The Investment Column: Walters surges on IT hopes

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The Independent Online
ROBERT WALTERS, the finance and information technology recruitment group, has had a storming run since coming to the market 18 months ago. Floated at 105p, the shares have surged to 548.5p, up another 58.5p yesterday, and were one of the five best performers on the whole market last year.

Yesterday's jump was on the back of a bumper crop of results showing that full-year profits doubled to pounds 7.7m on sales that also doubled to pounds 91m. Robert Walters, founder and chief executive, has bold plans to increase IT recruitment to 50 per cent of contract staff sales by 2000 from the current 25 per cent. There is even talk of being able to cope with an acquisition in contract recruitment that could run to pounds 50m-pounds 60m, almost half the group's market value.

The company is clearly growing rapidly at the moment but what the City has been keen to know is how well it is insured against a potential downturn, which tends to hit cyclical companies like recruitment consultants hard.

Its answer has been to expand into outsourcing, where Robert Walters takes on the recruitment functions of a major company or bank and installs its own staff on site. The benefits are that it provides more secure revenue and enables the company to get to know clients better. From a standing start a year ago Robert Walters now has 12 clients on this basis.

It points out that only 20 per cent of its revenues are from the more cyclical permanent/commerce sector with 60 per cent from contract placements which tend to increase in downturns as employers seek labour flexibility.

On the house broker's increased forecast of pounds 11.5m the shares trade on a forward rating of 17. There could be some profit-taking after such a strong run but with earnings growing so fast and the stock tightly held there could be more to go for. Hold.