- Latest trading alert follows that of January and lukewarm update in April
- June shows fresh slowdown in vacancies and interviews
- UK still very soft, China getting worse
- Temporary hires show ongoing weakness, as well as permanent ones
- Recruiter itself continues to cut jobs
“Shares in recruitment specialist PageGroup are falling back to 12-month lows as a slower-than-expected recovery in jobs markets around the world, and a particularly weak June, take a toll on the company’s profit outlook,” says AJ Bell investment director Russ Mould. “China looks to be a source of additional weakness, but at least the UK is showing a slower rate of decline and it can be argued these figures probably reflect budget decisions taken several months back, given the lengthy lead times involved in headcount changes by employers. The picture, therefore, may not be quite so bleak as it seems.
“Even so, investors will now look to trading updates from peers Hays on Thursday and Robert Walters next Monday. A trio of weak statements could help to justify the interest rate cuts for which financial markets continue to hope, even if inflation is proving sticky, to leave the Bank of England with an awkward juggling act.
“The pace of the year-on-year change in gross profit, or net fee income, finally stopped getting worse in the second quarter at PageGroup, but the April-to-June period still generated the fifth consecutive year-on-year decrease.
Source: Company accounts
“Moreover, PageGroup boss Nicholas Kirk flagged a year-on-year decline of 18% in gross profit in June alone, to suggest a notably weak end to the quarter, as the number of new vacancies and job interviews tailed off amid low confidence at employers (who were therefore reluctant to hire) and employees (who perhaps preferred to stay put rather than chance their arm on a change in job, in the view that if anything went wrong it could have become a case of ‘last in, first out.’)
“China was the one area where the rate of decline in activity accelerated, while the UK’s drop showed some signs of stabilisation, albeit against a soft base for comparison.
Source: Company accounts
“It will be of particular concern to the company’s shareholders, and perhaps economists and policymakers, that temporary hires are coming under further pressure. Usually employers will focus on full-time hires if they are feeling confident and temporary ones if they have less visibility, so retrenchment in part-time posts is a potentially troubling sign.
Source: Company accounts
“PageGroup itself is responding to these tougher times. A 3% quarter-on-quarter cut in fee earner headcount takes the total to 5,598, the lowest mark since the pandemic-blighted second quarter of 2021 and 12% below the level of a year ago.
Source: Company accounts
“Earnings estimates continue to slide, however, and this is weighing heavily on the share price. After January’s trading alert, analysts had pencilled in operating profit for 2024 of £129 million, a marginal increase on 2023’s £119 million.
“That forecast had seeped lower to £90 million by the time of April’s lukewarm first-quarter update and Mr Kirk has now steered expectations toward £60 million, a cut that makes even Tuesday’s share price fall look pretty mild by comparison.”
Source: Company accounts, Marketscreener, consensus analysts’ forecasts
