Robert Walters founder bows out as recruiter reports 21% increase in earnings

You could argue that, since lockdown, recruiters have been faced with an unusual set of circumstances in global labour markets. They have been forced to develop business plans in the face of an ongoing skills mismatch, an early exodus of near-retirees, fast-rising interest rates and surging wage inflation. Throw in the conflict in Ukraine, and the business of predicting and then responding to changes in labour markets becomes an increasingly fraught process.

Yet, for all this, Robert Walters (RWA) delivered a 21 per cent increase in earnings to 56.2p a share for 2022, while simultaneously driving revenues above the £1bn mark for the first time since 2019. It reported growth across all geographies, with Europe and Asia Pacific (collectively 75 per cent of net fee income) particularly noteworthy. The global expansion continued apace with the opening of its first office in Italy, while office networks in existing markets – Austin, Berlin and Bilbao – were also augmented.

The recruiter was able to increase the proportion of face-to-face interviews as the residual impact of the pandemic continued to dissipate, a trend that has continued into the current year. And to cope with the challenges and opportunities in a post-Covid jobs market, the group’s headcount was increased by a quarter, as reflected by a corresponding hike in administrative expenses.   

Net fee income grew across all forms of placement – permanent, contract, interim and recruitment process outsourcing. The group’s eponymous chief executive, Robert Walters, believes this blend of revenue streams represent “a clear strength and source of competitive advantage and resilience when market conditions become tougher”. That may be so, but it’s probably telling that contract recruitment activity increased in the latter part of the year. Naturally, companies tend to favour fixed-term employment arrangements over permanent whenever macroeconomic anxieties mount, and the group noted that several market indicators deteriorated over the second half of the year.

A solid performance that was not dissimilar in outlook to an earlier statutory release from rival PageGroup (PAGE), yet it came with news that Walters will retire from the top post at the April annual meeting, passing the reins to company insider Toby Fowlston. He will retire at a point when confidence in the jobs market is beginning to wane, not least because of the cutbacks we have witnessed in the global tech segment. The opposing tack is that China’s re-engagement with the global economy will have a galvanising effect. Whatever the outcome, a forward rating of 10 times FactSet consensus earnings isn’t prohibitive given a forward dividend yield approaching 5 per cent, but it would be folly to rule out a significant dip in net fee income in 2023. Hold.

Last IC view: Hold, 538p, 28 Jul 2022