Heap good news as Hays leads perm-focused white collar recruiters’ bounce back
1 May 2014
The lull over Easter has been as pedestrian as my progress down the A30 in an underpowered VW Camper with no second gear during the school holidays. Fortunately news for recruitment sector observers has picked up since but the tone has been more mixed than expected.
Thu, 1 May 2014 | Kean Marden, head of business services equity research, Jefferies InternationalThe lull over Easter has been as pedestrian as my progress down the A30 in an underpowered VW Camper with no second gear during the school holidays. Fortunately news for recruitment sector observers has picked up since but the tone has been more mixed than expected.
At one end of the scale, Hays’ trading between January and March was excellent and 8% net fee growth was well ahead of our 4% estimate. We felt there were three main positives: a further acceleration in perm growth; a sharp step up in UK Accountancy & Finance; and clear signs that conditions in Australia have stabilised.
Investors increasingly feel confident that, after five years in the doldrums, the UK has turned the corner under UK & Ireland managing director Nigel Heap and many of them now debate with us whether profitability can return to £100m or beyond.
At the other end, trading updates from the generalist recruiters were more mixed. Yes, disciplined cost control is driving higher than expected profitability but net fees seem slow to accelerate.
Manpower was the pick of the bunch. First-quarter profits were 26% ahead of market expectations driven by 3% organic revenue growth (versus 0-2% guidance provided by management three months earlier) and the shares rebounded by 8% on the day.
Conversely, Randstad’s profitability beat market expectations by 7% but revenue growth in March and early April hasn’t accelerated much from the 3.6% figure reported for Q1. According to management, Randstad isn’t currently experiencing an acceleration in growth but they remain confident that “gradual recovery” continues. Investors felt deflated, and the shares fell by 4%.
Across equity markets as a whole, the FTSE100 index has appreciated by 3% over the past fortnight. Very few recruiter shares are down over the period and so, warmed by the glow of a relaxing Easter break and Orchard Pig cider, we will focus on the leader-board this month.
Harvey Nash (+8%) heads up the list after highlighting that the “significant” improvement in trading seen in Q4 has continued into the new financial year. Manpower (+6%) held on to most of its results day gains and Robert Half (+7%) also impressed investors with its trading announcement.
Is there an obvious conclusion to be drawn? Maybe as pockets of the labour market start to switch from client-driven to candidate-driven, perm-focused white collar recruiters are re-establishing their historic growth superiority over the blue collar generalists.
At one end of the scale, Hays’ trading between January and March was excellent and 8% net fee growth was well ahead of our 4% estimate. We felt there were three main positives: a further acceleration in perm growth; a sharp step up in UK Accountancy & Finance; and clear signs that conditions in Australia have stabilised.
Investors increasingly feel confident that, after five years in the doldrums, the UK has turned the corner under UK & Ireland managing director Nigel Heap and many of them now debate with us whether profitability can return to £100m or beyond.
At the other end, trading updates from the generalist recruiters were more mixed. Yes, disciplined cost control is driving higher than expected profitability but net fees seem slow to accelerate.
Manpower was the pick of the bunch. First-quarter profits were 26% ahead of market expectations driven by 3% organic revenue growth (versus 0-2% guidance provided by management three months earlier) and the shares rebounded by 8% on the day.
Conversely, Randstad’s profitability beat market expectations by 7% but revenue growth in March and early April hasn’t accelerated much from the 3.6% figure reported for Q1. According to management, Randstad isn’t currently experiencing an acceleration in growth but they remain confident that “gradual recovery” continues. Investors felt deflated, and the shares fell by 4%.
Across equity markets as a whole, the FTSE100 index has appreciated by 3% over the past fortnight. Very few recruiter shares are down over the period and so, warmed by the glow of a relaxing Easter break and Orchard Pig cider, we will focus on the leader-board this month.
Harvey Nash (+8%) heads up the list after highlighting that the “significant” improvement in trading seen in Q4 has continued into the new financial year. Manpower (+6%) held on to most of its results day gains and Robert Half (+7%) also impressed investors with its trading announcement.
Is there an obvious conclusion to be drawn? Maybe as pockets of the labour market start to switch from client-driven to candidate-driven, perm-focused white collar recruiters are re-establishing their historic growth superiority over the blue collar generalists.
