PageGroup (PAGE:LSE) yesterday reported group gross profit decreased by 8.9% on a constant currency basis to £237.3 million during the fourth quarter of 2023. The group cited a lower exit to the quarter with continued weakness in client and candidate confidence.

On a reported basis, group gross profit decreased by 11.1%.

The company shed 224, or 3.7%, of its fee-earning roles and 57 back-office jobs in the final three months of 2023, with reductions made across all its regions worldwide. Overall, the group had 5,851 fee earners and a total headcount of 7,859.

Nicholas Kirk, CEO, PageGroup, said, “We produced a resilient performance in challenging market conditions. Despite the year-on-year decline in gross profit, we are still seeing good activity levels, albeit we did see a deterioration in job flow through Q4. However, these activity levels are not all converting into gross profit due to ongoing lower levels of candidate and client confidence.”

Trading conditions in Asia, the UK or the US saw no improvement, while trading conditions deteriorated in Europe.

According to PageGroup, the tougher market conditions at the end of Q3 continued into Q4, as low levels of client and candidate confidence continued to delay time to hire, particularly in permanent recruitment. 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 are not as elevated as they were in 2022.

PageGroup also experienced acute shortages of highly skilled candidates in nearly all of its markets, which continued to support high fee rates.

Reflecting the uncertain macro-economic conditions, temporary recruitment (5%) continued to outperform permanent (-14%), as clients sought more flexible options. 

In its trading statement, PageGroup said its 2023 full year operating profit is expected to be slightly below previous guidance of £120 million - £125 million, which includes a previously announced restructuring charge of circa £5 million.

Unless otherwise stated, all growth rates below are in constant currency and compared against 2021.

EMEA

In Europe, Middle East and Africa, gross profit declined 6.1% to £132.4 million. This was a weaker performance than the annual decline of 1.3% in Q3, despite a softer comparator in Q4. PageGroup noted a slower end to the quarter.

France declined 5%, with continued weakness in candidate and client confidence, particularly within Michael Page. Reflecting the uncertainty in the market, temporary recruitment (+10%) was more resilient than permanent (-15%). Germany declined 6%, with tougher conditions within permanent recruitment in Michael Page. The Technology focused Interim business continued to show resilience, up 7%. Elsewhere in the region, the tougher conditions the group experienced at the end of Q3 continued into Q4, with the majority of countries declining year-on-year. PageGroup reduced its fee earner headcount by 84 in Q4, which was broadly in line with the reductions in the previous two quarters.

Americas

In the Americas, PageGroup delivered gross profit of £40.4 million, down 8.0% against Q4 2022. The US declined 24%, broadly in line with Q3. Conditions remained challenging, with uncertainty affecting both candidate and client confidence. Conditions were particularly tough within accounting & financial services, while property & construction was more resilient.

In Latin America, gross profit grew 18%, despite political and macro-economic uncertainty across the region. This was also partially due to hyperinflation in Argentina following the recent election; excluding this, the growth rate was 11%. Mexico, the largest country in the region, was down 6%, broadly in line with Q3, whereas Brazil was up 20%. Elsewhere in Latin America, the remaining countries grew 22%, collectively. Overall fee earner headcount decreased by 35, mainly in Latin America, as the group held on to its more experienced fee earner headcount in the US.

Asia Pacific

In Asia Pacific, gross profit for Q4 was down 10.3% against 2022 to £35.9 million. Greater China declined 8%, with Mainland China flat. The improvement in the growth rate from Q3 was due to the softer comparators in Q4. Hong Kong declined 12% for the quarter. South East Asia declined 14%, broadly in line with Q3, with Singapore, which continues to be impacted by uncertainty related to China, down 14%. India delivered the standout performance, up 16%. Japan declined 7%, a deterioration on the growth of 4% in Q3. Australia was down 24% for the quarter, with uncertainty from both clients and candidates. The fee earner headcount in the region decreased by 54, mostly in Australia and Japan, as the group said it held on to its more experienced fee earner headcount in China.

UK

In the UK, gross profit for Q4 declined 19.9% against 2022 to £28.6 million. This was broadly in line with Q3, and PageGroup continued to see clients deferring hiring decisions and candidates becoming increasingly cautious about accepting offers. Reflecting the continued challenging trading conditions, fee earner headcount reduced by 50 in Q4 and is now 20% lower than Q4 2022.

Perm/Temp mix

Gross profit from permanent recruitment decreased 16.3% in reported rates and 13.9% in constant currencies to £165.4 million (Q4 2022: £197.7 million). Gross profit from temporary recruitment increased 3.9% in reported rates and 5.2% in constant currencies to £71.9 million (Q4 2022: £69.2 million). This resulted in a ratio of permanent to temporary recruitment of 70:30 (Q4 2022: 74:26).

Kirk said, "Looking ahead, macro-economic uncertainty persists. However, 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.”

“Given these fundamental strengths, we believe we will continue to perform well in these challenging markets, and we are confident in our ability to implement our new strategy driving the long-term profitability of the group,” Kirk said. “We are also seeing the benefits from our investments in innovation and technology, where Customer Connect is supporting productivity and enhancing customer experience, and Page Insights is providing real time data to inform business decisions."

PageGroup shares closed yesterday at £456.40, up 1.51% on the day. The company has a market cap of £1.48 billion.