Pagegroup PLC reported a decline in its Q1 2025 gross profit, citing challenging macroeconomic conditions and client risk aversion. The company's stock fell by 2.8% following the announcement, reflecting investor concerns over the ongoing uncertainty. According to InvestingPro analysis, the stock appears undervalued at current levels, with impressive gross profit margins of 48.45%. Despite the decline, Pagegroup maintains a strong balance sheet and a diversified business model.
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Key Takeaways
- Q1 2025 gross profit of £194.2 million, a 9.2% decline in constant currencies.
- Net cash decreased to £54 million from £95 million at the end of 2024.
- Cost optimization efforts to save £15 million annually starting from 2026.
- Temporary recruitment proved more resilient than permanent recruitment.
- Stock price dropped 2.8% post-announcement.
Company Performance
Pagegroup's performance in Q1 2025 was marked by a 9.2% decline in gross profit due to adverse macroeconomic conditions affecting candidate and client confidence. Despite these challenges, the company continues to focus on reallocating resources to areas with long-term growth potential and simplifying its management structure to improve efficiency.
Financial Highlights
- Gross Profit: £194.2 million, down 9.2% YoY.
- Net Cash: £54 million, down from £95 million at 2024 year-end.
- Productivity: Gross profit per Fiorna down 1%.
Market Reaction
Following the earnings announcement, Pagegroup's stock fell by 2.8%, closing at £256.8. This movement reflects investor concerns over the company's declining profits and the uncertain economic outlook. Technical indicators from InvestingPro suggest the stock is in oversold territory, with a significant 45.72% decline over the past year. The stock trades near its 52-week low, offering a notable dividend yield of 6.66%, highlighting both market caution and potential value opportunity.
Outlook & Guidance
Pagegroup did not provide forward-looking guidance due to the unpredictable economic environment. The company is closely monitoring April activity and is focused on balancing productivity with future opportunities. Cost optimization initiatives are expected to yield significant savings starting in 2026. InvestingPro data shows the company maintains strong financial health with a current ratio of 1.6 and operates with moderate debt levels, providing flexibility during this transition period.
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Executive Commentary
Kelvin Stagg, CFO, emphasized the company's adaptability, stating, "Despite the uncertain outlook due to the increasingly unpredictable economic environment, Pagegroup has a diversified and adaptable business model." CEO Nick Kirk highlighted the positive momentum in the U.S. market, particularly in engineering and manufacturing sectors.
Risks and Challenges
- Macroeconomic Uncertainty: Ongoing global economic challenges could further impact client and candidate confidence.
- Tariff Impacts: Recent tariff announcements may affect market dynamics and client behavior.
- Recruitment Slowdown: Client risk aversion has slowed recruitment processes, particularly in permanent roles.
Q&A
During the earnings call, analysts inquired about the potential impacts of tariffs and the stability of fee rates in Q1. Executives noted a "hurry up and wait" sentiment among clients following tariff announcements, with stable fee rates reported for the quarter. The U.S. market's strong performance was also a focal point, driven by gains in engineering and manufacturing.
Full transcript - Pagegroup PLC (PAGE) Q1 2025:
Ezra, Call Coordinator, Page Group: Hello, everyone, and welcome to the Page Group Q1 Trading Update. My name is Ezra, and I will be your coordinator today. We will be taking questions at the end of the presentation.
I will now hand you over to Kelvin Stagg, Chief Financial Officer, to begin. Please go ahead.
Kelvin Stagg, Chief Financial Officer, Page Group: Thank you, and good morning, everyone, and thank you for joining us at short notice. Welcome to the Page Group twenty twenty five first quarter trading update. I'm Kelvin Saag, Chief Financial Officer, and on the call with me is Nick Kirk, Chief Executive Officer. Although I will not read it through, I'd just like to make reference to the legal formalities that are covered in the cautionary statement in the appendix to this presentation and which would also be available on our website following the call. The group delivered a Q1 performance in line with expectations.
Q1 gross profit was £194,200,000 a decline of 9.2% in constant currencies against Q1 twenty twenty four. We saw challenging market conditions in the majority of the group's markets as ongoing macroeconomic uncertainty continued to impact candidates and client confidence. Our Fiorna headcount reduced by 74 or 1.4% with reductions in areas of weaker trading performance. Overall, the group ended the quarter with 5,296 Fiornas and a total headcount of 7,228. Despite the tough macroeconomic conditions, gross profit per Fiorna, our measure of productivity, remained at elevated levels, down just 1% on Q1 twenty twenty four.
