TIDMPAGE
RNS Number : 7005P
PageGroup plc
11 October 2023
11 October 2023
Implementing new strategy; resilient performance in challenging
markets
Q3 Highlights*
-- Group gross profit of GBP242.2m, -7.9% vs. 2022 (-10.5% in reported rates)
-- Stronger performance in temporary recruitment +5.8%; permanent -12.1%
-- Decrease in fee earner headcount of 310 to 6,075 (Q3 2022: 7,071)
-- Productivity up 4% on Q3 2022
-- EMEA -1.3%: France +1%; Germany +5%
-- Americas -13.3%: US -25%; Latin America +7%
-- Asia Pacific -11.0%: Greater China -22%; SE Asia -12%; Japan +4%; India +3%
-- UK -18.9%: Michael Page -20%; Page Personnel -17%
-- Strong cash position, net cash of c. GBP136m (Q2 2023: c. GBP96m, Q3 2022: c. GBP186m)
-- Interim and special dividends of GBP66.2m to be paid on 13 October 2023
Outlook
-- The Board expects 2023 operating profit, excluding the
previously announced one off cost of c. GBP5m, to be between
GBP125m - GBP130m
* In constant currencies vs 2022 except where stated
otherwise
Q3 Gross Profit Analysis
Reported (GBPm) Constant
Year-on-year % of Group Q3 2023 Q3 2022 % %
----------- -------- -------- ------- ---------
EMEA 53% 128.0 130.0 -1.6% -1.3%
----------- -------- -------- ------- ---------
Americas 18% 43.3 52.7 -17.9% -13.3%
----------- -------- -------- ------- ---------
Asia Pacific 17% 40.6 50.4 -19.3% -11.0%
----------- -------- -------- ------- ---------
UK 12% 30.3 37.4 -18.9% -18.9%
----------- -------- -------- ------- ---------
Total 100% 242.2 270.5 -10.5% -7.9%
----------- -------- -------- ------- ---------
Permanent 72% 175.5 206.5 -15.0% -12.1%
----------- -------- -------- ------- ---------
Temporary 28% 66.7 64.0 +4.3% +5.8%
----------- -------- -------- ------- ---------
Nicholas Kirk, Chief Executive Officer, PageGroup, said:
"The Group delivered a resilient result in challenging markets.
EMEA was our best performing region, however, tough market
conditions affected our performances in Asia, the UK and the US.
Overall, Group gross profit declined 7.9% in constant currencies
against Q3 2022.
"Candidate shortages remain acute and are supportive of
continued high fee rates. Salary levels remain elevated, albeit the
salary increases offered to candidates reduced compared to Q3 2022.
These lower offers, combined with lower candidate confidence, led
to a further increase in the number of offers rejected by
candidates, either through employer buybacks or unwillingness to
risk the move for the size of incentive on offer. The increased
time to hire that we saw in Q2 continued.
"Reflecting the uncertain macro-economic conditions, temporary
recruitment continued to outperform permanent, as clients sought
more flexible options. In line with these conditions, we reduced
our fee earner headcount by 310 (-4.8%) in Q3, following declines
in H1 2023 and Q4 2022, with reductions in all regions. Our total
headcount of 8,140 is now 10.7% lower than at the end of Q3 2022.
Productivity, measured as gross profit per fee earner, was up 4%
versus Q3 2022, as a result of our action on fee earner headcount
over the past 12 months.
" As previously disclosed, as part of our refined strategy and
our increased focus on our conversion rate target, we have already
implemented a number of initiatives to reduce our cost base. These
initiatives will incur a one off cost in 2023 of c. GBP15m, offset
by the majority of the cost savings being realised in FY23. The net
negative impact this year will be c. GBP5m. Going forward, we
expect these initiatives to deliver annualised savings of c. GBP20m
per annum compared to our FY23 cost base from FY24 onwards.
"Looking ahead, due to a slower end to the quarter, there is a
heightened degree of uncertainty in the short term. However, we
have a highly diversified and adaptable business model, a strong
balance sheet, and our cost base is under continuous review and can
be adjusted rapidly to match market conditions. Given these
fundamental strengths, we believe we will continue to perform well
in these challenging markets, and we are confident in our ability
to implement our new strategy driving the long-term profitability
of the Group. We are also seeing the benefits from our investments
in innovation and technology, where Customer Connect is supporting
productivity and enhancing customer experience, and Page Insights
is providing real time data to inform business decisions.
"At this stage of the year, t he Board expects 2023 operating
profit, excluding the previously announced one off cost of c.
