Personnel service providers: Which stocks are doing particularly well

by Ralf Witzler, Euro on Sunday

PPersonnel service providers are booming in times when there is a shortage of skilled workers. The largely empty labor market is an issue in the USA as well as in Japan, in Europe and last but not least in Germany. The number of vacancies in this country has been increasing for years. In Germany, however, this could only be the beginning of a longer-term development which, due to the age structure of the population, is likely to become even more explosive in the coming years.

The development is similar in many European countries, where the rate of unfilled jobs has been increasing for years. The situation in the USA is comparable, where unemployment, which had reached record levels at times during the pandemic, has long since returned to the pre-crisis level.

The shortage of workers is already particularly striking in the engineering sectors, especially in IT. In many companies, the human resources department has gained in importance. This also applies to their public perception as a critical factor in corporate success. Above all, medium-sized companies without a large personnel department are often dependent on the use of personnel service providers when filling vacancies. So golden times for the industry.

Amadeus FiRe, a personnel service provider that specializes exclusively in Germany in the placement of commercial specialists and executives in temporary work as interim managers and in the classic placement of workers, is experiencing a boom thanks to the lively job market in Germany. The company makes around 60 percent of its sales on the temporary employment market. Amadeus FiRe hires employees itself and places them temporarily with other companies at a premium on the salary paid. A market segment that grew in 2005 with the introduction of the Hartz IV measures. In recent years, however, business has steadily declined. The reason for this was increasingly restrictive regulation.

On the other hand, at Amadeus FiRe, the share of sales that is achieved with the temporary filling of vacancies in the management floors and with the classic placement of employees for a fee is increasing.

Corona initially only hit the industry for a short time. After the initial shock in the second and third quarters of 2020, with recruitment freezes almost across the board, things picked up again from the fourth quarter. The increased demand for workers that began at that time has continued unabated ever since. Employees are wanted. This applies above all to highly qualified employees.

Price maintenance with share buyback

Recruit Holdings, headquartered in Tokyo, is one of the really big internationally active personnel service providers with a market capitalization of around 70 billion euros. In Germany, the company is best known for the offers on the platforms Indeed or Glasdoor.

For example, the name Indeed is emblazoned on the jerseys of Eintracht Frankfurt football players. The job portal is one of the largest in the world, the Group is active here in over 60 countries and works in almost 30 languages. On Glasdoor you can find job postings, company reviews and salary information as well as interview information. With the large amount of additional information, Glasdoor basically gives people who are inclined to change jobs a reason to go to their site and perhaps – motivated by the supposed earning potential with another employer – to look for suitable offers for them.

In January, the Japanese stock came under more pressure because several institutional investors had signaled that they wanted to sell their shares. That’s why the management of Recruit Holdings decided at the end of January to launch a share buyback program with a volume of 34 million shares in order to largely cushion the sell-off.

In any case, business development in the first half of the year (as of the end of September) was promising. Sales increased by more than 30 percent compared to the same period last year, and earnings per share tripled.

Growth in the gig economy

The Dutch Randstad is not only one of the major personnel service providers in Europe, but also in a global comparison and operates the Monster job exchange, for example. The company has a very broad product portfolio for all aspects of personnel requirements: Randstad offers the filling of vacancies, permanently or temporarily, as well as the search for executives for top positions, interim management, strategic advice for companies in the human resources area or acts as an outsourced human resources department. In addition, Randstad provides outplacement advice and staff development.

As one of the newer trends in the market, the Dutch have considered the so-called gig economy: Analogous to the individual performances by musicians who serve as a living, the term describes a part of the labor market in which small orders are given to the self-employed, freelancers or part-time employees are assigned. Randstad estimates this market for 2020 in the EMEA region (Europe, Arabia, Africa) at a little over 60 billion euros.

Things are going well at Randstad too. 2021 brought a leap in growth. Sales increased by 20 percent to a record of almost 25 billion euros. The operating result (Ebitda) even rose by almost 60 percent to just over one billion euros. Shareholders can look forward to a dividend of five euros per share. And it goes on with momentum. January developed similarly to the fourth quarter, Randstad announced at the beginning of the week.

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