TIDMPAGE
RNS Number : 0567F
PageGroup plc
05 March 2020
5 March 2020
Full Year Results for the Year Ended 31 December 2019
PageGroup plc ("PageGroup"), the specialist professional
recruitment company, announces its full year results for the year
ended 31 December 2019.
Financial summary 2019 2018 Change Change
CC*
Revenue GBP1,653.9m GBP1,549.9m +6.7% +7.0%
------------ ------------ ------- -------
Gross profit GBP855.5m GBP814.9m +5.0% +5.0%
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Operating profit GBP146.7m GBP142.5m +3.0% +2.2%
------------ ------------ ------- -------
Profit before tax GBP144.2m GBP142.3m +1.4%
------------ ------------ -------
Basic earnings per share 32.2p 32.5p -0.9%
------------ ------------ -------
Diluted earnings per share 32.2p 32.4p -0.6%
------------ ------------ -------
Total dividend per share (excl.
special dividend) 13.70p 13.10p +4.6%
------------ ------------ -------
Total dividend per share (incl.
special dividend) 26.43p 25.83p
------------ ------------
2019 operating profit includes benefit of IFRS 16 of GBP1.9m
HIGHLIGHTS*
-- Group gross profit up 5.0% to GBP855.5m, a record year for the Group
-- Operating profit up 2.2% to GBP146.7m
-- Conversion rate** down to 17.1% (2018: 17.5%)
-- Gross profit per fee earner up 1.5% to GBP140.4k (2018: GBP138.3k)
-- Record gross profit in 19 countries
-- Net decrease of -89 fee earners (-1.5%); total headcount of 7,698
-- Final dividend of 9.40 pence per share, an increase of 4.4%
-- Total ordinary dividend increased 4.6% to 13.70p
-- GBP40.7m special dividend paid in October of 12.73p per share
*At constant currency - all growth rates in constant currency at
prior year rates unless otherwise stated
**Operating profit as a percentage of gross profit
Commenting on the results and the outlook, Steve Ingham, Chief
Executive Officer of PageGroup, said:
"2019 was a record year for the Group with gross profit,
operating profit and profit before tax all increasing. Today the
Board has also proposed an increase in the final dividend of 4.4%
to 9.4p reflecting confidence in the long-term strategic progress
of the Group.
"Due primarily to the tough trading conditions seen in a number
of the Group's markets, some of which are historically among the
highest conversion markets in the Group, our conversion rate
decreased slightly to 17.1%. EPS also declined marginally to
32.2p.
"The slowing growth that we saw in the second half of 2019,
caused by a number of macro-economic challenges, have continued in
the first two months of this year. In addition, we have seen the
emergence of COVID-19 in Greater China. This, combined with the
existing challenges, led Group gross profit to decline by -3% in
these first two months.
"In our market-leading Greater China business, where COVID-19
first emerged, we have around 550 people across 9 offices, we
reacted swiftly in challenging circumstances, recognising that the
health and safety of our employees, candidates and clients was our
top priority. With consultants continuing to work via home access,
we were able to maintain contact with both candidates and clients.
After periods of office closure in some cities, we had over 90% of
consultants back in our offices by the end of February. Business
was transacted using a range of technologies and while there was
almost no face to face contact, in the first two months we were
still able to deliver gross profit at c. 65% compared to 2019.
"Looking forward, in Greater China, many of our clients have not
been able to return to work with the same speed and therefore we
expect a significant impact in March, one of our largest months of
the year, and potentially beyond. With COVID-19 now impacting other
markets around the world, it is too early to estimate the impact on
the Group's operations. We will continue to monitor the situation
closely and will provide updates as necessary.
"PageGroup continues to have a flexible and highly diversified
business model that enables us to react quickly to changes in
market conditions. We are clear market leaders in many of our
markets, with a highly experienced senior management team, which,
we believe, positions us well to take advantage of all
opportunities during 2020.
"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."
Analyst meeting
The Company will be presenting to a meeting of analysts at
10.15am today at
FTI Consulting
200 Aldersgate
Aldersgate Street
London EC1A 4HD
If you are unable to attend in person, you can also follow the
presentation on the following link:
https://www.investis-live.com/pagegroup/5e4abaf015f73f0b0065a8be/suak
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 the access code 47 18 45 to gain access to the
call
The presentation and a recording of the meeting will be
available on the Company's website later today at
https://www.page.com/investors/investor-library.aspx
Enquiries:
PageGroup plc +44 (0) 1932 264446
Steve Ingham, Chief Executive Officer
Kelvin Stagg, Chief Financial Officer
FTI Consulting +44 (0) 20 3727 1340
Richard Mountain/Susanne Yule
MANAGEMENT REPORT
CAUTIONARY STATEMENT
This Management Report has been prepared solely to provide
additional information to shareholders to assess the Group's
strategies and the potential for those strategies to succeed.
This Management Report 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 report 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.
GROUP STRATEGY
At PageGroup we have a clear strategic vision. We aim to be the
leading specialist recruiter in each of the markets in which we
operate. We have sought to achieve this by developing a significant
market presence in major global economies, as well as targeting new
markets where we see the greatest potential for long-term gross
profit growth at attractive conversion rates.
