PageGroup’s (PAGE) third-quarter trading update warned that its operating profit was likely to be in the range of £140m-£150m for the full year; its second consecutive lowering of guidance. Management had already warned that profits would fall to the lower end of forecasts – between £156.5m and £168m – at the time of its half-year update. Robert Walters (RWA), meanwhile, said its profits would be flat on 2018, forcing broker Panmure Gordon to cut EPS forecasts by 2 per cent.
Anxieties over the recruitment sector’s prospects have been mounting due to a deteriorating global economic outlook, exacerbated by US-China trade tensions, Brexit and demonstrations in Hong Kong, not to mention a potential geopolitical flashpoint on the Syrian border with Turkey.
Investors reacted decisively to the two groups’ updates, sending shares in PageGroup, Robert Walters and even Hays (HAS) – which does not publish its trading update until next week – down by 12 per cent, 6 per cent and 3 per cent, respectively.
Both Robert Walters and Hays derive 27 per cent of their gross profits from the UK market. PageGroup, by comparison, is less exposed at 17 per cent, but has run into trouble in some other locales. Growth slowed markedly in PageGroup’s five “large, high-potential markets”, namely the US, Greater China, Germany, Southeast Asia and Latin America, with growth slowing to just 4 per cent in the third quarter, due in large part to a 24 per cent decrease in gross profits in China. Meanwhile, both Asia Pacific and the UK saw gross profit declines.
Robert Walters' problems were more limited to the UK, with an 11 per cent constant currency drop in profits marking the group’s only region to decline in the period. However, management said the issues had led to “a unique set of cumulative headwinds” on a global scale.
