#30 Grupa Pracuj S.A.
Polish recruitment and HR champion
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This analysis became quite lengthy, so I have provided a concise summary to make it more convenient. The detailed analysis follows below.
Short Summary
About Grupa Pracuj: Grupa Pracuj S.A. is a leading HR technology company in Poland, Ukraine, and the DACH region (Germany, Austria, Switzerland), specializing in recruitment, staff retention, and development. Its major brands include Pracuj.pl (Poland) and Robota.ua (Ukraine). The company has been publicly traded on the Warsaw Stock Exchange since December 2021.
Business Model and Revenue Streams: Grupa Pracuj operates through three main segments: Poland, Ukraine, and Germany. It generates revenue primarily from online job boards, SaaS-based recruitment management systems, and sales of recruitment projects, branding products, and multiposting services. The company uses multiple sales channels and focuses on expanding customer relationships and integrating new services.
Strategy: The company aims to solidify its HR tech leadership through technological advancements, market expansion, product diversification, and strategic acquisitions. Grupa Pracuj emphasizes a SaaS model for steady recurring revenue, customer focus, and operational excellence. Its strategic goals include achieving total consolidated revenues of PLN 1 billion by 2025 and maintaining high EBITDA margins.
Market and Competition: Grupa Pracuj operates in a growing online recruitment market in Poland, valued at EUR 175 million. The market is expected to expand significantly by 2030. The company faces competition from other job boards and recruitment platforms in Poland, Ukraine, and the DACH region.
Financial Analysis: From 2020 to 2023, Grupa Pracuj experienced substantial revenue growth, with a CAGR of 30.7%. However, profitability metrics showed some fluctuations. The company's cash flow improved significantly, and its leverage position remained strong. The Polish segment remains the largest revenue contributor, but the German segment has shown remarkable growth.
Development in 2023: Grupa Pracuj achieved consolidated revenue of PLN 724.4 million, driven by strong performance in Germany and Ukraine. The company saw growth in HR Tech SaaS platforms, with notable increases in Monthly Recurring Revenue (MRR). Financial metrics showed improved operating profit and net profit, reflecting operational efficiency and strategic growth.
Risks: The company faces risks related to cybersecurity, ICT dependence, economic environment, key personnel availability, operations in Ukraine, competition, and regulatory compliance. Measures to mitigate these risks include robust security systems, continuous market analysis, and legal compliance strategies.
Valuation: The company is currently undervalued, with a fair value estimation of 85 to 90 PLN per share, compared to the current trading price of 62.5 PLN. The valuation assumes a sustainable net income margin of 30%-31% and a free cash flow margin of 33%-36%.
Conclusion: Grupa Pracuj has demonstrated strong development and profitability. While the Polish market remains stable, the German market shows promising growth. The company maintains low debt levels and high profitability, positioning it well for future growth. Potential investors should consider the low liquidity of shares and use limit orders to ensure accurate pricing.
About Grupa Pracuj
Grupa Pracuj S.A. is a leading HR technology company based in Poland, primarily involved in supporting businesses with recruitment, retention, and development of staff, and assisting job seekers in finding suitable positions. The company, which has been operational for over 24 years in Poland, 15 years in Ukraine, and since 2022 in the DACH region (Germany, Austria, and Switzerland), employs approximately 1,100 people. Its notable brands include the largest Polish job board, Pracuj.pl, and Ukraine's top job board, Robota.ua. Additionally, it operates eRecruiter and softgarden, both of which provide recruitment management systems on a Software as a Service (SaaS) model.
Grupa Pracuj S.A. is committed to expanding its market leadership through strategic investments in SaaS capabilities, exploring acquisitions to enhance its HR solutions ecosystem, and pushing the boundaries of HR technological advancements. The group has segmented its operations into three main regions: Poland, Ukraine, and Germany, each focusing on distinct services ranging from complete recruitment solutions to specialized systems for managing recruitment processes and workplace absences.
Shares of Grupa Pracuj S.A. have been publicly traded on the Warsaw Stock Exchange since December 2021, and the company is listed in the mWIG40 mid-cap index as of June 2022. The company aims to continuously advance its technological offerings to maintain and strengthen its position in the HR tech industry.
