Why the PayGroup (ASX:PYG) share price surged 11% today

The PayGroup Ltd (ASX: PYG) share price was on the run today following the release of the company's trading update for November.

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PayGroup Ltd (ASX: PYG) shares were charging higher today following release of the company's trading update for November. By the market's close, the PayGroup share price was up 11.11% to 60 cents.

Let's take a closer look and see how the human capital management (HCM) solution company performed last month.

What's driving the PayGroup share price higher?

The PayGroup share price was on a tear today after the company reported trading conditions for its subsidy, AstuteOne, have rebounded strongly from the impacts of COVID-19.

The company said that AstuteOne delivered a 43% increase in timesheets throughout November for both Australia and New Zealand. This was compared with the June period, during which the business was most heavily impacted by COVID-19 restrictions.

PayGroup highlighted that AstuteOne's clients, which primarily comprise workforce management companies, provide a leading indicator of employment trends. Further to this, the company believes that the increase in labour hire indicates an employment recovery.

In addition to the sound result, PayGroup's Treasury Services partner recorded a 60% monthly revenue increase over the same timeframe.

Astute pleasingly signed on 37 new clients during the first half of 2021, representing total contract value of $1.1 million. The prime minister's business stimulus package for apprentices has seen strong uptake by government training organisations transitioning to the AstuteOne software-as-a-service platform.

Payroll HQ acquisition update

On 14 December, PayGroup completed its acquisition of Payroll HQ. The company predicts the takeover will lead to strong sales of TalentOz in both Australia and New Zealand.

TalentOz, which uses PayGroup's full suite of products, is being offered across 41 countries.

What did the management say?

PayGroup managing director Mr Mark Samlal commented on the trading conditions for AstuteOne, saying:

Increased activity for our clients in the workforce management sector is a leading indicator of economic recovery. It's very pleasing to see the increased business confidence in Australia and New Zealand, reflecting more buoyant employment conditions following the easing of lock down restrictions. This is having a positive impact on volumes for our AstuteOne business and the acquisition of new clients.

Our revenues will continue to grow in FY21 as new clients increase their hiring, and as existing clients increase their volumes as demand increases. Our new GTO clients have hiring volumes that are directly linked to apprentices being hired in greater numbers. These GTOs are seeing a greater need to digitise their pay-to-bill workflows. 

PayGroup is scheduled to release its updated sales data for FY21 in the first week of the new calendar year. 

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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