FTSE 250 staffer PageGroup (PAGE) has released its first half results which confirm the gross profit figure issued last month of £396m. The company has also announced a special dividend of 12.73p per share, or £40.6m.
This is the third consecutive year of special dividends, having paid out £20m in 2016 and £40m last year.
Given that gross profit was already known, the other new information from the results was the company’s operating profit before interest and tax. This is hit £67.2m, an 18.1% increase on the prior year.
Suhasini Varanasi, analyst at investment bank Goldman Sachs, says that while the news on the special dividend is welcome, ‘we think expectations could have been for a slightly higher payout given the strong EBITA (earnings before interest tax and amortisation) growth’.
The company increased its conversation rate by 80 basis points to 17%, this is the percentage of how much of its gross profit became operating profit. As Page’s operating profit increased by 18.1%, it’s not unreasonable to hope for a similar increase to its special dividend, which would mean 15p per share.
Broker Liberum also says that the special dividend is weaker than expected, the company paid out the same figure in 2017, although has hiked its normal dividend per share by 5.1% to 4.1p
NOT ALL PLAIN SAILING
While Page’s first half results are solid across the board, with every metric improving from revenue to earnings per share, there are some problem areas for the company.
Page’s CEO Steve Ingham, says there remains challenges including Brexit in the UK, trading in Catalonia and the forthcoming elections in Latin America.
However, despite these sticking points, the company has bold ambitions. These include making £1bn of gross profit with between £200m and £250m of operating profit. This would mean a 25% conversation rate.
As Shares has previously said, recruitment firms are good barometers of the state of the global economy. This is especially true of the large international companies like Page. If it is to hit its ambitious targets, economic growth has to continue as if it contracts this will not bode well for the company.
Shares in PageGroup are up 2.1% to 611.5p on Wednesday.
