Recruitment firm PageGroup PLC (LON:PAGE) shares fell as it said job markets in the UK, Singapore and Brazil continued to experience challenges but strong performances elsewhere helped to deliver third quarter profit growth.
Group gross profit in the third quarter was £177.3mln, an 8.8% increase in constant currencies and a 11.8% rise at reported rates compared to the same period a year ago.
READ: PageGroup reports record second quarter profits even as Brexit weighs on UK hiring
Permanent job placements, which account for 75% of the total, posted a 9.1% increase in gross profit at constant currencies to £133.4mln and temporary placements, 25% of the total, edged up 7.8% to £43.9mln.
Weaker pound boosts profits but benefit may be short-lived
Chief executive Steve Ingham said the positive effect of a weaker pound added £5mln to gross profit and £1mln to operating profit.
But if the exchange rates at the end of the third quarter continued, this benefit would reverse in the fourth quarter, he said.
The group added 290 fee earners in the quarter and 566 since the start of the year, an increase of 12%.
Total fee earner headcount reached a record 5,277 with total headcount at 6,750, giving a ratio of fee earners to operational support of 78:22.
Growth was supported by recruitment in Continental Europe, the Americas and Asia, offsetting a decline in profits in the UK and flat results in Singapore and Brazil.
The Europe, Middle East and Africa division, which represents 45% of total gross profit, saw gross profit increase 18.7% at constant exchange rates to £79.3mln.
READ: Recruiter PageGroup reports record quarter as UK profit improves despite Brexit concerns
The Asia Pacific region achieved a 13.9% gain in gross profit to £37.0mln at constant exchange rates, accounting for 21% of the total.
The Americas unit reported an 18.4% rise in gross profit to £26.1mln constant exchange rates, representing 15% of the total.
Brexit continues to weigh on business confidence
In the UK, where the recruitment market has taken a hit following the Brexit vote, gross profit fell 7.6% to £34.9mln at constant exchange rates. The UK accounts for 19% of total gross profits.
PageGroup said Brexit and political uncertainty continued to weigh on business confidence, particularly among its multi-national clients and the more senior permanent candidates. Temporary placements fell 2% and permanent placements dropped 10%.
Property and construction recruitment was the best performing sector in the UK with growth of 7%, while financial services was flat.
"We are pleased with the strong performances across the majority of our regions,” Ingham said.
“However, there remain a number of challenges as we continue through 2017 and into 2018: the UK, where we will continue to focus on protecting margins and investing in structural opportunities; Australia, where we have invested in headcount and a new office; and Brazil, which remains challenging, despite results improving from negative to flat year-on-year growth.”
Full year guidance in line with consensus forecast
The company ended the period with net cash of £109mln, compared to £89m at 30 June, excluding £521.3mln of interim and special dividends to be paid today.
Ingham said the outlook for the year remains in with with current market forecasts for operating profit of £113mln.
"Given the current uncertainties in key markets including the UK and Australia as well as current foreign exchange volatility we believe that this guidance remains conservative and see this risk to FY17 estimates lying to the upside," said Liberum analyst Rhim Karim.
"Given the recent strength in the shares we would not be surprised to see them slightly weaker on this in line update."
Liberum repeated a 'hold' rating and target price of 505p.
Shares fell 5.33% to 497.50p in morning trading.