1 USD is approximately 4 PLN. By international standards, Grupa Pracuj is considered a small-cap company with a market capitalization of about 4.2 billion PLN. The average daily trading volume is around 10,000 USD, indicating low liquidity. This low trading volume must be considered by all potential investors, as it can impact the ease of buying and selling shares without affecting the stock price significantly.
Business Model and Revenue Streams
Grupa Pracuj S.A. has identified three main operational segments as of December 31, 2023, focusing on the Polish, Ukrainian, and German markets:
Segment Poland: This segment includes Grupa Pracuj S.A., eRecruitment Solutions sp. z o.o., and BinarJobs sp. z o.o., which offer comprehensive recruitment and branding projects and manage recruitment processes through SaaS models.
Segment Ukraine: This consists of Robota International TOV, eRecruitment Solutions Ukraine TOV, and Snowless Global Ltd, which focus on end-to-end recruitment projects similar to those in Poland.
Segment Germany: This segment, including Spoonbill Holding GmbH, Spoonbill GmbH, softgarden e-recruiting GmbH, and absence.io GmbH, primarily provides systems to facilitate recruitment processes, manage working hours and absences, and support the (re)publication of recruitment ads predominantly in the DACH region.
Grupa Pracuj derives the majority of its revenue from its online job boards in Poland and Ukraine and from the sale of SaaS-based recruitment management systems like eRecruiter in Poland and softgarden in the DACH region. These systems support HR personnel in managing the recruitment journey comprehensively, from job posting to hiring.
The Group uses multiple sales channels such as direct sales, inside sales, e-commerce, and HR consulting to reach a diverse customer base, which includes small to large enterprises across various industries. The company measures its performance by the number of job postings, engagement with the platforms, and software utilization, aiming to expand customer relationships and integrate new services to enhance user experience and revenue. The primary revenue sources for the Group are:
Sales of Recruitment Projects: This includes job postings on Pracuj.pl and Robota.ua and supplementary products that enhance the visibility of these postings, thereby attracting more views and applications.
Multiposting: The resale of job advertisements initially purchased from other online recruitment platforms. Revenue recognition depends on whether the company acts as an agent or a principal, recognized on a net or gross basis accordingly.
Sale of Branding Products: This category includes employer profiles and publications in the Employer's Guide on the Pracuj.pl and Robota.ua websites.
Access to Recruitment Systems: The Group offers eRecruiter and softgarden systems, providing a SaaS-based recruitment management service.
Revenue is recognized over time for services like job announcements and employer profiles, reflecting the ongoing service provision period, usually up to one year. In contrast, access to recruitment systems is recognized over the period customers have system access.
Revenue from other products, like multiposting and certain branding products, is recognized at the point in time these services are provided. The Group also considers incremental costs related to contract acquisitions, recognizing them as assets if they are expected to be recovered, otherwise, they are expensed.
Strategy
Grupa Pracuj S.A. has formulated a multifaceted strategy to solidify its position as a premier HR Tech platform in Europe. This strategy encompasses technological innovation, market expansion, product diversification, customer focus, and financial efficiency.
Operating Excellence
The foundation of Grupa Pracuj’s business is built on operational excellence in sales and customer service, product creation, development, and innovation. A culture of entrepreneurship, characterized by engagement and a focus on achieving results, supports all business areas.
Technological Advancement and Product Innovation
One of the key pillars of Grupa Pracuj's strategy is technological advancement and product innovation. The company is committed to continuously enhancing its AI-driven features, which improve job-candidate matching accuracy and overall employer branding. The introduction of comprehensive tools like the HR Workflows platform and preboarding modules in eRecruiter exemplifies this focus. The company frequently updates its products to stay ahead of market needs and technological advancements.
Dynamic Pricing Strategy
Grupa Pracuj has adopted a dynamic pricing strategy, known as Pricing 3.0. This includes flexible pricing models based on customer needs and market conditions to optimize revenue. By implementing value-based pricing strategies and customizing pricing for different customer segments, the company aims to maximize profitability.
Market Expansion
In terms of market expansion, Grupa Pracuj is leveraging its acquisition of softgarden to solidify its presence in the DACH region (Germany, Austria, Switzerland). The company is also exploring entry into other European markets and potentially beyond, using a mix of organic growth and acquisitions. Tailoring product offerings and marketing strategies to fit local market conditions and forming alliances with local HR tech firms are key elements of this geographical growth.