Our balance sheet remains strong with net cash at the March of around £54,000,000 This compares to £95,000,000 at the end of twenty twenty four, having paid out annual bonuses and quarterly profit share in January. I will now give a brief financial review. We reduced Saffy Owner headcount by 74 or 1.4 during the quarter, with reductions in areas of weaker trading performance. And on operations, headcount reduced by 59 in Q1 due mainly to the exit of around 45 heads that we've been double running as we transitioned our shared service center from Singapore to Kuala Lumpur. We continue to review our Fiona headcount, reallocating resources in line with our strategy into the areas of the business where we see the most significant long term structural opportunities as well as ensuring it remains aligned to the levels of activity we are seeing in of our markets.
Against the ongoing challenging trading conditions, we've taken robust action to optimize the cost base by simplifying our management structure and reducing our leadership team, along with other business support functions. And these actions will benefit the group from 2026 onwards. These initiatives will deliver ongoing cost savings of around £15,000,000 per year with a one off charge in 2025 of also around £15,000,000 The net impact on 2025 operating profit is expected to be around 10%. Despite the tough macroeconomic conditions, productivity remains strong, down just 1% in constant currencies compared to Q1 twenty twenty four. Although salary levels remained high, offers made to candidates were not as elevated as they were in 2022 and early twenty twenty three.
As a consequence, conversion of interviews to accepted offers remained the most significant challenge as the ongoing macroeconomic uncertainty continued to impact candidate and client confidence. While our fee rates remained at high levels, as clients' recruitment budgets tightened, they became more risk averse, which continued to slow the recruitment process impacting time to hire. I will now present a regional review. Group gross profit declined 9.2% in constant currencies against Q1 twenty twenty four. The tough conditions we experienced in Q4 continued into Q1.
Foreign exchange had a negative impact on our results, decreasing our reported gross profit growth rate by 2.5 percentage points or £5,600,000 In our largest region, Europe, Middle East and Africa, which represented 55% of the group, gross profit declined 12% on Q1 twenty twenty four. The tougher conditions we saw at the end of twenty twenty four continued into Q1 twenty twenty five. Reflecting this uncertainty, temporary recruitment was more resilient, down 9% compared to permanent, down 14%. France, the group's largest market, which represented 13% of the group, declined 17% due to ongoing political and macroeconomic uncertainty. Germany, the group's second largest market, which represented 13% of the group, declined 12% in the quarter.
This was an improvement on the 23% decline in Q4 twenty twenty four with reduced levels of political uncertainty following the elections and more recently the lifting of the debt break to fund defense and infrastructure spending. We saw tough conditions in Michael Page, down 23%. However, our technology and accounting focused interim business was more resilient, down 2%. Spain was flat on Q1 twenty twenty four with a standout performance from our technology consulting business. In line with the tougher trading conditions, we reduced our Fiorna headcount by 74 in Q1.
The Americas, which represented 19% of the group and excluding Argentina due to hyperinflation, grew 3.3% against Q1 twenty twenty four. North America was up 5% with The U. S. Up 7%, a further improvement on the growth of 3% in Q4 twenty twenty four with a particularly strong performance in engineering manufacturing. In Latin America, excluding Argentina due to hyperinflation, gross profit grew 1%.
Mexico, our largest country in the region was flat, an improvement on the 4% decline in Q4. Brazil was up 10% with strong growth, particularly in temporary recruitment. Across the region, Fiona headcount decreased by 13%. In Asia Pacific, which represented 14% of the group, Q1 gross profit declined 11.1% on 2024. In Greater China, which represented 3% of the group, we declined by 22, broadly in line with Q4 twenty twenty four.
Mainland China was down 27% and Hong Kong was down 18%. Southeast Asia declined 16% due to particularly tough trading conditions in Singapore. India, where we have over two thirty fee continued to deliver the standout performance in the region, delivering a record quarter, up 14%. Elsewhere, Japan declined 7%, in line with Q4. Australia was down 14% with ongoing challenging conditions across all states.
Afiona headcount increased by 22 in the quarter. Our non operations headcount decreased by 51 due mainly to the exit of around 45 heads that we have been double running we transitioned our shared service center from Singapore to Kuala Lumpur. In The UK, which represented 12% of the group, gross profit declined 12.7% in line with Q4 twenty twenty four. Temporary recruitment, down 11%, outperformed permanent, down 14%, reflective of market conditions. Afiona headcount reduced by 9% in the quarter.
