Walters rides storm

Indeed, the biggest risk for recruiters at the moment is cutting back so much that they end up destroying the business, especially in smaller offices and less mature markets. Walters’ diverse geographic spread of 39 offices in 17 countries means it has more scope to cut than many of its rivals, but the rewards for maintaining its infrastructure should be there on the other side of the downturn.

So having cut headcount from 1,687 employees a year ago to 1,260 at the half-year stage, the hatches are now battened down firmly enough for management’s liking. What’s more, the habit of recruitment companies to throw off cash when business slows and demands on working capital reduces means Walters now has a reassuring cash pile. In fact, net funds increased from £8.3m at this stage last year to a healthy £22.5m, helped by strong operating cashflow and tight control over working capital.

Still, there’s no getting round the fact that trading is very tough. In the first half, the company's Asia Pacific division saw net fee income (gross profit) plunge by 38 per cent to £19m which led to an operating loss of £0.5m (2008: profit of £7.4m). This reflected a fall off in demand in Australia, due to the impact of the financial crisis and the slowdown in the commodity sector, and tough trading in Asia. It was no surprise either to see the UK business drop off sharply, too, given the economy has suffered its worst contraction in the past 70 years.

Broker Panmure Gordon forecasts a full-year loss per share of 5.48p followed by a loss of 0.46p for 2010 (2008: EPS of 16.6p).

More share tips and updates...