It is hard to know how much to read into the much better than expected first-quarter results from Robert Walters, the headhunter. We will know more today when the rival Page Group reports and tomorrow when Hays, the biggest of the quoted UK search groups, follows. The sector is widely followed to see the willingness of employers to take on staff and acts as an indicator of economic performance.
Jefferies, the broker, this week published a note ahead of the reporting season that suggested some uptick in job adverts in April after a subdued picture in February and March in the UK, and a further recovery in Australia after the downturn caused by earlier weakness in natural resources. There are also anecdotal reports of upward pressure on white collar salaries in Britain.
Walters takes about 30 per cent of fees from the UK and a 27 per cent rise in the first-quarter total is largely down to a resurgence in financial services. Again, it is hard to be too specific as these areas, particularly investment banking, are highly volatile.
The company is also getting the benefit of its resource solutions initiative, which contributed perhaps half the fee income and allows customers to outsource their hiring needs.
What is striking is the strong performance pretty well everywhere else. Walters is well entrenched in Japan and is moving into emerging markets such as Vietnam and Indonesia. The company has hiring issues of its own in China, where staff are inclined to move on to competitors if the pay is better. In Australia that return to confidence on the part of employers is coming through.
The results from Europe are equally striking, again with that confidence factor returning that encourages employers to hire and their staff to look for better jobs. This is even so in France despite the uncertainty of the election, though there and in the Netherlands there is a tendency to take on interim or contract staff because of onerous employment laws.
The trick with the recruiters is always to catch them when they are on the upswing. The share price performance rather suggests that this point is past. Up 18½p at 450p, the shares sell on 15 times earnings, which looks a full rating.
My advice Avoid
Why The shares have come up a long way and the rating looks high enough for now and takes into account better than expected trading
JD Sports Fashion
The list of British retailers that have successfully exported their skills to world markets is a short one but, arguably, those at the fashion end of the spectrum have done better than most.
To that list can probably be added JD Sports Fashion, which last year took about 10 per cent of all sales from outside the UK in its branded stores, setting aside joint ventures and other offshoots, and continues to expand into territories such as Malaysia and Australia. JD has the advantage of strong relationships with Nike and Adidas, which supply it with exclusive ranges that can go into such new stores and have themselves already indicated strong performances.
The main UK brand is surging ahead, led by the seemingly unstoppable trend towards wearing sportswear as casual clothes and those trainer brands. Sales here were up more than 10 per cent in the year to January 31, though the company has expressed typical caution over how long this can continue.
The Blacks and Millets chains are at last in the black, nearly five years after they were bought, and the latest acquisition, Go Outdoors, purchased for almost £124 million, is in the hands of the competition authorities.
JD shares, up another 33½p at 440p, sell on almost 20 times earnings for this year. Again, JD is cautious over how the current quarter is progressing, given how late Easter is this year, but the weather at least is in its favour. That multiple looks challenging but it would take a lot of nerve to bet against JD and the shares look good for the long term.
My advice Buy
Why Strength of brand should mean further progress
De La Rue
Paper is so last year. De La Rue may still be thought of as a banknote printer and currencies provided almost three quarters of revenues at the interim stage, but the purchase of Du Pont Authentication for $25 million this year gives an idea where the company is going. It provides holograms that go on to a range of goods such as spirits to prove they are what they claim to be.
De La Rue therefore aspires to be the provider of a range of intellectual property that it either uses itself or licenses to others, rather than merely a purveyor of the folding stuff. Yesterday’s year-end trading statement was unexpected and required because operating profits will come in some way ahead of the £66.4 million that the stock market was expecting.
The outperformers are identity systems and authentication and traceability — the currency side was in line with expectations. There is no change made to current financial year expectations. The company is gaining from the weaker pound but is increasing spending on R&D.
A rise of 43½p in the shares to 663p puts them on a still reasonable 14 times earnings for this year.
My advice Buy
Why Change in business not yet fully appreciated
And finally . . .
XP Power makes essential if unromantic controllers that convert power in electrical equipment to the appropriate form. The company is not that well known but revenues are reliable enough, and the shares rose by 9 per cent on a first-quarter trading statement that showed recent momentum had continued into 2017, with first-quarter sales up 23 per cent at constant currency rates and orders up by a third. XP has the habit of paying quarterly dividends and the latest payment has been raised by 7 per cent.