GBP5m, to be between GBP125m - GBP130m."
Geographical Analysis (unless stated otherwise all growth rates
are vs. 2022 and in constant currency)
EMEA Gross Profit (GBPm) Growth Rates
(53% of Group) 2023 2022 Reported Constant
----------- --------- -------------- --------------
Q3 128.0 130.0 -1.6% -1.3%
----------- --------- -------------- --------------
* Germany (14% of Group) +5%
* France (13% of Group) +1%
o Page Personnel +1%
o Michael Page +2%
* Benelux -8%
o Belgium +2%
o Netherlands -13%
* Southern Europe -5%
o Italy -5%
o Spain -8%
* Middle East and Africa +17%
Total Headcount at 30 September 2023: 3,900 (30 June 2023: 4,035)
In Europe, Middle East and Africa, gross profit declined 1.3%
against a tough comparator to GBP128.0m. Germany, our largest
market during Q3, delivered a record quarter, growing 5%. The
standout results continued to be delivered by our Page Personnel
(+15%) and Michael Page Interim businesses (+11%), the latter
delivering a record quarter. Tougher trading conditions remained in
permanent recruitment, which had a greater impact on Michael Page
(-4%). France was up 1% for the quarter, with similar performances
in both Michael Page and Page Personnel. We saw a stronger
performance from within temporary recruitment, which is indicative
of the current uncertainty in the market. Elsewhere in Europe,
trading conditions were tougher due to weaker candidate and client
confidence. Our businesses in the Middle East and Africa grew 17%,
with good growth in all markets. Having reduced fee earners by 79
in Q2 2023, we reduced our fee earner headcount further in Q3, down
93 for the region overall.
Americas Gross Profit (GBPm) Growth Rates
(18% of Group) 2023 2022 Reported Constant
---------- ---------- -------------- --------------
Q3 43.3 52.7 -17.9% -13.3%
---------- ---------- -------------- --------------
* North America (10% of Group) -25%
o US -25%
* Latin America (8% of Group) +7%
o Mexico -4%
o Brazil +4%
Total Headcount at 30 September 2023: 1,373 (30 June 2023: 1,500)
In the Americas, gross profit was GBP43.3m, down 13.3% against
Q3 2022. In the US, gross profit declined 25%, a deterioration on
the decline of 16% in Q2. Uncertainty in market conditions
continued to impact time to hire as well as client and candidate
confidence. In Latin America, gross profit grew 7%, a record
quarter, despite macro-economic uncertainty across the region.
Mexico, our largest country in the region, was down 4%, compared to
a decline of 7% in Q2 and Brazil was up 4%, an improvement on the
decline of 9% in Q2. Elsewhere in Latin America, our remaining
countries grew 19%, collectively. In line with the more challenging
conditions, overall fee earner headcount decreased by 96, mainly in
the US and Mexico.
Asia Pacific Gross Profit (GBPm) Growth Rates
(17% of Group) 2023 2022 Reported Constant
---------- ---------- -------------- --------------
Q3 40.6 50.4 -19.3% -11.0%
---------- ---------- -------------- --------------
* Asia (13% of Group) -11%
* Greater China (5% of Group and 35% of Asia) -22%
o Mainland China -23%
o Hong Kong -21%
* South East Asia -12%
* India +3%
* Japan +4%
* Australia -11%
Total Headcount at 30 September 2023: 1,624 (30 June 2023: 1,730)
In Asia Pacific, gross profit for Q3 was down 11.0% against 2022
to GBP40.6m. Permanent recruitment across the region declined 12%,
whilst temporary recruitment declined 3%, reflecting the continued
uncertain market conditions. Greater China declined 22%, with
Mainland China down 23%. Trading remained challenging with the
recovery continuing to be slower than anticipated. Hong Kong
declined 21% for the quarter. South East Asia declined 12%, with
Singapore, which continued to be impacted by the slowdown in
Greater China, down 13%. India continued to deliver strong results,
up 3% on Q3 2022, a record quarter. Japan returned to growth of 4%,
compared to the decline of 10% in Q2, whilst Australia declined
11%, compared to -4% in Q2, due to tougher market conditions. Our
fee earner headcount in the region decreased by 85, mainly in South
East Asia and Japan.