We offer our services across a broad range of disciplines and
specialisms, solely within the professional recruitment market. Our
origins are in permanent recruitment, but a quarter of our gross
profit is in temporary placements, where local culture and market
conditions allow. We focus on opportunities where our industry and
market expertise can set us apart from our competition. This
enables us to offer a premium service that is valued by clients and
attracts the highest calibre of candidates.
Our mix of permanent to temporary recruitment reflects the
balance of our business mix, both in terms of brands, where Michael
Page, our largest brand, operating at higher salary levels, has a
naturally higher level of permanent recruitment, as well as our
geographic mix. We are market leaders in regions such as Latin
America, Greater China and South East Asia, where we are also
seeing the emergence of the white-collar temporary recruitment
market.
PageGroup is focused on delivering against three key objectives
to achieve its strategic vision and provide sustainable financial
returns. These are: 1) to look for organic, high-margin and
diversified growth; 2) to position the business to be scalable
efficiently and highly flexible to reflect market conditions; and
3) as a people-oriented, organically driven business, to nurture
and develop talent and skills which are fundamental to us achieving
long-term sustainable growth.
We therefore invest significantly in our people, as the
recruitment, retention and development of the best talent available
is central to our ability to grow the business and to manage our
resources through economic cycles. Investment in the business has
been focused on developing the long-term sustainability of the
business and is supported by significant balance sheet strength and
cash flow generation.
Organic, scalable growth
Our strategy is to grow organically, achieved by drawing upon
the skill and experience of proven PageGroup management, ensuring
we have the best and most experienced home-grown talent in each key
role. Our team-based structure and profit share business model is
highly scalable. The small size of our specialist teams means we
can increase headcount rapidly to achieve growth when market
conditions are favourable.
Conversely, when market conditions tighten, these
entrepreneurial, profit-sharing teams reduce in size, largely
through natural attrition. Consequently, our cost base contracts in
downturns. Our strategy for organic growth has served the business
well over the 43 years since its inception and we believe it will
continue to do so. We have grown from a small, single-discipline
recruitment company operating in one country to a large
multidiscipline, multinational business, operating in 36 countries
represented by our four key brands of Page Executive, Michael Page,
Page Personnel and Page Outsourcing.
Diversification by region and discipline
Our strategy is to expand and diversify the Group by industry
sectors, professional disciplines, geography and level of focus, be
it Page Executive, Michael Page, Page Personnel or Page
Outsourcing, with the objective of being the leading specialist
recruitment consultancy in each of our chosen markets.
As recruitment is a cyclical business, impacted significantly by
the strength of economies, diversification is an important element
of our strategy as it reduces our dependency on individual
businesses or markets, thereby increasing the resilience of the
Group. This strategy is pursued entirely through the organic growth
of existing and new teams, offices, disciplines and countries,
maintaining a consistent team and meritocratic culture as we
grow.
Talent and skills development
We recognise that it is our people who are at the heart of
everything we do, particularly as an organically grown business
where ensuring we have a talent pool with experience through
economic cycles and across both geographies and disciplines is
critical. Investing in our people is, therefore, a vital element of
our strategy. We seek to find the highest calibre staff from a
diverse range of backgrounds and then do our very best to retain
them through offering a fulfilling career and an attractive working
environment.
This includes a team-based structure, a profit share business
model and continuous training and career development, often
internationally. Our strong track record of internal career moves
and promotion from within means that people who join us know that
they could be our future senior managers and main Board
Directors.
Diversity and inclusion are key to our culture and the success
of our business. It is not just an item on our to-do list, it's an
inherent part of our culture and our business. We are a people
business - the people who work here, the companies we do business
with, the candidates whose lives we change for the better on a
daily basis, and the communities and individuals we help as we give
back to others. Understanding the values and cultural differences
of our employees helps them reach their potential as we build a
stronger, more successful business. A business which reflects
society and the clients and candidates whose lives we change.
Sustainable growth
When we invest in a new business, be it a new country, a new
office or a new discipline, we do so for the long term. Our organic
and team-based business model allows us to grow strongly when
market conditions are favourable, enabling us to increase our fee
earner headcount investment rapidly. Conversely, downturns in the
general economy of a country or in specific industries will
inevitably have a knock-on effect on the recruitment market.
However, it has been our practice in the past, and remains our
intention, to maintain our presence in our chosen markets through
these downturns, while closely controlling our cost base. In this
way, we can retain our highly capable management teams in whom we
have invested. Normally, we find that we gain market share during
downturns, which positions our business for market-leading rates of
growth when the economy improves. Pursuing this approach means that
we carry spare capacity during downturns, which can have a negative
effect on profitability in the short term. A strong balance sheet
is, therefore, essential to support the business at these
times.
Our strategic priorities comprise the following:
-- increase the scale and diversification of PageGroup by
organically growing existing and new teams, offices, disciplines,
brands and countries;
-- manage the business with a team and meritocratic culture,
while delivering a consistent and high-quality client and candidate
experience;
-- invest through cycles in our Large, High Potential markets of
Germany, Greater China, Latin America, South East Asia and the US
to achieve scale and a market leading position;
-- manage our fee earner headcount in all other markets to
reflect prevailing market conditions, by adding selectively to
geographies and disciplines where there is positive growth
momentum, while reducing headcount where the outlook for growth or
fee earner productivity is weak;
-- focus on operational support consistency; and
-- focus on succession planning and international career paths
to encourage retention and development of key staff.
