Ryan FowlerPageGroup’s shares have fallen to 12-month lows as the company faces a slower-than-expected recovery in the global job market, coupled with a particularly weak performance in June. The latest trading alert follows similar warnings in January and a lukewarm update in April.
AJ Bell investment director Russ Mould commented, “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.”
June saw a fresh slowdown in vacancies and interviews, with both temporary and permanent hires showing ongoing weakness. China, in particular, exhibited additional declines, while the UK showed some signs of stabilisation despite remaining soft. Net fees declined by 17%, with temporary revenues down by 4% and permanent revenues dropping by 22%.
PageGroup CEO Nicholas Kirk reported an 18% year-on-year decline in gross profit for June alone, reflecting low confidence among both employers and employees. Employers are hesitant to hire, and employees are cautious about changing jobs due to the economic uncertainty, fearing the risk of being “last in, first out.”
The detailed year-on-year change in gross profit across different regions and types of hires further highlights the challenges:
- EMEA: -12%
- UK: -17%
- Asia Pacific: -24%
- Americas: -14%
- Group: -15%
Temporary hires, typically a sign of cautious hiring strategies, have come under further pressure, indicating potential trouble ahead. The company has also reduced its fee earner headcount by 3% quarter-on-quarter to 5,598, the lowest level since the pandemic-hit second quarter of 2021 and 12% below the level a year ago.
The reduction in headcount and other cost-cutting measures have been necessary to manage the challenging conditions. However, earnings estimates continue to decline. Analysts initially forecasted an operating profit of £129 million for 2024, marginally up from £119 million in 2023. By April, this forecast had dropped to £90 million, and following the latest update, expectations have now been adjusted to £60 million.
Mould concluded, “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.”
Investors are now keenly awaiting trading updates from PageGroup’s peers, Hays and Robert Walters, to gain further insight into the sector’s outlook. A trio of weak statements could strengthen the case for the interest rate cuts that financial markets are hoping for, despite persistent inflation concerns.
With the job market showing signs of ongoing difficulties and uncertainty, the near-term outlook for PageGroup remains challenging, although there are some longer-term prospects that could provide stability and growth in the future.
