In light of the dramatic collapse in stock markets this month, many ‘Chicken Little’ investors are anxiously fretting that the sky is about to fall in again. To us, however, the most likely outcome is that a new worldwide recession is not imminent. In fact according to the IMF only last week, global GDP is predicted rise 3.4% this year and 3.6% next (vs 3.1% LY), supported by resilient consumer spend, improving European labour markets and continued low unemployment in the US (5.0%) and UK
No noticeable effect from macro concerns Meaning that, as long as the current volatility subsides over the next 3-4 months, then with the exception of cuts in discretionary expenditure (eg advertising & travel budgets), there should be minimal long term damage to the ‘real economy’. A view consistent with this morning’s upbeat trading statement from specialist recruiter Matchtech, who we think are a useful barometer of corporate hiring intentions, and hence of future economic activity.
Here, H1’16 trading was said to be “in line with expectations” (FY16 consensus adjusted PBTA of £21.3m) with H1’16 NFI up 59% to £35.7m (including April’s £66.8m acquisition of Networkers). On a LFL basis, NFI was broadly flat at -1% YoY, thanks to strong performances from Engineering (+7%), Telecoms (8%, 4G/3G) and permanent placements (+4%), offset by weakness by IT (-20%) and lower contractor fees (-3%).
Plans are already in motion to turn round the IT division over the next 6-12 months, with a greater focus on specific niches leading to improved trading in FY17 and beyond. Importantly too, despite the ongoing headwinds in oil/gas and broader macro concerns, Engineering (60.5% H1’16 NFI) continues to power ahead due to buoyant conditions in infrastructure (+19%) and resilient demand for Automotive, Aerospace and Maritime staff.