PageGroup sterling gain offsets UK hiring
PageGroup has reported a slide in UK gross profit in the third quarter, citing “fragile” market conditions after the Brexit vote — but shares in the FTSE 250 recruiter rose as weak sterling boosted its international business.
On Tuesday, the company — which was previously known as Michael Page International — said gross profit in the UK fell 4.7 per cent year on year to £37.8m, in the three months to September 30. However, its total group gross profit rose 1.3 per cent on a constant currency basis to £158.6m.
“In the UK, confidence levels remained fragile and below levels seen earlier this year,” said Steve Ingham, chief executive. “It’s difficult to be able to predict what’s going to happen in the UK. Key performance indicators are holding up but there’s an element of caution.”
But analysts at HSBC suggested PageGroup’s UK operations had performed “better than many had expected”, and, by midday, the company’s shares were up 3.3 per cent.
Last week, mounting concern that British prime minister Theresa May favoured a “hard Brexit” approach — prioritising immigration controls over remaining part of the EU customs union or single market — led to a flash crash in the pound.
However, while Mr Ingham said he “would prefer a relatively free market of skilled people”, he noted that “we don’t do a lot of cross-border recruitment” and revealed that a cheaper pound had boosted the group’s overseas earnings.
PageGroup said it expected currency movements to add £45m to its gross profits and £10m to its operating profits in the full year.
Performance at its Europe, Middle East and Africa business (ex-UK) — which makes up two-fifths of the group — reflected this during the quarter: gross profit there rose 29.4 per cent year on year including the exchange rate effect. It was up 10.4 per cent when adjusted for constant currency.
France, where PageGroup has its largest European operation, lifted gross profit 4 per cent, while Germany had a record quarter and pushed its gross profit up 16 per cent.
Latin America excluding Brazil was one of the strongest regions, increasing by 23 per cent, but Brazil itself suffered a 12 per cent fall in gross profit.
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Total temporary recruitment profit rose 2 per cent, compared with a 1 per cent rise in profit from permanent — a differential typically seen during times of market uncertainty, when companies have less confidence in filling permanent jobs, so lower-risk temporary appointments increase.
Across the business, activity and trading was stronger in these temporary roles — and at lower salary levels. This was reflected in the 6 per cent growth achieved by the Page Personnel business, where temporary recruitment represents more than 40 per cent of gross profit. By contrast, in the division still known as Michael Page, where temporary recruitment represents only 17 per cent, business contracted 1 per cent.
PageGroup reported net cash of £100m on its balance sheet and tomorrow will pay interim and special dividends of £31.7m.