Major staffing company stocks immune to New Year investment euphoria – City Comment
7 February 2013
The first month of the new year was dominated by trading updates and results from three of the big four large cap UK recruiters.
Thu, 7 Feb 2013 | By Kevin Lapwood, head of support services equity research, Seymour Pierce
The first month of the new year was dominated by trading updates and results from three of the big four large cap UK recruiters.
Swimming against the tide of New Year optimism in equity markets, which we have spoken about before, it seems the major staffing companies were immune to the New Year investment euphoria. Their tone was unenthusiastic, particularly over the Asia-Pacific and European continental regions.
In tune with the negative sentiment in the recruitment market, Michael Page continued to disappoint, reporting a decline in net fee income (NFI) of 3.6% in the last quarter of the year. The company reported particularly tough trading conditions in Germany where NFI was 17% lower than the previous quarter. However, with German Manpower net employment outlook at +5%, and resilient GDP growth, it seems at odds that Michael Page is unable to flourish amid Angela Merkel’s garden of prosperity.
Taking centre stage in the large cap recruitment sphere, Hays showed no deceleration in quarterly trends and reported record activity levels in its German market. Far from simply having higher friends in The Bundestag, Hays’ dominance in this region can be attributed to its more favourable weighting towards temporary recruitment. The trend continues, and given the uncertain macro backdrop it seems employers will remain reluctant to commit resources to permanent recruits, preferring the flexibility afforded by temporary employment.
The start of the New Year also heralded the January edition of our Staffing Handbook. In this latest edition, we argued that most the recruitment stock valuations have moved too far ahead of earnings growth expectations given the continuing lack of good news from the frontline.
Over the past month the Seymour Pierce Staffing index has underperformed the FTSE All Share by 1.4%, while our Small Cap Staffing index was flat. Ever the proponent of “backing the little guy”, we remain positive on our small cap recruitment companies, whose niche recruitment sectors continue to bear fruit.
The first month of the new year was dominated by trading updates and results from three of the big four large cap UK recruiters.
Swimming against the tide of New Year optimism in equity markets, which we have spoken about before, it seems the major staffing companies were immune to the New Year investment euphoria. Their tone was unenthusiastic, particularly over the Asia-Pacific and European continental regions.
In tune with the negative sentiment in the recruitment market, Michael Page continued to disappoint, reporting a decline in net fee income (NFI) of 3.6% in the last quarter of the year. The company reported particularly tough trading conditions in Germany where NFI was 17% lower than the previous quarter. However, with German Manpower net employment outlook at +5%, and resilient GDP growth, it seems at odds that Michael Page is unable to flourish amid Angela Merkel’s garden of prosperity.
Taking centre stage in the large cap recruitment sphere, Hays showed no deceleration in quarterly trends and reported record activity levels in its German market. Far from simply having higher friends in The Bundestag, Hays’ dominance in this region can be attributed to its more favourable weighting towards temporary recruitment. The trend continues, and given the uncertain macro backdrop it seems employers will remain reluctant to commit resources to permanent recruits, preferring the flexibility afforded by temporary employment.
The start of the New Year also heralded the January edition of our Staffing Handbook. In this latest edition, we argued that most the recruitment stock valuations have moved too far ahead of earnings growth expectations given the continuing lack of good news from the frontline.
Over the past month the Seymour Pierce Staffing index has underperformed the FTSE All Share by 1.4%, while our Small Cap Staffing index was flat. Ever the proponent of “backing the little guy”, we remain positive on our small cap recruitment companies, whose niche recruitment sectors continue to bear fruit.
