PageGroup has hiring spree of its own

Amidst a host of record figures, there is a quiet hint of warning in PageGroup’s (PAGE) interim results. The professional recruitment company noted a “slight slowing in time to hire in some of [its] markets” in July, saying it would “continue to closely monitor” its forward-looking KPIs. 

There was no sign of a slowdown in the first half of the year, however. Operating profit rose by 79 per cent to £115.3mn and productivity surged, with gross profit per fee earner up 9 per cent. Shareholders have been rewarded with higher dividends and a special dividend of 26.71p per share.

PageGroup is doing well across the globe, but Europe, the Middle East and Africa is the standout performer, with gross profit up 50 per cent year on year. This is handy, as this is also the largest division, generating more than half of group sales. By contrast, lockdowns in China and Hong Kong hampered growth in Asia Pacific.

The business has significantly increased its workforce to keep up with strong demand. Total headcount had grown by 11 per cent to 8,668 at the end of June, up from 7,763 in 2019. The group has also increased its footprint, with long-term lease liabilities up by 18 per cent. 

PageGroup’s expansion plans make sense while the job market is booming. However, analysts at Liberum note that it “remains highly geared into the macro cycle” given its focus on permanent positions. If recession fears become a reality, and demand for recruitment services starts to falter, the group’s big workforce could prove costly. Investors are clearly wary, with the shares falling by 8 per cent in the wake of these results. For now, full-year operating profits are expected to meet consensus expectations of £206mn. Hold.

Last IC View: Hold, 541p, 3 Mar 2022