This week has seen two out of three UK recruitment firms finally post positive fee growth after several years of declines. In both cases the increase was marginal, but investors will be hoping it marks a turning point for the sector.
Fee growth finally turns positive
Today, recruitment firm Robert Walters (LON:RWA) reported a marginal increase in revenue for Q3. Performance across the regions was mixed, but the bottom line was a 1% increase in net fee income.
Asia Pacific, Europe and Rest of the World, which represent roughly 80% of group revenue, saw net fees from recruitment fall. The UK, however, saw a 14% increase in recruitment net fee income.
Moreover, recruitment outsourcing, which is unique to Robert Walters and represents around 20% of income, enjoyed strong growth. Asia Pacific, the UK and Rest of the World all posted double-digit growth in outsourced recruitment net fee income.
CEO Toby Fowlston said strengthened leadership in key markets and better data visibility had played into the outperformance. Although the global macroeconomy and geoplitics remained volatile, Fowlston said the firm’s FY results would be ‘at least in line with market expectations’.
Turning the page
On Tuesday, Michael Page (LON:PAGE) posted a trading update covering the three months to September. For the first time since Q4 2022, the firm reported growth in net fee income, albeit just a 1.5% increase.
As with Robert Walters, by geography and revenue split most of the group’s net fees were down. EMEA, which represents 49% of revenue, saw a 3.8% drop, while the UK, which represents 11% of revenue, experienced a 5.5% drop.
However, the Americas and Asia, which collectively account for 40% of revenue, saw fees rise 8.9% and 14.7% respectively. Moreover, growth was positive in both temporary and permanent hiring, marking another milestone.
CEO Nicholas Kirk put the improvement down to ‘a normalisation of conversion of offers to placements’. Kirk acknowledged there remained ‘a significant degree of uncertainty’ in some markets, but confirmed the company’s FY expectations.
Improving trend at Hays
Completing the picture, Hays (LON:HAS) posted its update for the three months to the end of September on Monday. While net fee income fell 3% on an organic basis, this was an improvement on the previous three quarters.
The firm’s three three key geographic regions of Germany, the UK & Ireland and Australia & New Zealand all saw fees fall. Temp and contracting fees were down 1%, while fees from permanent placements were down 7%.
CEO Mark Dearnley also flagged self-help measures for part of the group’s improved performance, saying there was ‘real energy across the group’. Dearnley added: ‘Our medium-term targets can be achived though our own actions and we were pleased to make continued progress during the quarter.’
We asked a couple of months ago if it was time to buy the recruiters, and their share prices responded positively. There hasn’t been the same reaction this time round, but it seems the low is in for net fees and the share prices.
Historically, investors have treated recruitment stocks as lead indicators of the economic cycle. Given the upheaval in the global economy over the last four or five years, though, it’s hard to know if that’s still the case.
All three firms have much bigger businesses outside the UK than inside nowadays. Therefore, what’s needed is an improvement in the global picture before we go nap on the sector, making it a waiting game.
