ii view: PageGroup encouraged by growth hotspots

Third-quarter trading update to 30 September

• Gross profit down 6.7% to £187.8 million
• Net cash held of £38 million, up from £11 million in late June

Guidance:

• Continues to expect full-year 2025 operating profit to broadly match City forecasts of £21.5 million – potentially down from £52 million in 2024

Chief executive Nicholas Kirk said:

"We continued to experience subdued levels of sentiment and confidence in Europe, particularly in our two largest markets, France and Germany, as well as in the UK. However, we delivered a fourth consecutive quarter of growth in the US, our fourth largest market, and a second consecutive quarter of growth in Asia. Collectively, these two markets represent a quarter of the Group.

“Overall, our focus remains to balance near-term productivity with ensuring we are well placed to take advantage of opportunities when market conditions improve. Despite the uncertain outlook due to the unpredictable economic environment, we remain confident in the execution of our strategy.”

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ii round-up:

Employment agency PageGroup (LSE:PAGE) operates across the brands of Page Executive, Michael Page, Page Personnel and Page Outsourcing.

Page helps companies across 25 different sectors, including accountancy, technology, engineering and construction to hire staff. 

For a round-up of this latest trading update announced on 15 October, please click here.

ii view:

Started in 1976 and headquartered in Weybridge, Surrey, PageGroup is today focused on the recruitment of specialist, generally 'white-collar' staff. Permanent hires generated most profits during this latest quarter at 71% with temporary hires the balance of 29%.

Geographically, Europe, the Middle East and Africa made most profits during Q3 at 52%, with France and Germany accounting for around half of that. Next came the Americas at 19%, followed by Asia Pacific which includes China and India at 17%, and finally the UK at 12%. 

For investors, although recently paying an unchanged interim dividend of 5.36p per share, a previous cut from rival Hays (LSE:HAS) plus City estimates for a one-third reduction over the year ahead, offer caution. Stretched government finances for key markets France, Germany and the UK all offer potential for increased taxes with implications for corporate hiring and candidates deciding to change jobs. The AI revolution may see fewer jobs required in the future, while a possible souring of trade talks between the US and China could undermine corporate confidence across regions. 

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To the upside, a trimming of recruitment consultants and associated costs to match reduced customer demand continues, with headcount down 17% from 2019 and recent cuts largely made across Europe. A wider adjustment of the management structure and support staff is expected to see annualised cost savings of £15 million from 2026 onwards. Diversity of both underlying client industries and geographical regions exists, while net cash held suggests a relatively robust balance sheet. 

In all, management action and growth across the US and Asia accounting for around a quarter of group profits offers hope. That said, more cautious investors are likely to await wider evidence of recovery before taking an interest. 

Positives: 

• Business sector and geographical diversity
• Flexible cost base

Negatives:

• Economic outlook uncertainty
• Currency moves can hinder

The average rating of stock market analysts:

Hold