SaaS Model and Revenue Diversification
The company places a strong emphasis on the SaaS model and revenue diversification. By promoting eRecruiter and softgarden’s SaaS products, Grupa Pracuj aims to create a steady stream of recurring revenue. Enhancing product features and customer support is critical to ensure high retention rates and reduce churn. Additionally, focused marketing campaigns highlight the benefits of SaaS solutions to potential customers. The company is also diversifying its revenue by offering services such as employer profiles, sponsored content, virtual job fairs, and multiposting services.
Customer Focus and Experience
Customer focus and experience are at the heart of Grupa Pracuj's strategy. Continuous improvements to the user interface of all platforms ensure ease of use and satisfaction. Leveraging AI to personalize job recommendations for candidates and job posting suggestions for employers enhances the overall user experience. The company also implements customer engagement programs, such as webinars, workshops, and newsletters, to keep customers informed and engaged.
Strategic Acquisitions and Partnerships
Strategic acquisitions and partnerships play a significant role in Grupa Pracuj's growth strategy. The company identifies and acquires firms that offer complementary technologies or market access, enhancing its capabilities. Developing comprehensive integration plans ensures smooth incorporation of new acquisitions into the existing business structure. Partnerships with leading technology providers and HR industry bodies help integrate advanced features into Grupa Pracuj’s platforms and stay ahead of industry trends.
Financial Performance and Efficiency
Financial performance and efficiency are critical to Grupa Pracuj’s strategy. The company has set aggressive growth targets, aiming for total consolidated revenues of PLN 1 billion by 2025 while maintaining an EBITDA margin above 40%. Streamlining operations and reducing costs through process automation and optimization are key to achieving these targets. Prioritizing investments in technology that offer the best returns further enhances operational efficiency.
Growth Areas
The company identifies several growth areas, both in pre-hire and post-hire stages. These include job postings, talent acquisition systems, and digital personnel files, as well as payroll, benefits, travel management, skills and competence management, performance reviews, onboarding, time and absence management, case management, employee listening, integrated HR analytics, goal setting, expenses management, internal communication, and learning platforms.
Strategic Implementation
To reach its strategic goals, Grupa Pracuj focuses on both organic growth and selective acquisitions. The company plans to achieve a single-digit average annual growth rate in the number of paid job postings and to increase prices based on the value delivered to customers. It will also grow its portfolio of data-based products (AI/Big Data) and improve cost-effectiveness in sales through customer service process automation using the e-commerce channel. Additionally, the company aims to increase its market share in the segments it serves and expects a 25%+ average annual growth rate in SaaS revenue, driven by increased subscription prices and low churn rates. Expanding into new markets, such as France, and acquiring complementary entities are also part of the strategy.
Prospects for 2024
Looking ahead to 2024, Grupa Pracuj expects single-digit growth in the number of published recruitment projects and effective pricing strategies tailored to market and segment needs. The company anticipates growth in the number of active customers in HR technology SaaS and double-digit growth in monthly recurring revenue (MRR). Further expansion of the eRecruiter and softgarden service portfolios with post-hire solutions, development and implementation of AI-based tools, and increased investment in new technologies to drive efficiency across the group are also expected. These initiatives aim to strengthen the company’s competencies and support its strategic growth objectives.
Looking Ahead to 2025 and Beyond
Grupa Pracuj aims to establish itself as the leading HR Tech platform in Europe by 2025. The company focuses on continuous technological and product development, international expansion, and building a comprehensive ecosystem of HR solutions. By leveraging technology, expanding geographically, diversifying revenue through SaaS models, enhancing customer experience, forming strategic partnerships, and maintaining financial efficiency, Grupa Pracuj is well-positioned to achieve sustainable growth and solidify its leadership position in the HR Tech industry.
Market and Competition
Market Size and Growth
Grupa Pracuj operates in a significant and expanding market. The Polish online recruitment market is valued at approximately EUR 175 million, within a larger serviceable available market (SAM) worth EUR 243 million and a total addressable market (TAM) estimated at EUR 1.2 billion. Between 2015 and 2019, the market for online job advertisements in Poland grew at an annual rate of about 15%, driven by labor market trends and increasing demand for efficient job listings. As more employers and job seekers move from offline to online platforms, the market is expected to grow further. Projections indicate that by 2030, the SAM in Poland could reach EUR 533 million, with the TAM potentially rising to EUR 2.3 billion.
