Following a strong set of interim results this summer, professional recruiter Robert Walters (RWA) has issued its third profit upgrade this year. Citing strong trading across all of the group’s regions during the first two months of the present quarter, the board expects full-year profits to be “materially ahead of market expectations”.
Following the announcement on 4 December the group’s share price rose by 11 per cent to 304p by the close of trading.
The group announced in July it expected full-year pre-tax profits to be towards the upper-end of market expectations following a 12 per cent increase in net fee income for the first-half.
Its interim results revealed strong growth, with year-on-year operating profits rising by 41 per cent to £5.3m. This echoed strong UK performance, where operating profits more than tripled, as well as gains in emerging markets such as Thailand and Malaysia. Management said they have seen UK confidence increase over the past 12 months, benefiting the business as more candidates feel able to move jobs. The group has also benefitted from increasing demand in Japan for bilingual candidates as well as expansion into emerging markets such as Thailand and Indonesia.
The group has previously struggled after the financial crisis hit the highly cyclical recruitment industry, before its 2014 full-year results indicated a change in fortune. Broker Investec revised its full-year pre-tax profit expectations for 2014 and 2015 by 14 per cent to £15.9m and 6.5 per cent to £18m. It reckons that even though the shares are trading at almost 20 times next year’s forward earnings now is a good time to buy given the group’s geographical spread and vertical mix.
Rival recruiter Hays (HAS) has also been particularly bullish, announcing its acquisition of US-based IT staffing company Veredus. The recruiter gained an 80 per cent stake in the business for an initial consideration of £28m, with the option to acquire the remaining part in March 2018. The purchase doubles the group’s US presence, providing similar scale to its Canadian business.
Analysts at Numis said the acquisition “provides an acceleration of its strategy to build scale in the US”. The broker rates the company as a buy since the shares are trading at a discount to its peers, at around 15 times forward earnings, and offer “value into cyclical recovery in the UK”.
