As if we needed any more evidence of the dire state of the employment market, Britain's second largest recruitment agency Michael Page International has just reported that its first quarter profits have dropped by a third.
The company said profits had fallen from £140.3m to £95m for the three months to the end of March, with market conditions continuing to weaken during the quarter. Chief executive Steve Ingham said, "The impact of the financial crisis [is] now evident in virtually every market and discipline in which we operate, albeit to varying degrees."
Analysts rushed to issue sell notes, although the shares came off their lows as traders suggested that larger rival Adecco of Switzerland - which abandoned a bid towards the end of last year - might return with a new offer. Having fallen as low as 205p, Michael Page is now down 5.5p at 210.75p. Analyst Andrew Ripper at Merrill Lynch said:
"Recent performance has been helped by closing of shorts and last week's management change at Adecco (prompting increased speculation that Adecco may come back) but on fundamentals we retain our under-perform rating."
Altium Securities, Panmure Gordon and Collins Stewart all issued sell notes after the figures. Collins Stewart suggested the company's dividend could be in danger:
"With management now cutting headcount hard in some regions, but holding it in others, we believe the company is likely to move into cash preservation mode. We believe that this makes a further significant cut in the dividend (the 2008 final dividend was reduced by 9%) as probable and we forecast it being halved to 4p. We re-iterate our sell and 140p price target (35% downside)."
Overall the market has gone into reverse after new manufacturing figures for February showed the 12th straight month of declines, albeit the fall was smaller than the one in January. Having climbed as high as 4039, the FTSE 100 is now down 45.05 points at 3948.49.
On the UK figures, Benjamin Williamson at the Centre for Economic and Business Research, said:
"Many will say that today's data adds to the growing impression that the economic downturn is beginning to bottom-out. In addition to last week's manufacturing PMI data, which showed the highest levels of activity since October last year, expectations that we are entering the beginning of the end of the downturn are increasing. However, our latest forecasts for the United Kingdomeconomy show that both total production and manufacturing sector output are in for double digit contractions in 2009. They still, therefore have someway left to fall."
