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UK – Robert Walters profits halved as banking sector remains difficult

02 August 2012

UK-based staffing firm Robert Walters (RWA:LSE) boosted half-year revenue and gross profit across all its geographical regions despite “muted” trading conditions in Europe, the firm reported Thursday. But the recruiter was hit by slowing activity in the permanent recruitment market and the banking sector, seeing a slide in profits in the first six months of the year.

“Current trading remains difficult necessitating close management of the Group's cost base, particularly in those locations where market conditions are most challenging,” said Chief Executive. Robert Walters. “We will continue to selectively invest in the long-term geographic growth and diversification of the Group.”

Revenue in the six months to June increased by +14% to £275.0 million with gross profit rising by +4% to £92.4 million. However, operating profit more than halved (-52%) to £3.4 million from £7.2 million a year ago. In the first half of the year, profit after tax also dropped sharply to £2.0 million compared to £4.8 million in 2011, seeing a fall of -57%.

The company’s recruitment process outsourcing (RPO) segment, Resource Solutions, saw revenue rise to £46.0 million, compared to £35.5 million a year ago. Overall, the firm said that the market and confidence levels remained fragile during the first half.

Contract recruitment now represents 31% of gross profit in the Group's recruitment segment, compared to 29% a year ago. Looking ahead, the firm is expecting to achieve improved growth rates during the second half of the year.

In the United Kingdom, which makes up around a quarter of total Group gross profit, revenue was up by +8% to £93.4 million. Gross profit also increased by +5% to £23.9 million. However, permanent recruitment levels in the banking sector remained weak. The RPO business Resource Solutions performed strongly during the first half of the year.

In continental Europe revenue was up slightly by +2% to £44.0 million compared to £42.9 million a year ago. Gross profit increased by +3% to £19.9 million, delivering a lower operating profit of £0.3 million against last year’s operating profit of £1.0 million.

In France, the staffing firm’s largest business in the region, business performed well. The firm said the German segment produced strong gross profit growth while in the Netherlands, market conditions remained tough and gross profit declined marginally. Recruitment activities were also “muted” in other countries due to economic and political uncertainty.

Asia Pacific, the staffing firm’s largest geographical segment in terms of revenue and gross profit, increased turnover by +23% to £134.7 million during the first half of the year. Gross profit was up by +3% to £45.9 million but remained flat in constant currency. Operating profit was down to £3.3 million compared to £5.8 million a year ago.

Australia, the largest business in the region, continued to perform well in the resources industry and the commerce sector. In Asia a slowdown in the banking sector impacted business with the firm investing increasingly in China, where it also restructured the management team.

In the company’s smallest segment, Americas and South Africa, revenue increased to £2.9 million from £2.5 million a year ago. Gross profit was up by +11% to £2.7 million with the firm reporting an operating loss of £0.2 million against last year’s operating profit of £0.1 million. South Africa produced strong gross profit growth, but in the USA the firm’s New York business was also impacted by the banking sector slowdown. In Brazil, recruitment activity slowed down in the second quarter but the firm said South America remained a long-term growth market.

Robert Walters is a specialist professional recruitment firm, providing services on a permanent and contract basis to clients in the financial, commercial and industrial sectors. The firm is one of the top 50 largest staffing companies in the world, according to Staffing Industry Analysts’ research.

In early trading this morning, the company’s share price was up by +2.0% to 185.00 pence, down -42.1% from a year ago and +17.8% above the 52-week low of 157.00 pence seen In December 2011. The recruitment firm has a market value of £143.71 million.

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