UPDATE: Michael Page Reports Growth, Set For Unusual Recovery

The U.K.'s second largest recruiter, Michael Page International PLC (MPI.LN), Friday beat market expectations when it reported first-quarter sequential growth in all its markets and said it would improve its performance significantly this year.

The company is setting up for unusual recovery with permanent recruitment, which makes up 77% of Michael Page's business, boosting earnings. Traditionally temporary recruitment is the first to recover.

As a result, Michael Page Chief Executive Steve Ingham said he can comfortably beat last year's profit. He was also upbeat about the recovery in the U.K. market as well saying that he is seeing sequential growth in all areas.

Michael Page beat larger rival Hays PLC (HAS.LN), when it reported a 7.9% sequential rise in first-quarter gross profit or a 2.9% rise on an annual basis.

It reported a 5.6% sequential growth in the EMEA region, 9.2% in the U.K., 7.5% in Asia-Pacific and 15.3% in the Americas.

Rival Hays on Thursday reported another decline in net fees, gave a cautious outlook, and said that one should not expect a recovery in the U.K. market this year.

But Michael Page's earnings are boosted by the unusual strong recovery in permanent placements, which saw a 13% rise year on year in gross profit. Gross profit from temporary placements fell 20.3%.

Numis Securities analyst Steve Woolf said Michael Page first-quarter earnings were "well ahead of expectations" with particularly strong performance in the US, U.K. and Asia.

"This is an unusual recovery," led by permanent recruitment, which is why Michael Page is doing better than Hays, he added.

At 0840 GMT Michael Page shares were up 6 pence or 1.4% to 429 pence, outperforming a 0.7% rise in the FTSE 250 Index. They news also boosted Hays shares, which rose 1 pence or 1.3% to 117 pence.

It seems that after two years of struggling, as the credit crunch and subsequent recession caused companies to contract and reduce staff or stop hiring, recruiters are finally seeing some positive signs in the market.

But while Michael Page can focus on boosting growth, Hays is still grappling with potential job cuts in the public sector after the May-general election and lack of candidate confidence that this will cause.

Only one tenth of Michael Page's business is in the public sector while 23% of Hays' net fees are in the public sector, which has already dragged down improvements in earnings in the private sector.

But as markets stabilized, both recruiters started hiring new staff with Michael Page increasing headcount by 3.1% and Hays increasing headcount by 2%.

But although Michael Page expects growth and CEO Ingham was upbeat about prospects in all market he cautioned that visibility remains low and that there are uncertainties in the US and U.K. He added that "the outlook for the U.K., Continental Europe and North America is less certain."

Michael Page shares closed Thursday at 424 pence giving the company market capitalization of GBP1.32 billion. They've risen 11.7% since the start of the year on hopes that the improving economic environment will translate into recruitment markets.

-By Anita Likus, Dow Jones Newswires; +44 20 7842 9407; anita.likus@dowjones.com

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