Signs of Recovery in Human Capital Sector?

The Recruitment and Employment Confederation’s recently published Report on Jobs announced a continuing rise in permanent placements at the fastest rate in six months, augmented by temporary staff placements also increasing following a decrease during April.  Yet how deep does such confidence run?

According to the CIPD Resourcing & Talent Planning Survey 2013, there continues to be a lack of confidence amongst potential candidates, partly as a result of the quest for job security in the face of continued economic uncertainty. Recent statistics from the Edenred-Ipsos Barometer indicating job dissatisfaction prevalent in almost 50% of the working population implies this should not be a long term constraint. Nevertheless, competition for well-qualified talent has grown three-fold over the last four years. Such a difficulty in filling roles is evidenced by flat net fees within the UK announced by key players such as Hays Plc.

The decline in the financial services sector continues to impact on firms, with survival being largely dependent upon diversification. Robert Walters’ recent Annual Report acknowledges its decline in profitability resulting from the subsector, highlighting the company’s strategic re-alignment resulting in 85% of net fee income being generated outside of financial services (78% in 2011).

Europe also continues to be a key concern for global recruitment firms, with any recovery expected to be slow and lagging a number of quarters behind the UK. In response, recruiters are diversifying geographically, for example Page Group opening offices in Cape Town, Rio De Janeiro, Taipei, Suzhou, Bogata and Casablanca during 2012. The success of diversifying is evidenced by its first quarter interim statement for 2013 which reported a quarter-on-quarter increase in gross profit of 0.2%, in spite of French and German profits being down 17% and 27% respectively.

Current opinion indicators point towards a recovery which is increasing in pace as confidence slowly returns. An expansion in job vacancies, driven by the private sector, is brightening the outlook for companies in the Human Capital sector.

In terms of M&A activity, there are encouraging signs from the latest Osborne Clark/Recruiter Recruitment Sector M&A barometer with 89% of respondents expecting an increase in M&A in the sector in the next six months. Coupled with the strengthening in equity markets and EV/EBITDA multiples highlighted in our Q1 2013 Human Capital M&A Market Review, we believe favourable conditions exist for corporates looking to undertake M&A activity.

Gambit Corporate Finance LLP is a leading independent corporate finance advisory firm with a focus on the Human Capital sector. If you would like to discuss any of the matters raised or other issues affecting your business please contact us.

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