Although we don’t believe in timing the market or panicking over every stock fluctuation, understanding how a business is performing, competing and changing is vital to sensible investment.
What: Michael Page International (LSE: MPI) — the specialist recruiters that operates under the brand PageGroup — released a trading update this morning, for the third quarter in which it warned that it is now expecting full-year operating profit to be “modestly lower” than market expectations. Its share price is currently down 11%.
So what: PageGroup says that its becoming more cautious about the short-term outlook, due to fragile confidence in its Europe, Middle East and Africa region (the company says both Europe and the Middle East are afflicted by “increased political and economic uncertainty”), the slowing of growth in Asia, and the adverse effect of currency movements.
In Europe, Page Personnel (the clerical and support hire business) in France and Germany continued to outperform the predominantly permanent Michael Page businesses, and in the UK growth continued to improve, with the strongest performances coming from the Finance & Accounting, Marketing, Procurement & Supply Chain, Property & Construction, and Page Personnel businesses.
Growth in Asia fell from 25% to 17% in the third quarter, with growth in Greater China — the company’s largest business — slowing from 37% to 25%. But PageGroup says that Australasia was positive for the first time in over two years, and that North and Latin America both delivered record performances (on constant currency basis).
The company also comments that the 11.6% increase in group gross profit for the quarter (up to £132.9m, at constant currency) reflects steady year-on-year growth in all four of its operating regions.
What now: PageGroup says it believes that it can best achieve its strategic goals for 2015 through targeted headcount investment, but notes that this will have a short-term impact on productivity, especially in Germany, France and the UK, where it is seeking to grow its temporary businesses.
It also reports that it completed the roll-out of its “Page Recruiting System” in the US and in Page Personnel UK during the quarter, and that it expects the roll-out to all UK businesses to be completed by the end of the year.
At 379.1p, Michael Page International’s share price is down over 20% on this time year, compared with a less than 3% dip in the FTSE All-Share. And the company is under-performing the index over the longer term, too, with just a 1.5% rise in its share price over then past five years, during which time the FTSE All-Share has gained 27%.