Several key trends are driving the growth of the online recruitment market. One primary trend is the shift from offline to online recruitment, which is supported by significant improvements in internet access and functionality. This shift has made online platforms more accessible and efficient for both employers and job seekers.
Additionally, the market for white-collar job advertisements is growing at a faster rate than the overall market. With an annual growth rate of around 19%, this trend reflects the increasing demand for specialized recruitment services for professionals. This surge in white-collar job postings highlights the expanding need for expertise in various professional fields and the corresponding rise in online recruitment solutions tailored to meet this demand.
Competitive Landscape
Grupa Pracuj faces competition from various players in Poland, Ukraine, and the DACH region (Germany, Austria, Switzerland). Here’s a detailed overview of its competitors:
Poland:
Praca.pl: Another prominent job board offering a variety of recruitment services.
InfoPraca: Part of an international network of job boards, providing a wide range of job listings and recruitment resources.
GazetaPraca.pl: Operated by one of the largest Polish newspapers, offering job listings and career advice.
OLX, Infopraca, NoFluff Jobs, Just Join IT: Platforms catering to different job market segments, from general listings to specialized recruitment.
Ukraine:
Work.ua: One of the largest job portals in Ukraine.
HH.ua (HeadHunter): A significant player in Eastern Europe’s job board market.
Jobs.ua: Another key job portal offering extensive job listings and recruitment services.
DACH Region:
StepStone: A leading job board across Germany and other European countries.
XING (New Work SE): A career-oriented social networking site popular in the German-speaking market.
Indeed Germany: A branch of the global employment search engine, providing direct job postings.
Grupa Pracuj also competes with comprehensive recruitment platforms that integrate advanced HR technology solutions like Applicant Tracking Systems (ATS), candidate management tools, and other SaaS offerings related to recruitment and HR management.
Grupa Pracuj's revenue is influenced by several economic factors that affect both the demand for employment and the supply of job vacancies. Overall economic growth plays a crucial role; economic expansion typically increases business confidence, leading to more hiring. Conversely, higher employment rates can decrease the number of job seekers, potentially reducing traffic to job boards.
Labor market dynamics also impact recruitment activities. Changes in demand for certain skills or professions can shift recruitment patterns, while business confidence significantly influences hiring decisions. Economic downturns often lead to hiring freezes, whereas a positive economic outlook can boost recruitment efforts.
Economic conditions in specific industries further influence recruitment activities. Different sectors react differently to economic changes, affecting how companies within those sectors approach hiring. Lastly, global economic stability affects multinational corporations and their hiring needs across countries, thereby influencing Grupa Pracuj’s revenue from international markets.
Market Share
Grupa Pracuj, through its flagship platform Pracuj.pl, is a leading player in the Polish online recruitment market. As of 2020, Pracuj.pl accounted for approximately 64% of the revenue market share in Poland. This dominance is supported by strong brand recognition, with Pracuj.pl having 89% aided brand awareness compared to competitors' awareness levels, which range between 27% and 88%. Pracuj.pl averages around 77,000 available job listings and maintains 35,000 active clients, showcasing its extensive reach and client base.
Financial Analysis
From its IPO to 2023, Grupa Pracuj S.A. exhibited substantial development across various financial and operational metrics, reflecting its strategic initiatives and market expansion efforts.
Revenue and income figures underscored Grupa Pracuj’s growth trajectory. Total Revenues increased from PLN 299.31 million in 2020 to PLN 724.40 million in 2023. This results in a CAGR of 30.7%. Correspondingly, Operating Income grew from PLN 136.24 million in 2020 to PLN 281.61 million in 2023 at a CAGR of about 26.7%. Net Income also showed a strong upward trend from PLN 105.75 million in 2020 to PLN 185.03 million in 2023.
Profitability and efficiency metrics also saw notable changes. The Return on Capital, which was impressively high at 82.86% in 2020, declined to 77.16% in 2021 and further dropped to 40.44% in 2022. This trend reversed slightly in 2023, with a Return on Capital of 42.40%. The EBIT Margin followed a similar pattern, peaking at 47.85% in 2021 before dropping to 34.39% in 2022 and recovering to 38.87% in 2023. The Normalized Net Income Margin increased from 27.83% in 2020 to 30.55% in 2021 but then declined to 23.62% in 2022 and further to 22.14% in 2023.