The main factors that could affect the business and the
financial results are described in the "Principal Risks and
Uncertainties" section in the PageGroup plc 2019 Annual Report and
Accounts, which will be available to shareholders in April
2020.
GROUP RESULTS
GROSS PROFIT Reported CC
Year-on-year % of Group 2019 (GBPm) 2018 (GBPm) % %
----------- ------------ ------------ ------- -------
EMEA 49% 418.3 394.3 +6.1% +7.0%
----------- ------------ ------------ ------- -------
Asia Pacific 19% 163.3 161.2 +1.3% -0.3%
----------- ------------ ------------ ------- -------
Americas 16% 138.8 121.0 +14.7% +13.8%
----------- ------------ ------------ ------- -------
UK 16% 135.1 138.4 -2.4% -2.4%
----------- ------------ ------------ ------- -------
Total 100% 855.5 814.9 +5.0% +5.0%
----------- ------------ ------------ ------- -------
Permanent 75% 643.8 621.7 +3.5% +3.3%
----------- ------------ ------------ ------- -------
Temporary 25% 211.7 193.2 +9.6% +10.4%
----------- ------------ ------------ ------- -------
At constant exchange rates, the Group's revenue increased 7.0%
and gross profit increased 5.0% for the year ended 31 December
2019. At reported rates, revenue increased 6.7% to GBP1,653.9m
(2018: GBP1,549.9m) and gross profit increased 5.0% to GBP855.5m
(2018: GBP814.9m).
The Group's revenue mix between temporary and permanent
placements was 61:39 (2018: 59:41) and for gross profit our
permanent to temporary ratio was 75:25 (2018: 76:24). Revenue from
temporary placements comprises the salaries of those placed,
together with the margin charged. This margin on temporary
placements increased slightly to 21.1% in 2019 (2018: 21.0%).
Overall, pricing remained relatively stable across all regions,
although a stronger pricing environment was experienced in markets
and disciplines where there were increased instances of candidate
shortages.
Our Large, High Potential markets category increased gross
profit by 9% in constant currencies and achieved a record gross
profit of GBP298.1m, now representing 35% of the Group. This was
achieved despite the tougher trading conditions in Greater China,
due to trade tariff uncertainty in Mainland China and social unrest
in Hong Kong. Excluding Greater China, growth was 16%.
Total Group headcount decreased by 74 in the year to close at
7,698. This comprised a net decrease of 89 fee earners (-1.5%) and
an increase of 15 operational support staff (+0.9%). Our fee earner
headcount responded to the increasingly tough market conditions
seen as the year progressed, with macro-economic uncertainties in
many of our markets. Our operational support headcount increased to
support our strategic transformation projects, although many of
these came to an end towards the end of the year, with a net
reduction of 37 in Q4. As a result of these movements, our fee
earner to operational support staff ratio was 78:22 (2018: 79:21).
In total, administrative expenses increased 5.4% to GBP708.8m
(2018: GBP672.4m). The Group's operating profit from trading
activities totalled GBP146.7m (2018: GBP142.5m), an increase of
2.2% in constant currencies and 3.0% in reported rates.
OPERATING PROFIT AND CONVERSION RATES
The Group's organic growth model and profit-based team bonus
ensures cost control remains tight. Approximately three-quarters of
costs were employee related, including wages, bonuses, share-based
long-term incentives, and training & relocation costs.
Depreciation and amortisation for the year totalled GBP57.5m
(2018: GBP19.7m), the increase being due to GBP36.6m of additional
depreciation as a result of IFRS 16. Amortisation relating to our
operating system, PRS, was GBP6.2m (2018: GBP6.9m).
Our fee earner to operational support staff ratio was 78:22, as
we reduced our fee earner headcount in response to the more
challenging trading conditions seen across many of the Group's
markets.
The Group's conversion rate for the year of 17.1% was a decline
from 17.5% in 2018. This was due primarily to the tough trading
conditions seen in a number of the Group's markets, many of which
have the highest conversion rates in the Group.
In EMEA, conversion was broadly flat on 2018 at 21.6%. This was
a combination of more challenging macro-economic conditions, offset
by our continued focus on conversion. In the UK, the conversion
rate increased from 9.7% to 12.8% as we managed our cost base in
response to the continued Brexit uncertainty. In Asia Pacific,
conversion fell to 12.1% (2018: 16.6%), mainly due to the tougher
trading conditions as a result of the trade tariff uncertainty in
Mainland China and social unrest in Hong Kong. The Americas'
conversion rate was broadly in line with 2018 at 13.9%. This was
our fastest growing region, benefiting from our investment in its
two Large, High Potential markets.
A net interest charge of GBP2.4m was primarily due to an IFRS 16
interest charge of GBP2.0m. Excluding IFRS 16, the net interest
charge of GBP0.4m reflected borrowing facility charges, partially
offset by interest income, albeit in the continued low interest
rate environment.
