City Comment: Recruitment shares begin 2014 with a bang
9 January 2014
Stock markets have experienced a confident start in 2014. US investors in particular are still looking to increase their exposure to companies who benefit from European economic recovery. Indeed, there was a rumour among traders earlier this week that one investor had just completed a $1bn (£0.6bn) switch out of US and into European equities.
Thu, 9 Jan 2014 | Kean Marden, head of business services equity research, Jefferies International
Stock markets have experienced a confident start in 2014. US investors in particular are still looking to increase their exposure to companies who benefit from European economic recovery. Indeed, there was a rumour among traders earlier this week that one investor had just completed a $1bn (£0.6bn) switch out of US and into European equities.
And who can blame them? Since the week before Christmas the share prices of European recruitment agencies have stormed ahead on a wave of investor optimism. USG (+14%), SThree (+10%), Hays (+8%), Randstad (+8%) and Adecco (+7%) have all posted meaningful gains, with Empresaria (+36%) heading the leader board after a typically well-timed purchase of 3.2m shares at 36p by chairman Tony Martin on 9 December. Contrast this with the US, where Manpower, Kelly Services and Robert Half share prices have barely budged over the same time period.
Robert Walters kicked off the trading update season earlier this week. Organic net fee growth was 9%, which was in line with analysts’ expectations and a little softer than the 10% figure reported in Q3. Momentum accelerated in Europe and the US but Australia weighed on the Asia Pacific division despite a good performance in Japan. Outlook comments were confident in tone and although 2013 profit estimates remained unchanged some analysts upgraded their 2014 estimates by 3%.
As we go to print, Hays has continued this theme in its trading update. Net fees were in line with expectations during the quarter but in our view two developments are more important. Firstly, perm fees increased by 4% (the highest rate of growth for almost two years) with the UK up an impressive 17% driven by improved candidate confidence, clients replacing leavers immediately and companies investing for growth.
Secondly, after five challenging years UK consultant headcount is likely to increase by 5-10% over the next six months as Hays looks to grab marketshare, particularly outside the South-East. Some of management’s anecdotes really stand out – Hays has placed more architects during the last six months than in the previous four years.
However, the start to 2014 has not been plain sailing. Ed Miliband issued a warning that the next Labour government would “ensure that agency workers cannot be used to undercut non-agency staff”. The Swedish Derogation is clearly in his line of fire.
Stock markets have experienced a confident start in 2014. US investors in particular are still looking to increase their exposure to companies who benefit from European economic recovery. Indeed, there was a rumour among traders earlier this week that one investor had just completed a $1bn (£0.6bn) switch out of US and into European equities.
And who can blame them? Since the week before Christmas the share prices of European recruitment agencies have stormed ahead on a wave of investor optimism. USG (+14%), SThree (+10%), Hays (+8%), Randstad (+8%) and Adecco (+7%) have all posted meaningful gains, with Empresaria (+36%) heading the leader board after a typically well-timed purchase of 3.2m shares at 36p by chairman Tony Martin on 9 December. Contrast this with the US, where Manpower, Kelly Services and Robert Half share prices have barely budged over the same time period.
Robert Walters kicked off the trading update season earlier this week. Organic net fee growth was 9%, which was in line with analysts’ expectations and a little softer than the 10% figure reported in Q3. Momentum accelerated in Europe and the US but Australia weighed on the Asia Pacific division despite a good performance in Japan. Outlook comments were confident in tone and although 2013 profit estimates remained unchanged some analysts upgraded their 2014 estimates by 3%.
As we go to print, Hays has continued this theme in its trading update. Net fees were in line with expectations during the quarter but in our view two developments are more important. Firstly, perm fees increased by 4% (the highest rate of growth for almost two years) with the UK up an impressive 17% driven by improved candidate confidence, clients replacing leavers immediately and companies investing for growth.
Secondly, after five challenging years UK consultant headcount is likely to increase by 5-10% over the next six months as Hays looks to grab marketshare, particularly outside the South-East. Some of management’s anecdotes really stand out – Hays has placed more architects during the last six months than in the previous four years.
However, the start to 2014 has not been plain sailing. Ed Miliband issued a warning that the next Labour government would “ensure that agency workers cannot be used to undercut non-agency staff”. The Swedish Derogation is clearly in his line of fire.
