COVID-19 infects global recruitment sector
Don't be surprised if like me you're out of breath due to the mountain of recent COVID-19 announcements. The pandemic has already paralysed large swathes of the global economy, and is now forcing other businesses to slash discretionary costs, freeze hiring, shed staff and hunker down.Today Gattaca also said that it too was being affected by this unprecedented CAT 5 economic hurricane. The crisis will ultimately blow over though. And once it does, those quality firms serving growth markets should emerge fitter. We saw this during the 2008-10 Great Financial Crisis, and believe it will happen again, with the business proving to be not only one of the survivors, but also a winner.
Indeed, the over-arching message from this morning’s H1’20 statement is that, Gattaca is well prepared, ahead of the curve and has stress tested the ‘worse-case’ scenarios. Here adjusted net debt (including £16.0m of non-recourse finance) fell by £5.7m to £19.1m as at Jan’20 from £24.8m only 6 months earlier.
Elsewhere, overall LFL NFI fell -11.9% to £32.2m (£36.5m LY), due to softer than predicted worldwide demand - particularly International (-20.9% LFL NFI to £4.0m: -14% ex China), UK Technology (-25.0% to £4.8m, headcount reductions) and to a lesser extent UK Engineering (-6.8%, £23.4m).
Similarly adjusted EBIT/NFI conversion came in at 11.2% (vs 21.5% LY) with the effective tax rate rising to 32.7% (24.4%), as overseas losses could not be recovered. All told, leading to a decline in diluted EPS from 15.8p to 5.5p.
The Board have sensibly withdrawn FY20 guidance. Meaning we’ve retracted our forecasts too - ie until there’s greater clarity surrounding COVID-19. But believe at 45p, the stock is attractively priced for patient risk tolerant investors - trading on a trailing EV/NFI multiple of 0.5x compared to typical industry multiples pre COVID-19 crisis of between 0.7x – 2.0x.
Adecco Group provides human resource services, including temporary staffing, permanent placement, outsourcing, consulting and outplacement. Co. has more than 5,500 branches in over 60 countries and territories. Co.'s Office and Industrial businesses offer a range of general staffing services, including temporary staffing, permanent placement, assessment, training and integrated human resources applications. In addition, Co. operates professional business lines, which include Adecco Finance & Legal, Adecco Engineering & Technical, Adecco Information Technology, Adecco Medical & Science, Adecco Sales, Marketing & Events and Adecco Human Capital Solutions.
Gattaca is an engineering and technology recruitment solutions company. Co. operates in the STEM markets (science, technology, engineering and maths), all sectors with skills shortages. Co. has three reporting segments, Engineering, Technology and International. Co.'s brands are Matchtech, an engineering recruitment specialist; Networkers, a technology recruitment specialist; Cappo, Provanis, Barclay Meade, a professional services brand, recruiting finance, procurement, sales and HR professionals., and Alderwood, which is involved in placing trainers and assessors with training providers throughout the U.K. and the Middle East.
Randstad is a global staffing and recruitment company, providing various solutions in the human resources (HR) services space. Co.'s services include regular temporary staffing and permanent placement of candidates. In addition, Co. provides several other HR solutions, such as Recruitment Process Outsourcing (RPO), Managed Services Programs (MSP), payroll services, and outplacement. Co. provides four distinct service concepts: Staffing, Inhouse Services, Professionals and HR Solutions.
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