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Sweden – Wise Group achieves strong profit growth

27 August 2015

Swedish staffing firm Wise Group (WISE: SS) reported revenue for the second quarter ending 30 June 2015 of SEK 157.3 million (€16.3 million), an increase of 17.6% compared with SEK 133.7 million (€13.9 million) during the same quarter last year. 

  Q2 2015 Q2 2014 Change
Revenue SEK 157.3 million SEK 133.7 million +17.6%
€16.3 million €13.9 million
Operating Profit SEK 6.9 million SEK 3.2 million +115.6%
€715,759 €331,946
Profit Before Tax SEK 6.9 million SEK 3.4 million +102.9%
€715,759 €352,693

Roland Gustavsson, CEO of Wise Group, commented: “Wise Group continues to grow and gain market share. The positive start to the year continued during the second quarter and we achieved growth of 18% this quarter. Operating profit was SEK 6.9 million (€715,759) with an operating margin of 4.4%, an improvement compared with the previous year. In the first half we had revenue of SEK 312 million (€32.4 million) and reported an operating loss of SEK 14 million (€1.5 million).”

“All three segments continued to show growth and develop positively. The trend of revenue growth and improved earnings in the Recruitment segment continued, which is good. As before, the HR segment showed the strongest operating margin, while the Consultant Services segment reported the highest revenue.”

“In September 2014 we launched K2 Search OY in Finland through a partnership between Wise Group’s subsidiary K2 Search and Finnish recruitment company People Management Finland. K2 Search OY has generated positive cash flow since it launched and has had a positive impact on earnings. We therefore are optimistic about the company’s continued expansion in Finland, with Helsinki as the base of operations we are preparing to set up more companies in Finland towards the end of the year.”

“In Denmark our revenue increased but our operating margin is still not at the level we want. Paradoxically, it is due in part to higher than expected demand for our HR services, as most of our services are delivered by subcontractors instead of our own employees, which negatively impacts margins.”

“I am pleased with how the first half has developed for Wise Group. In terms of sales, we are well in line with expectations and we are still growing more than most in the industry. The government changed employer contributions for young people from 1 August. This will, according to many analysts affect adversely affect large parts of the industry. However, I think it will not significantly affect Wise Group’s future business, growth, or earnings. Most of the consultants we employ or temporary workers we deploy are relatively experienced and therefore older than 26.”

“We still have some work to do to improve our margins. Compared with 2014 there are clear improvement, but our goal is to further improve our margins by the end of the year. If current market conditions and Wise Group’s current performance continues we believe that it is likely that we will see gradual improvement in the second half of the year,” Mr Gustavsson concluded.

Revenue by business segment was broken down during Q2 2015 as follows:

  Q2 2015 Q2 2014 Change
Recruitment SEK 36.4 million SEK 28.8 million +26.0%
€3.8 million €3.0 million
Consultant Services SEK 63.0 million SEK 57.8 million +9.0%
€6.5 million €6.0 million
HR Services SEK 57.9 million SEK 47.1 million +23.0%
€6.0 million €4.9 million

Geographically, revenue during Q2 2015 was broken down as follows:

  Q2 2015 Q2 2014 Change
Sweden SEK 151.0 million SEK 131.5 million +15.0%
€15.7 million €13.6 million
Denmark SEK 2.9 million SEK 2.2 million +31.0%
€300,826 €228,213
Finland SEK 3.3 million N/A N/A
€342,319 N/A

In trading today, the company’s share price remained unchanged at SEK 37 (€3.74), an increase of 61.9% compared with a year ago. Based on its current share price, the company has a market value of SEK 273.5 million (€28.4 million).