AJ Bell press comment – 10 January 2023
- Recruiter warns 2022 profits will miss expectations
- Slowdown in technology in USA and China hamper growth
- Attention will now shift to planned updates from Hays and PageGroup, whose shares are falling in sympathy
“The brief statement only has 40-odd lines, and the bad news is buried just four from the end, but the message is clear enough from recruitment specialist Robert Walters: growth is slowing, and profits will slightly undershoot analysts’ expectations for 2022,” says AJ Bell investment director Russ Mould. “There will be fewer pieces of economic data that get central bankers and investors on a state of higher alert than slowing jobs markets.
Source: Company accounts
“This is particularly the case as employment data is a lagging indicator. Even once a company is feeling profitable and positive enough to add to its headcount, it takes time to advertise, interview, select and then agree terms and get the candidate to sign on the dotted line. The same applies to job cuts, as due process must be applied, and the unlucky ones be permitted time to consult and given notice.
“As such jobs data released now may reflect boardroom thinking from three to six months ago. The bad news therefore is that the global economy may indeed be slowing and grinding toward recession across a third of the world, as the IMF’s latest thinking suggests. The good is that by the time the jobs data looks its bleakest, the world may be coming out of the other side and beginning its next upcycle.
“More good news is that the UK looked brighter after a difficult third quarter, but Europe slowed, as did Asia thanks to China, and the US, where the market has become more difficult in the technology sector in particular.
|
|
Year-on-year change in net fee income |
|||||||
|
|
Q1 2021 |
Q2 |
Q3 |
Q4 |
Q1 2022 |
Q2 |
Q3 |
Q4 |
|
Asia |
(5%) |
39% |
46% |
48% |
34% |
22% |
21% |
4% |
|
UK |
(12%) |
9% |
17% |
7% |
4% |
13% |
(6%) |
8% |
|
Europe |
(14%) |
22% |
15% |
28% |
35% |
35% |
33% |
21% |
|
Other |
(31%) |
11% |
(10%) |
44% |
32% |
56% |
78% |
17% |
|
GROUP |
(12%) |
25% |
26% |
33% |
27% |
26% |
22% |
11% |
Source: Company accounts
“It is possible, therefore, that a rebound in China could help going forward although the timing of that recovery from COVID remains unclear and it seems that investors are not convinced the worst is over yet. Robert Walters’ stock peaked almost exactly a year ago and had already dropped by a third, but the acknowledgement that profits will miss analysts’ forecast has prompted further falls, even if profits will still set a new record high – the consensus coming into the fourth-quarter update was looking for a pre-tax profit of £59 million in 2022, compared to just over £50 million in 2021.
“Of greater import now to the market will be whether estimates for another increase, albeit a smaller one, in 2023 are attainable or not.
Source: Company accounts, Marketscreener, analysts’ consensus forecasts. Forecasts based on consensus prior to trading alert and profit warning on 10 January.
“This is particularly the case as a higher headcount will add to costs at a time when income growth may be slowing.”
Source: Company accounts
