logo-loader

PageGroup achieves record 2018 but shares drop amid Brexit worries

Last updated: 11:10 14 Jan 2019 GMT, First published: 07:48 14 Jan 2019 GMT

worker
The recruiter says it will continue to focus on driving profitable growth

PageGroup PLC (LON:PAGE) expects full-year gross profit to rise 15.9% after the recruitment firm delivered a record fourth quarter despite a slowdown in the UK jobs market due to Brexit uncertainty.

In a trading update for the 2018 financial year, the group said gross profit rose to a record £815.0mln from £711.6mln a year ago, with growth in all regions apart from the UK, where business confidence is weaker ahead of the UK’s departure from the European Union on March 29.

READ: PageGroup expects annual profits to beat market forecasts after solid third quarter

The UK saw gross profit fall 1.7% to £138.4mln, representing 17% of the total.

The company’s biggest region - European, Middle East and Africa (EMEA), accounting for 48% of the business – offset the decline in the UK by delivering a 17.9% constant currency increase in gross profit to £394.2mln.

The Asia Pacific, which is the group’s second largest region at 20% of total gross profit, saw constant currency growth of 20.7% to £161.3mln.

In the Americas, gross profit gained 27.3% at constant currency to £121.1mln.

Fourth quarter gross profit growth eases

In the fourth quarter, gross profit rose 15.4% at constant currency to £211.1mln, slowing from the 19.4% growth reported in the previous quarter due to the tough comparative year-ago period.

The company achieved its second consecutive quarter of growth in the UK with gross profit rising 2.1% to £33.5mln.

The EMEA grew gross profit by 13.9% at constant currency to £104.4mln, led by a strong performance in Germany. The Asia Pacific generated a 22.0% rise in gross profit to £41.2mln, although growth in China eased to 12% from 21% in the third quarter due to confidence being hit by trade tensions between the nation and the US.

The Americas increased gross profit by 29.2% to £32.0mln with the US up 32% and Canada up 20%.

Permanent job placements made up most of the total gross profit at 76%, with temporary representing the rest.

Fee-earner additions slow in fourth-quarter 

PageGroup said it added 58 fee-earners in the fourth quarter, which marked a slowdown after adding 561 in the first three quarters.

“Whilst additions in Q4 are normally lower, we are also mindful of the heightened geopolitical and macro-economic uncertainty, which has the potential to impact client and candidate confidence,” said chief executive Steve Ingham.

"We will continue to focus on driving profitable growth while continuing our strategic investments towards our Vision of 10,000 headcount, £1bn of gross profit and £200mln - £250mln of operating profit.

“Our flexible and diversified business model ensures that we are able to respond quickly to changes in market conditions.”

The company maintained its guidance for 2018 operating profit of £141.8mln. 

In late morning trading, shares were down 5.6% to 438.80p.

Several negative factors spooking investors, says analyst 

AJ Bell investment director, Russ Mould, said there are "several negative factors spooking investors" despite a record quarter and year for the group.

He said a slowdown in the pace of fourth-quarter gross profit growth for temporary job placements has taken the shine off the business.

Temporary job gross profit grew by 9.0% at constant currency in the quarter compared to 14.4% a year ago. 

Mould added that Brexit uncertainty continues to be a drag on UK operations with a "meagre" 2.1% gross profit growth in the final quarter, while growth in China has slowed quarter-on-quarter due to concerns about the country's trade war with the US.

He also noted that the company guided to a slowdown in the number of people it has hired to place candidates into jobs.

"Activity involving ‘fee earners’ is normally a good way of gauging confidence in the recruitment market," he said.

"If a staffing agency feels that companies are confident enough to take on more workers or replace anyone leaving their job, it will continue to hire recruitment consultants. Additions will slow or cease if the outlook is gloomier."

Mould said it is "lucky" PageGroup is diversified geographically to help cushion the blow of macro-economic challenges in the UK and China.

"But concerns about a slowdown in global economic growth will inevitably weigh on the shares, suggesting that PageGroup and its peer group will find 2019 a lot harder than last year," he said.

Chesnara reports strong 2023 results with improved cash generation and...

Chesnara PLC (LSE:CSN) chief executive Steve Murray discusses the company's full-year results for 2023 with Proactive's Stephen Gunnion, describing them as strong and particularly highlighting £53 million in commercial cash generation and a dividend coverage of around 150%. The company has...

1 hour, 56 minutes ago