The company's cash flow metrics showed a positive trend over these years. Cash from Operations increased from PLN 124.46 million in 2020 to PLN 322.91 million in 2023. Similarly, Free Cash Flow grew from PLN 122.13 million in 2020 to PLN 300.47 million in 2023. The Free Cash Flow Margin, after peaking at 44.32% in 2021, saw a dip to 36.68% in 2022 but improved to 41.48% in 2023, indicating strong operational efficiency and liquidity.
The Net Debt/EBITDA ratio of the company showed significant fluctuations during this period. In 2020, the ratio stood at -0.60, indicating that the company had more cash than debt, a sign of strong liquidity. This positive trend continued in 2021 with an improved ratio of -0.77. However, in 2022, the ratio surged to 1.04. By the end of 2023, the ratio had decreased to 0.43, indicating a reduction in net debt and an improved leverage position.
Development of sales revenue per Segment
Grupa Pracuj S.A. has seen significant changes in its sales revenue distribution across its primary markets—Poland, Ukraine, and Germany—between 2020 and 2023. The company's performance in each segment reflects both strategic initiatives and regional market dynamics.
Polish Segment: Poland has consistently been the largest contributor to Grupa Pracuj's revenue. In 2020, the Polish segment generated PLN 265.463 million, accounting for 88.4% of the company's total revenue. This figure rose to PLN 425.684 million in 2021, representing 89.3% of total revenue. By 2022, revenue from Poland increased slightly to PLN 510.016 million, although its share of the total revenue dropped to 83.5%. In 2023, the revenue from Poland remained stable at PLN 509.802 million but its share further decreased to 70.1%. This declining proportion highlights the growing importance of other segments, despite Poland's stable revenue.
Ukrainian Segment: Ukraine has experienced more variability in its revenue contribution. In 2020, the Ukrainian segment brought in PLN 34.815 million, or 11.6% of total revenue. This increased to PLN 50.750 million in 2021, accounting for 10.7% of total revenue. However, in 2022, revenue from Ukraine fell sharply to PLN 26.130 million, making up just 4.3% of the total, likely due to regional challenges. The segment rebounded in 2023, with revenue rising to PLN 41.807 million, representing 5.7% of the total revenue.
German Segment: The German segment has shown remarkable growth since its introduction. By 2022, revenue from Germany was PLN 75.012 million, accounting for 12.3% of the total revenue. This rapid growth continued in 2023, with revenue soaring to PLN 176.074 million, making up 24.2% of Grupa Pracuj's total revenue. The German market's significant and rapid growth underscores the success of Grupa Pracuj’s strategic expansion into new markets.
From 2020 to 2023, Grupa Pracuj S.A. has diversified its revenue streams significantly. While Poland remains the dominant market, its share of total revenue has decreased due to the rising contributions from Ukraine and Germany. Despite fluctuations, Ukraine has maintained a steady contribution, while Germany has emerged as a major revenue source, reflecting the company's strategic international expansion.
Development of operating income per Segment
From 2020 to 2023, Grupa Pracuj S.A. saw significant shifts in operating income across its key segments in Poland, Ukraine, and Germany. In 2023, Poland remained the dominant contributor with operating income of PLN 268.515 million, comprising 95.3% of the total and achieving the highest margin of 53%. The Ukrainian segment recovered from previous challenges, reporting an operating income of PLN 2.505 million with a 17% margin. Germany, although smaller, showed promising growth with operating income of PLN 6.092 million and a 3% margin.
Development in 2023
In 2023, Grupa Pracuj S.A. demonstrated robust business development across its key regions and segments. The Group achieved a consolidated revenue of PLN 724.4 million, marking a 19.0% increase from the previous year. This growth was driven by strong performance in the DACH region and Ukraine, while the Polish market remained stable.
Regional Performance
Poland: Revenue from the Polish market amounted to PLN 508.1 million, virtually unchanged from the previous year. Despite a 10.8% year-on-year decrease in the number of recruitment projects, effective pricing strategies maintained revenue levels.
Ukraine: The Ukrainian market saw significant growth, with revenue increasing by 60.8% year-on-year to PLN 41.7 million. This was largely due to an increase in paid recruitment projects despite the challenging conditions caused by ongoing conflict.
Germany: The DACH region, particularly Germany, experienced the highest growth with revenues surging by 136.0% to PLN 174.6 million. This increase was primarily attributed to the first full year of consolidating softgarden’s results .
