Mon, 10 Nov 2014Today we reveal the third of our Recruiter HOT 10 breakouts, the HOT 10 IT & telecoms recruiters from this year’s HOT 100 list.

A supplement with the November issue of Recruiter will feature the 2014 Recruiter HOT 100, the ninth edition of the benchmark league table of the UK recruitment sector’s most efficient companies, as measured by gross profit (GP) per head, or net fee income (NFI).

Conducted on Recruiter’s behalf by Agile Intelligence, the 2014 HOT 100 is supported by Anderson Group and RBS.

Around 33 companies in the Recruiter HOT 100 have IT/telecoms as their main specialisation. In the calendar year 2014 to date, early results and company statements suggest some market growth within this sector, and possibly the start of a recovery in permanent demand, as business confidence and especially investment return to drive the market. These trends should become apparent in the 2015 HOT 100.

Companies in this sector operate on a mix of contractor and permanent placement business. During the past year, these companies have shown a further shift towards contractors versus permanent placements.

Key facts about the IT/telecoms HOT 10:

• They represent around £757m in turnover and generated £97m in net fees (GP) during calendar 2013.
• Net fees grew by 11.5% and average GP/head increased 13.2%, with employee numbers declining by 1.5%.
• HOT 10 newcomers in 2014 are Montash, People Source, Lorien Resourcing and Ajilon (UK). Lorien benefited from a substantial increase in contractor business, without any commensurate expansion in headcount. Ajilon is a surprise inclusion. But a sharp fall in its internal headcount may have resulted from the firm outsourcing its own support services, perhaps intra-group, which could flatter its GP/head. [Editor’s note: Impellam's acquisition of Lorien was revealed on 4 November.]
• Six constituents remain from last year – Vector Resourcing, Penta Consulting, LA International Computer Consultants, WA Consultants, G2V Recruitment and Opus Recruitment Solutions. The exit of Harvey Nash has removed the large company skew on the overall figures. Both employee numbers and the net fees aggregate have fallen because of this company’s exclusion.
• Seven companies increased employee numbers, with five of the HOT 10 simultaneously managing to increase GP/head.
• Vector Resourcing again leads. But turnover for this company fell slightly, as did GP. And a small gain in employees led to a further drop in GP/head. A 150-basis point rise in its margin almost certainly reflects the increased emphasis placed upon permanent placements, following the launch of a specialist division in 2012. It still operates from East Sussex and Wiltshire, not yet having followed through with the intended opening of a third office.
• Montash has surged into the HOT 10, coming in second. It substantially increased its contractor base last year; there was a sharp drop in overall gross margin as the mix was transformed. While it is still a relatively small company, it operates a global reach from its UK office, with material sales overseas.
• WA Consultants, based in Exeter, moved down to fifth position as its sales, GP and GP/head all declined.
• Diversification continued last year from information and communications technology (ICT) into sectors such as engineering, oil & gas, life sciences and energy. SThree, Hydrogen Group and several other large players have already embraced this approach. But the HOT 10 company that stands out here is G2V, now well spread across IT, engineering and oil & gas. Besides dealing with overseas sales from its UK base, it now operates directly from Houston in the US, as with many of its IT peers. Newcomer Opus also includes oil & gas in its specialisations.
• LA International maintained fourth place, once again increasing sales, GP and employees and improving its GP/head, all from its single UK location. It even achieved a single basis-point rise in gross margin to 7.8%. It has eight specialist divisions within its niche for security-cleared IT staff, servicing demand in the UK and 23 other countries.
• Among the departures, Henderson Scott has taken what may well be a temporary break from the HOT 10, as it has invested for future growth in both headcount and new offices, including reopening in London. This investment has dragged down productivity this year.

We now turn to gross margin trends, which depend not only on temporary pricing but also on the mix of business between spot, volume contract and permanent:

• Weighted average gross margin of this HOT 10 fell 110 basis points to 12.8%, balancing the ultra-low margin/contractor-biased pitch of LA International and Lorien against the remainder, at a higher margin determined by more pronounced but variable perm mix. The mix was diverse, with six falling and four increasing their margin overall. Most of the overall margin decline is attributed to higher contractor/lower permanent mix.
• Underlying temporary margin was subject to relatively modest pricing pressure again, with little room for manoeuvre.

• For the complete 2014 Recruiter HOT 100, see November’s issue of Recruiter out later this week.