US uncertainty casts shadow over recruitment sector - City Comment
10 October 2013
Debt ceiling negotiations and the related shutdown of public sector services in the US have created understandable headwinds for share prices this autumn.
Thu, 10 Oct 2013 | By Kean Marden, head of business services equity research, Jefferies International
Debt ceiling negotiations and the related shutdown of public sector services in the US have created understandable headwinds for share prices this autumn.
Although economic growth in China, the UK and Europe does seem to be more firmly established than for some time, equity markets invariably struggle as soon as there is any uncertainty over the outlook for the world’s economic engine. Against this backdrop, the FTSE 100 index of leading London listed companies has retreated by 3% over the past fortnight.
Within the recruitment sector, main decliners include Harvey Nash (-6%) despite the release of encouraging interim results, which stressed improved US permanent recruitment demand and an improving outlook in its UK recruitment market. Elsewhere, Kelly Services (-5%) and Robert Walters (-4%) prop up the foot of the table, although it would be remiss of us not to acknowledge that the latter soared by a phenomenal 50% during August and September.
The leader board includes two Dutch recruitment agencies this month, with USG rising by an impressive 12% and Randstad a respectable 2%. Latest temp industry data from ABU, the trade body for recruiters in the Netherlands, suggests an improving overall trend and that the higher margin administrative and technical segments are starting to edge closer to positive year-on-year growth. Interestingly, this echoes French temp industry data for September, which extended a sustained pattern of improvement into a fourth month.
Other recruiters who have managed to buck the decline include Matchtech (+7%), Hays (+4%) and Staffline (+4%). I hosted a couple of investor meetings with Hays’ management a few weeks ago and haven’t sensed the same degree of confidence in years. Their analyst and investor seminar in mid-November is the first since 2010 and will be awaited with interest.
Over the next few weeks, many of the industry’s heavyweights will update investors on third quarter trading. As we go to print, Robert Walters has kicked off proceedings with slightly stronger organic revenue growth but analysts’ profit estimates remain unchanged due to exchange rate headwinds. At the group level, net fee growth accelerated from 7% in Q2 to an impressive 10% in Q3 driven by stronger momentum in the UK and Asia Pacific but, despite improved economic indicators, the performance in Europe was more subdued. Perhaps this sets the tone for the next few weeks.
Debt ceiling negotiations and the related shutdown of public sector services in the US have created understandable headwinds for share prices this autumn.
Although economic growth in China, the UK and Europe does seem to be more firmly established than for some time, equity markets invariably struggle as soon as there is any uncertainty over the outlook for the world’s economic engine. Against this backdrop, the FTSE 100 index of leading London listed companies has retreated by 3% over the past fortnight.
Within the recruitment sector, main decliners include Harvey Nash (-6%) despite the release of encouraging interim results, which stressed improved US permanent recruitment demand and an improving outlook in its UK recruitment market. Elsewhere, Kelly Services (-5%) and Robert Walters (-4%) prop up the foot of the table, although it would be remiss of us not to acknowledge that the latter soared by a phenomenal 50% during August and September.
The leader board includes two Dutch recruitment agencies this month, with USG rising by an impressive 12% and Randstad a respectable 2%. Latest temp industry data from ABU, the trade body for recruiters in the Netherlands, suggests an improving overall trend and that the higher margin administrative and technical segments are starting to edge closer to positive year-on-year growth. Interestingly, this echoes French temp industry data for September, which extended a sustained pattern of improvement into a fourth month.
Other recruiters who have managed to buck the decline include Matchtech (+7%), Hays (+4%) and Staffline (+4%). I hosted a couple of investor meetings with Hays’ management a few weeks ago and haven’t sensed the same degree of confidence in years. Their analyst and investor seminar in mid-November is the first since 2010 and will be awaited with interest.
Over the next few weeks, many of the industry’s heavyweights will update investors on third quarter trading. As we go to print, Robert Walters has kicked off proceedings with slightly stronger organic revenue growth but analysts’ profit estimates remain unchanged due to exchange rate headwinds. At the group level, net fee growth accelerated from 7% in Q2 to an impressive 10% in Q3 driven by stronger momentum in the UK and Asia Pacific but, despite improved economic indicators, the performance in Europe was more subdued. Perhaps this sets the tone for the next few weeks.
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