TIDMPAGE
RNS Number : 0592P
PageGroup plc
08 October 2019
8 October 2019
PAGEGROUP PLC
THIRD QUARTER 2019 TRADING UPDATE
Q3 Highlights*
-- Group gross profit growth +2.1% (+4.2% in reported rates)
-- Large, High Potential markets (37% of Group) +4%
-- EMEA +5.6%; France +2%; Germany +16%
-- Asia Pacific -8.1%; Greater China -24%; South East Asia +11%; Australia +2%
-- Americas +13.0%; North America +10%; Latin America +17%
-- UK -4.1%; both Michael Page and Page Personnel -4%
-- Fee earner headcount increased by 46, decrease in operational support staff of 20
-- Strong balance sheet, net cash of c. GBP92m
-- Interim and special dividends paid tomorrow, 9 October, of GBP54.5m or 17.03 pence per share
Outlook
-- Given the heightened political and macro-economic challenges
seen in the quarter, together with our limited forward visibility,
we currently expect 2019 operating profit to be in the range of
GBP140m to GBP150m
* In constant currencies except where stated otherwise
Q3 GROSS PROFIT ANALYSIS
Reported (GBPm) Constant
Year-on-year % of Group Q3 2019 Q3 2018 % %
----------- -------- -------- ------- ---------
EMEA 47% 101.5 94.9 +7.0% +5.6%
----------- -------- -------- ------- ---------
Asia Pacific 20% 44.1 46.0 -4.0% -8.1%
----------- -------- -------- ------- ---------
Americas 17% 37.3 31.8 +17.0% +13.0%
----------- -------- -------- ------- ---------
UK 16% 33.8 35.2 -4.1% -4.1%
----------- -------- -------- ------- ---------
Total 100% 216.7 207.9 +4.2% +2.1%
----------- -------- -------- ------- ---------
Permanent 75% 162.4 158.5 +2.5% +0.1%
----------- -------- -------- ------- ---------
Temporary 25% 54.3 49.4 +9.8% +8.5%
----------- -------- -------- ------- ---------
Steve Ingham, Chief Executive Officer, said:
"The majority of the Group's regions were impacted by increased
macro-economic and political uncertainty in Q3. Consequently, Group
gross profit growth slowed to 2.1% in constant currencies from 7.4%
in Q2.
"We saw standout performances in Germany, India, and Latin
America, as well as a strong performance in the US, despite a
slowing Financial Services market in New York. However, we saw
increasingly challenging trading conditions in many of our larger
markets, including Greater China, the UK and France.
"Looking ahead, the deterioration in trading conditions seen
during Q3 across the majority of our regions is anticipated to
continue. In the UK, heightened Brexit related uncertainty is
expected to remain as we approach and go beyond 31 October. With
worsening macro-economic indicators in Continental Europe,
particularly in Germany, and in the US, there are signs that growth
in these markets may slow. In Greater China, confidence in Mainland
China continues to be affected by trade tariff uncertainty and the
social unrest in Hong Kong is increasing. Given these heightened
political and macro-economic challenges, together with our limited
forward visibility, we currently expect 2019 operating profit to be
in the range of GBP140m to GBP150m.
"However, we will continue to focus on driving profitable
growth, while progressing our strategic investments towards our
Vision of 10,000 headcount, GBP1bn of gross profit and GBP200m -
GBP250m of operating profit."
Group Trading Update
PageGroup delivered third quarter gross profit of GBP216.7m, up
2.1% in constant currencies and 4.2% in reported rates. In constant
currencies, there was similar growth in both Michael Page and Page
Personnel.
Headcount
While in the first half our fee earner headcount reduced by 81,
it increased by 46 in the third quarter. Fee earner headcount fell
in markets where we saw more challenging conditions, such as
Australia and Greater China, but we continued to invest in markets
where we saw the strongest growth, such as Germany, the US and
India. Our flexible business model enables us to react quickly to
changes in market conditions by adjusting our headcount to focus on
productivity and conversion. Our operational support headcount
decreased by 20 in the quarter, as we completed the roll out of our
new Global Finance System. In total, we have 6,081 fee earners and
a total headcount of 7,789.
Perm/Temp mix
Gross profit from permanent recruitment grew 2.5% in reported
rates and 0.1% in constant currencies, to GBP162.4m (Q3 2018:
GBP158.5m). Gross profit from temporary recruitment grew 9.8% in
reported rates and 8.5% in constant currencies, to GBP54.3m (Q3
2018: GBP49.4m). This reflected uncertainty in mature markets and
the structural evolution of temporary in emerging markets. This
resulted in a ratio of permanent to temporary recruitment of 75:25
(Q3 2018: 76:24).
Q3 Gross Profit - Discipline analysis
Reported (GBPm) Constant
Year-on-year % of Q3 2019 Q3 2018 % %
Group
------- -------- -------- ------ ---------
Finance
Accounting and Financial Services 36% 78.3 72.5 +7.9% +6.1%
------- -------- -------- ------ ---------
Professional Services
Legal, Technology, HR, Secretarial, Healthcare 24% 53.0 50.2 +5.5% +3.1%
------- -------- -------- ------ ---------
Technical
Engineering, Property & Construction, Procurement & Supply Chain 23% 49.2 49.7 -0.9% -3.3%
------- -------- -------- ------ ---------
Marketing, Sales and Retail 17% 36.2 35.5 +2.2% -0.2%
------- -------- -------- ------ ---------
Total 100% 216.7 207.9 +4.2% +2.1%
------- -------- -------- ------ ---------
Geographical analysis (unless otherwise stated all growth rates
are in constant currency)
EMEA Gross Profit (GBPm) Growth Rates
(47% of Group) Reported Constant
----------- --------- ----------- -----------
Q3 2019 vs. Q3 2018 101.5 94.9 +7.0% +5.6%
----------- --------- ----------- -----------
Headcount at 30 September 2019: 3,344 (30 June 2019: 3,316)
* France (15% of Group) +2%
* Germany (9% of Group) +16%
EMEA Q3 gross profit grew 5.6% to GBP101.5m, down from growth of
9.0% in Q2 as increased economic uncertainty impacted market
confidence across the region. Growth was faster in Michael Page, up
9% compared to 2% in Page Personnel. France, representing 15% of
the Group, slowed to 2%, from 6% in Q2 2019. Germany, despite
weaker macro-economic data, maintained strong growth, up 16%, with
our Interim business, mainly focused on Technology, growing 28%.
