PageGroup, which is the old Michael Page International, is the first in the recruitment sector to report figures covering the period after the Brexit vote (the larger Hays had full-year figures out in the summer, but these went up only to the end of June).
There was a noticeable slowdown in hirings ahead of the referendum. The sector is a clear economic indicator, showing how confident employers are in hiring, particularly at the top end of the salary scale in the case of Page, and how willing staff are to look at new jobs.
The results from Page, which gets a quarter of its fee income from the UK, are nowhere near as bad as had been thought. Total fees in the UK were off by 4.7 per cent and the country is bracketed alongside China and Brazil as the more challenging markets, but analysts had been expecting worse. Fees in the the UK public sector were down by 9 per cent as public bodies pulled back from hiring staff.
Yet Page reported greater activity across the group at lower salary levels and among temporary jobs, which tend to be lower-paid, which is promising enough for companies such as Hays, more exposed to those markets, when they come to report.
In the UK, Page Personnel, which specialises in temporary work and comprises about a quarter of the business, suffered a 3 per cent decline, against 5 per cent at the full-time business. This is hardly catastrophic, even if there is, as ever, no visibility of future performance.
Growth is accelerating in Germany, with fee income up 16 per cent as the benefits of earlier investment in temporary work come in. The New York financial services business was down by 41 per cent, but some of this work may be elsewhere, in other cities where Page is investing. Even Brazil is showing signs of stablising, while the rest of Latin America was 23 per cent up.
With little need to invest, the company will keep on piling up the cash, about £70 million once outstanding dividends are paid, making further special dividends likely. The shares rose 19p to 368p. On the basis of payments already announced, they yield almost 5 per cent. The fall this year looks overdone and the yield is a good enough reason to hold.
My advice Hold
Why It is hard to be too confident about prospects, especially in the UK, but the dividend yield does at least give some support
Volution Group
Volution is one of the flotations of the summer of 2014 that appears to have gone well below the radar. The company makes ventilation products, Vent-Axia being the best-known brand, and at the start of the century was part of Smiths, the engineering conglomerate. It came to the market at about the same time as Polypipe, another business seen as a useful play on the UK housing market, and the shares suffered in the wake of the referendum, falling below their 150p flotation price.
The company’s main strength, aside from a position in the growing Nordic market, is its ability to make acquisitons of new products in a sector that is still very fragmented, funding these with cashflow rather than by issuing fresh shares. Underlying revenues were ahead by 3 per cent in the year to the end of July, Volution’s second as a public company, though four deals pushed the headline figure up by almost 19 per cent.
The main weakness was the UK repairs and maintenance market, where other businesses are toiling. The shares, up ½p at 172½p, sell on 13 times’ earnings. Attractive for those growth prospects, even if it might take them time to get going.
My advice Buy
Why The growth is there in the long term
N Brown Group
It is probaby a measure of the market’s nervousness over N Brown that the shares were marked up 29p to 205p at the halfway stage amid relief that the dividend is being held and that the retailer was “comfortable” with market expectations for the year to the end of February.
N Brown, a long-established catalogue retailer, has been moving more online, boasting just over two thirds of sales in the first half. The company has warned about challenging trading conditions, but it is hardly alone in this, given warnings from the likes of Next and Bonmarché. It is focusing on its “Power Brands”, which are seen as more relevant to today’s shoppers. All generated useful rises in sales, if you disregard one legacy brand that is being discontinued. Its traditional segment continues to trail, with sales off by 4.2 per cent.
The rollout of a new digital programme has had to be delayed, after experiences in the United States where it overran, but the effect of this will be minimal. The Brexit vote will put pressure on margins on products sourced in dollars, though N Brown does hedge against currency movements and in this is no different to other high street retailers.
Halfway pre-tax profits exceeded expectations but were still off by almost 20 per cent. Before yesterday, the shares had halved since March and the yield on them is now 7.5 per cent while the earnings multiple is a lowly nine times. That dividend will be held, but there could be further downside for the shares.
My advice Avoid
Why There is no obvious catalyst for progress
And finally . . .
Shares in RWS Holdings continue to progresss, up another 12 per cent after a trading update that was better than expected. This provider of translation services can only see demand grow as clients continue to file patents in different territories. It says it has just enjoyed its best year and that revenues and profits will beat market expectations, helped by the stronger dollar. The latest acquisition is doing well. With debt virtually eliminated, there must be an expectation that the next one is not too far away.
