Brexit Takes its Toll on Recruiters

The Week: Morningstar columnist Rodney Hobson says that despite gloomy figures from Page and Robert Walters, some parts of the world are still hiring

Rodney Hobson 11 October, 2019 | 10:00AM
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Rush hour in Asia

Regular readers will be aware that I regard recruitment companies as something of a bellwether on the global economy. While companies on different continents continue to recruit, then the end of the world is probably not nigh. It was a nasty blow when two leading recruitment agencies brought out gloomy figures on the same day.

However, the news was not all bad: overall Page increased profits by an underlying 2.1% that was doubled when converted into sterling thanks to the fall in the value of the pound, while the figures for Walters were similar at 2% and 4% respectively. The worry is that these growth figures still represent a serious slowdown. For example, growth at Page was 7.4% in the second quarter.

Clearly the continuing uncertainty of whether we leave the European Union is taking a huge toll. I try to keep a neutral stance on the issue but the figures from Robert Walters (RWA) and Page Group (PAGE) encourage me in my long held view that never-ending limbo is the worst possible position for the UK, far worse than a no-deal Brexit or crawling back on our knees to the EU.

Walters reported that UK gross profit had fallen by 11% in the three months to September while the figure for Page, whose shares I hold, was a more respectable but still disappointing minus 4.1%. Both have been saved by having a presence across the globe that has produced spectacular growth in some areas.

Given that the Chinese economy has slowed dramatically, it is perhaps no surprise that Page reported a sharp fall of 24% there, yet the slowdown in the US did not prevent a rise of 10.7% in North America. Fears that Germany could be falling into recession were confounded with a rise of 16% in Page’s gross profits.

Walters did particularly well in parts of the Asia-Pacific region and Europe. Both groups made progress in Australia.

Page and Walters both expect the slowdown to continue. It’s hard to disagree. Page’s gross profit projections for the full year are reduced from £156-168 million to £140-150 million while Walters now expects profits to show no improvement on last year.

Walters shares nearly reached 800p just 14 months ago but are now trading around 450p. Page has slumped from 623p to 385p over the same period. They probably won’t pick up until there is better economic news somewhere in the word. Settling Brexit one way or another would help.

Dunelm Slips Up 

A drop of 10% in the share price was not something Dunelm (DNLM) shareholders have come to expect after a series of sparkling trading updates but the retailer suffered this fate thanks to a key line in the latest statement.

“The recent softness in the homewares market” spooked investors but the reaction may have been a little overdone. The homewares market has been soft for some time, as Marks & Spencer (MKS) can confirm after years of falling sales in this department. In contrast, Dunelm has come through pretty much unscathed, indeed enhanced.

Like-for-like stores sales were up only 2.9% in the 12 weeks to 28 September, Dunelm’s first quarter. This was better than many retailers but low by Dunelm’s recent standards. However, I have long argued that this figure is increasingly irrelevant as shoppers switch to buying online, where sales shot up 34.7%, more than offsetting the slippage in stores. Unfortunately Dunelm did so well in the previous quarter that the growth in group sales at 5.8% seemed positively pedestrian by comparison.

Dunelm shares doubled from 483p last Christmas to 981p in June so a correction was called for. At 730p it is fair to argue that the correction has gone quite far enough.





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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Dunelm Group PLC1,012.00 GBX-0.30
PageGroup PLC474.40 GBX0.08
Robert Walters PLC360.00 GBX-1.37

About Author

Rodney Hobson

Rodney Hobson  is a columnist for and author of several investing books, including The Dividend Investor and How to Build a Share Portfolio.

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