Michael Page to be broadly in line

Recruitment firm Michael Page's profits took a tumble as market conditions worsened in the second quarter, and things are not looking much brighter for the second half of the 2012 either.

"We anticipate a challenging second half as we enter the seasonally quieter summer period in both Continental Europe and the UK. This is set against tough comparables and an ongoing backdrop of economic uncertainty," said Chief Executive, Steve Ingham.

Although revenue and gross profit in the first half of 2012 were both broadly flat year-on-year, profit before tax and exceptional items tumbled 20.6% to £36.1m from £45.5m the year before. The exceptional items largely related to staff severance packages. Reported profit before tax slumped 37.0% to £28.2m from £45.5m.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Revenue was up 0.1%, or 2.6% on a constant exchange rate basis, to £502.6m from £502.1m in the first half of 2011, while gross profit eased slightly to £273.9m from £275.1m a year earlier.

In the first half, the mix of the group's revenue and gross profit between permanent and temporary placements decreased slightly to 44:56 (2011: 45:55) and 79:21 (2011: 80:20), respectively.

The gross margin on temporary placements in the first half of 2012 improved slightly to 20.8% (2011: 20.2%). Pricing has remained relatively stable throughout the first half of 2012, with a stronger pricing environment in rapidly growing markets, being offset by competitive pressures in the weaker UK and Southern European markets, the group said.

Market conditions remained tough but broadly stable in the UK, which represents just over one-fifth of the group's gross profit.

Asia-Pacific also earns just over one-fifth of the group's gross profit, and is just behind the UK in terms of money-earning contribution. This region saw growth of 23.3% in revenue to a record £94.6m and a 17.1% increase in gross profit to £56.9m, driven by a particularly strong performance in Australia.

In the Americas, which represents around one-seventh of the group's gross profit, revenue dipped by 4.1% to £50.6m while gross profit fell 7.2% to £37.4m as the region, like the UK, saw the lucrative financial services business go off the boil.

"The group is financially strong, with net cash of £32.4m. We remain well-placed to take advantage of any recovery in the markets in which we operate. At this time, we expect our full year operating profit from trading activities to be broadly in line with current market estimates," Ingham said.

Diluted earnings per share dived to 6.1p from 9.7p the year before but the interim dividend has been held at 3.25p.

JH