Recruitment firms with good references
THE tight labour market means employers must get smarter with hiring talent, but they also need to be on their A game to keep their best workers on the books.
At the same time, the compliance bar is being raised in occupational health and safety, certifications and employee verification.
The digital era spawned a plethora of ASX stocks focused on the hiring side, notably the $7.9bn market cap Seek.com.au (ASX:SEK).
Several others were acquired and privatised, including Chandler MacLeod and Skilled Group. A few small caps with some, err, interesting ideas about revolutionising recruitment simply fell by the wayside.
Two surviving small caps started out with products to verify the credentials of new sign-ons, such as checking their police record and alleged qualifications. Now they’ve evolved to the “hireto-retire” approach of helping employers to retain staff.
Formerly known as CV Check, Kinatico (ASX:KYP) aims to identify problems in real time, rather than during a compliance audit. “We play in the monitoring and maintenance of workforce compliance, all the way from workplace screening and credential validation to ‘dayin-the-life’ type stuff,” chief executive Michael Ivanchenko says.
The latter can include a formal assurance that a company vehicle has been serviced, or that Covid tests actually have been carried out. “Compliance can be a box-ticking exercise, but with heightened ESG (environmental, social and governance) requirements, it is something that needs to be demonstrated not only to boards, but to shareholders and customers,” Ivanchenko says. Kinatico has about 10,000 customers in Australia and New Zealand, ranging from the top blue chips to the more classic SMEs with a handful of staff.
Meanwhile, Xref (ASX:XF1) claims to be the “No. 1” provider of reference checking globally, but as with Kinatico, the company is expanding its wares.
“Employers need to move quickly to hire the best talent, so having the right processes in place to make confident hiring decisions has never been more important,” Xref founder and chief executive LeeMartin Seymour told last week’s AGM.
In November, Xref acquired the employee engagement company Voice
Project for $4m – $2m in cash and $2m in deferred shares. Voice Project facilitates workplace and customer satisfaction surveys to customers including Hungry Jack’s, health care provider HammondCare and 70 universities. The company is profitable and is expected to contribute $4m of revenue to Xref. Across its existing base of 15,000 users over 1300 organisations, Xref generated revenue of $18.6m in the year to June 2022, 29 per cent higher. The $55m market cap also managed operating cash flow of $4.6m, with a $730,000 net profit. Kinatico, meanwhile, posted revenue of $26.3m in the year to June 2022, up 51 per cent, with a net loss of $1.5m. September-quarter revenue was $6.9m, up 9 per cent, with positive cash flow of $233,000.
Valued at about $40m, Kinatico has $11m in the bank. Ivanchenko says the company is generating enough money to fund its own growth – and the board has backed this by launching a $2m share buyback.
Meanwhile, Seek shares have lost 38 per cent of their value over the past year, despite the hiring boom that helped its 2021-22 revenue surge 47 per cent (to $1.12bn) and net profit increase by 81 per cent to $246m.
At last month’s AGM, management confirmed current-year guidance of revenue of $1.25-1.3bn and net profit of $250-270m. With near-record job ad volumes continuing to flow to Seek’s platform, some pundits reckon the company might do a shade better.