City Comment: Caroline de La Soujeole and Kevin Lapwood_2
28 March 2012
Spring is here and, for equity analysts, it is time for company results. Given the caution at the end of 2011, we were particularly interested in management outlook expectations. So my colleague Caroline and I downed our slide rules, put away our crows’ entrails, and sallied forth to meet the great and good of the recruitment sector.
Fri, 16 Mar 2012 | By Caroline de La Soujeole and Kevin Lapwood, Seymour Pierce
Spring is here and, for equity analysts, it is time for company results. Given the caution at the end of 2011, we were particularly interested in management outlook expectations. So my colleague Caroline and I downed our slide rules, put away our crows’ entrails, and sallied forth to meet the great and good of the recruitment sector.
There were reasons to be cheerful in ICT recruitment when SThree reported a 40% increase in profits for the year and a pick-up in first quarter growth. This was echoed by Albert Ellis at Harvey Nash who announced that his figures would be above expectations with pre-tax profits up by 31% due to strong performances in technology outsourcing and freelance contracting. It appeared that the caution at the end of 2011 was overdone.However, others were less sanguine. Capita’s resourcing businesses are affected by UK government austerity measures, in part responsible for a 7% decline in 2011 group revenues. Hays’ UK business was also hit, but its half-year numbers were better than expected due to buoyant demand for miners in Australia and engineers in Germany. However, with full-year profits expected to be less than half the 2007 level, Hays cut its dividend by 55%.
Hydrogen reported a 48% profit increase with good growth in its contract operations but profits at Robert Walters were only up by 15%. While Robert Walters (chief executive of the eponymous firm) pondered the growth potential of places like Africa, he was more cautious over the immediate outlook, particularly in permanent placement where candidate confidence is low.
The Michael Page meeting was the last at which chief financial officer Stephen Puckett would explain the numbers. Again, the caution that was evident when the group warned on profits last December has moderated, and chief executive Steve Ingham was back to his usual ebullient self. He did, however, produce a chart showing that NFI [net fee income] had declined in each of the last two quarters, leaving some of us to conclude that this was a normal cyclical downturn.
So it seems that things are not as bad as was feared, which has been reflected in share prices. The Seymour Pierce Staffing Index was up almost 25% in the three months ending 13 March (relative to the wider market). However, there is still uncertainty over the economic outlook and, with the sector trading on a prospective P/E (price/earnings) multiple of 18.2x, we remain cautious.
Kevin Lapwood, head of support services equity research, and Caroline de La Soujeole, support services analyst, Seymour Pierce
Spring is here and, for equity analysts, it is time for company results. Given the caution at the end of 2011, we were particularly interested in management outlook expectations. So my colleague Caroline and I downed our slide rules, put away our crows’ entrails, and sallied forth to meet the great and good of the recruitment sector.
There were reasons to be cheerful in ICT recruitment when SThree reported a 40% increase in profits for the year and a pick-up in first quarter growth. This was echoed by Albert Ellis at Harvey Nash who announced that his figures would be above expectations with pre-tax profits up by 31% due to strong performances in technology outsourcing and freelance contracting. It appeared that the caution at the end of 2011 was overdone.However, others were less sanguine. Capita’s resourcing businesses are affected by UK government austerity measures, in part responsible for a 7% decline in 2011 group revenues. Hays’ UK business was also hit, but its half-year numbers were better than expected due to buoyant demand for miners in Australia and engineers in Germany. However, with full-year profits expected to be less than half the 2007 level, Hays cut its dividend by 55%.
Hydrogen reported a 48% profit increase with good growth in its contract operations but profits at Robert Walters were only up by 15%. While Robert Walters (chief executive of the eponymous firm) pondered the growth potential of places like Africa, he was more cautious over the immediate outlook, particularly in permanent placement where candidate confidence is low.
The Michael Page meeting was the last at which chief financial officer Stephen Puckett would explain the numbers. Again, the caution that was evident when the group warned on profits last December has moderated, and chief executive Steve Ingham was back to his usual ebullient self. He did, however, produce a chart showing that NFI [net fee income] had declined in each of the last two quarters, leaving some of us to conclude that this was a normal cyclical downturn.
So it seems that things are not as bad as was feared, which has been reflected in share prices. The Seymour Pierce Staffing Index was up almost 25% in the three months ending 13 March (relative to the wider market). However, there is still uncertainty over the economic outlook and, with the sector trading on a prospective P/E (price/earnings) multiple of 18.2x, we remain cautious.
Kevin Lapwood, head of support services equity research, and Caroline de La Soujeole, support services analyst, Seymour Pierce