Earnings per share and dividends
In 2019, basic earnings per share decreased -0.9% to 32.2p
(2018: 32.5p), due to an increase in the effective tax rate from
27.1% to 28.3%. Diluted earnings per share, which includes the
dilutive effect of share options, decreased -0.6% to 32.2p (2018:
32.4p).
The Group's strategy is to operate a policy of financing the
activities and development of the Group from our retained earnings
and to maintain a strong balance sheet position. We first use our
cash to satisfy our operational and investment requirements and to
hedge our liabilities under the Group's share plans. We then review
our liquidity over and above these requirements to make returns to
shareholders, firstly by way of an ordinary dividend.
Our policy is to grow this ordinary dividend over the course of
the economic cycle, in line with our long-term growth rate. We
believe this will enable us to sustain the level of ordinary
dividend payments during a downturn as well as to increase it
during more prosperous times.
Cash generated in excess of these first two priorities will be
returned to shareholders through supplementary returns, using
special dividends or share buybacks.
In line with the growth rates and increase in operating profits,
a final dividend of 9.40p (2018: 9.00p) per ordinary share is
proposed. When taken together with the interim dividend of 4.30p
(2018: 4.10p) per ordinary share, this is an increase in the total
dividend for the year of 4.6% over 2018 to 13.70p per ordinary
share.
The proposed final dividend, which amounts to GBP30.2m, will be
paid on 19 June 2020 to shareholders on the register as at 22 May
2020, subject to shareholder approval at the Annual General Meeting
on 4 June 2020.
After consultation with our shareholders, we also paid a special
dividend of 12.73p per share (2018: 12.73p per share) on 9 October
2019, totalling GBP40.7m. We will continue to monitor our cash
position in 2020 and will make returns to shareholders in line with
the above policy.
Cash flow and balance sheet
Cash flow in the year was strong, with GBP194.1m (2018:
GBP131.7m) generated from operations. The closing cash balance was
GBP97.8m at 31 December 2019, broadly in line with the prior year.
The movements in the Group's cash flow in 2019 reflected the
underlying trading conditions, with a GBP15.9m increase in working
capital.
The Group had a GBP50m invoice financing arrangement, GBP30m
revolving credit facility and GBP21m uncommitted overdraft
facilities to support cash flows across its operations and ensure
rapid access to funds should they be required. None of these were
in use at the year end.
Income tax paid in the year was GBP37.0m (2018: GBP41.0m) and
net capital expenditure in 2019 was GBP24.6m (2018: GBP24.4m).
Spending on software increased from 2018 as we completed the
roll-out of our new Global Finance System and commenced the
implementation of our new Customer Connect operating system.
Spending on property, plant and equipment decreased, with no
significant office moves in the year, as well as a reduction in our
fee earner headcount.
Dividend payments were up on the prior year at GBP83.5m (2018:
GBP81.3m). The generally lower share price in 2019 meant that there
was a decrease in cash receipts from share option exercises, with
GBP7.2m in 2019, compared to GBP26.9m in 2018. In 2019, GBP10.0m
(2018: GBP11.6m) was also spent on the purchase of shares by the
Employee Benefit Trust to satisfy future obligations under our
employee share plans.
The most significant item in our balance sheet was trade
receivables, which amounted to GBP271.1m at 31 December 2019 (2018:
GBP288.2m), comprising permanent fees invoiced and salaries and
fees invoiced in the temporary placement business, but not yet
paid. Day's sales in debtors at 31 December 2019 were 52 days
(2018: 54 days).
EUROPE, MIDDLE EAST AND AFRICA (EMEA)
EMEA is the Group's largest region, contributing 49% of the
Group's gross profit in the year. With operations in 17 countries,
PageGroup has a strong presence in the majority of EMEA markets and
is the clear leader in specialist permanent recruitment in the two
largest, France and Germany. Across the region, permanent
placements accounted for 68% and temporary placements 32% of gross
profit.
The region includes four of our Large, Proven markets, France,
Spain, Italy and the Netherlands, across which there is a broad
range of competition. EMEA also includes Germany, one of the
Group's Large, High Potential markets, which has low penetration
rates (markets where less than 30% of recruitment is outsourced)
and significant growth potential, particularly in temporary
recruitment. In addition, there are markets such as Poland, Turkey
and Africa, which are less developed, with limited competition, but
are increasingly looking for professional recruitment services.
EMEA GBPm Growth rates
(49% of Group in 2019) 2019 2018 Reported CC
------ ------ --------- ------
Gross Profit 418.3 394.3 +6.1% +7.0%
------ ------ --------- ------
Operating Profit 90.3 85.6 +5.5% +6.5%
------ ------ --------- ------
Conversion Rate (%) 21.6% 21.7%
------ ------ --------- ------
In 2019, the EMEA region saw market conditions deteriorate as
the year progressed, despite this, 9 countries delivered record
gross profit for the year. In constant currencies, revenue
increased 9.0% on 2018 and gross profit increased by 7.0%. In
reported rates, revenue in the region was up 8.1% to GBP861.8m
(2018: GBP797.4m), and gross profit increased 6.1% to GBP418.3m
(2018: GBP394.3m).
