Buy Robert Walters on a tear

Robert Walters has got off to a great start to 2018 with 17 per cent growth in net fee income (NFI) measured at constant currencies. The first quarter is traditionally a quiet time so brokers on the whole left forecasts unchanged following the update for the three month, but the strong performance provides a solid foundation for a continuation of the upgrade cycle that powered share price rises last year. Indeed, according to Bloomberg data, over the past 12 months consensus forecasts for 2018 earnings have been increased by 38 per cent while expectations for 2019 earnings have been pushed 32 per cent higher (see graph)

Walter's largest market is the Asia Pacific region, which accounted for 40 per cent of net fee income (NFI) in 2017. Japan and Hong Kong both had record performances in the year and the group achieved 11 per cent constant currency NFI growth in the first three months of 2018. NFI from the region has grown consistently since 2014 thanks to a combination of conventional recruiting and recruitment process outsourcing (RPO) – which involves outsourcing large parts of companies' recruitment functions and is also behind some of the resilience in the UK. 

The company has also been performing strongly in Europe (23 per cent of NFI) which was the star performer in the first quarter. The group reported 32 per cent growth in constant-currency terms. The fastest growth is coming from markets such as Germany and Spain, which are benefiting from strong economies, increased market penetration and structural changes to the recruitment sector helped push first-quarter NFI up by more than 35 per cent in both countries.

True, trading in the UK, which accounts for 29 per cent of NFI, is subdued but Walters is doing better than rivals, recording 6 per cent first-quarter growth thanks to a strong presence in the regions, its recent investment in RPO, and exposure to some stronger parts of the market.