- Reduced headcount
- Difficult conditions in UK and Asia Pacific
The recruitment sector has suffered another blow following a warning from PageGroup (PAGE) that full-year operating profits will be “slightly below” previous guidance of £120mn-£125mn. This implies a year-on-year drop in profitability of at least 39 per cent.
The FTSE 250 agency reported an 8.9 per cent decline in gross profit in the fourth quarter of 2023, as low levels of client and candidate confidence continued to delay time to hire, particularly in permanent recruitment. Trading was made “particularly challenging” by year-end salary reviews and bonuses.
The geographical picture was mixed, however. Europe, the Middle East and Africa (EMEA) – which account for 56 per cent of group fees – held up the best. While gross profit fell by 6.1 per cent at constant currency in Q4, fees were stable across the year as a whole. By contrast, UK gross profit tumbled by a fifth in Q4 and 16 per cent across the full year. The Asia Pacific region also reported double-digit declines.
Chief executive Nicholas Kirk said macroeconomic uncertainty had persisted into 2024. However, the group has managed to boost productivity – measured as gross profit per fee earner – by 8 per cent by cutting headcount. “Acute shortages” of highly skilled candidates have also supported high fee rates.
Much like Robert Walters (RWA), PageGroup is painfully exposed to the permanent recruitment market at a time when clients are seeking “more flexible” options. Robert Walters has not lowered its guidance, but pre-tax profit is expected to drop by over 60 per cent year on year to £20.5mn. Read our analysis of Robert Walters' latest trading update here.
Elsewhere in the sector, Hays (HAS) cut its half-year profit forecasts by almost a fifth this month, after fees fell by 15 per cent in the run-up to Christmas.
Last IC view: Hold, 447p, 7 Aug 2023
