- Year-end update warning brings minor downgrade to 2024 forecasts
- PageGroup had already set the gloomy tone with Monday’s alert
- October Budget cited as a major reason for UK weakness
- Recruiter itself continues to cut jobs
- Net cash balance sheet provides some ballast
“Shares in recruitment specialist Robert Walters were already trading close to their Covid-inspired lows of five years ago, so the shares have managed to shrug off a weak fourth-quarter update, thanks in part to how a £53 million net cash pile on the balance sheet represents a quarter of the company’s stock market valuation,” says AJ Bell investment director Russ Mould. “That provides some degree of downside protection and ballast, while chief executive Toby Fowlston’s forecast of a broadly break-even year in 2024 at the pre-tax level compares to a consensus forecast of a £2.5 million profit, so the downgrade to forecasts is not a big one.
Source: LSEG Refinitiv data
“Nor is it a great surprise to investors that 2024 was a tough year that ended amid great uncertainty, especially as recruitment sector peer PageGroup steered expectations to the low end of the forecast profit range for the year on Monday.
“Overall gross profits (or net fees) fell 17% year-on-year in the fourth quarter and represented a mild deterioration in the rate of decline from the July-to-September period. That also extended a streak of year-on-year comparisons that has been in negative territory since the second quarter of 2023.
Source: Company accounts
“As at PageGroup, France, Germany and the UK were weak. Unlike PageGroup, America offered little help. China and Hong Kong showed further year-on-year declines in income.
Source: Company accounts
“It is tempting to argue that these figures probably reflect budget decisions taken several months back, given the lengthy lead times involved in headcount changes by employers. But Mr Fowlston does specifically flag the October Budget as a reason for weakness in the UK operations in the final three months of last year, as he asserts it is already weighing on employers’ plans for hiring.
“Investors will now look to the third and final trading update from recruiters this week, when Hays reports for the final three months of last year (which is the second quarter of the company’s financial year to June 2025).
“A further weak statement seems likely and so the debate is set to move on to how quickly the recruiters start to see an upturn in their fortunes. Analysts are predicting improved profits for all three firms in the coming year but a return to 2022’s levels is now seen as some way off, let alone the pre-Covid highs.
Source: Company accounts, management guidance, Marketscreener, consensus analysts’ forecasts. PageGroup and Robert Walters have December year-ends, Hays’ financial year runs to June.
“Robert Walters is taking no chances and already turning to self-help during tougher times. A 5% quarter-on-quarter cut in fee earner headcount takes the total to 3,294, the lowest mark since the pandemic-blighted second quarter of 2021 and 17% below the level of a year ago.”
Source: Company accounts