Our largest businesses in the region, France and Germany,
together representing half of the region by gross profit, grew 4%
and 20% respectively, for the full year in constant currencies.
Michael Page Interim in Germany, which is mainly focussed on
technology and where we continue to invest heavily in temporary and
contracting recruitment, grew 38%. Elsewhere we saw good growth in
Benelux of +9%, Italy +10% and Spain +5%, despite macro-economic
uncertainty across the region.
The Middle East and Africa, which represented 4% of the region,
grew 1%, with tougher trading conditions in Africa.
2019 operating profit increased 5.5% to GBP90.3m (2018:
GBP85.6m), with the conversion rate broadly flat at 21.6% (2018:
21.7%). The region has the highest conversion rate in the Group,
though was slightly moderated by more challenging macro-economic
conditions as the year progressed.
Headcount across the region increased by 18 (+0.5%) to 3,317 at
the end of 2019 (2018: 3,299). We continued to invest in markets
where we saw growth, such as Germany, offset by managing down our
headcount where we saw more challenging conditions.
ASIA PACIFIC
Asia Pacific represented 19% of the Group's gross profit in
2019, with 76% of the region being Asia and 24% Australasia. Other
than in the financial centres of Hong Kong, Singapore and Tokyo,
the Asian market is generally highly under-developed and offers
attractive opportunities in both international and domestic markets
at good conversion rates. Two of our Large, High Potential markets,
Greater China and South East Asia, are in this region. With a
highly experienced management team, over 1,300 staff and limited
competition, the size of the opportunity in Asia is significant.
Across Asia, driven by cultural attitudes towards white collar
temporary recruitment, permanent placements accounted for 94% and
temporary placements 6% of gross profit.
Australasia is a mature, well-developed and highly competitive
recruitment market. PageGroup has a meaningful presence in
permanent recruitment in the majority of the professional
disciplines and major cities in Australia and New Zealand. Page
Personnel has a growing presence and significant potential to
expand and grow market share.
ASIA PACIFIC GBPm Growth rates
(19% of Group in 2019) 2019 2018 Reported CC
------ ------ --------- --------
Gross Profit 163.3 161.2 +1.3% -0.3%
------ ------ --------- --------
Operating Profit 19.8 26.8 -26.0% -28.7 %
------ ------ --------- --------
Conversion Rate (%) 12.1% 16.6%
------ ------ --------- --------
In Asia Pacific, in constant currencies, revenue increased 1.7%
and gross profit decreased by -0.3%. In reported rates, revenue
increased 2.5% to GBP273.4m (2018: GBP266.7m), while gross profit
rose 1.3% to GBP163.3m (2018: GBP161.2m).
In Asia, representing 14% of the Group, gross profit declined
-1%. Greater China declined -10% with trade tariff uncertainty
impacting confidence, as well as social unrest in Hong Kong. South
East Asia was up 6% on the prior year, with strong performances in
our newer countries of Indonesia, Thailand and Vietnam, offset by
tougher trading conditions in Singapore, which was impacted by the
contagion from trade tariff uncertainty. India, where we now have
around 160 fee earners, delivered a record year with growth of 32%.
Japan, where we invested heavily in fee earners, saw growth of 11%
and delivered a record year. This was despite tougher trading
conditions in the second half of the year, particularly amongst our
international clients. Australia grew 3%, with tougher trading in
New South Wales.
Operating profit decreased -26.0% to GBP19.8m (2018: GBP26.8m),
with the conversion rate down at 12.1% (2018: 16.6%). Operating
profit and conversion rate in the region were impacted by our
continued investments in the two large, high potential markets, as
well as investments in new offices in Bangalore and Canberra, the
Nikkei market in Japan and new disciplines in Page Personnel
Australia. Operating profit was also impacted by tougher trading
conditions as a result of the trade tariff uncertainty in Mainland
China, which also affected other markets in Asia, as well as the
social unrest in Hong Kong.
Headcount across the region declined by -30 (-1.8%), ending the
year at 1,679 (2018: 1,709). Our fee earner headcount in Greater
China decreased in response to the tougher trading conditions, but
we continued to invest elsewhere, particularly in India and
Japan.
THE AMERICAS
The Americas represented 16% of the Group's gross profit in
2019, being North America (59% of the region) and Latin America
(41% of the region). The US and Latin America are two of the Large,
High Potential markets in our growth strategy. The US, where we
have eight offices, has a well-developed recruitment industry, but
in many disciplines, especially technical, there is limited
national competition of any scale. PageGroup's breadth of
professional specialisms and geographic reach is uncommon and
provides a competitive advantage. Latin America is a highly
under-developed region, where PageGroup enjoys the market leading
position with around 800 employees in six countries and 13 offices.
There are few international competitors and none with regional
scale. Across Latin America, permanent placements accounted for 87%
of gross profit and temporary placements 13%.
