As the political theatre at Westminster turns to farce and then tragedy (with comedy passing for leadership often) investors in the UK listed recruitment sector have benefitted (largely) from a positive two months in terms of share price performance.
The FTSE100 has continued its upward trajectory and closed at 7508 on 23rd April, a rise of 3.75 per cent over the two or so months since 15th February (when City Focus last covered the UK listed staffing sector).
Most of the larger (by market cap) listed recruitment businesses have comfortably outperformed the broader market. PageGroup (market cap of £1.7 billion) has risen by a handsome 12.6 per cent from 462.5p to 521p over the period from 15th February to 23rd April. It has been an impressive run for Page albeit it remains 15 per cent below its 52-week high of 614p reached on 30th August last year. Larger peer, Hays, with a market cap of £2.23 billion, has had a subdued two months inching down 3.3 per cent from 158.5p to 153.2p.
Robert Walters (market cap £447 million) managed to outperform the market and rise by 4.89 per cent from 556p to 583.2p and elsewhere shareholders have been seeing buoyant share price rises. Staffline (market cap of £238 million) has hiked by 29.4% per cent from 670p to 867.5p albeit its P/E ratio remains (relatively speaking) low at 9.56. The star performer has been Gattaca (market cap of £52 million), which has delivered an eye watering 39.9 per cent price rise from 115.75p to 162p.
SThree (market cap of £401 million) meanwhile managed to eke out a 1p rise from 306p to 307p from 15th February to 23rd April. Impellam shareholders have nursed the most significant wounds, however, seeing the £226 million market cap business plummet by over 17 per cent from 555p to 460p.
Notwithstanding the relatively resilient share price performance of most of the above listed businesses, there is little doubt that investors are nervous about the potential slowdown in key markets for UK listed recruiters.
Hays, for example, reported on 16th April that year-on-year its net fee income growth for the three months to end of March was five per cent but that in its largest market (Germany) it had delivered NFI growth of six per cent compared to 13 per cent during the first half of the year.
Paul Venables, CFO, added a cautionary tone to investors: “The economic background is much worse than a year ago.” He did add, however, pointing to the UK market, “The positive in the UK is that candidate confidence remains strong and candidates are changing jobs.”
Earlier in April, PageGroup had reported a gross profit growth of 11 per cent year-on-year but that in France (which accounts for 16 per cent of the group revenue) the growth had slowed to eight per cent. The French market was similarly challenging for Robert Walters in its latest quarterly update.
Broader and possibly more long-term, challenges for the UK economy’s prospects were outlined by the OECD when it highlighted that the national savings rate for the UK was the lowest of any OECD nations. Pointing to figures from 2015, the OECD analysis records that UK households, companies and the Government were in deficit of some five per cent.
Figures from the ONS for the third quarter of 2018 highlighted that little has changed; that the largest sectors in the UK economy (equating to households, companies and the Government) had spent 5.1 per cent more than they had earned; which means this was borrowed from abroad. The ONS warned that these sectors “…have been in deficit at the same time: A situation last recorded in the boom years of the late 1980s.”
While this lack of saving may blunt the potential for domestic investment in the longer-term, investors are also aware of worries over the world economy. Whilst there has as yet been only a deceleration in the world economy (with weak growth has largely been contained to the manufacturing sector) the sword of trade war between the US and China still hovers over economic crystal balls.
Meanwhile, back in the UK with Brexit negotiations (and the date of the UK’s departure from the EU) likely to continue for many more months - at least - the spectre of uncertainty is likely to be a constant bedfellow for investors for the rest of the year.
This article was originally published in Talint (formerly Recruitment International)