Robert Walters delivers against an unsettled backdrop

Recruiters have been operating under a unique set of circumstances since Covid-19 emerged.

We’ve had coronavirus job retention schemes, work-from-home guidance, the “great resignation”, labour shortages and vacancies exceeding pre-crisis levels. It’s clear that the impact of the pandemic on labour markets differed from a garden-variety recession in that it had unequal impacts across sectors, with those involving social contact disproportionately affected.

Against this evolving backdrop, Robert Walters (RWA) has turned in “its most profitable year ever”, with net fee income up 17 per cent at £354mn, four-fifths of which is linked to its international businesses. The most noteworthy performance was attributable to the Asia Pacific region, where net fees increased by a third to £164mn.

Tight labour markets and wage inflation “across all geographies and specialist disciplines” provided fertile ground for the group’s consultants, so overall productivity increased by 20 per cent, while the number of employees increased by 11 per cent to 3,484.

Management indicates that the labour market has waxed and waned in response to clinical developments, specifically the efficacy of vaccine programmes. Volumes increased through the year as business confidence returned and even the emergence of the Omicron variant towards the end of 2021 did little to slow momentum, as the group’s clients, candidates and consultants “were again able to seamlessly adapt with no material impact on productivity”. Permanent and interim recruitment activity were the strongest drivers of growth as businesses felt able to take long-term employment decisions. Permanent recruitment now represents 68 per cent of group net fee income, up from 62 per cent in 2020.

There is always some debate as to whether the recruitment market is a leading or lagging economic indicator, but this is perhaps even less clear at the moment because of the unprecedented nature of events. BDO’s employment index climbed for the fourth month in a row in February, hitting its highest level since the pandemic began, although you’re left wondering the extent to which this represents a backlog.

Robert Walters, like industry peers, is operating in a sweet spot, but the global economy is now under severe strain because of the steep rise in energy costs, not all of which relate to the crisis in Ukraine. And while wage inflation is fine, it needs to be accompanied by a commensurate increase in productivity – a point not lost on employers. The recruiter’s shares trade at an undemanding 11 times forward consensus earnings and at a 41 per cent discount to the target price, but macro issues are far from settled. Hold.

Last IC view: Hold, 726p, 28 Jul 2021