- Marked slowdown in hiring in last quarter
- Net profits to ‘slightly’ miss estimates
- Hays and Michael Page report tomorrow
Professional recruitment firm Robert Walters (RWA) revealed a sharp slowdown in net fee income growth in the final quarter of last year as it faced ‘difficult market conditions’ across its business.
The shares fell 6.5% to 505p, pulling down with them shares in rivals Hays (HAS) and Michael Page (PAGE) ahead of their earnings updates tomorrow.
WHY DO RECRUITMENT FIRMS MATTER?
Along with chipmakers, staffing firms are often a leading indicator of the economic cycle as companies tend to spend more on people and technology when the outlook for their business is good and cut back on both when they see tough times ahead.
All three UK recruiters noted ‘softness’ in the job market in the third quarter of last year, and the ‘exit rate’ in September was a lot lower than in June, but their results were flattered by the strength of the US dollar.
The fourth quarter is important for the sector as firms typically ramp up hiring for the year ahead after the summer break, but Robert Walters recorded constant currency net fee income growth of just 8% in the three months to December compared with 18% in the previous quarter.
Growth in Asia Pacific, the firm’s largest market, slowed to 3% from 16% in the third quarter due to ongoing Covid restrictions in China, while the company faced a tough comparison with the fourth quarter of 2021 which was a record for the region.
Growth in Europe slowed from 32% to 18%, with a marked reduction in the rate of hiring in France, the Netherlands and Spain, the firm’s three biggest businesses.
In contrast, UK net fee income rose 8% last quarter against a fall of 6% in the third quarter as financial and technology recruitment held up with the firm seeing ‘a notable uptick’ in contract recruitment to boot.
LOWERING EXPECTATIONS
Full-year net profits are expected to hit a new record, although according to the company’s founder Robert Walters they are set to miss the consensus expectation.
According to Stockopedia, the average forecast for net profits is £43 million or just over 58p per share, up from 43p in 2021 and a forecast of 41p per share at the start of last year.
Investors in Hays and Michael Page will be watching tomorrow’s earnings announcements with particular interest after both firms cited a reduction in client and candidate activity in certain markets such as the UK and the US in the previous quarter.
