Michael Page plans to pay £40m back to investors

Michael Page, the recruitment company, tentatively signalled that recent tough trading conditions had hit a plateau yesterday, as it announced plans to buy back up to £40m of its shares over the next 12 months.

The group, which acts as a barometer for the wider economy, suggested that the worst was over for the recruitment market – hit by the most difficult conditions since the early Nineties. It said trading would remain "challenging but stable" for the rest of the year, while warning that it remained impossible to predict an upturn.

"We are running the business on the assumption that it will be difficult but reasonably stable," Terry Benson, the chief executive, said. "There hasn't been any deterioration but there hasn't been a marked improvement either."

He pointed to the "encouraging" improvement in revenues reported in the group's second quarter, which rose against the first quarter for the first time in more than a year. "It's encouraging that [business] is stable. But it could be that we are just taking market share from our competitors," Mr Benson said.

The group, which posted three profit warnings in 2001, said revenue in the second quarter was £51.4m, up from £49.5m in the previous three months. "At least we are seeing some consistency, albeit sideways. It is bumbling along the bottom for now," Paul Jones, an analyst at Numis Securities, said.

Confirmation of the share buyback, which was approved at the company's annual shareholders meeting, sent the shares 10 per cent higher to 131.5p. The group said it would use excess cash generated by the business to buy back the stock, creating a more efficient capital structure and enhancing shareholder value. Mr Benson, who founded Michael Page, said the group was not committed to any specific timetable for the buyback programme. "It depends on what happens to the share price," he said. The stock has fallen back to test October's low of 96.5p after rallying on hopes of an imminent economic recovery.

Despite reporting that pre-tax profits for the six months to 30 June had more than halved to £18m, the group – which relies on permanent placements for two-thirds of its business – said it was well positioned to grow profits when conditions improved. The proportion of the group's turnover from permanent placements fell to 39 per cent in the first half from 47 per cent a year earlier, while temporary placements rose to 61 per cent of sales from 53 per cent a year earlier. "We will see temporary recruitment bouncing back ahead of permanent," Mr Benson said.

The group, which was rocked by controversy after its first profits warning swiftly followed its flotation in March 2001, said recruitment in marketing and sales was worst hit, with revenues 26 per cent lower. Finance and accounting revenues fell by 22 per cent, while other sectors declined by 15 per cent. Trading conditions were most difficult on the Continent, where operating profits plunged to £4.4m from £17.4m.