Recruiter PageGroup (PAGE) reported declining net fee income (NFI) in three out of its four global regions but investors still rushed to snap up shares in the professional services specialist.

Finance recruitment, which represents only around 6% of PageGroup’s global NFI, continues to drag on performance. In the UK, NFI in financial services declined as much as 14%, chief executive Steve Ingham told Shares.

But overall performance in the country at minus 5% was better than expected, driven by gains in technology and other recruitment sectors.

Shares in PageGroup are 4.2% higher today at 363p.

‘In financial services there are ongoing challenges from the global financial crisis that are still weighing on banks, as well as debt, low interest rates, foreign exchange issues and in some areas of the world, like China, slowing growth,’ said Ingham.

‘Politics is also potentially a reason in the US and in the UK, following the referendum vote, and clearly that does not help financial services.

‘There are also structural changes which in some ways hurt us and in some ways help. Financial institutions are looking to be more efficient businesses, outsourcing and restructuring some support functions into lower cost geographies.

‘That is good for us because we can help them with that. But because of the changes we’ve made to our business, with more diversification, you should get slightly different results compared to our historical performance.’

Financial services represents 6% of PageGroup’s NFI versus 20% in 2008, Ingham added.

Geographically, Germany was the stand-out performer with NFI growth accelerating to 16% versus 8% in the second quarter.

PageGroup - Key financials (£m, year-end 31 Dec.)
2015 2016e 2017e
Net fee income 1,065 1,221 1,281
Operating profit 90 94 91
Pre-tax profit 91 94 92
EPS 21.1p 21.4p 20.9p
DPS 11.5p 12.0p 12.5p
Net cash (debt) 95  90  113
Source: HSBC (11 Sep)


‘Page has been investing in Germany, and this appears to be bearing fruit,’ writes Matthew Lloyd, an analyst at HSBC.

‘The UK, which many of us had expected to be weak, was better than expected. The UK business contracted by 5% with public sector weakest at -9%. We had forecast a 10% contraction on expectations that the higher-wage brackets that Page operates would drag the number lower.’

Key risks at PageGroup include the cyclical nature of recruitment markets and the stock's premium rating, which means its share price could fall if expected growth is not delivered.

Issue Date: 11 Oct 2016