UK recruiters set to dominate global markets – City Comment
7 March 2013
Recent results from the quoted recruitment companies under our coverage indicate that there could be some grounds for optimism.
Thu, 7 Mar 2013 | Kevin Lapwood, head of support services equity research, Cantor Fitzgerald Europe
Recent results from the quoted companies under our coverage indicate that there could be some grounds for optimism.
So far this year we have seen the full year results for 2012 from SThree, Robert Walters and Michael Page, and half-year results from Hays. There have also been trading updates from Hydrogen, Matchtech and Harvey Nash. The themes are quite clear. The second half of last year was truly dreadful for most global recruiters, particularly the third quarter. Most regions, including Asia Pacific, which had hitherto bucked the negative trend, came under pressure. Average net fee income (NFI) in 2012 was down by 0.3% and operating profits fell by 12.8%.
Temporary and contract NFI held up better than permanent and some specialist areas, like engineering and IT were stronger than average. Looking forward, the outlook is uncertain but it appears that some degree of normality is now returning to most markets. This is far from unbridled optimism and it by no means signals the end of the recession but it could, in Churchill’s words, be the “beginning of the end”.
However, this is not likely to be of much comfort to financial services recruiters, where the outlook looks unremittingly gloomy across the globe. In the past, this would have been the signal for a significant, but often short-term, reduction in recruiter headcount as companies cut costs while waiting for the good times to return. It is interesting that this appears not to have happened. Average headcount decreased by less than 2% in 2012, as companies sought to reallocate resources to new markets both geographically and operationally. Most quoted UK companies opened more international offices and many entered new markets both geographically and operationally.
This will significantly alter the shape of the industry for years to come. It will become less reliant on traditional markets, like the UK, and more diversified in its activities. This has got to be good news for UK recruitment companies, which look set to dominate global markets for many years to come. It will, we believe, only be a question of time before this attracts the attention of large US and European predators and we expect more M&A activity in the near future. So perhaps there is some good news for financial services after all.
Recent results from the quoted companies under our coverage indicate that there could be some grounds for optimism.
So far this year we have seen the full year results for 2012 from SThree, Robert Walters and Michael Page, and half-year results from Hays. There have also been trading updates from Hydrogen, Matchtech and Harvey Nash. The themes are quite clear. The second half of last year was truly dreadful for most global recruiters, particularly the third quarter. Most regions, including Asia Pacific, which had hitherto bucked the negative trend, came under pressure. Average net fee income (NFI) in 2012 was down by 0.3% and operating profits fell by 12.8%.
Temporary and contract NFI held up better than permanent and some specialist areas, like engineering and IT were stronger than average. Looking forward, the outlook is uncertain but it appears that some degree of normality is now returning to most markets. This is far from unbridled optimism and it by no means signals the end of the recession but it could, in Churchill’s words, be the “beginning of the end”.
However, this is not likely to be of much comfort to financial services recruiters, where the outlook looks unremittingly gloomy across the globe. In the past, this would have been the signal for a significant, but often short-term, reduction in recruiter headcount as companies cut costs while waiting for the good times to return. It is interesting that this appears not to have happened. Average headcount decreased by less than 2% in 2012, as companies sought to reallocate resources to new markets both geographically and operationally. Most quoted UK companies opened more international offices and many entered new markets both geographically and operationally.
This will significantly alter the shape of the industry for years to come. It will become less reliant on traditional markets, like the UK, and more diversified in its activities. This has got to be good news for UK recruitment companies, which look set to dominate global markets for many years to come. It will, we believe, only be a question of time before this attracts the attention of large US and European predators and we expect more M&A activity in the near future. So perhaps there is some good news for financial services after all.
