PageGroup Q4 profit rises, full-year profit seen in line with consensus

Recruiter PageGroup was under the cosh on Monday as it posted record profit for the fourth quarter, but only modest growth in the UK and a slowdown in China.

Fourth-quarter gross profit rose 15.4% at constant currency to £211.1m, with EMEA profit 13.9% higher at £104.4m, while Asia Pacific and the Americas saw profit grow 22% and 29.2% to £41.2m and £32m, respectively. Profit in the UK was up just 2.1% to £33.5m.

Fourth-quarter total gross profit was 3% ahead of consensus expectations of £205.3m.

For the full year, total gross profit was up 15.9% to £815m. Profit in EMEA - which accounts for nearly 50% of group profit - rose 17.9% to £394.2m, with profit in Asia Pacific and the Americas up 20.7% and 27.3% to £161.3m and £121.1m, respectively.

It was a less cheery picture in the UK, however, as profit slipped 1.7% to £138.4m, with profit at Page Personnel up 12% but Michael Page down 1%.

Meanwhile, PageGroup reported a slowdown in the pace of profit growth for the temporary jobs business, which came in at 9.8% for the fourth quarter versus 13.6% the year before. The group also reported a slowdown in growth in Greater China, to 12% in the fourth quarter from 31% in the third, as confidence in mainland China took a hit from worries about trade tariffs.

Page said its operational support headcount fell by 4% during the quarter.

Chief executive officer Steve Ingham said: "Having added 561 fee earners in the first three quarters, additions in Q4 slowed to 58. Whilst additions in Q4 are normally lower, we are also mindful of the heightened geopolitical and macro-economic uncertainty, which has the potential to impact client and candidate confidence.

"We will continue to focus on driving profitable growth, while continuing our strategic investments towards our Vision of 10,000 headcount, £1bn of gross profit and £200m - £250m of operating profit. Our flexible and diversified business model ensures that we are able to respond quickly to changes in market conditions. We are pleased with the group's performance and expect 2018 operating profit to be in line with consensus."

Company-compiled consensus is for operating profit of £141.8m for the year.

At 1000 GMT, the shares were down 5.3% to 440.60p.

Russ Mould, investment director at AJ Bell, said: "Sometimes it pays to look beyond the headline messages presented by a company in a trading update or financial results. If you look under the bonnet you’ll see several negative factors spooking investors.

"A slowdown in the pace of fourth quarter gross profit growth for temporary job placements has taken the shine off the business.

"Brexit uncertainty continues to be a drag on UK operations with a meagre 2.1% gross profit growth in the final quarter of 2018, year-on-year, and its growth in China has slowed quarter-on-quarter because of concerns related to the country’s trade war with the US.

"The company also guides to a slowdown in the number of people it has hired to place candidates into jobs.

"Activity involving ‘fee earners’ is normally a good way of gauging confidence in the recruitment market. If a staffing agency feels that companies are confident enough to take on more workers or replace anyone leaving their job, it will continue to hire recruitment consultants. Additions will slow or cease if the outlook is gloomier."