Shares in recruitment firms PageGroup (PAGE) and Robert Walters (RWA) suffered heavy losses after both firms cut their full year earnings guidance due to lack of visibility in the staffing business.

Shares in PageGroup were down 10.5% to a two-year low of 374p after the firm cut its outlook for this year’s operating earnings to £140m to £150m against market expectations of £150m to £160m.

This was after net fee income grew by just 2.1% in the third quarter, dragged down by weakness in the Asia Pacific region (fees down 8.1%) and the UK (fees down 4.1%).

Meanwhile Robert Walters lowered its guidance for full year pre-tax profits from a small increase to at best flat on last year (£49.1m), sending its shares down 7% to 457p, also a two-year low.

Like PageGroup, it reported 2% growth in net fee income in the third quarter with growth in Asia Pacific slowing to 3% from 7% the previous quarter and UK fees down a hefty 11% compared with 8% the previous quarter.


According to PageGroup chief executive Steve Ingham, ‘confidence in Mainland China continues to be affected by trade tariff uncertainty and the social unrest in Hong Kong is increasing.’

Meanwhile, with worsening macro-economic indicators in Continental Europe, particularly in Germany, and in the US, Ingham is concerned that ‘growth in these markets may slow’.

In contrast, Robert Walters is still seeing good growth in its core markets in Europe and the US with net fees in France, its largest European business area, up more than 10% last quarter.


In the UK however, both firms are in agreement. PageGroup reported that heightened Brexit-related uncertainty was ‘impacting candidate and client confidence at all levels’. This drop in confidence was felt at Page Personnel and Michael Page, which targets more senior job opportunities.

Similarly, Robert Walters reported that ‘client and candidate confidence continued to be generally weak in the UK across both the recruitment and recruitment outsourcing markets’, although it saw better growth in the regions and in the IT segment.

According to the latest UK employment survey by consultants KPMG, permanent job hires fell for the seventh month in a row in September while the rise in vacancies was the weakest for more than seven years.


If there is a silver lining for shareholders in the staffing firms it is that they have ‘been there, done that’ before, in the recession of the early 1990s and the financial crisis of 2008, and they are adept at managing their cost bases during downturns.

They are also strongly cash-generative, hence PageGroup ended the third quarter with a net cash position of £92m while Robert Walters ended the quarter with net cash of £82m.

Robert Walters, chief executive of the firm which bears his name, described the situation as ‘like walking up the down escalator’ but stressed that there were no plans to make drastic cuts to the platform. Rather, costs would be closely managed while keeping an eye on market opportunities ‘as and when they arise’.






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Issue Date: 08 Oct 2019