- Shares fall as much as 20%
- Earnings seen 'significantly' below forecasts
- Rival firms report mid-July
A second profit warning in less than six months from professional recruitment firm Robert Walters (RWA) has sent a shiver through the staffing sector just when it seemed from most macro data the global job market was in good health.
Robert Walters shares opened down as much as 20% at 371p before clawing their way back to 394p for a loss of 15.5%, while shares in Hays (HAS) were 6.5% lower at 102p and Pagegroup (PAGE) shares dropped 8% to 405p.
WHY HAS THE COMPANY WARNED?
The firm, which has a strong bias towards the Asia-Pacific region, reported a 10% fall in net fee income for the first two months of the current quarter on a constant-currency basis after posting flat revenues in the first quarter to March.
In January, it warned that the second half of 2022 had seen ‘difficult market conditions’ due to reduced levels of candidate confidence and lengthening time to hire, it but reported 8% growth in net fee income for the final quarter.
In April, the firm said last year’s market uncertainty had ‘tipped over’ into the first quarter but it expected a return of confidence in the Chinese economy and a decline in inflation to have a positive effect on companies’ hiring plans.
Contrary to expectations, however, candidate and employer confidence haven't shown a sustained improvement, and the board now sees full year earnings being ‘significantly lower’ than current market forecasts (the consensus pre-tax profit estimate is around £50 million).
WHY DO STAFFING FIRMS MATTER?
Like chipmakers, staffing firms are often seen as an indicator of the health of the global economy 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.
Whether the read-across to Robert Walters' rivals is fair we will find out next month, as Pagegroup reports second-quarter earnings on 12 July and Hays reports a day later, but neither has quite the same exposure to Asia as Robert Walters.
For Hays, continental Europe – in particular Germany – together with the UK and the Americas make up over 80% of net fee income, and in its first quarter update the firm said client and candidate activity was ‘solid overall in temp and contracting, with modestly lower numbers of new assignments offset by greater contract extensions’.
Like Hays, Pagegroup earns more than three quarters of its fees outside Asia and posted ‘strong’ results in the first quarter, although it admitted it had seen a delay in the decision-making process in permanent hiring as candidates became more reluctant to accept offers, leading clients to hire more temporary staff to fill their needs.
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