ii view: recruiter PageGroup has a record June

Shares for this FTSE 250 company are down close to a third in 2022 and now sit on an estimated future dividend yield of around 4%. Buy, sell, or hold?

Second-quarter trading update to 30 June

• Currency adjusted gross profit up 25.5% year-over-year to £280.9 million
• Net cash held of £135 million, up from £122 million in Q1

Chief executive Steve Ingham said:

"We continued to see strong growth in Q2. We delivered a record quarter for the Group, with record performances in 25 countries. We exited the quarter strongly, delivering a record month in June, our second month of gross profit in excess of £100 million.

"Looking forward, we are clearly aware of the heightened degree of macro-economic and political uncertainty that exists globally, particularly with regards to increasing inflation in the majority of the markets in which we operate. We are monitoring all KPIs in the business regularly, but to date we have seen no significant changes apart from the usual seasonal movements.”

ii round-up:

Global employment agency PageGroup (LSE:PAGE) today reported growth in second-quarter profit which beat City forecasts while also flagging economic and political uncertain ahead.   

Currency adjusted profit to the end of June rose 25.5% year-over-year to £280 million, beating analyst estimates for growth closer to 24% and enjoying a record month in June. 

PageGroup shares were little changed in UK trading having come into this latest update down by almost a third year-to-date. Shares for smaller rival Robert Walters (LSE:RWA) are down by a similar amount over that time, while larger competitor Hays (LSE:HAS) hasfallen by around a fifth, about the same as the FTSE All World index. 

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Page operates across 25 different client sectors from actuarial to technology companies. Profit growth of almost 30% for its biggest region of Europe and Africa helped counter more pedestrian 12% growth for its second biggest region - Asia Pacific. Growth there was hindered by pandemic lockdowns in China, with gross profit falling 11% year-over-year. 

The group’s US and America’s business, almost equal in size to its Asia Pacific division, achieved gross profit growth of 34%, with the UK at 22%. 

Its own total of fee earning staff rose to 6,734, up 307 from the same quarter 2021. Group net cash rose to £135 million, up from £122 million in the prior first quarter. Broker Morgan Stanley highlighted the potential for another special dividend come its 8 August first half results.  

ii view:

Started in 1976 and headquartered in Weybridge, Surrey, PageGroup today employs more than 8,600 staff with its brands including both Page Personnel and Michael Page. Over 70% of its business is made up of permanent hires with the rest coming from temporary positions. It is currently pursuing a strategy to expand and diversify the business by industry sectors, professional disciplines and geographies.

For investors, the impending departure of its chief executive of the last 16 years offers some uncertainty. Economic issues and rising costs for business and industry generally could eventually leave the company's corporate clients more reluctant to hire, while the pandemic continues to hinder its China business.     

On the upside, a record June implies ongoing trading momentum for now. Diversity in both client sectors and geographical regions is enjoyed, while the FTSE 250 company’s cost base remains flexible, with Page having the experience of operating within economic downturns previously. For now, and while some caution looks sensible, an estimated future dividend yield of around 4% remains an attraction for income seekers. 

Positives: 

• Business sector and geographical diversity
• Flexible cost base

Negatives:

• Economic outlook uncertainty
• Departure of experienced CEO

The average rating of stock market analysts:

Buy