The Investment column: Page recruits profits overseas

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The Independent Online
Recruitment consultancy is if anything more operationally geared than the catalogue retailing Argos specialises in. With a largely fixed overhead base, even quite modest rises in the numbers of successful placements can have a dramatic impact on profits. No surprise then that an unexpected 45 per cent rise in permanent jobs and 25 per cent increase in temps at Michael Page in the half year to June led to soaring profits and a big jump in the share price yesterday.

Interim profits emerged from those benevolent trading conditions 79 per cent higher at pounds 14m. Earnings per share were 74 per cent better at 14.28p and the dividend was all but doubled at 2p (1.1p). Encouragingly, the cash pile at the end of the half year was a better- than-expected pounds 29.9m and analysts believe it will be closer to pounds 37m by December.

Analysts had pencilled in profits closer to pounds 11m for the six months so it was again no surprise that the share price should jump 28p to 345p yesterday. At that level, they have already risen more than 10 fold since the 33p low point reached at the end of 1993.

Highlights of the period were buoyant City recruitment with significantly better permanent and contract business pushing profits 70 per cent higher. Accountancy was strong, but the real success story has been Page's push overseas where France and the Netherlands are booming and Australia achieved record profits, up 86 per cent.

The successful creation of a genuinely international portfolio of businesses is important because it will provide Page with some protection when the chill winds of recession start blowing again. The disadvantage of being geared to an upturn is that you tend to be equally geared to a decline in business.

On the basis of house broker BZW's forecasts for this year and next of pounds 28m profits rising to pounds 32m, the shares stand on a prospective price/earnings ratio of 12, falling to 10. Even if you adopt the prudent approach of attaching a discount to the shares to cover the inevitable cyclical dip in earnings, the cushion of the cash in the bank and the geographical spread mean the shares still have a little way to go. But only a little - most of the good news is now in price.

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