When it comes to London-listed recruitment firms, investors will be familiar with big names such as Hays and PageGroup (formerly Michael Page International), but today I’ve unearthed a much smaller company with perhaps much bigger growth potential.
Small can be beautiful
International recruitment group Robert Walters (LSE: RWA) currently trades just outside the large and mid-cap FTSE 350 index with a market capitalisation of just under £300m. This figure is dwarfed by FTSE 250-listed Hays and PageGroup which are valued at £2.4bn and £1.5bn respectively. But don’t let that put you off, as the saying goes, small can sometimes be beautiful.
Like its larger peers, the group’s share price suffered in the aftermath of last year’s shock Brexit vote, plunging from 344.5p to 251p in just two days following the EU referendum. But like many other sectors that suffered from panic-selling last summer, London-listed recruiters have bounced back handsomely, and Robert Walters is no exception. In fact, at 400p, the group’s shares are now trading 16% higher than they were just prior to the referendum result. So are the shares still worth buying, or have we missed the boat on this one?
International presence
Well, for a start, results for 2016 looked very impressive indeed. The group boasted a record-breaking performance with profits before taxation increasing 26% year-on-year to £28.1m, equivalent to 16% on a constant current basis. But that’s not all, net fee income grew across all regions, with no less than 15 countries delivering record performances.
The company also increased its international presence during the year, opening new offices for the first time in Canada, India, the Philippines, and Portugal. Three new offices were also opened in existing markets in Antwerp, Penang and Toulouse. With all the political and economic turmoil going on in the UK at the moment, it’s also reassuring to note that 69% of the company’s net fee income is generated overseas.
Nevertheless, UK net fee income rose 8% in 2016 to £86.7m, with operating profit up 4% to £6.3m. Overall, net fee income was up 19% on the previous year to £278.3m, with operating profit surging 14% to £26.2m. Total group revenue came in tantalisingly close to the magic £1bn mark at £998.5m, 23% higher than the £812.7m reported in 2015.
Plenty more to come
In its most recent trading update the group again announced very impressive results, with net fee income up 33% to £78.3m in the first quarter of 2017. At the end of the quarter the company had operations spanning 28 countries, with over 3,300 staff specialising in the placement of high-calibre professionals in accountancy and finance, banking, engineering, HR, IT, legal, sales, marketing, secretarial and support, and supply chain and procurement.
Robert Walter’s shares have performed exceptionally well since the Brexit vote, gaining around 20% over the past 12 months, but I think there’s much more to come from this specialist recruiter. Despite the share price rally, I think the valuation remains appealing with the P/E ratio falling to just 12 by the end of next year.