Product Performance
Recruitment Services: The Group continued to expand its recruitment services through Pracuj.pl and Robota.ua, enhancing its technological capabilities with AI-driven features and a revamped product portfolio. The introduction of Pricing 3.0 significantly boosted average prices and revenue from recruitment projects .
HR Tech SaaS: The HR Tech SaaS segment also performed well, with eRecruiter and softgarden contributing to a significant increase in monthly recurring revenue (MRR). The segment saw an MRR growth of nearly 20.0% year-on-year for eRecruiter and over 25% for softgarden .
Financial Results
Operating Profit: The Group’s operating profit increased by 14.5% to PLN 281.8 million. This growth was driven by improvements across all segments, with Poland contributing PLN 268.5 million, Ukraine PLN 7.2 million, and Germany PLN 6.1 million .
Net Profit: The consolidated net profit was PLN 187.7 million, a 14.1% increase from the previous year. This rise was primarily due to higher operating profits and the impact of non-recurring events such as the remeasurement of shares in Beamery Inc. .
Cash Flow
Operating Activities: Net cash flows from operating activities increased by 35.1% to PLN 322.9 million, driven by higher receipts from customer contracts.
Investing Activities: Net cash flows from investing activities were negative at PLN -22.1 million, significantly impacted by investments in property, plant, and equipment, and IT infrastructure.
Overall, Grupa Pracuj S.A. exhibited strong business development in 2023, with notable growth in key regions and segments, enhanced operational efficiency, and significant improvements in financial performance and cash flow management.
Other key metrics
In 2023, Grupa Pracuj S.A. saw notable changes in the average price per recruitment project across its key platforms, Pracuj.pl and Robota.ua.
Pracuj.pl experienced a steady increase in the average price per recruitment project. In 2022, the average price was PLN 819.5. By 2023, this had risen to PLN 898.0, reflecting a year-on-year increase of 9.6%. Focusing on the final quarter of the year, the average price per recruitment project in the three months ending December 31, 2023, was PLN 947.2, up from PLN 841.7 in the same period in 2022, representing a 12.5% increase. This upward trend highlights the platform's growing value and ability to command higher prices.
Robota.ua also saw significant changes, though with some differences between local currency and PLN terms. In 2022, the average price per paid recruitment project was UAH 650.9. By 2023, it had increased to UAH 727.5, marking a notable 11.8% year-on-year rise. When converted to PLN, however, the average price per paid recruitment project decreased from PLN 88.1 in 2022 to PLN 83.9 in 2023, indicating a 4.8% decline. Examining the last quarter of 2023, the average price in UAH terms rose from 639.0 in 2022 to 753.0 in 2023, showing a 17.8% increase. In PLN terms, the average price for the same period increased slightly from PLN 80.4 to PLN 82.4, a 2.5% rise.
These trends demonstrate a robust pricing strategy for Pracuj.pl, with consistent increases in average prices both annually and quarterly. For Robota.ua, while the local currency prices showed significant growth, the conversion to PLN revealed more nuanced changes, with a slight annual decrease but a positive trend in the final quarter. This indicates the influence of currency fluctuations on the overall pricing dynamics for Robota.ua.
Also in 2023, Grupa Pracuj S.A. saw substantial growth in the number of active customers for its HR Tech SaaS platforms, eRecruiter and softgarden, as well as in Monthly Recurring Revenue (MRR).
eRecruiter showed a notable increase in its customer base. The number of active customers grew from 1,816 in 2022 to 1,970 in 2023, marking an 8.5% year-on-year increase. This steady growth underscores eRecruiter's ability to attract and retain customers through its comprehensive and effective HR solutions.
softgarden experienced even more pronounced growth. The number of active customers rose from 1,443 in 2022 to 1,630 in 2023, reflecting a significant 13.0% year-on-year increase. This impressive growth highlights softgarden's expanding market presence and the increasing demand for its advanced recruitment technology.
The overall impact of this growth is reflected in the company’s Monthly Recurring Revenue (MRR) for its SaaS products. The MRR surged from PLN 8,222.6 thousand at the end of 2022 to PLN 10,296.2 thousand at the end of 2023, representing a substantial 25.2% year-on-year increase. This rise in MRR indicates not only a growing customer base but also potentially higher subscription values and greater customer engagement with the platforms.
