Investors in ASX-listed employment services have a lot to think about at the moment — from the impending entry of Google to uncertainty about employment growth and robot workers.

In Australia the recruitment industry is worth about $12 billion a year and is growing at 1.8 per cent, estimates researcher IBISWorld.

The 20 or so ASX stocks focused on employment have delivered mixed results over the past year.

>> Scroll down for a list of ASX employment stocks and their performance over the past year

Large-cap heavyweight Seek (ASX:SEK) has delivered 15 per cent share price growth since this time last year, while small caps such as Ashley Services and HiTech have made strong gains.

Despite a contract loss announced this week, Ashley (ASX:ASH) shares are ahead 233 per cent over the past 12 months while IT recruiter HiTech (ASX:HIT) is up 80 per cent.

At the other end of the table at least eight recruitment stocks — many offering high-tech solutions such as automated CV checking — are down between 30 per cent and 80 per cent over that period. (See table below).

The challenges facing employment stocks

Three key issues impacting recruitment stocks are Google, automation and the economy.

Australian employment growth appears to be slowing, according to recent figures.

Just 52,900 jobs have been created so far this year, equating to an average increase of 13,200 per month, well below the 34,600 average seen in 2017, Business Insider Australia noted last week.

After rising for 17 consecutive months, online job vacancies — as measured by the Australian government’s Internet Vacancy Index — fell by 0.5% to 183,500 in April, according to Australia’s Department of Jobs and Small Business.

Fewer job vacancies means less revenue for most recruitment services.

However, the Reserve Bank of Australia believes hiring will remain at elevated levels in the short-term at least.

In the minutes of its May monetary policy meeting, the bank noted that “survey measures of job vacancies and hiring intentions, as well as information from the Bank’s liaison, pointed to above-average employment growth in the near term”.

The threat of automation

Then there’s the threat of robots replacing workers.

ASX-listed robot home-builder Fastbrick Robotics offers a clear case study. Fastbrick’s (ASX:FBR) Hadrian X robot can build a house in three days, compared to four-to-six weeks for a team of four human builders.

Fastbrick reckons it can replace all construction jobs for low-rise buildings globally with just 150,000 robots.

Research from jobs website Adzuna suggests a third of Australian jobs could be automated by the year 2030.

Manual labour roles in regional areas would be hit first but white-collar jobs in areas such as accounting would also decline.

Google For Jobs

Perhaps the biggest shadow hanging over ASX recruitment stocks is the expected entry of “Google For Jobs” in Australia. At the moment when you search for “jobs” on Google’s Australian site, a list of recruiters pops up.

After the service launches in Australia — we don’t yet know when — a new “Jobs” section will pop up, which helps direct job seekers to ads posted directly on an employer’s website.

“Our guess is that the arrival of Google For Jobs will see recruiters move into more of an advisory role,” said Lorcan Barden, the CEO of ASX-listed ApplyDirect in an opinion column in The Australian.

Mr Barden says ApplyDirect is on the front foot, collaborating with Google on introduction  of the service.

“With Google directly surfacing jobs from employers own websites, the need for an external job ads should reduce,” Mr Barden said.

Recruitment services may need to move away from a “job boards” approach to value-add offerings such as candidate assessement.

Here’s a list of employment-related stocks on the ASX:

ASX codeCompanyOne-year price changePrice May 25Market Cap
ASHASHLEY SERVICES2.333333333330.228.8M
CGRCML GROUP1.230769230770.58115.6M
HITHITECH GROUP AUS0.80.9938.1M
PPEPEOPLE INFRASTRUCTURE (*listed Nov 2017)0.561.5699.5M
RFNREFFIND0.4444444444440.0137.2M
MMSMCMILLAN SHAKESP0.21933621933616.91.4B
SEKSEEK0.15947786606120.437.1B
XF1XREF0.040.5276.8M
TPPTEMPO AUSTRALIA-0.0270270270270.1843.3M
AMBAMBITION GROUP-0.0303030303030.1610.7M
CV1CV CHECK-0.09523809523810.09523.4M
SCLSCHROLE GROUP (*listed Oct 2017)-0.30.0148.1M
CNDCLARIUS GROUP-0.382022471910.0555.0M
RUBRUBICOR GROUP-0.420.0297.1M
GO2GO2 PEOPLE (*listed Oct 2017)-0.450.1113.0M
GOOGOOROO VENTURES-0.5588235294120.0756.5M
AD1APPLYDIRECT-0.66250.05411.1M
NVONVOI-0.750.0125.0M
TKFTIKFORCE-0.8095238095240.0081.9M

 

Recruiter Ashley Services (ASX:ASH) could be on a track to recovery. Ashley listed in 2014 after raising $98.7 million selling shares at $1.66 apiece. The shares lost more than 80 per cent of their value in the following year or so after several profit downgrades.

