ii view: recruiter Page Group restarts the dividend

Both an interim and special dividend leave the shares on a yield around 5%. Buy, sell or hold? 

First-half results to 30 June 

• Revenue up 17% to £766.4 million
• Operating profit of £64 million, up from £0.4 million
• Interim dividend of 4.7p per share
• Special dividend of 26.71p per share

Chief executive Steve Ingham said:

"Due to the uncertain trading conditions caused by Covid-19 last year, we chose to temporarily suspend our dividend policy and cancel our 2019 final dividend. Given the improvement in trading conditions in H1, as well as our strong liquidity position, the Board has decided to reinstate our dividend policy.”

"Looking ahead, there continues to be a high degree of global macro-economic uncertainty as Covid-19 remains a significant issue and restrictions continue in a number of the Group's markets.”

ii round-up:

Global employment agency PageGroup (LSE:PAGE) today reiterated its raised full-year profit guidance detailed back in early July. Accompanying management comments also warned that it remained unclear as to whether the improved performance is still the result of pent-up supply and demand, or a sustainable trend.

PageGroup shares retreated by more than 4% in UK trading, having almost doubled since pandemic market lows back in March 2020. Shares for sector giant Hays (LSE:HAS) are up by around 44% over that time. Shares for both SThree (LSE:STEM) and Robert Walters (LSE:RWA) have both more than doubled. 

Operating profit for Page rose to £64 million from last year’s pandemic hit £0.4 million. Full year operating profit is forecast to be between £125 million to £135 million, up from 2020’s £17 million. Pre-pandemic 2019 operating profit hit £147 million.  A combination of higher sales and reduced costs from reduced staff headcount from 2019 helped boost profitability. 

Both improved trading conditions and strong liquidity underlay a decision to resume the dividend. An interim payment of 4.7p per share was declared, an increase of 9.3% over the 2019 interim of 4.3p per share. In addition, and given management’s policy to return surplus capital to shareholders, it also declared a special dividend of 26.71p per share. 

Gross profit for its Asia Pacific region jumped the most at 43%, representing a fifth of its overall total. Followed by the UK with a rebound of 36% and Europe and the Middle East at an improvement 32%. The latter region accounted for a half of overall gross profit in this latest half year. 

ii view:

Founded in 1976, today Page consultants operate across 25 arenas from actuarial to technology companies. Accounting and financial services provided its biggest customer segment in 2020, generating just over a third of gross profit, followed by Legal, Technology, HR and Secretarial at around a quarter. It employs over 6,000 staff in more than 30 countries. It is currently pursuing a strategy to expand and diversify the business by industry sectors, professional disciplines, geography and level of focus. 

For investors, ongoing pandemic uncertainty and the difference between pent-up demand and a new sustainable trend need to be remembered. A price to net asset value of 6.5 times also sits above the three-year average nearer to 5 times, suggesting that the shares are not necessarily cheap.

More favourably, both sector and geographical diversity are enjoyed and the combination of the declared interim and special dividends leaves the shares sat on a historical yield of around 5%. Not bad in the current ultra-low interest rate environment. In all, and with the shares trading close to the current analyst estimate of fair value at 605p per share, the shares for now look up with events. 

Positives: 

• Business sector and geographical diversity
• Cost base reduced

Negatives:

• Ongoing pandemic uncertainty
• Above average price to NAV valuation

The average rating of stock market analysts:

‘Hold’