The latest earnings from two prominent London-listed recruitment firms were, as expected, underwhelming, highlighting their uphill struggle in an exceptionally tight employment market.
FTSE 250 constituent PageGroup PLC (LSE:PAGE) had earlier warned that full-year profits would be below previous guidance of £120 million to £125 million.
That prediction rang true in today’s results, with profit before tax for the year coming to £117.4 million, representing a 40% year-on-year decline.
Dividends matched expectations at 32.24p per share.
Smaller cap recruiter Robert Walters PLC (LSE:RWA) matched market expectations with profit before tax for the year falling 63% to £20.8 million and the dividend staying unchanged at 23.5p.
Net fee income was down 18% year-on-year, with recruitment in London down 29%, “impacted by financial services and technology retrenchment”.
Both companies struck the same tone in their comments on their substantially lower earnings comparatives- summed up by the word “challenging”.
Pagegroup’s chief executive Nicholas Kirk said that “macroeconomic uncertainty persists” while touting the group’s “highly diversified and adaptable business model, a strong balance sheet, and our cost base is under continuous review and can be adjusted rapidly to match market conditions”.
Robert Walters’ chief executive Toby Fowlston had this to say: “During the first few weeks of 2024, trading conditions across the group's markets have, consistent with the end of 2023, remained muted - albeit with some isolated pockets of growth.”
As prominent City of London recruiters, both firms have the same headwinds to contend with.
According to Morgan McKinley’s London Employment Monitor, the number of jobs available in the City’s financial district collapsed nearly 40% year on year in 2023, while the number of job seekers fell 16%.
Some 60,000 financial services jobs were slashed in 2023, effectively undoing the post-Covid employment drive and making 2023 one of the worst years for cuts since the global financial crisis.
But City recruitment is not necessarily reflective of the broader UK employment sector.
In January, British employers advertised the fewest jobs in nearly three years as the Bank of England governor hailed “full employment”. Not quite- the unemployment rate was 3.8% for the month, but this is a historical low point.
This could suggest that recruitment firms have seen the bottom of the cycle and the only way is up, particularly if, as is generally accepted, the UK recession finished before it started.
In the near term, cost-cutting measures mean Robert Walters and Pagegroup have added to the supply of jobseekers on the market, with the former slashing its workforce by 9% in 2023 (from 4,356 to 3,980) and the latter slashing more than 1,000 fee earners, thus reducing headcount by 15.7%.
The market responded mixed to this latest recruiter earnings season though, with Robert Walters’ shares adding 2.9% and Pagegroup dipping 0.4%.