PageGroup surprisingly resilient

The group operates in 36 countries across the world, offering broad geographic diversification. The largest region – Europe, the Middle East and Asia – accounted for 47 per cent of gross profits at the last full year. It is similarly diversified across the disciplines it recruits into, although they are predominantly white collar in nature. Accounting and financial services was the largest at the full year, representing 37 per cent of gross profits.

Staffing companies are often seen as a bellwether of confidence in the wider market, which led to them being among the hardest hit when sentiment began to turn in early October. In theory, PageGroup’s broad geographic diversification gives it a measure of protection against the vicissitudes of individual markets – although there is no denying there are signs of potential trouble on the horizon for the global economy. However, some evidence of PageGroup's resilience can be seen in the group’s strong overall performance so far this year, in spite of the challenges the UK market has faced since the Brexit referendum, where it generates about a fifth of gross profit.

PageGroup is highly cash generative and offers the comfort of a robust balance sheet. Net cash stood at £122m at the end of the group's third quarter, which was £35m higher than the half-year figure given in our table below. In recent years management has channeled excess cash into special dividend payments. The latest of these totalled 12.73p a share, effectively doubling the dividend yield to more than 5 per cent (special dividends are included in the table below).

The latest trading update, released in September, gives further cause for confidence. The troubled UK market returned to modest growth, with gross profits up 0.8 per cent in the third quarter, after contracting by 4.6 per cent in the first half of the year. More importantly, the 36 per cent of gross profits accounted for by the group’s five 'high-potential' markets – investment in which is a major strategic priority – achieved growth of 30 per cent overall. Profit for the full year is due to come in ahead of expectations.

Perhaps most telling was the group’s investment in headcount. Recruitment is by nature a people business, and changes in the number of employees is a crucial indicator of the prospects of a division. PageGroup achieved a record headcount of 6,014 in the third quarter of the year, growth of 10.2 per cent in the year to date.