City Comment: Sue Dodd
Tue, 10 Apr 2012 | By Sue Dodd, director, Agile Intelligence
Just three company announcements issued in the past week but each a heavyweight
Last and best was Robert Walters which ended the Easter term on a high note, with a 10% rise in Q1 net fees at constant currency generating the group’s highest ever Q1 results. Even better news was the 9% growth in the UK, confounding all estimates suggesting a dire market in Q1. Asia Pacific, its powerhouse division, grew at a modest 7% while Europe added 14%. Nevertheless the language to investors remains cautious citing a challenging economic backdrop and the need to manage costs sensibly while investing for the longer term. Whilst well off their 2011 peak the shares now sit close to their 2012 high at 255p.
Earlier in the week we were treated to a major tome as HCL finally announced its unaudited 2011 results. Putting aside the many detailed issues, legal and financial, which the board and its advisors are grappling with, it is clear that solid efforts are being made to place the business back onto a secure footing. Tactical changes to strategy are well underway – aligning HCL firmly with framework contracts in the NHS – whilst streamlining its branding and optimising its use of premises.
The historic results, except as a guide to financial health, have become little more than a sideshow now – one would expect management to have put all the bad news out there so that performance hereon is a reflection of that change of strategy and improved financial control. Nevertheless the market share lost in the past year does place HCL at a major disadvantage, especially given the reputational damage, which must have ensued from the very public failures described. UK sales dropped 24.4% and gross profit fell by 32.1% with nursing its most resilient business. These accounts indicate what a long road back it will be for HCL but do perhaps represent a step in the right direction.
Finally, Morson announced solid 2011 results and is upbeat for the future, albeit with a warning that its core markets will continue to be subject to margin pressure although this rose slightly in its recruitment services. Overall sales and net fees were ahead around 11% with a solid performance from its recruitment businesses in its key technical markets, especially aerospace, marine & defence. Its design consultancy, Morson Projects, saw sales growth over 20% but cost overruns led to a sharp drop in profits. With contracts amounting to around one-third of recruitment revenues up for renewal in 2012, it must focus on its UK core business but is equally looking to strengthen its international operations currently run from 7 overseas offices. Despite the solid news investors did not respond well, presumably nervous of contract renewals, and the shares sit well below the 2012 peak set in January.
Sue Dodd, director, Agile Intelligence