SJR - Recovery has started, demand is increasing
Staffing is leading the way back to normal Only slight adjustments to estimates Proposed dividend of SEK 2 per share Q4: Sales of SEK 91m (-14% y-o-y), 5% below ABGSCe SJR reported Q4 sales of SEK 91m (106m), which were -5% vs. ABGSCe. However, we think it is positive that both staffing and recruiting revenues are improving q-o-q. Staffing revenues were SEK 81m (88m), -8% y-o-y versus -17% y-o-y in Q3 and demand has increased gradually during Q4.
For the recruitment business, the recovery is not as clear with revenues of SEK 10m (18.1m), -45% y-o-y versus -52% y-o-y in Q3. However, Q4 ’19 was rather strong, and if we instead look at q-o-q growth it was 28%, which is better than we saw in both 2019 and 2018. EBIT was SEK 4.3m (6.7m), corresponding to an EBIT margin of 4.7%.
We expected EBIT of SEK 4.1m with a margin of 4.3%. The full-year EBIT margin was 4.1%; we believe this should be considered as fully acceptable as the recruiting share of revenues dropped from 17% to 11%. Moreover, SJR did not receive any state grants in Q4 and therefore was able to propose a dividend of SEK 2 per share.
2022 EPS up 1.3% on higher margin assumption We make only minor changes to our forecast following the Q4 report as we think the recovery from the COVID-19 headwinds is well underway and that the miss versus our Q4 estimates was just a timing issue. We raise our ‘22e EPS by 1.3% based on slightly higher EBIT margin assumptions following the Q4 beat. We think the recovery in EBIT margins will be driven by an improved market for recruiting as the business yields a higher margin than staffing.
As for timing, we think it will be a gradual improvement the coming two years. Recruitment recovery should drive profitability improvement Our forecast assumes a gradual recovery for SJR and to get a fair view of the valuation multiples we argue one should look at ‘22e where the SJR stock trades at a P/E of 10.6x and an expected dividend yield of 7.5%. If the recruiting market recov....