PageGroup warns on profits, cuts staff as firms delay hirings

Recruitment specialist PageGroup said 2023 full year operating profit was expected to be slightly below previous guidance as risk-averse employers delayed hiring decisions globally.

Full year operating profit was now expected to be slightly below previous guidance of £120m - £125m. The company also axed 224 jobs, or 3.7% of its fee-earning roles, to cut costs.

Fourth-quarter group gross profit fell 8.9% to £237.7m year on year. Trading conditions in Asia, the UK or the US saw no improvement, while trading conditions deteriorated in Europe, the company said in a trading update on Monday.

“We experienced a slower end to the quarter as customer uncertainty was compounded by the proximity to year end salary reviews and bonuses, which combined to make trading particularly challenging,” PageGroup said.

The news follows sector peer Hays last week downgrading its profit forecast as the global jobs markets stagnated, while Robert Walters also made job cuts.

"Despite the year-on-year decline in gross profit, we are still seeing good activity levels, albeit we did see a deterioration in job flow through Q4. However, these activity levels are not all converting into gross profit due to ongoing lower levels of candidate and client confidence," said chief executive Nicholas Kirk.

Gross profits from temporary hiring rose 5.2% over the fourth quarter, compared with a 13.9% decline for gross profits from permanent appointments.

“How times change. In August, PageGroup handed out a £50m special dividend,” said AJ Bell investment director Russ Mould.

“Add this to a trading alert from Hays and a slow, downward leakage in profit estimates at Robert Walters and the jobs market may be finally showing some weakness, some two years after the first round of central bank rate hikes."

"This may help to justify the rate cuts for which financial markets are now baying, but if they come because of a hard economic landing, rather than the widely anticipated soft one, the picture may not be as rosy as the fourth quarter’s broad stock market rally might imply."

Mould said the earnings miss "feels as if it will be relatively small, given chief executive Nicholas Kirk’s acknowledgement that operating profit for 2023 is now expected to slightly undershoot the company’s prior guidance of £120m to £125m".

"It looks as if consensus estimates had already slipped to £119m, a near-40% drop from the £196m recorded in 2022."

Reporting by Frank Prenesti for Sharecast.com