Australian recruitment firm Ignite (IGN:ASX) reported revenue increased by 1% in the third quarter ended 31 March 2022 to AUD 27.8 million (USD 19.7 million).

The company’s business operations continued to be impacted by Covid-19 to different degrees during the quarter, with varying public health orders in place across states and territories.

The company’s gross profit for the March 2022 quarter of AUD 3.50 million (USD 2.48 million), an increase of 10% against the comparative quarter in 2021. The larger increase in gross profit relative to the revenue increase was due to the higher gross profit contribution from high margin permanent placements.

Across all divisions, active contractors as at 31 March 2022 were 826 versus 882 as at 31 December 2021 and 889 as at 31 March 2021.

During the March 2022 quarter, total employee headcount increased by one versus the previous quarter and seven versus the comparative quarter in 2021 (a 10% increase in total headcount). Salary and oncosts increased 9% against the comparative quarter in 2021, primarily due to the hiring of several business leaders and recruitment consultants as well as the establishment and staffing of the national resource centre.

The March 2022 quarter saw a 34% increase in other operating costs relative to the comparative quarter in 2021. This increase arose mainly from increased marketing and advertising expenditure and the one-time costs associated with planned projects to implement two software as a service (“SaaS”) platforms.

During the March 2022 quarter the Specialist Recruitment business contributed a gross profit increase of 9% against the prior comparative period.

The On Demand IT Services gross profit was in line with the comparative quarter in 2021.

For the March 2022 quarter the Talent Solutions business recorded a 69% improvement in gross profit against the comparative quarter in 2021, versus a 39% decrease in gross profit compared with the December 2021 quarter. The decrease relative to the prior quarter is the result of the completion of several projects commenced in the first half of FY22.

Looking ahead, in the Specialist Recruitment division, customer demand for contingent labour is expected to continue at current levels during the June 2022 quarter across the company’s commercial customers and in particular, the engineering vertical, which has delivered a consistent performance in the first nine months of FY22, the group stated. Demand from the company’s Federal Government customer base in the IT vertical is expected to be slower due to the Federal Government election in May 2022.

The On Demand IT Services division is expected to finalise the replacement of its legacy customer and contractor management system during the June 2022 quarter. While the division’s business operations were impacted by Covid-19 related public health orders and customer site closures in the first half of Fiscal Year 22, it is expected to deliver a better performance in the June 2022 quarter.

Talent Solutions has built out the skills and capabilities of the team with several new appointments during the quarter and is now focused on pursuing new project opportunities with existing and new customers. With a Federal Government election scheduled in May 2022, the division will likely experience slower customer demand during the June 2022 quarter.

Ignite said it will continue to increase active contractor numbers across the Australian Capital Territory, New South Wales and Victorian Specialist Recruitment businesses to drive gross profit growth.

It will also continue to drive permanent recruitment placements, in particular across New South Wales and Victoria, where the market is buoyant. Furthermore it will continue to attract and engage high-quality business leaders and recruitment consultants in key geographic markets, with a particular focus on the IT vertical. The group also plans to continue to invest in the national resource centre which will focus on developing candidate talent pools to support recruitment consultants in meeting customer demand.

Shares in Ignite Ltd closed at AUD 0.16 (USD 0.11), up 6.67% on the day and 38.46% below its 52-week high of AUD 0.26 (USD 0.18), set on 7 March 2022. The company has a market cap of AUD 13.44 million (USD 9.54 million).