- Second-quarter fees down 12%
- June exit rate even worse, reversing 18%
- Firm cuts full-year profit goal
FTSE 250 firm PageGroup (PAGE) sent the European staffing sector lower across the board after warning soft trading in the second quarter meant full-year profits would be below expectations.
PageGroup shares fell as much as 60p, or 15%, to a 12-month low of 360p before recovering to trade down around 6% at 396p. Industry peers failed to escape the negative read across, with Hays (HAS) falling 4% to 91p, while Dutch recruiter Randstad (RAND:AMS) saw its shares continue recent declines to set a three-year low €42.
WEAKNESS CONTINUES
Surrey-based PageGroup said trading had softened throughout the three months to the end of June, with group gross profit – also referred by some firms as net fee income – down 12% during the quarter but registering an 18% drop in June alone.
Every major geography was in negative territory with China down 29%, France down 9%, Germany down 10%, Japan down 6%, the US down 17% and the US down 19%.
The only bright spot was India where gross profit rose 7%, although the country makes up just a fraction of the group’s total fee income.
The firm said key indicators of forward activity such as new jobs registered and the number of interviews had declined while candidate and client confidence remained low.
‘We continued to see challenging market conditions in the second quarter’, said chief executive Nicholas Kirk.
‘The conversion of interviews to accepted offers is the most significant area of challenge, as candidate and client confidence remains subdued, reflecting the macro-economic uncertainty in the majority of our markets.
‘Permanent recruitment continues to be impacted more than temporary, as clients seek more flexible options and permanent candidates remain reluctant to move jobs.’
Due to the weakness of its markets, the board now expects the firm to post a full-year operating profit of around £60 million against consensus forecasts of around £90 million.
EXPERT VIEW
‘What may alarm investors in recruiter PageGroup after the company’s profit warning is the evidence of an acceleration in the extent to which trading conditions are deteriorating’, observed AJ Bell investment director Russ Mould.
‘Look at the numbers and it’s clear the company had a horrible June. Recruitment firms are always tied to wider economic conditions to some extent but this seems particularly to be the case for PageGroup and suggests a shift in market positioning might be required if the business is going to make itself more resilient in the future.’
Disclaimer: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Ian Conway) and the editor (Steven Frazer) own shares in AJ Bell.
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