly contractor driven, with project solutions services also a contributor. PSR, Falcon Green, Coyle and, to a lesser extent, Options have the largest permanent exposures but margin is also about the competitive fee rate, temporary client mix and delivery model. 

 

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