The increase in both the number of active customers and MRR for Grupa Pracuj’s HR Tech SaaS platforms demonstrates the company's successful expansion and strong market positioning. The consistent growth in customer numbers and revenue underscores the effectiveness of their strategic initiatives and the high value placed on their HR technology solutions by the market.
Overall, Grupa Pracuj S.A. demonstrated considerable growth and financial improvement from 2020 to 2023. Despite some fluctuations in profitability metrics and a significant rise in net debt in 2022, the company managed to enhance its cash flows and maintain robust revenue growth. The company’s operational and strategic initiatives have significantly contributed to its solid performance, positioning it well for future growth and stability.
Risks
Grupa Pracuj S.A. faces several material risk factors that could impact its operations:
Cybersecurity Risks: The Group is susceptible to cyber-attacks and data leaks due to its significant use of technology and handling of personal data. These risks arise from insufficient security measures, errors in system configurations, poor change management, inadequate employee awareness, ineffective incident response, and vulnerabilities in third-party services.
Economic Environment: Economic downturns, particularly in Poland and Europe, could negatively affect the Group's financial position and operations. A weaker economy could lead to fewer job postings and reduced user traffic on the Group's platforms.
Operations in Ukraine: The ongoing military conflict in Ukraine poses risks to the Group's operations in the region, potentially leading to a halt in activities if the situation worsens.
To mitigate these risks, Grupa Pracuj has implemented several measures, including robust security systems, routine security audits, data center and infrastructure redundancies, scenario-based budgeting processes, continuous market and competitor analysis, and comprehensive legal and compliance strategies.
Shareholder Structure of Grupa Pracuj S.A.
As of the latest data, the shareholder structure of Grupa Pracuj S.A. is dominated by Przemysław Gacek, co-Founder and CEO, who holds a majority stake with 35,857,913 shares, accounting for 52.53% of the share capital and 52.53% of the total votes at the General Meeting. Other significant shareholders include TCV Luxco Perogie S.à r.l., holding 4,638,861 shares (6.81% of the share capital and votes), and Fundacja Rodzinna MANageWell, with 5,755,449 shares (8.43% of the share capital and votes). The remaining shares are distributed among other shareholders, collectively holding 22,012,803 shares, which constitute 32.24% of the share capital and total votes.
This ownership structure highlights Przemysław Gacek's substantial control and influence over the company, reflecting his significant role in shaping the strategic direction and key decisions of Grupa Pracuj S.A.
Annual Report Insights
Assessment of the Group's Interest in Pracuj Ventures
As of 31 December 2023, Grupa Pracuj S.A. maintained its 71.96% interest in Pracuj Ventures, classifying it as an investment, consistent with the previous year. Despite holding a significant share, the Company’s Management Board determined that they do not have the ability to influence the direction and decision-making of Pracuj Ventures' investment activities. This is due to the structure and decision-making processes of Pracuj Ventures, which are beyond the control of Grupa Pracuj S.A.
Key factors influencing this assessment include the decision-making process at Pracuj Ventures, which is handled by an investment committee that includes various shareholders but excludes Grupa Pracuj S.A. Additionally, the Company does not have representation on the key management personnel of Pracuj Ventures, nor any influence over its composition. Significant control over investment activities requires unanimity among specific individuals, including Przemysław Gacek, Maciej Noga, Ataraxy Ventures Man sp. z o.o., and Paweł Leks, with no direct control exercised by Grupa Pracuj S.A.
Furthermore, the ongoing oversight of Pracuj Ventures' activities is conducted by the management board of its general partner, Pracuj Ventures sp. z o.o., with which Grupa Pracuj S.A. has no capital ties. As a result, Grupa Pracuj S.A. does not have control over Pracuj Ventures, nor any influence over its investment returns.
My view on this
Despite Grupa Pracuj S.A. holding a 71.96% interest in Pracuj Ventures, the entity is not fully consolidated into Grupa Pracuj's financial statements. From my perspective, Pracuj Ventures should be fully consolidated because Przemysław Gacek, the majority shareholder and President of the Management Board of Grupa Pracuj, is heavily involved in Pracuj Ventures. His significant involvement in the decision-making process through his role on the investment committee suggests that there is a level of influence that warrants full consolidation. This would better reflect the extent of Grupa Pracuj’s control and interest in Pracuj Ventures, aligning the financial reporting with the reality of Gacek's involvement and ensuring a more accurate representation of the company's financial position. Since Pracuj Ventures is certainly not profitable, the group's overall profitability would look a little weaker.
