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Europe keeps PageGroup special

As with other recruiters, the company has seen weakness in the UK financial services sector
August 11, 2017

Weakness in sterling has continued to benefit global recruiter PageGroup (PAGE), pushing operating profit 20.9 per cent higher to £56.9m for the six months to June 2017, while constant-currency growth was modest by comparison at 9.2 per cent. The flattering effect of foreign exchange is expected to wane in the second half of the year. Still, shareholders can enjoy a near doubling in the special dividend (see table).

IC TIP: Hold at 504p

Growth in the business came from operational improvements as much as external factors, with fee earner headcount reaching a record level of 4,987 at the end of the period, while maintaining an earner to support staff ratio of 77:23, itself a record for the group. The conversion rate of gross profit into operating profit moved up from 15.7 per cent to 16.2 per cent, although that's still below rival Hays (HAS), which reported 21.5 per cent earlier this year.

As has been seen with other recruiters, PageGroup saw big improvements in its European business driving the rest of the company. Gross profit for the Europe, Middle East and Asia division was up 13.8 per cent in constant currency, with double-digit growth across France, Germany and Spain, the largest segments in the division. The UK continued to struggle, with gross profit declining 2.3 per cent over the period due to weakness in the accounting and financial services segment, as well as in marketing, sales and retail.

Analysts at Panmure Gordon are forecasting adjusted pre-tax profit of £112m, giving EPS of 25.7p for the year to December 2017 (from £100m and 23p in 2016).

PAGEGROUP (PAGE)   
ORD PRICE:504pMARKET VALUE:£1.64bn
TOUCH:503-505p12-MONTH HIGH:512pLOW: 324p
DIVIDEND YIELD:2.4%PE RATIO:20
NET ASSET VALUE: 83pNET CASH:£88.9m
Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)*
201657646.910.83.75
201767356.913.13.90
% change+17+21+21+4
Ex-div:7 Sep   
Payment:11 Oct   
*Excludes special dividend of 6.46p paid in October 2016 and 12.73p to be paid in October 2017