AMERICAS GBPm Growth rates
(16% of Group in 2019) 2019 2018 Reported CC
------ ------ --------- -------
Gross Profit 138.8 121.0 +14.7% +13.8%
------ ------ --------- -------
Operating Profit 19.3 16.7 +15.2% +8.1%
------ ------ --------- -------
Conversion Rate (%) 13.9% 13.8%
------ ------ --------- -------
In constant currencies, revenue increased by 18.9% and gross
profit increased by 13.8%. In reported rates, revenue increased by
19.0% to GBP205.1m (2018: GBP172.3m) while gross profit increased
14.7% to GBP138.8m (2018: GBP121.0m).
In North America, our gross profit increased by 13% in constant
currencies. The US grew 17%, despite a weaker financial services
sector in New York. Our strategy of diversification continued, with
particularly strong performances from our regional offices of
Boston, Chicago, Houston, Los Angeles and Philadelphia. We
increased our US fee earner headcount by 14% compared to last year,
as we continued to invest in this Large, High Potential market.
In Latin America, gross profit was up 14% year-on-year in
constant currencies. Our business in Brazil delivered growth of
14%, with Mexico, our largest country in Latin America, delivering
a record year, with growth of 20%. Elsewhere, the other four
countries in the region, with a headcount of over 300, saw growth
of 10%, collectively, despite tougher trading conditions in Chile
in the second half of the year due to political and social
unrest.
Operating profit increased 15.2% to GBP19.3m (2018: GBP16.7m),
with a conversion rate of 13.9% (2018: 13.8%). The Americas was our
fastest growing region. However, the conversion rate was broadly
flat on the prior year as improvements in growth and productivity
in most markets were offset by our continued investment in the two
Large, High Potential markets in the region, as well as the
challenging Financial Services market in New York and social unrest
in Chile. Headcount across the region increased by 48 (+3.6%) in
2019 to 1,376 (2018: 1,328).
UNITED KINGDOM
The UK represented 16% of the Group's gross profit in 2019,
operating from 26 offices covering all major cities. It is a
mature, highly competitive and sophisticated market with the
majority of vacant positions being outsourced to recruitment firms.
PageGroup has a market leading presence in permanent recruitment
across the UK and a growing presence in temporary recruitment. In
the UK, permanent placements accounted for 69% and temporary
placements 31% of gross profit.
The UK business operates under the four brands of Michael Page,
Page Personnel, Page Executive and Page Outsourcing, with
representation in 13 specialist disciplines via the Michael Page
brand. There remains opportunity to roll-out new discipline
businesses under the lower salary-level Page Personnel brand, which
now represents 26% of UK gross profit.
UK GBPm
(16% of Group in 2019) 2019 2018 Growth rate
------ ------ -------------
Gross Profit 135.1 138.4 -2.4%
------ ------ -------------
Operating Profit 17.3 13.4 +28.9%
------ ------ -------------
Conversion Rate (%) 12.8% 9.7%
------ ------ -------------
In the UK, revenue was flat on 2018 at GBP313.6m (2018:
GBP313.5m), whereas gross profit declined -2.4% to GBP135.1m (2018:
GBP138.4m), reflecting a slight swing to temporary recruitment as a
result of the continued economic uncertainty.
The UK experienced challenging market conditions throughout the
year due to continued Brexit uncertainty impacting candidate and
client confidence. Page Personnel, which represents a quarter of
the UK, grew 2% and delivered a record year. Michael Page, which is
focused on more senior opportunities and was impacted to a greater
extent by the uncertainty, declined -4%.
Despite these challenging market conditions, operating profit
increased 28.9% to GBP17.3m (2018: GBP13.4m) with the conversion
rate increasing to 12.8% (2018: 9.7%). While some of the
improvement in profitability was through tight control of our cost
base, partly as a result of the reduction in headcount, our
Customer First initiative that was implemented in 2018, also led to
an increase in our conversion rate during the year. Customer First
restructured the business, moving from operating on a discipline to
a regional basis, to more closely align with our customers. This
had the effect of increasing productivity and repeat business, a
reduction in travel and drove a reduction in the UK management
team.
Headcount decreased to 1,326 at the end of December 2019 (2018:
1,436). Our fee earner headcount reduced by 86 (8.6%) in response
to the challenging trading conditions seen throughout the year.
OTHER FINANCIAL ITEMS
Foreign exchange
Foreign exchange had a negligible impact on the Group's results
for the year. However, if 2019 results were restated at current
exchange rates, this would reduce Group gross profit by c. GBP15m
and operating profit by c. GBP3m. In addition, current rates also
remain substantially below pre-Brexit levels.
IFRS 16 - Leases
The Group is reporting under the new accounting standard, IFRS
16, for the first time. Under IFRS 16, the straight-line rental
expense of GBP38.5m has been replaced with a depreciation charge in
respect of the right of use assets of GBP36.6m. This has resulted
in an increase to EBITDA of GBP38.5m and an increase to EBIT of
GBP1.9m. An interest charge in respect of the lease liabilities of
GBP2.0m has also been recognised resulting in a decrease in Profit
Before Tax of GBP0.1m.
Taxation
The tax charge for the year was GBP40.8m (2018: GBP38.6m). This
represented an effective tax rate of 28.3% (2018: 27.1%). The rate
is higher than the effective UK rate for the calendar year of 19%
(2018: 19%) principally due to the impact of higher tax rates in
overseas countries and to a lesser extent disallowable expenditure.
