The largest listed recruitment company in the UK, Michael Page, has often boasted that 76 per cent of its net fee income is generated from overseas. This, plus a market-leading position in Latin America and Asia, has been the cornerstone of a premium rating to other recruiters. Yet as growth slows and storm clouds gather over Europe, analysts are taking a machete to forecasts. We think it's about time you handed in your notice on Michael Page shares.
- Market leader in Latin America and Asia
- Cash on the balance sheet
- Unemployment rising
- Overseas growth slowing
- Dividend cover falling
- Premium rating
The Europe, Middle East and Africa region, responsible for 44 per cent of Page's net fees, reported organic growth of 10 per cent in 2012's first quarter. That's quite a slowdown from 23 per cent growth in last year's third quarter and 15 per cent in the fourth. Nor is the outlook great. Chief executive Steve Ingham says: "Markets continue to be weak and visibility remains limited."
The troubles in the UK's jobs market are well documented. May's Report on Jobs from the Recruitment and Employment Confederation and KPMG, a consultant, showed that permanent staff salaries are down slightly and temporary billings are falling. As the UK's austerity budget bites and jobs in banking are slashed Michael Page's bosses assured shareholders that overseas growth would pull the company through, but the group as a whole is slowing down.
MICHAEL PAGE (MPI) | ||||
|---|---|---|---|---|
| ORD PRICE: | 357p | MARKET VALUE: | £1.1bn | |
| TOUCH: | 357-358p | 12-MONTH HIGH: | 558p | LOW: 313p |
| DIVIDEND YIELD: | 2.9% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 57p | NET CASH: | £58.2m | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 0.97 | 140 | 30.3 | 8.0 |
| 2009 | 0.72 | 21 | 3.9 | 8.0 |
| 2010 | 0.83 | 101 | 21.6 | 9.0 |
| 2011 | 1.02 | 86 | 18.7 | 10.0 |
| 2012* | – | 77 | 17.3 | 10.5 |
| % change | – | -10 | -8 | +10 |
Normal market size: 6,000 Matched bargain trading Beta: 1.3 *JPMorgan Cazenove estimates | ||||
The eurozone's woes and cuts in the banking sector cuts are taking their toll. Fee income grew 10 per cent year on year in January and February, but the pace slowed to 4 per cent in March. That's worrying because March is often the busiest month of the year for recruiters as employees get itchy feet once their bonus is banked.
City analysts didn't like what they saw and took a red pen to forecasts. JPMorgan Cazenove cut its forecast for 2012's earnings by 10 per cent to 17.3p. That also means that Page's likely dividend would be covered by earnings just a skinny 1.7 times. Sure, Page has a cash-rich balance sheet, but without a revival in trading the payout could be under threat.