Ukraine Business
On February 24, 2022 the invasion by Russian troops lead to unpredictable circumstances for the Ukrainian economy. Although Grupa Pracuj does not generate significant revenue from Ukraine it holds shares in entities operating in Ukraine. The ongoing armed conflict poses several risks, including a prolonged economic downturn, potential revenue decline, challenges in receivables collection, and possible asset devaluation.
To date, no assets generating cash flows in the Ukrainian entities have been destroyed, and there are no restrictions on access to these assets, including those available through banking systems. However, regulatory restrictions prevent Ukrainian companies from making dividend payments outside Ukraine. In the first half of 2022, due to the conflict's escalation and changing financial conditions, Grupa Pracuj's management recognized an impairment loss of PLN 3,900 thousand for its equity-accounted investees. Despite these challenges, the Ukrainian subsidiaries achieved positive financial results for the year ending December 31, 2023.
On January 9, 2023, the shareholders of Work Ukraine TOV resolved to distribute profits earned in previous years, declaring a dividend of PLN 4,371 thousand. Given the ongoing conflict and the restrictions on dividend payments to recipients outside Ukraine, this dividend is expected to be received by December 31, 2025. Consequently, the management decided to discount the dividends receivable, resulting in a finance cost of PLN 984 thousand for 2023.
Grupa Pracuj’s management continues to monitor the situation closely, analyzing its impact on the operations of the Ukrainian entities. Despite the challenging and unstable situation, the company remains vigilant, ensuring measures are in place to mitigate potential risks and sustain positive financial performance. The future impact of the conflict remains uncertain, and the management is prepared to take appropriate actions as necessary.
The management's proactive approach and continuous monitoring aim to navigate through these uncertain times while maintaining the financial stability and operational integrity of Grupa Pracuj’s Ukrainian subsidiaries.
My view on this
I believe that, at this moment, no one can predict how or when this conflict will be resolved. From an investor's perspective, I view the Ukrainian business segment as highly vulnerable, with its going concern status under significant threat. Consequently, its contribution to the overall value of Grupa Pracuj is extremely limited, if not negligible. Therefore, any valuation I conduct for Grupa Pracuj excludes any contributions from the Ukraine segment.
Valuation
Grupa Pracuj achieved an average operating margin of 46.3% and a normalized net income margin (my own calculation) of 35.3% in the last years. Currently, I have data available only from 2020 onwards, which is a short period. I believe a normalized net income margin of about 30%-31% is sustainable from a long-term perspective and will use this for my DCF Valuation. I am cautious about the company's growth target of PLN 1 billion in sales by 2025, assuming a CAGR of 6.6% to 8.7% for the detailed planning period. Considering my assumptions for working capital needs and CapEx, I estimate a free cash flow (FCF) margin of about 33% to 36%. Consequently, my estimations conclude a fair value of about 85 to 90 PLN per share. Currently, the shares trade at 62.5 PLN per share, indicating a significant undervaluation of 40% to 45%.
Conclusion
Grupa Pracuj has demonstrated promising development since 2020. The company is well-established and highly profitable in Poland. However, a slight revenue decline in Poland in 2023 raises some concern, making it crucial to monitor how this trend evolves in 2024. Operations in Ukraine, while at high risk, do not significantly impact the overall group's financial performance. The recently launched business in Germany shows promising growth, though improving profitability in this segment will be essential, as the majority of income currently originates from Poland.
The company maintains very low debt levels and boasts high profitability. Its operating margins and return on capital are excellent and are expected to stabilize at sustainable levels over the long term. I believe the stock is currently undervalued. Potential investors should consider the low liquidity of the shares and use limit orders to ensure accurate pricing. I opened a position and invested in the stock a few weeks ago.
Disclaimer: The information provided in this publication is for educational and informational purposes only and does not constitute financial advice. The content is solely reflective of my personal views and opinions based on my research and is not intended to be used as a basis for investment decisions. While every effort is made to ensure that the information is accurate and up-to-date, the writer makes no representations as to the accuracy, completeness, suitability, or validity of any information in this post and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All readers are advised to conduct their own independent research or consult a professional financial advisor before making any investment decisions. The author is invested in Grupa Pracuj.
Any idea, why the stock is performing that bad? The valuation is fair?