Robert Walters PLC shares dropped on Thursday as it reported a slow start to 2023, but China’s reopening could provide it with something to cheer about in the year ahead, analysts said.

Robert Walters shares fell 7.8% to 404.00 pence each in London morning, before recovering slightly to 430.00 pence each, down 1.8%.

The slowdown in the first quarter of 2023 was ‘as expected’, Liberum analyst Sanjay Vidyarthi commented, warning that the first half of the year is ‘likely to be difficult’ but that wage inflation, labour supply and demand and fee rates remain ‘supportive of growth’.

The London-based recruitment company reported net fee income in the first quarter of 2023 was £102.4 million, increasing 4.1% from £98.4 million the year prior. The company noted that net fee income remained was at constant currency, due to the impact of global uncertainty conditions.

Asia Pacific net fee income fell 1.1% to £43.4 million, from £43.9 million in 2022, with a 44% decline in China as Covid disruption continued to dent market conditions. Meanwhile, UK net income dropped 8.9% to £16.3 million from £17.9 million.

‘Significantly, UK income is down 9%, with technology recruitment particularly impacted by layoffs since the end of last year,’ Edison Group Director Andy Murphy commented, noting that 2022’s figures has been record earnings ‘as economies across the world added vacancies on a large scale post-pandemic’.

In Europe, net fee income was up 16% at £34.3 million, from £29.5 million, boosted by strong performances in seven of the company’s nine markets, including a record results in Belgium and Germany, rising 10% and 25% respectively.

Other international net fee income increased to £8.4 million, up 18% from £7.1 million the year prior. In South America, Brazil income rose by 58% and Chile by 22%, while the Middle East’s net fee income was up by 24%.

Noting that the European market has remained strong, Murphy added: ‘China’s re-engagement with the global economy will also provide a boost to the recruitment sector in the year ahead.’

Vidyarthi agrees, commenting: ‘Management remains of the view that structural growth drivers are intact. We think China lockdowns easing should support green shoots in Asia.’

With macro-economic conditions still volatile, Vidyarthi warned: ‘An H2 recovery will be required to meet market expectations.’

Liberum maintained its ’buy’ rating for Robert Walters.

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