In the past year however, the shares have quadruped from around 6c to as high as 24.5c.

In the December half Ashley reported a $2.2 million profit compared to a $5.1 million loss in the same period last year. Revenue was up 4 per cent to $169.5 million.

IT recruiter HiTech (ASX:HIT) is ahead 80 per cent over the past year. In February HiTech announced record results for the December half.

Revenue was up 19 per cent to $13.3 million and profit moved ahead 27 per cent to $1 million

“Significantly increased revenue and profit results” were expected for the full year due to new business wins and improved contractor numbers.

HiBase — which is also moving into IT consulting — built its own “predictive intelligence tool for sourcing talent” but believes “the human element to this work is critical and irreplaceable”.

Nvoi (ASX:NVO) is Australia’s only open market “workforce-as-a-service” platform which directly connects employers and skilled professionals.

Nvoi’s platform works like LinkedIn-meets-Google-meets-eHarmony for jobs, CFO Michael Bermeister recently told Stockhead.

“Everything a human recruiter does can be digitised,” Mr Bermeister says.

“When you think about what they do — canvas for jobs, check their networks or advertise on job sites for candidates, trawl through applications to create a shortlist, then interview and eventually hand the top three to a customer — technology can do the whole process instantaneously.”

Bespoke algorithms perform keyword searches, matching job ads and job seekers to provide a Google-like list of candidates for hiring managers.

ApplyDirect (ASX:AD1) is collaborating with Google on its new jobs service — and could turn out to be a beneficiary.

ApplyDirect offers technology to revamp an employer’s career pages to make it more discoverable by job seekers, improve the candidate experience and hence also improve their engagement, Stockhead columnist Tim Knapton recently wrote.

Labour hire provider The GO2 People (ASX:GO2) has had a difficult start to public life on the ASX.

Perth based GO2 People (ASX:GO2) floated on the ASX in October after raising $10 million to fund expansion from Western Australia into the eastern states and New Zealand

The shares — issued at 20c — have fallen to about 11c since the company took a hit when client VCS Civil and Mining was placed into voluntary administration in February.

Still, customer receipts grew from $8.5 million to $11 million in the March quarter, along with a burn-rate of about $1.8 million.

Ambitious artificial intelligence developer Gooroo (ASX:GOO) says it “understands how every person in the world thinks”.

The softawe maker is applying for a patent on technology that woudl allow employers to “map an individual’s decision-making patterns”, allowing a computer to judge what workers will do “when faced with uncertainty, change and challenge”.

Gooroo is a very eary stage business, banking less than $150,000 in the nine months to March. But it says it’s “laser-focused on building out its partner network and signing enterprise contracts”.

Gooroo listed in October 2016 after raising $5 million at 20c and now trades at around 8c.

But its strategy seems smart compared to businesses focused on commodity services such as job listings.

Background checkers

The ASX offers a squadron of tech plays that focus on checking candidates CVs.

Teacher background checker Schrole Group (ASX:SCL) gained 40 per cent last week after making the first sale of its “Schrole Verify” service.

Schrole’s listed in October after raising $6 million at 2c per share. The stock hit a high of 3.9c but is now trading at about 1.4c.

Xref (ASX:XF1) was founded by recruitment industry veteran Lee-Martin Seymour and technologist Tim Griffiths to remove the biggest “pain point” in the hiring process — collecting reference checks and making sure they’re valid.

Its software allows employers to automate reference checks and even automatically cross-reference job candidates according to sex offences, criminal records, driving accidents and drug checks.

Xref banked $1.5 million in cash receipts in the March quarter but burned $1.6 million, leaving $5.5 million in the kitty. It was maintaining “positive growth trajectory and anticipates continued revenue growth in Q4”.

In March the founders sold 13.3 per cent of the company, each pocketing $5.9 million.

Similarly, CVCheck (ASX:CV1) makes software that allows employers to check job candidates against police records, credit, financial and reference and other records.

CVCheck last week jumped to its highest share price in six months after announcing “overall business performance continues to exceed management expectations with continued strong corporate revenue”.

Reffind (ASX:RFN) offers WooBoard — is a cloud-based employee rewards and recognition platform that allows enterprise customer employees to acknowledge, reward and celebrate their achievements.

Its stock price soared late last year after it announced it was joining the blockchain club, spending $US2.3 million to invest in Loyyal Corporation, a blockchain-based loyalty business.

 

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