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Recruiter Michael Page Says Profit Rises 38%

British recruitment firm Michael Page reported record profit numbers and an upbeat outlook Tuesday, but analysts warned staffing stocks in general may be heading for a fall because of worries over the economic outlook.

Michael Page's shares surged 10 percent on the news then later traded 7.6 percent higher.

"We continue to experience strong demand for talent around the globe ... with numerous opportunities to grow our existing and new businesses, we are confident in the prospects," it said in a statement.

But the immediate outlook for the sector remained grim despite this bright spot, Marc Zwartsenburg from ING Wholesale Banking told "Squawk Box Europe."

"In the short term there might still be softening in staffing stocks and share prices, so I wouldn't be surprised to see further weakening in the first quarter," Zwartsenburg said, adding that things are likely to come back to normal starting with the second quarter.

France - Largest Business

Michael Page, which specialises in high-margin professional and permanent staffing, said fourth-quarter gross profit rose by 37.6 percent to a record 128.2 million pounds ($252.9 million), with full-year profit up 37 percent to a record 478 million.

Europe, Middle East and Africa showed a 55.9 percent gross profit growth to 57.7 million pounds, with France, its largest business in the region, growing 35 percent.

In the UK, which accounts for 40 percent of group profit, gross profit rose by 15.6 percent to 45 million.

"During the fourth quarter, save for some weakness in specific banking sectors, the UK business continued to experience good levels of activity across all other disciplines and industry sectors," it said.

Banking business, which centres on London, Manhattan, Hong Kong and Tokyo, represents around 7 percent of its business, with UK banking accounting for around 10 percent.

"Any slowdown or softness in the market we see is really confined in the front office part of banking, which roughly speaking is less than 20 percent of our banking business," Chief Executive Steve Ingham told Reuters in an interview.

"It could spread but at the moment we see continued hiring in the back office."

Expansion Plans

By 1003 GMT, shares in Michael Page, which have underperformed the UK support services sector by around 45 percent over the past six months, were up 5.8 percent at 262-1/4 pence, having hit 274-3/4p.

"The signs in October were that the final quarter of the year would either be good or very good, but that has been irrelevant, since the shares are now discounting a significant downturn in 2008," Seymour Pierce analyst Kevin Lapwood said.

"These results will be scanned for signs of an imminent downturn but there are very few to be seen... The company's confidence in the outlook is demonstrated by its continued recruitment of sales consultants."

Michael Page increased group headcount by 5.8 percent in the fourth quarter to over 5,000 in 25 countries and said it planned to continue to increase consultants at the current level to support its expansion plan.

"Record headcount...is a good proxy for the underlying strength of the market given the short term drag on profits additional employees can have until up to speed," Panmure Gordon analysts said.

"We suspect any signs of market weakness would more likely lead to no growth/headcount reduction."

Michael Page said its expansion would focus on China, Latin America, Germany and Sweden.

The group, which repurchased 4.5 percent of its outstanding shares at a cost of 74.4 million pounds at an average price of 494 pence, plans to carry out its buyback program opportunistically in 2008, Ingham said.