ii view: PageGroup profit outlook still grim

Asia helps counterbalance a tough UK market at this global employment agency. 

Fourth-quarter trading update to 31 December

• Fee income or gross profit down 20% year-over-year to £165.5 million
• Net cash of £165 million

Chief executive Steve Ingham said:

"The Group's results improved in each of the three months of Q4, which continued the monthly sequential improvement since May. This performance was achieved despite the background of continued and increasing restrictions or lockdowns in many of our markets. 

"As we enter 2021, there remains a high degree of global macro-economic uncertainty in many of our markets, as Covid-19 remains a significant global issue and lockdowns have returned in a number of the Group's markets. However, in the UK we are encouraged that the Brexit deal has provided a degree of clarity. We remain confident in our strategy of maintaining our platform and continuing to carefully invest in headcount, as well as continuing to roll-out new technology and innovation.”

ii round-up:

Global employment agency PageGroup (LSE:PAGE) today reported a 20% fall in fourth-quarter fee income as corporates continued to hire sparingly under efforts to conserve cash during the pandemic. 

The UK proved its worst performing region with fee income, or gross profit, retreating by just over a third. Asia Pacific did best, buoyed by growth for both mainland China and Japan in December, with a fall of just over 10%.

PageGroup shares fell by around 5% in UK trading, having gained by more than 40% since late-March lows. Shares for rival SThree (LSE:STEM) are up by a similar amount, while shares for the UK’s biggest employment agency by stock market value Hays (LSE:HAS) are up by around a third since March.

The 20% decline in fourth-quarter fee income compares to a 32% fall in the third quarter. Fee income for its biggest region Europe, the Middle East and Africa – accounting for just over half of 2019 revenue – fell by 19%.

Page consultants operate across 25 sectors from actuarial to technology. Consultant headcount reduced by a net 882, or 15% over the year. Company net cash rose to £165 million from £98 million in the final quarter of 2019. 

Despite monthly sequential improvement through the last quarter, with overall fee income down 18.2% in December, management offered no financial estimates for 2021 given the ongoing level of pandemic uncertainty. Analyst consensus estimates for full-year 2021 operating profit are expected to reduce to £70 million from £82.8 million.  

Full-year results are scheduled for the 3 March. 

ii view:

Page was founded in 1976 and today employs over 7,000 staff in more than 30 countries. Accounting and financial services is its biggest customer segment, followed by Legal, Technology, HR and Secretarial. Permanent hires typically account for around 75% of profit, temporary hires the balance. It is currently pursuing a strategy to expand and diversify the business by industry sectors, professional disciplines, geography and level of focus. 

For investors, action to boost cash has been taken, an ongoing improvement in trading has been seen, while Page offers diversity across both client sectors and geographical regions. That said, ongoing pandemic uncertainty cannot be ignored. Lower exposure to temporary hires than some rivals could also leave it lagging competitors as economic growth potentially unfolds. For now, sat close to the analyst consensus target price (440p), the shares look up with events.

Positives: 

• Business sector and geographical diversity
• Cost base reduced

Negatives:

• Covid clouded outlook
• Suspended dividend payment

The average rating of stock market analysts:

Strong hold