ii view: tough times for recruiter PageGroup
Lower staff numbers, net cash on the books and a decent dividend yield. We assess prospects for this FTSE 250 company.
14th October 2024 15:52
by Keith Bowman from interactive investor
Third-quarter trading update to 30 September
- Permanent hire gross profit down 18.5% to £142.8 million
- Temporary hire gross profit up 12% to £58.6 million
- Overall gross profit down 16.7% year-over-year to £201.4 million
Guidance:
- Now expects full-year operating profit broadly in line with City estimates of £58 million, down from a previous estimate of £60 million
Chief executive Nicholas Kirk said:
“Whilst most markets were sequentially stable, we experienced softer activity and trading in a number of European countries including France and Germany.
“We have a highly diversified and adaptable business model, a highly experienced management team, a strong balance sheet and our cost base is under continuous review. We continue to see the benefits of our investments in innovation and technology.”
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ii round-up:
Recruitment agency PageGroup (LSE:PAGE) today detailed a fall in profits as both job seeker and corporate hiring customer confidence remained low given the tough economic backdrop.
Third-quarter gross profit fell 18.5% year-over-year to £201.4 million, missing City estimates of £206 million. Page now expects full-year 2024 operating profit to broadly matching current analyst estimates of £58 million, down from its previous estimate of £60 million and below 2023’s outcome of £118.8 million.
Shares in the FTSE 250 company fell 2% in UK trading having come into this latest news down by almost a quarter year-to-date. That’s similar to larger rival Hays (LSE:HAS) and comfortably below a 6% gain for the FTSE 250 index.
Page operates across 25 different client sectors from accountancy to technology companies via its brands Page Personnel and Michael Page.
The Weybridge headquartered company continued to downsize its workforce given the difficult trading environment, axing 98 fee earning consultants and 36 operational personnel, largely in Europe, to leave it with a headcount of 7,442.
Page highlighted no improvement in market conditions in September, a key month after the seasonally quieter summer holiday period. Temporary recruitment continued to outperform permanent as hiring customers continued to seek more flexible options.
Broker UBS reiterated its ‘buy’ stance on the shares post the announcement. A fourth-quarter trading update is scheduled for 13 January.
ii view:
Started in 1976, Page is today focused on the recruitment of specialist, generally 'white-collar' staff. Located in 36 countries, it serves clients and jobseekers from more than 130 offices globally. Geographically, Europe, the Middle East and Africa generated its biggest slug of gross profit during this latest period at just over half, followed by the Americas at 18%, Asia 16%, and the UK 13%.
For investors, the tough economic backdrop including pressure to reduce government spending and borrowing in major markets such as Germany and France 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. Costs generally for businesses such as wages remain elevated, while a forecast price/earnings (PE) ratio above the three-year average implies the shares are not obviously cheap.
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More favourably, 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 £93 million was held as of late September.
Page operates in a cyclical sector. Its shares have been in short-term decline since May and have now reached an area of technical support at 355-360p. A degree of caution remains highly sensible until signs of an economic turnaround appear. A forecast dividend yield of 5% is some compensation for shareholders who wait.
Positives:
- Business sector and geographical diversity
- Flexible cost base
Negatives:
- Economic outlook uncertainty
- Currency moves can hinder
The average rating of stock market analysts:
Buy
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