Stock markets around the world have been a strange place for these past ten years. In some ways the credit crunch seems a distant memory and its lessons long forgotten. Countries, companies and individuals still fail to live within their means so another crash may be inevitable some day.
Yet there are few voices warning that the long upward run of shares across the globe is coming to an end. Indeed, we have since around the start of 2009 got used to the idea that indices move only one way, and that is upwards. This week the FTSE 100 set a new high.
These thoughts went through my mind when Robert Walters (RWA), Hays (HAS) and Pagegroup (PAGE) produced generally encouraging updates this week. Surely global recruitment firms give a fair idea of how the world is making a living. If so, it would be premature to get out of equities now.
Walters, the larger and more globally spread of the three, warned that profits would beat expectations after enjoying record growth in the third quarter, with net fee income up 21% year on year and gross profit 22%.
Asia Pacific was least exciting, up just 12%, while Europe steamed ahead by 39% and other international markets, which cover North America, Brazil, the Middle East and South Africa, leapt 75%. Growth was spread comfortably across permanent, interim, contract and outsourcing sectors.
Given the worries over the impact of Brexit, it was particularly reassuring to see UK net fee income rise by 15%, and although London stood out with the technology and legal sectors particularly active, good growth was recorded across the UK regions.
Robert Walters shares have had a great run from 260p to nearly 600p over the past 15 months but it is hard to feel they are overvalued while growth continues apace.
Growth at Hays was pretty good, though at 13% a little way behind Walters. The one area of concern was UK and Ireland, where Hays was only 1% better than the same quarter last year. It is of little consolation to say this is an improvement from the sharp drop experienced at this time a year ago. Hays has come nowhere near to making up the ground lost in 2016-17. There are still only modest signs of improvement in the private sector business that represents 75% of the UK operations.
I hold shares in Hays and, after a rocky period, they are well ahead of my purchase price but I can’t honestly say I would be rushing to buy at current levels around 190p, although I am content to hold.
Pagegroup presented by far the worst picture of the UK, with gross profit down 7.6% here in the third quarter, although that decline was more than offset by growth just about everywhere else, which meant the group as a whole was up 8.8%.
The worrying part of the UK figures is that there has been a marked deterioration at home: in the first half of 2017 the UK was down just 2.3%. This was a big factor in a 48p fall to 477p in Pagegroup shares on the day of the update, although they are still up 100p over the past 12 months.
For those thinking of buying into the sector, some caution is required. There will inevitably be reluctance among companies operating in the UK to recruit staff until talks on Brexit make headway. On the other hand, if genuine progress is achieved then pent-up demand for staff could be unleashed.
Secondly, international companies are subject to currency fluctuations as they translate overseas earnings into sterling. Since the rest of the world accounts for the greater share of the three companies reporting this week, it is a factor to bear in mind.
Please Say Hello
I hope any readers of this column who will be attending the London Investor Show at the Novotel London West in Olympia next Friday will come and have a chat with me during the course of the day. See you then.
Rodney Hobson is a long-term investor commenting on his own portfolio; his comments are for informational purposes only and should not be construed as investment advice, nor are they the opinions of Morningstar.
