House of HR - comment

Not as bad as many feared and therefore slightly positive for the bonds. House of HR Q226 total revenues were almost on target, but expenses disappointed with an overrun of €-10m (partially driven by bonus accruals resuming in powerhouses showing growth, flagged on the call as a Q2-specific effect versus Q1), bringing EBITDA to only €55m vs. our €68m. Catch-up taxes did not yet go out (tax payments to reach €-57m this year, more next year), temporarily saving the company €20m outflow relative to forecast, so that OCF delivered an €8m beat to us. CapEx was on target and, with a further €25m drawing of its RCF (to fund the EUR -23m Pro Industry earn-out payment) cash now stands at a healthy €86m vs. our €72m (but with that RCF draw). The headline minus 3.2% revenue decline is almost entirely the freelance book unwinding, not genuine payroll deterioration. The story remains one of cost reduction - also with the help of AI. Management is guiding to a €18m reduction this year, of which €10m have already been delivered, except that they are not visible due to other costs growing. The name remains unchanged in our opinion. We think the fundamental downside is contained and the path to an orderly refinancing remains narrow, but open. However, there are holes in the legal protections the bonds are enjoying. We remain long the SSNs for close to 4% of NAV.