Can Page Group sustain record profits amid recession warnings?

Written by Kunal Sawhney, CEO, Kalkine

In recent months, recruitment agencies have benefitted from the increased hiring activities and wage inflation. Staff shortage has prompted employers to offer higher pay packages to attract more staff and also take some burden off amid the cost-of-living crisis amid rising inflation. This has benefitted companies like Page Group.

The company, which owns Michael Page and Page Executive, has posted record profits in the first six months of 2022, boosted by the higher wages paid by the employers in a tight labour market. The recruitment consultancy posted £538.9 million in gross profits for the first half of 2022, up by around a third. This pushed the company’s gross profits from every ‘fee earner’ 9.2% higher to £82,800.

Page’s profits before tax rose 80% to reach £114.5 million over the period, while the revenue saw a little less than 28% rise to £977.3 million, the company said.

The firm’s fee income is based on the wages of people it recruits for other businesses. Favourable trading conditions, like higher fees rates, wage inflation, and higher demand for candidates after the COVID-19 pandemic, have boosted its profits. For the full year, the consultancy stood by its previous guidance.

Moreover, the business also said that its headcount has jumped by over 10% to 8,668.

Higher profits also helped Page Group reward its shareholders by raising its interim dividend by 4.5% to £15.6 million, which turns out to be 4.91p per share. Investors are expected to get a special dividend of 26.7p per share, totalling £84.9 million. This means that investors have received £133.2 million so far this year.

Slowdown in time to hire

However, despite the record profits, the company is not rushing to hire new staffs. In fact, it revealed it would take time to hire new staff. Chief executive Steve Ingham says they continue to monitor the forward-looking KPIs closely. He also acknowledged the rising macroeconomic and geopolitical instability across the world amid the increasing inflation.

In such situations, businesses typically slow down their hiring plans, posing a risk to the outlook of recruitment firms. A recent survey revealed that UK employers in July put the brakes on hiring through recruitment consultancies, slowing it down by the most in 17 months.

Last week, the Bank of England issued a fresh warning of the UK could slip into recession in the latter half of the year. This hints at more companies exercising caution on their outlook and likely reducing the hiring activity. While Page Group scored bumper profits due to higher demand, things may slow down a little in the second half of the year, particularly in the fourth quarter, if Bank of England’s predictions turn into reality.