Challenging market conditions weighed heavily on Michael Page's performance during the third quarter of the year. The company's business in Europe, the Middle East and Africa (EMEA), which represents 39 per cent of its profits, suffered a 16 per cent year-on-year fall in gross profits to 49m pounds, for example. Profitability in the UK and the Americas also dropped sharply. Back in March, Questor advised investors to sell Michael Page shares
at 443p because they had rallied by 48 per cent since early December. However, since then, the group's shares have continued to fall. Michael Page's management team, led by Mr Ingham and finance director Andrey Bracey, has taken steps to mitigate the tough market conditions. Amongst other things the company has reduced its headcount. Not only this, but the group has moved into new sectors such as technology, property and construction and design over the past year or two to diversify its operations, which should benefit it in the longer term. Overall, the company is well managed with executives that realise the business must evolve in order to grow. This aside, Michael Page is clearly not immune to the broader economic backdrop. For this reason, Questor advises investors to avoid buying shares in the company for now and await firmer signs of growth in the global economy before moving into the recruitment sector.
There was some relief among investors in Daisy Group that its trading update after the end of its half-year did not prompt the same share price fall as that of its rival Kcom on Friday, after its own update, Tempus writes today. It may just be that Daisy was better than Kcom at keeping the market up to date. The shares have come back from 115p in April to close at 98p last night. The company made clear that free cash-flow had begun to improve in the first half to the end of September, even if debt had increased to reflect the last acquisition, in April. Daisy has grown by buying up smaller rival providers, but the indications are that this may not continue at the same rate. The need to account for those acquisitions has meant that reported figures have been of little relevance. The company provides its own adjusted earnings figures, even if analysts tend to rely on free cash-flow. Their forecasts of earnings for this year would put the shares on about seven times earnings. Not unattractive, but immediate progress in the present climate looks limited.
Tempus believes the bravest call of the week comes from Peter Hyde, at Liberum Capital, who has a "Buy" note on FirstGroup after last week's farce over the West Coast Main Line franchise. He puts the shares at 191p last night, on a little less than six times six times earnings for the year to the end of March 2015. It may win one of the rail franchises it is currently bidding for although it isn't certain. FirstGroup will probably need a deeply discounted rights issue at perhaps around 140p. Tempus concludes: "I said in May that the shares were for risk-takers only. Nothing has changed on that."