A number of the quoted recruitment companies have announced their results recently, while others have issued trading updates. “So what?” the private recruitment owner might ask, “what relevance does this have to me?”

The fact is that the market sentiment towards recruitment is driven by the performance of the PLCs – when they are enjoying strong performance the market as a whole generally benefits and vice versa. 

Private companies are always valued at a discount to public companies for a variety of reasons, including scale and liquidity. Nevertheless favourable market sentiment arising from healthy results increases valuation of the public companies, which in turn has a knock-on effect on the valuation of private recruitment businesses. So in general terms it’s good news for everyone when the market sees healthy results from the sector giants.

So what have we seen in the recent sets of announcements? Here is a selection of extracts, which is not intended to be comprehensive but which reveals some interesting details:

Hays – six months to December 2013

•Net fee income (NFI) +2%

•Operating profit +15%

•Profit before tax +10%

UK & Ireland NFI grew by 9%, Asia grew by 23%, Australia down 17%, Brazil challenging.

Company statement: “…we exit the first half with clear momentum in several key markets, and while some areas are likely to remain challenging, there are many opportunities for growth.”

Michael Page – Year-ended December 2013

•NFI -2.7%

•Operating profit +4.7%

•Profit before tax +12.4%

Reduction in operational support staff enabled profitability growth. Fee earner headcount grew.

UK NFI grew by 2.2%, Asia grew by 7%, USA grew 31%, Australia and New Zealand down 19%. France and Germany down for the year but improving in second half.

Company statement: "During 2013, we also continued to invest in our large, high potential markets of China, South-East Asia, Germany, Latin America and the US, identified in our long-term growth strategy. We see these markets as sizable long-term opportunities…”

Impellam – 52 weeks to 27 December 2013

•NFI -0.5%

•Operating profit -15%

•Profit before tax - Down from £9.8m to a loss of £1m

Impellam incurred significant exceptional costs exiting onerous contracts within its support services business.

Company statement: “Economic conditions in both the UK and North America during 2013 favoured the growth and development of our managed services operations, while from late Q3, our specialist staffing businesses, in particular those with a permanent placement orientation, began to accelerate.”

SThree – Year-ended 1 December 2013

NFI -3.4%

Operating profit -16.3%

Profit before tax -17.8%

The company stated that conditions improved during the year, which is borne out in more recent results for the quarter ended 2 March 2014, which showed NFI growth of 9%. Strong performance in energy and life science markets.

Company statement: “We are trading in markets that are at different stages of the cycle - growing, stable or still in decline - and, while improved sentiment is clearly evident in certain markets, on balance, it is still too early to call a broadly-based recovery.”

Hydrogen – Year-ended December 2013

•NFI +2%

•Operating profit -25%

•Profit before tax -25%

Profit reductions reflect investment in offices, IT and branding.

Strong performance in Singapore, weak in Australia. Technical, scientific and life science practices performed strongly.

Other recent announcements:

Harvey Nash – NFI +9% (UK &Ireland +10%)

Matchtech – NFI +15% (Engineering and professional services up)

Parity – Revenue +7%

So while it might appear that different companies have had varying fortunes over the past 12 months, eliminating non-recurring items as far as possible and interpreting the language used in the accompanying reports, the message seems to be:

•The second half of 2013 saw growth in many areas

•There is modest growth in the UK, Asia is strong and Australia remains weak

•There is no certainty of strong growth in 2014 but there is a sense of cautious optimism for continued improvement in trading conditions

It should be noted that the companies reviewed have typically invested heavily over a period of years in their overseas markets. Their strength of performance in Asia, for example, should not therefore be taken as an indication that any recruitment business can expect to enjoy similar success if they opened an office now. 

I believe that these results are generally encouraging and barring unexpected macro-economic factors, pave the way for an improving 2014.

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