I will now provide a summary of our results. The slower end to Q4 twenty twenty four continued into Q1 twenty twenty five, albeit the majority of our markets were sequentially stable in economic conditions, which remained challenging. The conversion of interviews to accepted offers remained the most significant challenge as ongoing macroeconomic uncertainty continued to impact confidence, which all spend time to hire. Despite the decline in gross profit, activity levels remained robust. India continued to deliver the standout result of the group, up 14%.
We saw an improvement in customer confidence in Germany as well as an improvement in trading in The U. S, particularly in engineering and manufacturing. Against the ongoing challenging trading conditions, we have taken robust action to optimize our cost base by simplifying our management structure and reducing our leadership team along with other business support functions. And these actions will benefit the group from 2026 onwards. We also continued with our strategy of reallocating resources into the areas of the business where we see the most significant long term structural opportunities, as well as ensuring it remained aligned to the activity levels we were seeing in each of our markets.
Overall, our focus remains to balance near term productivity with ensuring we remain well placed to take advantage of opportunities when market conditions improve. Despite the uncertain outlook due to the increasingly unpredictable economic environment, Pace Group has diversified and adaptable business model, a strong balance sheet and our cost base is under continuous review. Given the recent introduction of tariffs and the result of market uncertainty, we are not providing forward looking guidance on business performance. Nick and I will now be happy to take any questions you may have.
Ezra, Call Coordinator, Page Group: Thank you very much. Our first question comes from Remy Renaud with Morgan Stanley. Remy, your line is now open. Please go ahead.
Remy Renaud, Analyst, Morgan Stanley: Good morning, Thanks for taking my questions. So I'm going to throw at you the very tough question, trying to assess the impact of the current situation probably on a best effort basis. I just wanted to understand what was the impact of the tariffs under the first Trump administration, if there were any? And as things stand, is your base case scenario given how bad the current situation must be on business confidence? So do you think it's likely likely that we are going to see like for like growth going backwards once again?
And trying to think in scenario there, if the tariffs are actually implemented for a meaningful period of time or if we see these So that would be the first question. Then the second one, I think you're flagging in the press release that client hiring budgets are being constrained or being optimized. Has it translated into any discussion on the level of fee rate that you are charging for these recruitments? And the third one would be on the phasing of growth in Q1.
Is there any material differences in performance between Jan, Feb and March that you think is worth flagging?
Nick Kirk, Chief Executive Officer, Page Group: Okay, Remi. I think I can probably take all three of those. So in terms of the impacts of tariffs, mean, the reason that we've withdrawn any kind of forward looking guidance is that at this stage, it's just too early to tell. And we closed out Q1. We started to see the results from Q1 on April 1, April '2.
And then later that day, we have the announcements on the tariffs. And really at this stage, we haven't even seen a week of activity to judge what clients and candidate sentiment will be. I think it is fair to say though that we were already trading in a market that was uncertain and challenging and there was difficulty in converting activity into revenue. And it's therefore very difficult to believe that in the current state that confidence will have improved in any way. I think what we are seeing and hearing not on a large scale, but early kind of conversations with clients is probably hurry up and wait, a sense of hesitation, a sense of pausing, a sense of we still want to go ahead with this hiring, but let's just wait to see how things pan out over the next week or two similar with candidates.
And that will undoubtedly have an impact on our performance in April. I think that's probably the only thing I can say at this stage. Much beyond that, we're into realms of crystal balls and guessing and that's something that we don't want to do at this stage. Your second question was around client hiring budgets and fee rates. I mean, the only data I have at the moment is Q1.
And Q1 was in line with last year, so record fee rates and that hasn't changed. And then as regards phasing across Q1, it was pretty much identical in each of the three months. There wasn't a significant change in any specific month. So nothing to call out there.
Remy Renaud, Analyst, Morgan Stanley: Understood. Thanks very much.
Nick Kirk, Chief Executive Officer, Page Group: Thank you, Remi.
Ezra, Call Coordinator, Page Group: Our next question comes from Rory McKenzie with UBS. Rory, your line is now open. Please go ahead.
Rory McKenzie, Analyst, UBS: It's Rory here. Just before we think about whatever is coming next, can you just talk more about the dynamics in The U. S. That you saw in Q1? '7 percent growth is actually quite meaningful.
