Australian recruitment firm Ignite (IGN:ASX) reported revenue fell 4% in the second quarter ended 30 June 2022 to AUD 28.49 million (USD 19.9 million).

The company’s gross profit for the quarter was AUD 3.8 million (USD 2.6 million), an increase of 1% against the comparative quarter in 2021. The increase in gross profit relative to the revenue decrease was due to the higher gross profit contribution from high margin permanent placements and managed services versus contingent labour.

Ignite’s business operations continued to be impacted by Covid-19 during the quarter, though with lesser intensity than in the previous three quarters. Despite this, within the Specialist Recruitment division the Federal Government business maintained its performance albeit tempered by the Federal Government election. In addition, the On Demand IT Services business and the Technology & Talent Solutions business, both had strong double-digit gross profit growth against the comparative quarter in 2021.

Cash receipts from customers were AUD 32.1 million for the June 2022 quarter (USD 22.4 million), down 4% on the previous year and up 11% on the prior quarter.

Across all divisions, active contractors as of 30 June 2022 were 843 versus 826 as at 31 March 2022 and 906 as at 30 June 2021.

During the June 2022 quarter, total employee headcount increased by ten versus the comparative quarter in FY 2021 (a 15% increase in total headcount) and three versus the prior quarter.

Within the Specialist Recruitment business, the group contributed a gross profit decrease of 5% against the comparative quarter in 2021. The gross profit decrease reflected a 45% increase in permanent placement revenue and a 4% decrease in contingent labour gross profit against the comparative quarter in 2021 with customers opting to engage candidates on a permanent rather than contingent basis.

The On Demand IT Services gross profit improved by 28% against the comparative quarter in 2021, reflecting the post Covid-19 lockdown recovery in New South Wales and Victoria.

At the end of the June 2022 quarter, Talent Solutions underwent a rebrand to “Technology & Talent Solutions” to better reflect the focus of its services. The division recorded an 80% improvement in gross profit against the comparative quarter in 2021.

Looking ahead, in the Specialist Recruitment division, customer demand for contingent labour is expected to strengthen from current levels during the September 2022 quarter across the company’s government and commercial customers

The On Demand IT Services division is expected to finalise the replacement of its legacy customer and contractor management system during July 2022. The divisional restructure in the June 2022 quarter which achieved lower fixed operating costs, together with the post Covid-19 lockdown recovery in New South Wales and Victoria, should drive a stronger financial performance in the September 2022 quarter, the group said.

“Customer demand for contingent labour and permanent resources is currently strong across all geographic markets and functional verticals,” the group stated. “Furthermore, with the June 2022 seasonally adjusted unemployment rate at 3.5%, reduced Australian immigration, and the June 2022 annual consumer price index at 6.1%, there is a combination of a shortage of qualified candidates and contractors and upward pressure on salaries and wages.”

“These factors highlight the important role the company’s recruitment consultants play and should drive strong gross profit growth in FY23,” the group stated.

Finally, given the company’s investment in developing a National Resource Centre in FY22 and its ongoing focus on attracting and retaining high quality talent, the directors and management are optimistic the strong financial performance delivered in FY 2022 will be maintained in FY 2023.

Shares in Ignite closed at AUD 0.105 (USD 0.073), no change on the day and 52.17% above the 52 week low of AUD 0.069 set on 30 Jul 2021. The company has a market cap of AUD 9.41 million (USD 6.5 million).