Italy improved slightly on its Q2 growth rate of 7%, delivering
growth of 11% and Spain grew 3%, in line with Q2. Benelux slowed
from 13% in Q2 to 7%. The Middle East and Africa declined 10%, with
particularly tough conditions in South Africa. Our fee earner
headcount increased by 33.
Asia Pacific Gross Profit (GBPm) Growth Rates
(20% of Group) Reported Constant
---------- ---------- ----------- -----------
Q3 2019 vs. Q3 2018 44.1 46.0 -4.0% -8.1%
---------- ---------- ----------- -----------
Headcount at 30 September 2019: 1,711 (30 June 2019: 1,737)
* Asia (15% of Group) -11%
* Greater China (8% of Group and 50% of Asia) -24%
* Australasia (5% of Group) +1%
In Asia Pacific, gross profit declined 8.1% to GBP44.1m. Greater
China, one of our Large, High Potential markets, declined 24%,
against a tough comparator of 31%. Trade tariff uncertainty
continued to impact Mainland China, particularly among our larger
international clients, while the increased social unrest affected
our Hong Kong business. South East Asia, another of our Large, High
Potential markets, grew 11%, with growth in some of our newer
countries, partially offset by a 4% decline in Singapore, which was
affected by the wider trade tariff concerns. Japan, where we
continue to focus on both the Gaishikei and Nikkei markets, grew
5%, down from 13% in Q2, with weaker growth from multinational
clients. India, now with over 150 fee earners, delivered another
record quarter, up 23%. Australia grew 2%, with strong growth in
Victoria offset by more challenging trading in New South Wales.
Overall fee earner headcount in the region declined by 27 in the
quarter.
Americas Gross Profit (GBPm) Growth Rates
(17% of Group) Reported Constant
---------- ---------- ----------- -----------
Q3 2019 vs. Q3 2018 37.3 31.8 +17.0% +13.0%
---------- ---------- ----------- -----------
Headcount at 30 September 2019: 1,366 (30 June 2019: 1,342)
* North America (10% of Group) +10%
* Latin America (7% of Group) +17%
The Americas, our fastest growing region, grew 13.0% to
GBP37.3m. The US delivered growth of 14%. Growth was strongest in
our offices outside of New York, which was impacted by a slowing in
Financial Services. Latin America grew 17%, delivering another
record quarter for the region. Mexico, the largest country in Latin
America, grew 13%, while our Brazilian business continued to
perform well, growing 25%. Elsewhere, the other four countries in
the region grew 15% collectively, with record performances from
Argentina, Colombia and Peru, partially offset by more challenging
conditions in Chile. We increased our fee earner headcount by 23
across the Americas, mainly into the US.
UK Gross Profit (GBPm) Growth Rate
(16% of Group)
---------- ---------- -----------------
Q3 2019 vs. Q3 2018 33.8 35.2 -4.1%
---------- ---------- -----------------
Headcount at 30 September 2019: 1,368 (30 June 2019: 1,368)
The UK declined 4.1%, with heightened Brexit related uncertainty
now impacting candidate and client confidence at all levels. This
was reflected by Page Personnel, which represents a quarter of the
UK, and Michael Page, which is focused on more senior
opportunities, both declining by 4%. Having started the year with
around 1,000 fee earners, this had declined to 929 at the end of
June. During Q3 we replaced some of these leavers, adding 16 to end
the quarter with 945.
Financial Position
Save for the effects of Q3 trading detailed above, the purchase
of shares into the Employee Benefit Trust (EBT) of c. GBP10m and
the forthcoming payments of the 2019 interim and special dividends
amounting to GBP54.5m which are being paid tomorrow, there have
been no other significant changes in the financial position of the
Group since the publication of the results for half year ended 30
June 2019. Net cash at 30 September 2019 was in the region of
GBP92m (Q2 2019: c. GBP82m; Q3 2018: c. GBP122m).
Shares
At 30 September 2019 there were 328,579,724 Ordinary shares in
issue, of which 11,151,335 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 8,667,869 shares and
consequently these shares should be excluded when calculating
earnings per share. The total number of voting rights in the
Company is 328,579,724.
Cautionary Statement
This Third Quarter 2019 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.
Enquiries:
PageGroup +44 (0)20 3077 8425
Steve Ingham, 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 9:00am today. The live presentation can
be viewed by following the link:
https://www.investis-live.com/pagegroup/5d6f819e379ece0b006c728b/pgrr
Please use the following dial-in numbers to join the
conference:
United Kingdom (Local) 020 3936 2999
All other locations +44 20 3936 2999
Please quote participant access code 40 46 74 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
8 October 2019 at:
https://www.page.com/investors/investor-library.aspx
The Group will issue its Fourth Quarter Trading Update on 14
January 2020 and its Full Year Results on 5 March 2020.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
TSTBCBDGDDGBGCR
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October 08, 2019 02:00 ET (06:00 GMT)
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