Staffer Robert Walters (RWA) kicks off the recruitment reporting season and reveals its first quarter gross profits are up 17% on a year-on-year basis to £88.5m.
While the company is continuing to prosper from improving global economic conditions, the usually high growth Asia Pacific region only grew 3% in the quarter to 31 March.
AJ Bell investment director Russ Mould says this was due to ‘movements in the foreign exchange markets and stripping out the currency impact growth was a more robust 11%’.
Also contributing to the modest performance was the fact that, according to the company, Singapore ‘remained challenging’. It explained that Singapore employment law is attempting to increase the proportion of Singaporean employees and having a detrimental impact on the company.
This is presumably due to the high level of ex-pats based in Singapore which is a hub for South East Asia and home to top law and accounting firms.
Given the absence of strong growth in its largest contributor to net fee income, it’s unsurprising the share price is broadly flat at 706p.
THE REGIONS
Robert Walters has enjoyed qualified success in its second largest market the UK, which is up 6% to £25.2m. The UK is a challenging market and some of the company’s peers have gone backwards here.
The company’s offices in the UK’s regions are doing well as major companies such as Burberry (BRBY) and Marks and Spencer (MKS) are setting up in places like Manchester, Milton Keynes and St Albans. These are all areas Robert Walter has covered.
However, broker Liberum was less impressed with the UK performance saying ‘due to challenges in financial services, the UK result was marginally weaker than our forecasts’. For this reason and ‘macroeconomic uncertainty’ Liberum leaves its forecasts unchanged.
The real driving force behind Robert Walters strong first quarter showing has been its performance in mainland Europe. Germany, Spain and Holland delivered fee income growth in excess of 35% in constant currencies.
THE NUMBERS
At 31 March, Robert Walters had a net cash position of £34m, compared to £31.1m the prior year. Liberum expects this cash to be returned to shareholders, pencilling in a 15% hike in its ordinary dividend, £10m spent on share buybacks and sees this as a conservative estimate. The company would still be sitting on a £34.3m cash pile after paying out.
Using Liberum’s forecasts, Robert Walters is trading on 16 times 2018’s 44p of earnings.
