Share buybacks are a poor use of shareholders’ cash in a bear market, and nowhere more so than in the notoriously cyclical recruitment sector, where the stock market has spent the past year pricing in downturn before it emerged. So it should come as no surprise that Hays – whose shares have fallen 57 per cent over the past 12 months – has decided to scale back its repurchase programme.

Having earmarked up to £100 million a year for this purpose – it spent £91 million in the 12 months to June 30, implying an uncomfortably high average price of 124¼p – it admits this year’s buyback will be lower than the last.

If Hays itself has less appetite for its own stock, why should outside investors prove any different? Certainly there was little in yesterday’s year-end trading update to send it higher. Trading in the UK – which accounts for more than half of profits – has continued to weaken, with like-for-like growth in net fees having fallen from 11 per cent in the second quarter to 4 per cent in the fourth. Worst hit was construction and property, which makes up a quarter of Hays’s domestic business.

A record 46 per cent year-on-year rise in quarterly fees from its continental European business was more encouraging. However, with recruitment in France and Germany expected to slacken, the past three months are likely to prove the peak. The most telling sign of trouble was that the growth in temporary positions has outpaced that of permanent positions for the first time in five years, providing evidence that employers are substituting transitory staff for full-timers.

Hays is better placed to take advantage of that trend than many of its peers, with fees evenly split between temporary and permanent positions, in contrast to the likes of Michael Page International, which is heavily skewed towards the latter. Hays’s UK business also benefits from a significant proportion of more resilient public sector work, which accounts for about a quarter of fees.

All the same, Hays is taking welcome steps to tighten its belt – and not just in buying back fewer shares. It has got tougher on collecting cash from customers and is trimming staff numbers: having shed 2 per cent of its UK workforce in the third quarter, it has got rid of a further 5 per cent in the fourth. More cuts might be expected in a company where salaries account for three quarters of total costs.

Hays’s expanded overseas business – up to 44 per cent of fees from 16 per cent five years ago – should provide a partial buffer, especially given the steady shift in continental Europe towards using agencies to find staff rather than internal HR departments. At 76½p, or less than seven times forward earnings, and yielding more than 7 per cent, Hays looks cheap, but not cheap enough given the risk of downgrades. Tempus advised sell last September, and that remains the case.

IHG

As sure as night follows day, so a gloomy trading update from Marriott International, the US hotel operator, hits the shares of InterContinental Hotels Group (IHG). Yesterday’s second-quarter numbers from Marriott were no exception, wiping 7 per cent from the IHG share price and taking the decline over the past 12 months to 50 per cent. But is that fair?

The answer is: yes – to an extent. There is no doubt that demand is softening across America. Not so long ago Marriott was forecasting full-year growth in revenue per available room (revpar) of 3-5 per cent in its US hotels, but its new forecast is in the range of growth of 1 per cent to a decline of 1 per cent.

IHG, which in recent years has tended to outperform the market, does not give out revpar forecasts, but after its 2.3 per cent increase in its Americas region in the first quarter, analysts reckon the full year will be flat or a shade better. IHG also benefits from having a bigger pipeline of new rooms, which makes a significant contribution to absolute revenues, and a greater proportion of its US portfolio is franchised, limiting the impact of any revpar dip.

Don’t forget that in the wake of 9/11, IHG’s American revpar fell by up to 10 per cent, but rooms growth meant it still increased total revenues. There is also a positive read-through from Marriott’s strong growth outside the US. Hoteliers are in for a bumpy ride, but IHG has a more robust business model than most. Hold.

Craneware

Craneware is in danger of confusing potential investors on two counts. First, contrary to what its name suggests, this AIM-listed company has nothing to do with construction equipment; it develops billing and auditing software for hospitals. Second, its Scottish base – its headquarters has been in Livingston for all of its nine years – masks the fact that Craneware derives all of its sales from America. But any perplexity among shareholders will have been more than compensated by Craneware’s postfloat performance: the shares have surged 66 per cent from September’s issue price.

Yesterday’s year-end trading update did nothing to detract from that strength. In signing up 194 US hospitals over the past year – taking its tally to 950 – Craneware has beaten the target set at its float by nearly a third. Further, renewal rates for its multi-year contracts, mostly struck for four years, remain above 90 per cent.

The company’s allure is as one of two suppliers of software to a market driven by a legislative change that requires US states to ensure correct Medicare payments to healthcare providers by 2010. With most US hospitals still manually raising bills and settling invoices, that market is forecast to grow at around 30 per cent a year for the foreseeable future. However, at 212½p, or 34 times forward earnings, prospective buyers should sit tight for now.

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