ii view: recruiter PageGroup slumps to lowest since Covid crash

Fourth-quarter trading update to 31 December

• Currency adjusted permanent hire gross profit down 12.5% to £137.4 million
• Currency adjusted temporary hire gross profit down 14.2% to £59.3 million
• Overall gross profit on a currency adjusted basis down 13% year-over-year to £196.7 million
• Net cash of £95 million, up from £93 million in late September

Guidance:

• Now expects full-year 2024 operating profit to be towards the lower end of City forecasts of between £49 million and £58.5 million

Chief executive Nicholas Kirk said:

"Market conditions remained challenging in Q4 and whilst most markets were sequentially stable, we experienced a further worsening in Europe.

"Looking ahead, a high degree of macro-economic and geopolitical uncertainty remains across the majority of our markets, notably in France and Germany. However, we have a diversified and adaptable business model, a highly experienced management team, a strong balance sheet and our cost base is under continuous review."

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ii round-up:

Recruitment agency PageGroup (LSE:PAGE) today lowered its full-year profit forecast as the tough economic backdrop for Germany and France affected confidence among companies and candidates, extending the time taken to hire.  

A 16% fall in gross profit year-over-year to £107.5 million at its European, Middle East and African region (EMEA), was behind a 13% decline in overall group-wide fourth-quarter gross profit to £196.7 million. That’s just below City forecasts of £197 million, with Page now expecting full-year 2024 operating profit to come in at the lower end of current analyst forecasts of £49-58.5 million.

Shares in the FTSE 250 company fell 4% in UK trading having come into this latest news down by almost a third over the last year. That’s similar to larger rival Hays (LSE:HAS) and compares with a 2.6% gain for the FTSE 250 index itself over that time.

Page helps companies across 25 different sectors, including accountancy, technology and engineering, to hire staff via its brands Page Personnel and Michael Page.

EMEA, the group’s biggest region at 55% of 2024 gross profits, saw activity levels for its largest contributor France, drop 17% year-over-year. Those in Germany, its second biggest European market, retreated 23% from a year ago. 

Countering Europe, North American activity rose 2%, although with fourth-quarter gross profit for the wider Americas region still down 5.5% from Q3 2023 on a currency adjusted basis to £35.4 million. 

Group-wide fee earners at Page were reduced by 2.4% to 5,370 as management continued to focus on costs. Company net cash held of £95 million rose from £93 million as of the end of the prior third quarter.  

Full-year results are due 6 March. 

ii view:

Started in 1976 and headquartered in Weybridge, Surrey, Page is today focused on the recruitment of specialist, generally 'white-collar' staff. Located in more than 30 countries, the EMEA region is its biggest at 55% of gross profits in 2024. That’s followed by the Americas at 18%, Asia 15%, and the UK 12%.

For investors, the tough economic backdrop, including pressure to reduce government spending and borrowing in major markets such as France and Germany, are now hindering the confidence of corporate customers to hire. Sectors such as technology and banking and including such companies as Amazon and Citigroup, have been reducing staff numbers. A forecast price/earnings (PE) ratio above the three-year average may suggest the shares are still not obviously cheap, while forecast earnings dividend cover of under one may raise questions about the dividend. 

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To the upside, diversity of both underlying client industries and geographical regions exists. Page has the experience of operating within economic downturns previously. The group’s cost base is flexible with personnel numbers being reduced, while net cash of £95 million should help support a forecast dividend yield above 5%. 

For now, a good dose of caution appears to remain sensible. That said, given exposure to any future economic recovery and a consensus analyst fair value estimate above 400p per share, may keep Page on investor watchlists.  

Positives: 

• Business sector and geographical diversity
• Flexible cost base

Negatives:

• Economic outlook uncertainty
• Currency moves can hinder

The average rating of stock market analysts:

Strong hold