PageGroup (PAGE:LSE) announced that group gross profit declined by 12.8% to £219.7 million on a constant currency basis. The slowdown PageGroup saw at the end of Q4 2023 continued into Q1, with some deterioration experienced, particularly within Continental Europe.

Trading conditions in Asia, the UK and the US saw no improvement with low levels of client and candidate confidence continuing to delay time-to-hire, particularly in permanent recruitment.

Gross profit analysis

Nicholas Kirk, Chief Executive Officer, PageGroup, said, "The slower end to Q4 2023 continued into Q1 2024, particularly within Continental Europe. Overall, activity levels remain strong, however we experienced a slight deterioration in job flow towards the end of the quarter. Conversion of final interviews to accepted offers is still the most significant challenge, as candidate and client sentiment remains subdued reflecting the general macro-economic uncertainty in most of our markets. Permanent recruitment was more impacted than temporary across all of our markets, as clients continue to seek more flexible options.”

PageGroup added that as clients' recruitment budgets have tightened, they have become more risk averse which has slowed the recruitment process. Although salary levels remain strong, offers made to candidates were not as elevated as they were in 2022 and early 2023.

When it comes to the group’s perm/temp mix, overall gross profit from permanent recruitment decreased 18.6% in reported rates and 14.9% in constant currencies to £159.7 million (Q1 2023: £196.3 million). Gross profit from temporary recruitment decreased 9.9% in reported rates and 6.7% in constant currencies to £60.0 million (Q1 2023: £66.7 million). This resulted in a ratio of permanent to temporary recruitment gross profit of 73:27 (Q1 2023: 74:26). According to the group, this reflected the uncertain macro-economic conditions, as clients sought more flexible options.

Group fee earner headcount reduced by 100 (-1.7%) during Q1, which was slower than the reductions made in 2023. The group had already shed 224, or 3.7%, of its fee-earning roles and 57 back-office jobs in the final quarter 2023. Overall, the Group now has 5,751 fee earners and a total headcount of 7,778.

Foreign exchange movements had a negative impact on the group's results in Q1, decreasing the Q1 reported gross profit by 3.6%, or £9.4 million.

Geographical analysis (in constant currency)

In Europe, Middle East and Africa, gross profit declined 12.7% to £123.3 million. The tougher conditions PageGroup saw at the end of 2023 continued into Q1 2024. Reflecting this uncertainty, though temporary recruitment was more resilient than permanent.

France declined 16% for the quarter, with similar performances in both Michael Page and Page Personnel. This was a marked slowdown from the -5% in Q4.

Germany declined 16%, compared to -6% in Q4. Tougher conditions were experienced in permanent recruitment, down 23%, while the group’s technology focused interim business was more resilient, down 8%. Q1 2023 was also a tough comparator, with the region still growing in the first half of 2023. The company also reduced its fee earner headcount in Q1 2024 by 46.

In the Americas, PageGroup delivered gross profit of £37.3 million, down 5.5% against Q1 2023. In the US, the group declined 15%, an improvement on Q4 2023, albeit this was due partially to a softer comparator. The conditions the group saw at the end of 2023 continued into Q1, with uncertainty around market conditions affecting both candidate and client confidence, particularly within accounting and financial services.

In Latin America, gross profit grew 9%, despite macro-economic uncertainty across the region. This was also partially due to hyperinflation in Argentina following the election. Excluding Argentina, the region declined 4%. Mexico, the group’s largest country in the region, was down 12%, compared to -6% in Q4. Brazil was up 10%, however, elsewhere in Latin America, PageGroup’s remaining countries declined 6%, collectively. Fee earner headcount in the region increased by 37.

In Asia Pacific, gross profit for Q1 was down 15.7% against 2023 to £32.0 million. Greater China declined 15%, with Mainland China down 19% and Hong Kong down 12% for the quarter. This was a worsening from the performance in Q4, due to a further reduction in headcount of circa 30 in Q1.  

South East Asia declined 3% with Singapore returning to growth in Q1. India reported a record Q1, up 13%. Japan experienced tougher conditions during the quarter, declining 26%. Australia declined 32%, below the Q4 growth rate of -24%, with tough conditions in all states. The group’s fee earner headcount in the region decreased by 65, mainly in Australia and Greater China.

In the UK, Q1 gross profit declined 19.2% against 2023 to £27.1 million, following the decline of 19.9% in Q4 2023. PageGroup continued to see clients deferring hiring decisions and candidates cautious about accepting offers. Reflecting the uncertain market conditions, clients sought more flexible options, and, as such, temporary recruitment (-12%) was more resilient than permanent recruitment (-22%). In line with the more challenging trading conditions, the group’s fee earner headcount reduced by 26 in Q1 and at the end of the quarter was 17% lower than Q1 2023.

Kirk said, “While we anticipate a period of low confidence levels, based on our current outlook, we intend to hold fee earner headcount broadly at existing levels to ensure we are well placed to take advantage of opportunities as sentiment and confidence improve. We have a highly diversified and adaptable business model, a strong balance sheet and our cost base is under continuous review and can be adjusted rapidly to match market conditions.”

"We continue to see the benefits of our investments in innovation and technology,” Kirk continued. “Customer Connect is supporting productivity and enhancing customer experience, Page Insights is providing real time data to inform business decisions for both Page and our customers, and we continue to work with our partners to deploy AI and automation tools into our working environment. Given the group's fundamental strengths, we believe we will continue to perform well despite the challenging environment, and we are confident in our ability to implement our new strategy driving the long-term profitability of the group."

The company exited the quarter with March down 18% on 2023, albeit this was against a tough comparator and was impacted by the reduced number of working days in March due to the timing of Easter.

“However, against this backdrop activity levels remained good and we continued to experience acute shortages of highly skilled candidates in nearly all our markets, which was supportive of continued high fee rates,” the company stated.

PageGroup shares last traded at £460.80, down 4.83% on the day and 8.30% below its 52-week high of £502.50, set on 14 December 2023. The company has a market cap of £1.59 billion.