The updates from the recruitment specialists this week on prospects for employment in the UK have been decidedly mixed. Robert Walters was positive enough, with strength in the areas of technology and the law, though they are a smaller operator.
Pagegroup’s figures on Wednesday were poor, a 7.6 per cent fall in income from the UK reflecting uncertainty among employers in the run-up to Brexit. Now Hays, the biggest recruiter, has come in with a 1 per cent rise in the UK in the first three months of its financial year to the end of September, with a decent 4 per cent rise in the private sector and a 9 per cent fall in the public sector, in part driven by changes in tax law that make hiring consultants less attractive.
The Hays numbers may have been flattered by the amount of work it gets from firms outsourcing their hiring and firing requirements, which tends to be more reliable, and their relatively high proportion of temporary business. This also tends to move ahead when those employers are less confident, though its exposure to the public sector kept temporary fee income flat.
Hays is getting by with fewer staff and so better productivity; consultant numbers are down 4 per cent year on year. The company says there is, from its own experience, a degree of confidence returning among employers and candidates.
UK and Ireland is only 25 per cent of the total. Elsewhere in the world, all is moving ahead strongly. Germany, the biggest business and the most profitable, saw a 15 per cent increase in fees, one of 13 countries in Europe that produced double digit rises, a reflection of the economic recovery in the eurozone and increasing outsourcing by corporates there.
Asia Pacific saw a 15 per cent rise in Australia, the fourth year of growth, and record performances from Hong Kong, China and Malaysia. A 10 per cent rise in fee income across the group, despite that flatness in the UK, continues the momentum seen in the previous quarter. Hays still has cash in the bank and the assumption is that this year will bring another special dividend, after the 4.5p paid last year.
The shares, which slumped to below £1 after the referendum, have climbed since though yesterday’s figures saw a muted reaction, up ??p at ??p. Assuming a similar level of dividends, the forward yield is 4 per cent while the shares sell on 20 times earnings. They look high enough for now.
MY ADVICE Hold
WHY The shares have come up a long way and seem to be discounting a repetition of the special dividend, though this does provide a decent yield
Tarsus
One of the problems in analysing the quoted exhibitions companies such as Tarsus is the wild swings in earnings from one quiet year to one in which several big biennial events take place.
This year is a busy one for Tarsus with the forthcoming Dubai Air Show and the Labelexpo Europe in Brussels just finished both taking place in odd years. The imbalance this year is made greater because of the purchase at the end of 2016 of an annual US travel show and, in the spring, of a biannual Chinese home furnishings event.
The other problem with the smaller companies can be a disparity of earnings from year to year as macroeconomic or political events impact in a given territory. Tarsus suffered from the recent upheaval in Turkey, though this is only 5 per cent of the business. Its performance is in any case more consistent than some of its rivals.
The nine-month trading update showed that bookings for Dubai, for example, are promising enough while there was an 84 per cent rate of rebooking for the next Labelexpo two years hence. For this year like-for-like bookings are running 8 per cent up on last year, about twice the industry average. Those two acquisitions are trading well, with the prospect of quadrupling the space in China by 2019.
Tarsus shares took a fall to well below £3 in the late summer as one institution was required to sell. They have recovered, up 3p to 304p, but still sell on about 11 times earnings. Worth tucking away for a further recovery.
MY ADVICE Buy
WHYTarsus is among the more reliable in the sector
Polar Capital
Polar Capital has now turned the corner after a difficult few years of falling assets under management. The turning point came in March, the start of the financial year. Before that there were two years of net outflows. The fund manager’s flagship Japan fund had become too big for its own good, about 40 per cent of the portfolio at one stage, and when the Japan market turned downwards, investors fled.
Assets under management since March grew from £9.3 billion and passed £10 billion at the end of June to stand at £10.6 billion at the end of the first half. The gain in the last quarter was about 60 per cent from net inflows.
The hope at Polar is that, unlike in the previous financial year, the dividend that provides a yield of 5.1 per cent will be covered by earnings. This would probably require a favourable view on performance fees; these shot ahead from £2.8 million to £9.6 million in the first half but that sum is not nailed down and depends on performance to the end of 2017.
The third aspect of the recovery is the share price, up from about £3 at the start of this year and ahead another ¼p to 489¾p on the numbers. The shares sell on 15 times earnings, which looks about right.
MY ADVICE Avoid
WHY Shares have recovered strongly and look fairly valued
And finally . . .
Some of its markets remain challenging because people are not necessarily moving house and upgrading their bathrooms as much as they used to but Norcros, the maker of showers and tiles and adhesives, saw strong progress in its first half, benefiting as it benefited from the continued boom in new housebuilding. In the UK sales were actually 8.4 per cent higher, while in its South African subsidiary a 4.8 per cent constant currency rise was boosted by the recovery in the value of the rand. The shares were up by 6.5 per cent.
