What's new...
■ Weak first quarter
■ Too exposes to permanent placements
■ The shares have slumped
Recruitment group Michael Page International (MPI) - which rebranded itself as PageGroup last October - is having a tough time. Its first-quarter trading update this month revealed that recruitment markets are weakening and sector analysts think there's little chance of a recovery any time soon.
The figures themselves were grim. Group first-quarter like-for-like net fee income (NFI) fell 6.7 per cent, with NFI from the Europe, the Middle East and Africa unit - responsible for 41 per cent of the group total - having tumbled 15.1 per cent. Painfully, NFI dropped 17 per cent in France and 27 per cent in Germany, while a moribund UK market meant that NFI here fell 1.2 per cent. There was a glimmer of hope from Asia, however, where NFI rose 14 per cent there - however, this was offset by Australia's weak mining sector, which dragged down NFI for the Asia Pacific region as a whole by 0.3 per cent.
The group is also relatively more exposed than many of its peers to poor recruitment sentiment through its hefty exposure to the weak permanent placement sector. That generates 77 per cent of group NFI and fell 7.6 per cent in the period - rather weaker than the 3.6 per cent NFI slippage for temporary recruitment business.
Espirito Santo says...
Neutral. First-quarter trading was weaker than anticipated and this places pressure on our - and on consensus - forecasts. We have cut our full-year adjusted pre-tax profit forecast by 8 per cent to £70m, giving EPS of around 15p. We analyse the recruiters in terms of growth track record (staff numbers and productivity), return on invested capital, and financial strength - Michael Page does score very well on these measures. However, we believe a PE ratio of over 24 times forecast earnings for 2013 already assume a meaningful recovery. We prefer SThree, where the scope for growth from diversification is greater. We therefore maintain our neutral stance.
Panmure Gordon says...
Sell. The first-quarter update does little to dispel our fears that trading remains tough in recruitment markets and we think there's little sign of either market stability, or a return to growth. The group remains a strong brand name and financially robust, but the outlook for 2013 now looks weaker than anticipated and greater efforts will now be have to be made to monitor and adjust the cost base. We suspect that this will not be enough in the short term to stop profit expectations moving lower on this update and, with continued investment in markets that remain key growth targets, Michael Page is clearly playing a longer-term game than the current share price anticipates.
