Headhunters are having a tough time, three of the UK’s listed recruitment businesses have said.
Hays, Page Group and Robert Walters have told investors that elections and macroeconomic volatility are depressing job activity and, as a result, their recruiters aren’t pocketing fees from placing clients into roles.
So what are investors to do? On the one hand, recruitment company shares are depressed with the possibility of a bargain but, on the other, there may be a while to wait. Midas takes a look at the outlook for each of the three firms.
Hays
Hays Group, which issued a fourth quarter trading statement on July 11, described market conditions as ‘challenging’.
Chief executive Dirk Hahn cited ‘low levels of confidence’ and said quarterly group fees would be down 15 per cent on last year.
Tough time: On the one hand, recruitment company shares are depressed with the possibility of a bargain but, on the other, there may be a while to wait
Hays operates in several global markets, including Germany, the UK, Australia and New Zealand, and fees were down in every geographical area with a notable 22 per cent decline in Oz. For the full year, profits will be nearly 50 per cent lower than 2023.
Fees from placing staff into permanent roles fell hardest.
However, while at some points these have been offset by revenue from placing temporary staff to fill those roles, this has not been the case this quarter. Fees for placing temporary staff are down 20 per cent compared with 12 per cent for temporary roles.
Hahn is gloomy but focused on cost cutting and the longer term. ‘Given ongoing global uncertainties, in the near-term we expect our key markets will remain challenging,’ he says. He has taken £60 million of costs out of the business this year and is confident that Hays can ‘deliver substantial profit growth once our end markets recover’.
Traded on: Main market Ticker: HAS Contact: haysplc.com 020 3978 2520
Page Group
Having produced a second quarter trading update on July 9, it is also fond of the word ‘challenging’. Chief executive Nicholas Kirk said that ‘challenging market conditions’ and a ‘softening in activity levels’ pushed profit down 12 per cent if currency fluctuations are stripped out of the equation.
Page Group also has a wide geographical spread, with the UK accounting for just 12 per cent of profit, Asia Pacific 14 per cent, the Americas 18 per cent and Europe 56 per cent, with a bias towards France and Germany.
The company’s results update cites that all these markets are tough with ‘little signs of improvement’, although optimists might point to cheerier news out of Brazil and India where profits are up.
Although Kirk has reduced headcount somewhat, it is a balancing act to keep enough staff ready to be on the front foot when conditions improve. He plans to keep fee earners ‘at existing levels’ so they can take advantage of a turnaround when it comes.
‘We have a highly diversified and adaptable business model, a highly experienced management team, a strong balance sheet and our cost base is under continuous review,’ he says.
Traded on: Main market Ticker: PAGE Contact: page.com 0207 831 2000
Robert Walters
By the time we received Robert Walters’ trading update on July 15, only an optimist would be surprised that the group is finding the market ‘challenging’.
Chief executive Toby Fowlston says that ‘macroeconomic turbulence and political uncertainty’ is ‘restraining client and candidate confidence in certain geographies’. He’s also looking to the long-term.
‘Our near-term planning now assumes that any material improvement in confidence levels will be gradual, and likely not occur before 2025,’ he adds.
Headcount is down 13 per centon last year and Fowlston says that the company is being selective on replacing employees who leave the business. Unlike its rivals, Walters has done well in Asia with China and Japan fees up.
Traded on: Main market Ticker: RWA Contact: robertwalters.co.uk 0207 509 8034
Fairly priced or undervalued?
As one might expect on this downbeat news, the recruitment firms do not look expensive, and the dividend yields can be tasty, too.
Robert Walters shares are down 25 per cent from five years ago at 380p and yield nearly seven per cent.
Hays shares are down nearly 40 per cent from five years ago and it has an expected dividend yield of 3.3 per cent this year.
Page Group shares are down nearly nine per cent on five years ago.
Analysts are divided on which stocks is the best bet. Tom Callan at Investec likes Robert Walters for a better geographical positioning while RBC thinks Page is making the right call by not cutting head count too far to be ready when the market turns and has a buy on the stock, while analysts at UBS and Barclays favour Hays.
Whichever you choose, these figures show you will be waiting a while for improvement from any of the recruiters, as there are many global events to play out before the market strengthens.
If you already hold shares in any of these companies, you should certainly retain them for better times, but only optimists with an eye on the long-term should buy at this level.
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