PageGroup: investors are not swayed by recruiters’ confidence

Like weather forecasters, recruiters struggle to see more than a few weeks ahead. So PageGroup’s investors will take scant comfort from the balmy outlook described by the FTSE 250 consultant on Wednesday. Its market value hints at reaching the top of the cycle. Since January, the recruitment business’s shares are down by a third.

Conditions are scorching hot right now. In Britain, there are more vacancies than unemployed people for the first time on record. One in five people globally say they are likely to move jobs this year, a PwC survey found.

PageGroup’s second quarter gross profit rose by just over a quarter, as it filled more jobs and earned higher fees. It reported wage inflation of up to 15 per cent. The scarcity of candidates stopped employers quibbling over fees, which rose by a fifth to 29 per cent in Germany and the US.

But central banks want to knock the froth off the labour market, as they try to damp down inflation. PageGroup’s high operational gearing would hurt it in a downturn. But much is priced in. Its enterprise value has dipped to just 1.3 times 2022 gross profits, on HSBC numbers. That is the depth it plumbed in the financial crisis, when gross profits fell by two-fifths.

Diversification should make it more resilient this time round. Financial services accounts for 4 per cent of gross profits, a fifth as much as before the financial crisis. The UK’s share is just 14 per cent; down some 25 percentage points.

The job market has also changed. Videoconferencing has cut the effort — and time — required to interview for jobs. Employees are less loyal and more demanding than in the past. When asked to increase the number of days they work in the office, PageGroup says many are voting with their feet.

Candidates’ confidence will probably take a knock as the economy turns down. But the long term forecast looks fair. Skills shortages should persist, forcing employers to turn to professionals to find the recruits they need.