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PageGroup shares hit by pessimism

All five of the recruiter’s target markets experienced double-digit net fee growth
March 7, 2019

On the face of it, PageGroup’s (PAGE) results for 2018 reflect a familiar pattern: record performances internationally, coupled with relative stagnation in the UK. However, delve a little deeper, and the domestic picture is looking more positive. After net fees dropped by 4.6 per cent in the first six months of the year, the UK business returned to growth and ended the year down just 1.7 per cent. The turnaround was primarily due to continued high demand for contractors, which saw Page Personnel grow 8 per cent in the year.

IC TIP: Buy at 440p

Meanwhile, management’s faith in the five 'high potential' markets has been justified. All five saw record gross profit, but Germany led the way, with growth of 30 per cent. Headcount also reached a record at 7,772, while the conversion rate – the percentage of gross profit that drops through to operating profit – increased by 90 basis points to 17.5 per cent.

The question remaining for investors is how long PageGroup can keep such a performance going, particularly as commercial activity seems to be tapering off in the eurozone economies – even mighty Germany. 

HSBC expects 2019 EPS of 38.4p (from 32.56 in 2018).

PAGEGROUP (PAGE)   
ORD PRICE:440pMARKET VALUE:£1.44bn
TOUCH:439-440p12-MONTH HIGH:614pLOW: 424p
DIVIDEND YIELD:3%PE RATIO:14
NET ASSET VALUE:97pNET CASH:£97.7m
Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20141.0580.419.311.00
20151.0690.721.311.50
20161.2010023.111.98
20171.3711826.512.50
2018 *1.5514232.513.10
% change+13+21+23+5
Ex-div:16 May   
Payment:17 Jun   
*Special dividend of 12.73p a share declared at the half-year mark