Michael Page shares sink after profit warning - UPDATE
The share price of Michael Page International (MPI) dived on Tuesday after the recruitment firm delivered a profit warning, saying that its full-year bottom line would be "modestly lower than consensus market expectations".
Pagegroup
449.80p
14:34 26/04/24
The company said it was more cautious than it was previously on the short-term outlook in a number of international markets.
Confidence levels in Europe, the Middle East and Africa (EMEA) are "increasingly fragile", while growth rates have fallen in the Asian business. Foreign exchange movements have also continued to affect reported results.
MPI said it was also making strong investments in headcount as it looks to grow its temporary businesses in Germany, France and the UK, though this will have a short-term impact on productivity.
These factors mean that the company is now guiding to operating profits below analysts' current average forecast of £82m for 2014, compared with £68.2m the year before.
Group gross profits totalled £132.9m (consensus: £132.9m) in the third quarter ended 30 September, up 11.6% on a constant-currency basis but just 4.7% higher on a reported basis.
The permanent business, which accounts for three-quarters of earnings, saw underlying profits rise 12.7%, while the temporary division grew profits by 8%.
The EMEA, UK and Americas regions all saw profit growth pick-up from the second quarter, but growth rates slowed in Asia from 25% to 17%.
However, "in EMEA the market sentiment declined during Q3 and coupled with currency, is responsible for management’s belief that the group is likely to modestly miss consensus EBITA estimates of £82m," Shore Capital's David O'Brien commented.
O'Brien also noted how weakness in Brazil also weighed on the firm's performance in the Americas.
"We continue to believe that the rating is fully valued with upside to the shares highly dependent on whether the investment in headcount comes through in FY2015F," the analyst added.
The stock was down 11.4% at 368.3p by 08:21.