15th Apr 2024 10:16
(Alliance News) - PageGroup PLC is being hit "from every angle" as harsh conditions in recruitment markets continued into 2024.
Shares in PageGroup fell 6.4% to 453.40 pence each in London on Monday morning.
On Monday, the Weybridge, England-based recruitment company said gross profit in the three months to March fell 13% to GBP219.7 million from GBP263.0 million the year prior.
Analysts at Citi noted the "weaker than expected" performance was well below the company provided consensus of GBP227.5 million.
As a result, the broker has cut its 2024 earnings before interest, tax and amortisation forecast to GBP90 million from GBP101 million.
Chief Executive Nicholas Kirk said the slower end to the fourth quarter continued into the first quarter of 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," he continued.
Kirk said permanent recruitment was more impacted than temporary across all markets, as clients continue to "seek more flexible options."
PageGroup said gross profit fell 13% in Europe, the Middle East and Africa, by 5.5% in the Americas, by 16% in Asia Pacific and by 19% in the UK.
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, the company stated.
PageGroup said as clients' recruitment budgets have tightened, they have become more "risk averse", which has slowed the recruitment process.
AJ Bell investment director Russ Mould said: "It's an awful time to be a recruitment consultant despite resilience in many major economies. The persistently high interest rate environment means companies are under pressure to cut costs and trimming the number of jobs is one way to save money."
"The natural path to follow is to either make redundancies, shift from permanent to more flexible part-time staff or not to replace anyone leaving of their own accord."
"These steps are all bad for recruitment agencies because it reduces the opportunities to place candidates into roles and increases the pool of people looking for work, meaning companies in certain sectors don't have to be as generous with hiring packages as there is more candidate choice."
"PageGroup's trading update paints a picture of a company being hit by gusts of wind from every angle. There isn't a single territory showing profit progression and both permanent and temporary jobs are proving to be tough terrain," Mould commented.
Citi noted going forward, Page intends to protect current levels of fee earner capacity, which should "weigh on near term margins."
It pointed out the deterioration in performance is "perm-led," with first quarter permanent net fees fees down by 15% compared to the 7% drop in temporary fees.
As a result, Citi explained countries with bigger temporary recruitment books, such as Belgium, performed more resiliently.
Citi reiterated a 'buy' rating and 600 pence share price target.
"When the current macro storm abates, shares should correct towards normalised earnings-based valuations," Citi suggested.
"Page boasts a strong financial position such that shareholders do not risk being diluted before the macro storm clears," it remarked.
By Jeremy Cutler, Alliance News reporter
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