January 11, 2012 9:48 am

Weak fourth quarter drags down Michael Page

Michael Page’s earnings were pulled down in the last quarter by a growing number of multinational groups putting hiring “on hold”, the recruitment company’s chief executive said, adding that there was no way of knowing what 2012 will hold for the industry.

The group’s shares fell last month after it warned that a global loss of confidence in business meant that its full-year gross profit would be slightly below £86.5m, the lower end of the range forecast by analysts. On Wednesday it said the figure would be £85m – a rise of 18 per cent from gross profit in 2010, excluding one-off items.


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In common with rivals Robert Walters and Hays, Michael Page’s UK operation was by far its weakest performer in the three months to December, with net fee income rising 0.6 per cent.

“[The UK] is a very mature recruitment market, and therefore very competitive,” said Steve Ingham, chief executive. Michael Page had reduced its UK workforce by 160 people, he said, and could bring it down further by avoiding new hiring as employees moved on.

The company performed better in emerging markets: gross profit rose 18.6 per cent in the Americas and by nearly a quarter in Asia. But, like other recruiters, it warned of slowing growth rates in Asia towards the end of the year.

“There are some international companies that clearly have put global recruitment on hold at the moment,” Mr Ingham said. “It doesn’t matter whether the office is in Hong Kong or in London – it’s on hold. And that obviously affects our numbers wherever they are.”

However, he stressed that the business was still growing, and said it was well placed to take market share from competitors such as Hays.

Shares in Michael Page closed 6.6 per cent higher at 368p. Analysts ascribed the movement to management’s unexpectedly upbeat tone in a conference call, and to a likely closing of short positions by speculators who had bet that the fourth-quarter performance would be significantly worse than forecast.

Kevin Lapwood, an analyst at Seymour Pierce, said Michael Page’s gross profit was likely to decline in 2012. He noted that the management appeared “happy with the consensus forecast of about £70m in 2012 – which is completely at odds with what they’re saying about the general direction of the business going into the new year”.

FT Comment: Despite last month’s profit warning, investors remain much keener on Michael Page than on other UK recruiters – a source of annoyance to some rivals, who complain privately that its share price is being propped up by its prestigious brand. That, along with the stock’s greater liquidity, helps to explain its forward price/earnings ratio of 21 – nearly double that of Hays, its nearest UK rival by market capitalisation, which trades at 11 times. Furthermore, it will enjoy a bigger boost from the jobs market’s eventual recovery due to its concentration on permanent recruitment, which is more tightly linked than the temporary sort to broader economic performance. Yet the shares still look overpriced relative to the peer group. Those patient enough to invest in the recruitment sector should consider a less fashionable stock.

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