There are some countries in which the tax rate is lower than the
UK, but the impact is small either because the countries are not
significant contributors to Group profit, or the tax rate
difference is not significant.
In 2019, the tax rate was impacted primarily by higher tax in
overseas countries (+4.0%), tax on share-based payments (+0.8) and
other permanent differences (+1.0%), principally employee related
expenditure and entertainment expenses.
The tax charge for the year reflects the Group's tax strategy,
which is aligned to business goals. It is PageGroup's policy to pay
its fair share of taxes in the countries in which it operates and
deal with its tax affairs in a straightforward, open and honest
manner. The Group's tax strategy is set out in detail on our
website in the Investor section under "Responsibilities".
Share options and share repurchases
At the beginning of 2019 the Group had 10.6m share options
outstanding, of which 4.3m had vested, but had not been exercised.
During the year, options were granted over 1.9m shares under the
Group's share option plans. Options were exercised over 1.7m
shares, generating GBP7.2m in cash, and options lapsed over 0.5m
shares. At the end of 2019, options remained outstanding over 10.3m
shares, of which 4.2m had vested, but had not been exercised.
During 2019, 2.2m shares were purchased for the Group's Employee
Benefit Trust, and no shares were cancelled (2018: 2.2m shares were
purchased and no shares were cancelled).
Audit tender
The Company last tendered its audit services in 2011. In
accordance with good governance practices, this year the Company
will undertake a competitive tender for its external audit services
and currently plans to announce the outcome of the process ahead of
the Annual General Meeting on 4 June 2020.
KEY PERFORMANCE INDICATORS (KPIs)
KPI Definition, method of calculation and analysis
Financial
Gross profit How measured: Gross profit growth represents
growth revenue less cost of sales expressed as the
percentage change over the prior year. It consists
principally of placement fees for permanent
candidates and the margin earned on the placement
of temporary candidates.
Why it's important: This metric indicates the
degree of income growth in the business. It
can be impacted significantly by foreign exchange
movements in our international markets. Consequently,
we look at both reported and constant currency
metrics.
How we performed in 2019: Gross profit increased
5.0% in both constant currencies and reported
rates. This was a slowing from the 15.9% in
constant currencies in 2018.
Relevant strategic objective: Organic growth
-----------------------------------------------------------
Gross profit How measured: Total gross profit from: a) geographic
diversification regions outside the UK; and b) disciplines outside
of Accounting & Financial Services, each expressed
as a percentage of total gross profit.
Why it's important: These percentages give
an indication of how the business has diversified
its revenue streams away from its historical
concentrations in the UK and from the Accounting
& Financial Services disciplines.
How we performed in 2019: Geographies: the
percentage increased to 84.2% from 83.0% in
2018, demonstrating a high degree of diversification.
This reflects relatively stronger trading in
the majority of our overseas businesses, with
more challenging conditions in the UK due to
Brexit related uncertainty.
Disciplines: the percentage decreased slightly
to 65.1% (2018: 65.2%), impacted by tougher
trading conditions in our Marketing, Sales and
Retail discipline category.
Relevant strategic objective: Diversification
-----------------------------------------------------------
Ratio of gross How measured: Gross profit from each type of
profit generated placement expressed as a percentage of total
from permanent gross profit.
and temporary Why it's important: This ratio reflects both
placements the current stage of the economic cycle and
our geographic spread, as a number of countries
culturally have minimal temporary placements.
It gives a guide as to the operational gearing
potential in the business, which is significantly
greater for permanent recruitment.
How we performed in 2019 : T he ratio decreased
slightly to 75:25 (2018: 76:24), with stronger
growth in temporary recruitment due to the macro-economic
uncertainty in a number of our markets.
Relevant strategic objective: Diversification
-----------------------------------------------------------
Basic earnings How measured: Profit for the year attributable
per share (EPS) to the Group's equity shareholders, divided
by the weighted average number of shares in
issue during the year.
Why it's important: This measures the underlying
profitability of the Group and the progress
made against the prior year.
How we performed in 2019 : The Group saw a
-0.9% fall in Basic EPS to 32.2p, due to an
increase in the effective tax rate from 27.1%
to 28.3%.
Relevant strategic objective: Sustainable growth
-----------------------------------------------------------
Cash How measured: Cash and short-term deposits
Why it's important: The level of cash reflects
our cash generation and conversion capabilities
and our success in managing our working capital.
It determines our ability to reinvest in the
business, to return cash to shareholders and
to ensure we remain financially robust through
cycles.
How we performed in 2019: Cash increased to
GBP97.8m (2018: GBP97.7m). This was after dividend
payments of GBP83.5m (including a special dividend
of GBP40.7m).
Relevant strategic objective: Sustainable growth
-----------------------------------------------------------
Strategic
Fee earner headcount How measured: Number of fee earners and directors
growth involved in revenue-generating activities at
the year end, expressed as the percentage change
compared to the prior year.
Why it's important: Growth in fee earners is
a guide to our confidence in the business and
macro-economic outlook, as it reflects our expectations
as to the level of future demand for our services
above the existing capacity currently within
the business.
