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AJ Bell Youinvest Breaking the Mould – Robert Walters

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From a top-down perspective, the coming week is due to be fairly quiet but watch out for two snippets from the world’s biggest economy, America Both are due out on Tuesday 7 July and both have been covered here before

They are the • NFIB small business optimism survey And the • Job Openings and Labour Turnover, or JOLTS, survey Looking at the NFIB, it reached a new high of 1088 in August 2018 but had begun to gently lose altitude from then on, to suggest all may not have been entirely well with the US economy even before the pandemic But then came COVID-19 and in April the NFIB showed an understandable lack of optimism amongst smaller US firms as the reading fell to 909, its lowest since February 2013

May brought a small improvement to 944 so let’s see what June brings Economists will be hoping for improvement, as will those investors who have exposure to US equities There is some suggestion that the trend in the NFIB reading bears some relation to the trend in America’s leading small-cap index, the Russell 2000, which is also seen to be a pretty good barometer for wider risk appetite When it comes to the JOLTS survey, the more job openings there are the healthier the US economy should be, at least within reason

Just like the NFIB reading, the JOLTS survey had peaked even before the pandemic, at 75 million new openings in November and February 2019 It has been downhill all the way since then and by April of this year the number of new job openings had fallen 5 million, the lowest mark since December 2014 Some sign of stabilisation would be welcome here as the world’s largest economy looks to shake off the virus but the renewed lockdown in Texas for example and fresh outbreaks in Florida, Arizona and others must be watched carefully in this context, as well as others Back home on the company front a good number of large-, mid- and small-cap firms are due to update their shareholders in some way, shape or form

However, does please remember that the regulator, the Financial Conduct Authority, is still giving firms extra time in which to prepare their figures, so these dates are subject to change • On Tuesday 7th July, the names in the frame will include Premier Inn-owner Whitbread, retailers Halfords and Superdry and also FTSE 250 tech stock Micro Focus • They will be followed on the 8th by house builder Barratt Developments and transport firm FirstGroup • And on Thursday 9th two more builders, Persimmon and Vistry, will release trading updates, alongside Jet2-owner Dart, builders’ merchant Grafton and MJ Gleeson However, for me, the stock most capable of causing a real fuss in the week ahead is Robert Walters The recruitment specialist is due to release a second-quarter trading update on Thursday 9th July The FTSE 250 firm’s comments should be particularly interesting because of what it does

As a recruitment company, Robert Walters has its finger on the pulse when it comes to the economy wherever it works, which, in this case, is not just the UK but worldwide In this context, it may not be a surprise to see that the shares have taken a drubbing over the past year, falling by some 40%, even if they are up a long, long way from their spring lows The company has put out two brief updates so far with regard to 2020 • Back in early April, the company announced the cancellation of its proposed final dividend, which left shareholders with just the interim payment of 45p a share for 2019

That ended a growth streak in the full-year distribution that stretched back to 2013 • A few days later, Robert Walters then unveiled its customary first-quarter update On a stated and a constant currency basis, fee income fell 11% year-on-year That was worse than the 7% drop in the fourth quarter of last year as COVID-19 began to have an impact When shareholders and analysts look at the second quarter update will be the group-wide numbers and chief executive Robert Walters himself predicted a tough three months back in April as Europe, the UK and the US had just entered lockdown as Asia was coming out of it

And the geographic trends will be the second point of interest in the quarterly update In the first quarter: • Asia was down 5% on a stated basis as Japan, Korea and Vietnam stayed resilient, workers were returning to offices in China and Taiwan and Australia and New Zealand had slowed right down at the end of the first quarter • Europe was down 2% year-on-year on a stated basis That was still a big slowdown from last year thanks to France and Spain in particular • And the UK fell 29%, adding to a dismal trend that had begun as the Brexit deadline and then the December general election drew closer in 2019

Again, watch for the trends across all of those in the April-to-June period, with both Robert Walters but also the wider economy in mind Robert Walters has reacted to the downturn in trading, cutting that dividends, cutting costs by 15% and trimming back executive salaries Group headcount fell 2% to 3,935 in the first quarter (and you wouldn’t necessarily say that a recruiter cutting jobs is a bullish sign for the future) Also keep an eye on the company’s net cash pile, which was a reassuring £110 million at the end of March I hope that you and your families are all in good health and good spirits during these difficult times

Thank you for listening and I look forward to talking to you again next week

Source: Youtube

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