Robert Walters propelled by fiercely competitive labour markets

What a strange set of economic circumstances we are living under. With growth headed towards negative territory and inflation at the multi-decade high, it seems disingenuous that we are blessed by (or saddled with) a booming jobs market.

As foreshadowed at the start of July, Robert Walters' (RWA), record second-quarter performance was underpinned by strengthening recruitment activity levels, leading to upwardly revised market expectations for 2022. Second quarter net fee income climbed to £112mn from £89mn a year earlier, while half-year earnings for the first half were up by a third to 27.5p a share.

It has been widely posited that the pandemic accelerated many trends already evident in the global economy, not least of which the digital transition. This has helped to trigger a boom in specialised white-collar positions, thereby exacerbating the seemingly perennial skills shortage.

So, we continue to witness significant churn in job markets right across the globe as employees scramble for better pay deals. Burgeoning wage inflation is a natural consequence of fast-rising consumer prices, and this has resulted in “fierce competition for talent across all of the group's geographies”. There are other factors feeding into acute skills shortages, such as negative net migration in certain economies that have been shuttered in due to pandemic travel restrictions.

There seems to be no let-up in activity and Robert Walters has significantly expanded its consultant (fee-earner) numbers to secure market share. A forward PE multiple of 10 times consensus earnings isn’t prohibitive, particularly given a forecast dividend yield of 4.2 per cent, yet the fact that its shares have lost 32 per cent of their value in the year-to-date suggests that the market is pricing in a negative medium-term outlook on the jobs market. Hold.

Last IC View: Hold, 514p, 6 Jul 2022