SD Worx maintains steady growth in first half of 2024

 

SD Worx, the leading European HR solutions provider, achieved a consolidated revenue of EUR 581.8 million in the first half of the year, an increase of 10.9% compared to the first half of 2023 (EUR 524.6 million). The consolidated adjusted EBITDA grew 36.7% from EUR 88.5 million in the first half of last year to EUR 121.0 million during the first six months of 2024. The consolidated net result increased from EUR 42.5 million in the first two quarters last year to EUR 54.9 million in the first half of this year.

Particularly SD Worx People Solutions performed well. The financial numbers of this entity, offering solutions for payroll, reward, core HR and talent, rose significantly. This is especially driven by a solid organic revenue growth of EUR 35.2 million across all countries, both in recurring and non-recurring business. The revenues generated by Workforce Management solutions grew by 27% from EUR 26 million in the first half of last year to EUR 33.1 million in the same period this year. Staffing & Career Solutions, the entity that offers services and solutions around flexible work, saw the impact of the difficult market conditions in the staffing sector and recorded a revenue decline of -8.5% from EUR 113.8 million to EUR 104.1 million.

Filip Dierckx, chairman of the board of directors at SD Worx: "The reported financial numbers meet our expectations. We started the year with an excellent first quarter but saw growth slowing down during the second quarter. This is in line with the macro-economic circumstances: generally, we see economic growth relatively weakening.”

Kobe Verdonck, CEO of SD Worx: "We are happy with the overall growth across the group. This is reflected in the results of all markets where we provide payroll and HR solutions to our customers. I would like to thank our employees for their contribution to our growth and our customers for their trust in our technology and services. Our organic growth and the acquisitions of Tribeperk, Romanian Software and Sheepblue earlier this year show that we are working well on our ambition to be the leading European HR solutions provider for all companies of any size. We are looking forward to the second half of the year where we will continue our growth.” 

 

 

Adjusted EBITDA increased from EUR 88.5 million to EUR 121.0 million over the first six months of 2024, which results in a record adjusted EBITDA level and puts the Group on track to achieve an historic record result in the current year.

The increase is driven by a strong performance of the People Solutions segment of the Group where revenues have grown by EUR 65.7 million compared to prior year. The main drivers to mention behind these strong results are the solid organic growth which amounts to EUR 42.3 million or 10.1% (excluding growth in commission income obtained under the customer fund cooperation agreement). The organic growth is noted across all markets where the Group has a presence, both in recurring and non-recurring business. Within the Belgian market, the Group realized additional one-off revenues relating to the support it provides to its customers on the organization of the social elections. The revenue was also supported by higher commission income obtained under the customer fund cooperation agreement (EUR 14.8 million increase compared to prior year). Inorganic growth through new acquisitions contributed EUR 8.6 million in revenue.

The growth in consolidated revenue is noted in spite of the challenging environment in which the Staffing & Career Solutions segment continues to operate. As a result of this difficult market, the Group saw revenue within this segment decreasing by EUR 9.6 million. The Group aims at limiting the impact on adjusted EBITDA by actively monitoring its costs to compensate for the lower revenue.

 

Further details about the net result

 

Restructuring cost and integration costs amount to EUR 2.2 million, relating mainly to the integration and rebranding tracks for both prior acquisitions, such as Intelligo, Integhro and SD Worx Croatia, and new acquisitions, such as SoftMachine and Romanian Software.

Acquisition and transaction costs relate to due diligence costs which the Group incurs in search of new acquisitions to strengthen its portfolio.

The cost of share-based payments relates to the non-committed stock-based compensation with regards to the Group’s existing share plans for its management. These plans qualify as equity settled and the cost is spread evenly over a vesting period of three years. The increase in cost recognized for these plans follows from the strong performance of the Group, which results in a higher value for newly issued plans.

Depreciations and amortizations

A total depreciation, amortisation and impairment charge of EUR 34.3 million has been recorded per 30 June 2024 on the Group’s tangible and intangible assets and are mainly related to the Group's important and continuing investments in digital solutions and the refurbishment of office spaces. As part of this total depreciation and amortisation charge, the Group recognized EUR 3.8 million of amortisation relating to acquired intangible assets from business combinations, such as brand names and customer relationships.

Financial results

The financial result per 30 June 2024 amounts to EUR -2.6 million, mainly resulting from the interest costs of the subordinated EUR 80.0 million bond issued in June 2019, the committed EUR 400.0 million revolving credit facility, financial charges on lease liabilities and non-operational foreign currency translation differences.

The total leverage of the group remains conservative at a level of 0.8x adjusted EBITDA to net debt as per 30 June 2024.

Taxes

The tax expense increased to EUR 21.3 million as of 30 June 2024, which represents an effective tax rate of approximatively 28% compared to 23% in the previous period. The previous year’s tax rate was notably influenced by the recognition of deferred tax assets on the planned restructuring of the group’s French operations.

Net result

The net result stands at EUR 54.1 million, which is EUR 12.4 million higher than the previous year. Key factors contributing to this robust result include sustained and solid growth in operational performance, as well as an increase of EUR 14.8 million on commission income influenced by the level of interest rates on the group’s operating profit and the strategic buy-and-build policy employed by the group.

More details can be found in this report.