So what was the range of trends verticals? And what had been happening with job flow, I guess, up until April? And then secondly, again, I guess, looking back at 2018, '20 '19, obviously, externally, we saw APAC fall from high teens growth into high single digit declines over that time period. As you look back on your own data internally over that time period, what did that reflect? Were clients telling you they wanted to pause hiring for a bit?
Were clients telling you that they were closing capacity or rightsizing operations in APAC? Yes, I'm sure you spent a lot of time looking back as much as you can. So what did that experience tell you at all about how your reacted before?
Nick Kirk, Chief Executive Officer, Page Group: Okay. Thanks, Mario. I'll take the first question. As regards to U. S, let's maybe talk about right up to the point of the announcements because otherwise I'll be sat caveating everything saying tariff, tariff, tariff and there's no need for that.
So how did Q1 go? A very positive feeling throughout the quarter in The U. S. I've got to say. Real sense of impetus and momentum, clients feeling positive about hiring, putting sensible offers on the table to get candidates over the line, candidates feeling equally optimistic and being happy to turn that activity back into that conversion rate around final interviews to accepted offers that we talked about before, which as we've said dropped from probably four out of five, three out of five.
You saw it going back to historical norms in The U. S. During Q1, which was what we'd expected. And I suppose what we were hoping then would start to kind of probably have some kind of halo effect markets going through the year, this return to normal trading every five offers we get, four of them turn into a fee. So we saw that.
So that all went on. As regards job flow, again, very positive, really good job flow throughout the quarter and actually some good momentum on job flow in March, which again, if it weren't for the announcement on the tariffs, I think would lead us to high levels of optimism coming into April. As regards verticals, our biggest discipline, as you know, in The U. S. Is construction and that grew low single digit.
Financial Services, again, is our third largest discipline and that grew low single digit. The really big swing was our second largest discipline, which is engineering and manufacturing, which was up 50%. We saw a real bounce back in that sector, which are particularly encouraging. A lot of the work that we do is around life sciences, medical devices, that kind of area. So again, it was a really strong quarter.
And I guess, we just now wait and see. We just wait and see. I'll be watching activity very closely.
Rory McKenzie, Analyst, UBS: I think
Nick Kirk, Chief Executive Officer, Page Group: that's the really the name of the game over the next few weeks is looking at activity levels because we've said before, our headcount is very much linked to the job flow. And as we've said on many calls, the job flow hasn't decreased significantly. So we've had busy consultants. If that were to change, then we'd obviously take a look at fee on a headcount. But at the moment, the activity levels have been good, but we haven't seen a full week of trading since the announcement as we do and as we get through April, understanding that Easter is in there somewhere as well.
So that will slightly dull the results at some stage, then we'll have a better idea as to the impact of the announcement. But actually through Q1 to your question, very optimistic, feeling very positive about the trading performance and a real sense of announcement to one side, a start of a recovery perhaps. Kelvin?
Kelvin Stagg, Chief Financial Officer, Page Group: Yes. So think back to 2018, '20 '19 times, pardon me, when we had the previous tariffs, the impact was seen mainly in Mainland China and in Hong Kong. And it did contribute towards a slowing in those markets really from digits into the low single digits. I would say contribute rather than cause. I think the scale of the tariffs is completely different to what we're looking at today and the sort of global nature of the ones today.
The main impact that we felt back then was really with the multinationals. So less of an issue for domestic companies, probably for relatively obvious reasons where it's domestic demand. But certainly it was multinationals that were more concerned about the impact of tariffs in 2018 and 2019. I suspect that that can be the case again this time, albeit I think the size of the tariffs this time are likely going to hit domestics as well as multinationals.
Rory McKenzie, Analyst, UBS: Thanks, guys. Very helpful. Thank you.
Ezra, Call Coordinator, Page Group: Thank you very much. We currently have no further questions. So I will hand back over to Kelvin for any closing remarks.
Kelvin Stagg, Chief Financial Officer, Page Group: Thank you. So as there are no further questions, can I just thank you all for joining us this morning? Our next update to the market will be our Q2 twenty twenty five trading update on the July 11. Thank you all.
Ezra, Call Coordinator, Page Group: Thank you very much, Kelvin, and thank you, Nick, for being our speakers on today's conference call. This concludes our call for today. You may now disconnect your lines.
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