UK Gross Profit (GBPm) Growth Rate
(12% of Group) 2023 2022
---------- ---------- ----------------------
Q3 30.3 37.4 -18.9%
---------- ---------- ----------------------
* Michael Page -20%
* Page Personnel -17%
Total Headcount at 30 September 2023: 1,243 (30 June 2023: 1,307)
In the UK, gross profit for Q3 decreased 18.9% against 2022 to
GBP30.3m, following the decline of 17.0% in Q2. We continued to see
clients deferring hiring decisions and candidates cautious about
accepting offers. We also experienced an increase in turndowns and
buybacks in our permanent business during September. Reflecting the
uncertain market conditions, clients sought more flexible options,
and, as such, temporary recruitment (-5%) was more resilient than
permanent recruitment (-24%). In line with the more challenging
trading conditions, our fee earner headcount reduced by 36 in Q3
and is now 17% lower than Q3 2022.
Perm/Temp mix
Gross profit from permanent recruitment decreased 15.0% in
reported rates and 12.1% in constant currencies to GBP175.5m (Q3
2022: GBP206.5m). Gross profit from temporary recruitment increased
4.3% in reported rates and 5.8% in constant currencies to GBP66.7m
(Q3 2022: GBP64.0m). This resulted in a ratio of permanent to
temporary recruitment of 72:28 (Q3 2022: 76:24).
Headcount
We reduced our fee earner headcount by 310 (-4.8%) during Q3,
with reductions made across all regions, albeit more significantly
in markets where we saw the most challenging trading conditions.
Our non-operations headcount fell by 122 (-5.6%) in Q3, as we
reduced headcount in areas such as operational support and
candidate acquisition. Overall, the Group had 6,075 fee earners and
a total headcount of 8,140.
Productivity
As a result of the reduction in fee earners made in the quarter,
gross profit per fee earner, our measure of productivity, increased
4% compared to Q3 2022. We continued to see the benefits of video
interviewing, continued high fee rates as well as wage inflation.
However, reduced candidate and client confidence caused an increase
in time to hire as well as some reluctance to accept offers,
limiting the number of placements per fee earner.
Foreign Exchange
Foreign exchange had a negative impact on the Group's reported
results during Q3, decreasing our Q3 reported gross profit by 2.6
percentage points, or GBP7.0m.
Financial Position
Save for the effects of Q3 trading detailed above and the
forthcoming payment of the 2023 interim and special dividends of
GBP66.2m to be paid on 13 October 2023, there have been no other
significant changes in the financial position of the Group since
the publication of the results for the quarter ended 30 June 2023.
Net cash at 30 September 2023 was c. GBP136m (Q2 2023: c. GBP96m,
Q3 2022: c. GBP186m).
Shares
At 30 September 2023 there were 328,618,774 Ordinary shares in
issue, of which 15,149,770 were held by the Employee Benefit Trust
(EBT). The rights to receive dividends and to exercise voting
rights have been waived by the EBT over 13,502,599 shares and
consequently these shares should be excluded when calculating
earnings per share. The total number of voting rights in the
Company is 328,618,774.
Cautionary Statement
This Third Quarter 2023 Trading Update has been prepared solely
to provide additional information to shareholders to assess the
Group's strategies and the potential for those strategies to
succeed. The Trading Update should not be relied on by any other
party or for any other purpose. This Trading Update contains
certain forward-looking statements. These statements are made by
the Directors in good faith based on the information available to
them up to the time of their approval of this Trading Update and
such statements should be treated with caution due to the inherent
uncertainties, including both economic and business risk factors,
underlying any such forward-looking information. This Trading
Update has been prepared for the Group as a whole and therefore
gives greater emphasis to those matters that are significant to
PageGroup and its subsidiary undertakings when viewed as a
whole.
The Group will issue its Fourth Quarter Trading Update on 15
January 2024.
Enquiries:
PageGroup +44 (0)19 3226 4032
Nicholas Kirk, Chief Executive Officer
Kelvin Stagg, Chief Financial Officer
FTI Consulting +44 (0)20 3727 1340
Richard Mountain / Susanne Yule
The Company will host a conference call and presentation for
analysts and investors at 8.30am today. The live presentation can
be viewed by following the link:
https://www.investis-live.com/pagegroup/650bfe60673c270c00b7af50/dssa
Please use the following dial-in numbers to join the
conference:
United Kingdom (Local) 020 4587 0498
All other locations +44 20 4587 0498
Please quote participant access code 27 10 62 to gain access to
the call.
A presentation and recording to accompany the call will be
posted on the Company's website during the course of the morning of
11 October 2023 at:
https://www.page.com/presentations/year/2023
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October 11, 2023 02:00 ET (06:00 GMT)
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