Steve Ingham, chief executive of recruiter Michael Page, said that trading was "tough and getting tougher" in a trading update last month so the slump in underlying pre-tax profits from £45.5m to £36.1m was expected. With less business to go around, a fall in consultants' productivity (gross profit per fee earner) hit margins and the group's conversion rate of net fee income (NFI) to operating profit slipped by more than three points to 13.1 per cent. Post results, broker Canaccord Genuity downgraded full-year forecast adjusted EPS by 7 per cent to 15p (19p in 2010) and rated on a punchy 24 times earnings estimates, we see little reason to change our sell advice.
Operating profit from Michael Page's largest region, Europe, Middle East and Africa, which is responsible for 43 per cent of NFI, slumped by £3.6m to £13.4m, mainly due to the challenging trading conditions in recession-hit southern Europe. The UK is struggling, too - and the banking sector, in particular - which led to a 17 per cent decline in operating profits, even though the UK headcount has been cut by 12 per cent since the third quarter of 2011.
This weakness was partially offset by a strong performance from Asia Pacific, where operating profit rose almost 13 per cent to £13.8m, buoyed by a strong Australian market and new offices in Taipei and Suzhou. The only surprise was the collapse in profits in the Americas, down from £5.8m to £0.2m, reflecting investment in new offices and changes to senior management.
MICHAEL PAGE (MPI) | ||||
|---|---|---|---|---|
| ORD PRICE: | 371p | MARKET VALUE: | £1.1bn | |
| TOUCH: | 370-371p | 12-MONTH HIGH: | 505p | LOW: 313p |
| DIVIDEND YIELD: | 2.7% | PE RATIO: | 25 | |
| NET ASSET VALUE: | 59p* | NET CASH: | £32.4m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 502 | 45.5 | 10.0 | 3.25 |
| 2012 | 503 | 28.2 | 6.1 | 3.25 |
| % change | - | -38 | -39 | - |
Ex-div: 5 Sep Payment: 5 Oct *Includes intangible assets of £44m, or 14p a share. | ||||
