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PageGroup Q2 gross profit slides 12%, issues profit warning

PageGroup Q2 gross profit slides 12%, issues profit warning

July 9, 2024
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UK staffing firm PageGroup (MPI:LSE) reported today that second-quarter gross profit declined by 12% on a constant currency (CC) basis when compared to the same period a year ago. On a reported basis, gross profit fell by 15%.

PageGroup said in its trading update that it continued to see tough market conditions in many of its markets with no immediate signs of improvement.

“As clients’ recruitment budgets have tightened, they have become more risk averse which has slowed the recruitment process,” the group stated in the company’s trading update. “Although salary levels remain strong, offers made to candidates were not as elevated as they were in 2022 and early 2023.”

Reflecting the uncertain macroeconomic conditions, temporary recruitment (-9.8% CC) continued to outperform permanent (-12.8% CC), as clients sought more flexible options.

“We continued to see challenging market conditions throughout the group in Q2 and we experienced a softening in activity levels through the quarter, particularly in terms of new jobs registered and number of interviews,” PageGroup CEO Nicholas Kirk said in the company’s trading update.

“The conversion of interviews to accepted offers is the most significant area of challenge, as candidate and client confidence remains subdued, reflecting the macro-economic uncertainty in the majority of our markets,” Kirk said. “Permanent recruitment continues to be impacted more than temporary, as clients seek more flexible options and permanent candidates remain reluctant to move jobs.”

Gross profit Q2

(£ millions)

Q2 2024

Q2 2023

% change

% change constant currency

Europe, the Middle East and Africa

125.1

142.7

-12.3%

-10.2%

Americas

40.1

46.3

-13.5%

-6.6%

Asia Pacific

32.3

42.3

-23.7%

-19.8%

UK

26.8

32.5

-17.4%

-17.4%

Total

224.3

263.8

-15.0%

-12.0%

Permanent

165.3

195.9

-15.7%

-12.8%

Temporary

59.0

67.9

-13.1%

-9.8%

Foreign exchange movements had a negative impact on the group’s results in the second quarter, decreasing its reported gross profit by 3.0%, or £7.9 million.

Overall, when it comes to group headcount, PageGroup reduced its fee earner headcount by 153 (-2.7%) during the second quarter, mainly in Europe. Following these decreases, the group said its intention remains to hold fee earner headcount broadly at existing levels. The group’s non-operations headcount decreased by 49 (-2.4%) in the quarter due to finalising the closure of UK SSC (shared services centre). Overall, the company had 5,598 fee earners and a total headcount of 7,576.

Geographical Analysis (unless stated otherwise, all growth rates are versus 2023 and in constant currency).

In Europe, Middle East and Africa, second-quarter gross profit declined 10.2% to £125.1 million. France, the largest market in the group, was down 14%. The company saw a more resilient performance within temporary recruitment, indicative of the current uncertainty in the market.

Germany, the group’s second-largest market, declined 9% in the second quarter.

Elsewhere in Europe, the company saw tough market conditions in all countries. In the Middle East and Africa, gross profit grew 7%, a new record quarter. PageGroup reduced its fee earner headcount in response to the tougher market conditions in the second quarter, down 120, mainly in Germany, France and the Netherlands.

In the Americas, gross profit was £40.1 million, down 6.6% year over year. In the US, gross profit declined 19%. The conditions PageGroup saw in the first quarter continued into the second quarter, with uncertainty around market conditions affecting both candidate and client confidence.

In Latin America, gross profit grew 9%. However, excluding Argentina due to hyperinflation, the region declined 4%. Mexico, the largest country in the region, was down 10% due to its high level of dependency on the US. Brazil was up 9%, with a particularly strong performance in temporary recruitment. Elsewhere in Latin America, the remaining countries declined 8%, collectively. In line with the more challenging conditions, the overall fee earner headcount decreased by 31.

In Asia Pacific, gross profit for the second quarter was down 19.8% year over year to £32.3 million. Greater China showed no sign of improvement and declined 29% in the second quarter, with Mainland China down 25% and Hong Kong down 38%. Southeast Asia declined 12%, due mainly to Singapore, which was down 16%. India continued to deliver standout results, with a record second quarter, up 7% on the prior year. Japan declined 6%. Australia declined 38%, with ongoing challenging conditions in all states. Fee earner headcount in the region decreased by 9.

In the UK, gross profit for the second quarter declined 17.4% against 2023 to £26.8 million, following the decline of 19.2% in the first quarter. PageGroup continued to see clients deferring hiring decisions and candidates cautious about accepting offers. Permanent recruitment (down16%) was more resilient than temporary recruitment (down 21%), due partially to a softer demand for permanent. Following headcount decreases over the past 18 months, the company held its fee earner headcount broadly flat (up by 7) in the second quarter.

PageGroup stated, “Despite this, we continued to invest in the group’s strategy, by broadly maintaining our platform of fee earners. Given the weaker than expected trading in June, recent increased geopolitical and macro-economic uncertainty and consequently a more cautious view for H2, the board now expects full year 2024 operating profit to be in the region of £60 million.”

The group will issue its H1 results on 8 August 2024.

PageGroup set a new 52-week low during today’s trading session when it reached £360.00. Over this period, the share price is down 5.43%. Shares last traded at £400.20, down 5.30% on the day. The company has a market cap of £1.39 billion.