SD Worx records strong growth figures in the first half of 2022

Consolidated turnover reaches 475.3 million euro (+18%), normalized EBITDA is 70.2 million euro (+9.2 %).

August 26, 2022

SD Worx records strong growth figures in the first half of 2022 — Freepik

SD Worx, the leading European provider of payroll and HR services, recorded a consolidated turnover of 475.3 million euro in the first half of 2022. That is an increase of 18% compared to the first half of last year. Normalized EBITDA came in at 70.2 million euro, which is 9.2% more compared to the first half of 2021. During the second half of 2021, SD Worx invested significantly in attracting additional employees to support the company's rapid growth.

With a solid growth in consolidated turnover of 18%, SD Worx can look back on a strong first half year. In particular, the turnover from the Payroll & Reward and Core HR offering rose sharply, from 267.5 million euro in the first half of 2021 to 332.7 million euro in the first half of this year. The services and solutions offerings around Workforce Management also performed well, with a growth in turnover from 19.4 million euro to 22.3 million euro. Finally, the turnover of the staffing and recruitment offering rose from 117.0 million euro to 122.0 million euro. This less strong increase is in line with the flexible working market, which is under additional pressure due to the current economic climate.

Consolidated normalized EBITDA increased from 64.3 million euro in the first half of 2021 to 70.2 million euro in the first six months of 2022, representing a growth of 9.2%, completely in line with what was expected. SD Worx anticipated the rapid growth and therefore invested extra in attracting even more employees.

“We are investing in our future, which means that the increase in costs is higher in percentage than the increase in our income,” says Filip Dierckx, chairman of the board of directors at SD Worx. “Due to the current economic situation, the staffing and recruitment market in general is under pressure. However, we are doing very well in the other areas in which we are active. We are experiencing significant growth, particularly in the market for smaller and medium-sized companies.”

Kobe Verdonck, CEO of SD Worx: “These strong financial results show that our strategy to be the end to end HR and payroll provider for customers of all sizes and in all industries is working. We invest a lot in people and our solutions to support further growth. We offer our customers both innovative digital applications and associated services. With the acquisition of huapii and HRPRO earlier this year we have strengthened our talent management offering and entered the Southeastern European market. In the second half of the year we will continue on the path we have taken to further support strong organic growth and we have more acquisition targets in the pipeline. It makes us more than ever the European HR and payroll specialist.”

Financial Results

RESULTS PER SEGMENT

FURTHER DETAILS ABOUT THE NET RESULT

Non-recurring cost

Restructuring cost and integration costs amount to 3.7 million euro and have increased by 2.1 million euro compared to 30 June 2021, mainly as a consequence of the integration and rebranding of Aditro, Launch! and GlobePayroll into SD Worx.

Acquisition and transaction costs amount to 0.4 million euro and are mainly related to the acquisition of HRPRO in Croatia, which has been closed in July 2022, and earn-out remeasurements.

The cost of non-committed share plans for the group management is spread evenly over a vesting period of three years. The increase of 1.8 million euro is related to the share plans issued in July FY2021 and the recently issued employee share purchase program. The employee share purchase program provided the unique opportunity to every single employee of the group to acquire share certificates of SD Worx with a limited discount to its share price. The employee share purchase program is an equity-settled plan, because it is the group’s majority shareholder WorxInvest that has the obligation to repurchase the share certificates. Please note that as of FY2022, the group considers a part of its share-based compensation (0.7 million euro) as recurring. The recurring share-based compensation cost has been included as a staffing cost in operating expenses.

The profit from business and asset disposal mainly results from the sale of the shares of SD Worx Real Estate NV to WorxInvest, SD Worx’ majority shareholder. SD Worx Real Estate NV is the owner of office spaces in Belgium used by the group and third parties. SD Worx entered into a leaseback agreement for most of the disposed office spaces.
It should also be mentioned that the international celebrations of the 75-year anniversary of SD Worx (0.7 million euro) have been normalized as other non-operating expenses.

Depreciations and amortizations

Depreciations and amortizations on tangible and intangible assets of 26.7 million euro have been recorded per 30 June 2022 and are mainly related to the group's important and continuing investments in digital solutions (12.5 million euro), the depreciation of leased right-of-use assets such as rented buildings and company cars (11.8 million euro) and the amortization of intangible assets acquired in business combinations (2.4 million euro). The increase in depreciations and amortizations are largely a consequence of increased investments in digital solutions, the leaseback agreement with SD Worx Real Estate and the amortization of acquired intangible assets from business combinations, such as brand names and customer relationships.

Financial results

The financial result per 30 June 2022 amounts to -4.2 million euro, mainly due to the interest costs of the subordinated 80 million euro bond issued in June 2019, the committed 125.0 million euro revolving credit facility, financial charges on lease liabilities and unrealized foreign currency losses on cash pool solutions.

The financial result decreased by 1.2 million euro, mainly as a result of the incurred foreign currency losses. Remark that the group has restructured its capital structure in the course of 2022 when it agreed on a capital reduction and share-buyback program for a total amount 272.9 million euro. The proceeds from the capital reduction remain largely unpaid as per balance sheet date. A limited interest expense of 0.3 million euro is charged on the outstanding payable resulting from this transaction.

Taxes

Tax charges decreased by 9.4 million euro from 11.4 million euro to 1.9 million euro. The strongly decreased effective tax rate is mainly a consequence of the tax exempted capital gain realized on the sale of the shares of SD Worx Real Estate to WorxInvest and deferred tax assets recognized on fiscal losses carried forward in view of the positive results of the group.

Net result

The net result, recorded at 53.7 million euro per 30 June 2022, increased significantly in relation to the same period last year due to the aforementioned increase in operating profit, the sale of SD Worx Real Estate NV and the decreased effective tax rate.

More details can be found in this report.