PageGroup says Brexit effect hits UK job market confidence

Last Updated: Wed, Jan 11, 2017 18:43 hrs

By Noor Zainab Hussain and Esha Vaish

(Reuters) - Recruitment company PageGroup Plc on Wednesday reported record fourth-quarter profits, but said job market confidence in Britain had deteriorated further, with Brexit uncertainty causing finance companies and retailers to hold off from hiring.

The company, which earned 21 percent of its quarterly gross profit in Britain, said the fall in sterling since the Brexit vote in June was helping exporters and possibly also manufacturers, but importers, such as retailers, were probably finding it slightly tougher.

"There is a little bit of concern and hesitation from both clients and candidates, but it isn't huge yet, and I think until we get some clarity, it probably won't be. And it will depend on what clarity looks like," Chief Executive Steve Ingham said.

He said finance multinationals were hesitant about making hiring decisions due to concerns that Britain may lose its ability to sell services to rest of the European Union.

But Ingham, who said PageGroup gets about 30 percent of its gross profit from multinationals and larger companies, said companies had still not spoken to him about triggering contingency plans and moving out of Britain.

Recruitment companies such as PageGroup, Hays, SThree and Robert Walters are seen as gauges of wider economic health because people tend to switch jobs more often when confidence rises.

PageGroup reported a 3.8 percent rise in fourth-quarter profit in constant currencies to 163.4 million pounds ($197.99 million), driven by growth in continental Europe and Latin America, outside Brazil. Its shares rose 3.8 percent.

The company said year-on-year gross profit from its British operations fell 6.7 percent to 33.8 million pounds at constant currencies in the quarter, steeper than a 4.7 percent fall in the preceding quarter.

Jefferies said PageGroup's fourth-quarter net fees were 4 percent ahead of consensus as robust EMEA momentum more than offset slight shortfalls in the UK and Asia. The brokerage has a "hold" rating on the stock.

Liberum analysts said: "Although down 6.7 percent y/y, the performance of the UK business was better than expected, with permanent activity more resilient." Liberum rates PageGroup "buy".

Smaller rival Robert Walters on Monday reported higher UK gross profit and said the UK hiring market was picking up pace.

Hays, which is due to report October-December results on Thursday, has previously said companies are still cautious about adding to staff levels because of uncertainty over Brexit.

PageGroup estimated that its full-year operating profit would be at the top end of a company-compiled consensus range of 91 million to 100 million pounds. It is due to report full-year results on March 8.

($1 = 0.8230 pounds)

($1 = 0.8253 pounds)

(Reporting by Noor Zainab Hussain and Esha Vaish in Bengaluru; Editing by Gopakumar Warrier and Jane Merriman)

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