With a UK economic recovery now looking well-entrenched and much improved market sentiment in the US, the recruitment industry is a natural beneficiary. Michael Page International (MPI) is already reaping the rewards of renewed UK confidence, with an uptick in its finance and accounting, and property and construction disciplines particularly. Its North American expansion also makes it well placed to take advantage of the growth on offer across the pond. Indeed, it was the group's strongest market in the final quarter of 2014, with gross profits up a fifth on the previous year. And we believe there is much more upside to come for investors willing to take a longer-term view. While the group's half-year conversion rate (a measure of how much of Page's fee income is being converted into profit) improved by 1.2 percentage points to 13.5 per cent in 2014, this is still less than half the 32.1 per cent it achieved before the credit crunch, leaving plenty of scope for improved profitability.
- Potential to significantly improve profitability
- UK/US recovery play
- Strong earnings forecast
- Emerging market expansion potential
- Weak euro
- Potential Asia Pacific volatility
Net fee income for the fourth quarter of 2014 grew by 13 per cent to £136.2m, ahead of expectations of £134m. The recruiter's UK and US businesses, which respectively make up around a quarter and 14 per cent of group gross profit, have been the most consistent drivers of growth. In the UK, Page Personnel has been a key force behind this, delivering 26 per cent gross profit growth in the fourth quarter and 17 per cent in the first half. The group's focus on permanent recruitment, which accounted for 75 per cent of group gross profits in 2014, puts it in a good position to benefit from further UK recovery.