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Headhunters are having a tough time, three of the UK’s listed recruitment firms have said.
Hays, Page Group and Robert Walters have all told investors that the election and macroeconomic volatility are depressing job activity and as a result their recruiters are not receiving fees for placing their clients in positions.
What can investors do? On the one hand, stocks in recruitment companies are depressed by the possibility of a bargain, but on the other, they may have to wait a while. Midas analyses the prospects for each of the three companies.
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Hays Group, which issued a fourth-quarter trading report on July 11, described market conditions as “challenging.”
Chief Executive Dirk Hahn cited “low confidence levels” and said quarterly group rates would be down 15 percent from last year.
Tough times: On the one hand, stocks of recruitment companies are depressed at the prospect of a bargain, but on the other, there may be a wait for a while.
Hays operates in a number of global markets, including Germany, the UK, Australia and New Zealand, and rates were down across all geographic areas, with a notable 22 per cent decline in Australia. For the full year, profits will be almost 50 per cent lower than in 2023.
Costs for placing staff in permanent positions fell the most.
However, while at some points these revenues have been offset by the hiring of temporary staff to fill those positions, this has not been the case this quarter. Fees for hiring temporary staff are down 20% compared to 12% for temporary positions.
Hahn is pessimistic, but focused on cost reduction and the long term. “Given the current global uncertainties, we expect our core markets to remain challenging in the near term,” he says. Hahn has removed £60m of costs from the business this year and is confident Hays can “deliver substantial profit growth once our end markets recover.”
Listed in: Main market Heart: HAS Contact: haysplc.com 020 3978 2520
Group of pages
Having released a second-quarter trading update on July 9, it also likes the word “challenging”. Chief executive Nicholas Kirk said “challenging market conditions” and a “softening of activity levels” caused profits to fall 12 per cent if currency fluctuations are removed from the equation.
Page Group also has a wide geographic spread: the UK accounts for just 12 percent of revenue, Asia Pacific 14 percent, the Americas 18 percent and Europe 56 percent, with a bias towards France and Germany.
The company’s results update cites all these markets as being tough with “small signs of improvement,” though optimists could point to more encouraging news coming out of Brazil and India, where profits are rising.
While Kirk has cut back on staff a bit, it’s a balancing act to keep enough staff ready to be on the front lines when conditions improve. He plans to keep workers on payroll “at current levels” so they can take advantage of a change 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 said.
Listed in: Main market Heart: PAGE Contact: page.com 0207 831 2000
Roberto Walters
When we received Robert Walters’ trading update on July 15, only an optimist would be surprised that the group found the market “challenging.”
Chief executive Toby Fowlston says “macroeconomic turbulence and political uncertainty” are “limiting client and candidate confidence in certain geographies.” He is also thinking about the longer term.
“Our short-term planning now assumes that any material improvement in confidence levels will be gradual and likely not occur before 2025,” he added.
Headcount is down 13 percent from last year and Fowlston says the company is being selective about replacing employees who leave. Unlike its rivals, Walters has performed well in Asia, with rates rising in China and Japan.
Listed in: Main market Heart: RWA Contact: robertwalters.co.uk 0207 509 8034
Fair price or undervalued?
As expected in the face of such discouraging news, recruitment firms do not seem expensive and the dividend yields may be appetizing too.
Robert Walters shares are down 25 per cent from five years ago at 380 pence and yield almost seven per cent.
Hays shares are down nearly 40 percent from five years ago and have an expected dividend yield of 3.3 percent this year.
Page Group shares are down nearly nine percent compared with five years ago.
Analysts are divided on which stock is the most suitable. Tom Callan at Investec prefers Robert Walters for its better geographic positioning, while RBC thinks Page is making the right decision by not cutting headcount too much to be ready when the market turns and recommends buying the stock, while analysts at UBS and Barclays favour Hays.
Whichever you choose, these figures show that you will have to wait a while for any of the recruiters to improve, as there are many global events that need to develop before the market strengthens.
If you already own shares of any of these companies, you should certainly hold on to them for better times, but only long-term optimists should buy at this level.
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