How we performed in 2019: Fee earner headcount
declined by 89, or -1.5% in the year, resulting
in 6,027 fee earners at the end of the year.
Our fee earner headcount reduced in markets
where we saw more challenging trading conditions,
such as Greater China and the UK. However, we
continued to invest in markets where we saw
the strongest growth such as Germany, India
and the US.
Relevant strategic objective: Sustainable growth
-----------------------------------------------------------
Gross profit How measured: Gross profit divided by the average
per fee earner number of fee-generating staff, calculated on
a rolling monthly average basis.
Why it's important: This is our indicator of
productivity, which is affected by levels of
activity in the market, capacity within the
business and the number of recently hired fee
earners who are not yet at full productivity.
Currency movements can also impact this figure.
How we performed in 2019: Productivity increased
1.5% to GBP140.4k (2018: GBP138.3k). This was
as a result of our focus on productivity through
our COO office, partially offset by more challenging
trading conditions in a number of the Group's
key markets.
Relevant strategic objective: Organic growth
-----------------------------------------------------------
Fee earner: How measured: The percentage of fee earners
support staff compared to operational support staff at the
headcount ratio year end, expressed as a ratio.
Why it's important: This reflects the operational
efficiency in the business in terms of our ability
to grow the revenue-generating platform at a
faster rate than the staff needed to support
this growth.
How we performed in 2019: The ratio decreased
to 78:22 from 79:21 in 2018. This was driven
by a decline in our fee earner headcount of
89, in response to the more challenging trading
conditions in many of our markets. Our operational
support staff headcount increased by 15 to support
strategic transformation programmes. A number
of these programmes came to an end in the year,
with a reduction of 37 operational support staff
in Q4.
Relevant strategic objective: Sustainable growth
-----------------------------------------------------------
Conversion rate How measured: Operating profit (EBIT) expressed
as a percentage of gross profit.
Why it's important: This reflects the level
of fee-earner productivity and the Group's effectiveness
at controlling costs in the business, together
with the degree of investment being made for
future growth.
How we performed in 2019: The Group's conversion
rate decreased to 17.1% (2018: 17.5%), due to
more challenging trading conditions seen across
a number of the Group's markets, many of which
normally have the highest conversion rates in
the Group.
Relevant strategic objective: Sustainable growth
-----------------------------------------------------------
People
Employee engagement How measured: A key output of the employee
index surveys undertaken periodically within the business.
Why it's important: A positive working environment
and motivated team helps productivity and encourages
retention of key talent within the business.
How we performed in 2019: We recorded an 83%
positive score for employee engagement in the
latest Employee Survey in 2019. This was a combination
of questions, including: how valued our people
felt; how proud they were to work for PageGroup;
and the level of trust and recognition they
received for their work.
Relevant strategic objective: Sustainable growth
-----------------------------------------------------------
Management experience How measured: Average tenure of front-office
management measured as years of service for
directors and above.
Why it's important: Experience through the
economic cycle and across both geographies and
disciplines is critical for an organic cyclical
business operating across the globe. Our organic
business model relies on an experienced management
pool to enable flexibility in resourcing and
senior management succession planning.
How we performed in 2019: The average tenure
of the Group's management increased from 12.0
years to 12.5 years, with the largest increase
in EMEA.
Relevant strategic objective: Talent and skills
development
-----------------------------------------------------------
Total GHG emissions How measured: Direct and Indirect GHG emissions
calculated in line with the UK Government's
2019 DEFRA reporting standards. Principally
based on data from a sample of our offices,
covering 70% of the Group by headcount, and
extrapolated for the Group as a whole.
Why it's important: The emissions calculations
look at the CO2e impact of our operations in
absolute terms.
How we performed in 2019: Direct GHG emissions
relating to the combustion of fuel increased
by 9.3% to 2,054 tonnes CO2e, while Indirect
GHG emissions, through the purchase of energy
such as electricity, decreased by 18.2% to 4,413
tonnes.
Relevant strategic objective: Sustainable growth.
-----------------------------------------------------------
Intensity values How measured : Intensity values for GHG emissions
of GHG emissions are based on property and vehicle energy-derived
emissions per 1,000 headcount. Headcount is
viewed as being the most representative metric
for PageGroup's activity levels and is unaffected
by issues such as business mix or foreign exchange
variations.
Why it's important: Intensity values help to
normalise the GHG metrics and place them in
the context of the Group's changing business
profile, particularly in terms of increases
in headcount. It helps to identify where progress
has been made on emissions reduction.
How we performed in 2019: Energy-derived emissions
were reduced by 10.3% compared with 2018, largely
due to a decrease in headcount, along with changes
in fuel sources and improvements in office energy
efficiencies.
Relevant strategic objective: Sustainable growth.
-----------------------------------------------------------
The source of data and calculation methods year-on-year are on a
consistent basis, including changes resulting from the use of 2019
DEFRA conversion factors. The movements in KPIs are in line with
expectations.
Steve Ingham Kelvin Stagg
Chief Executive Officer Chief Financial Officer
4 March 2020
Consolidated Income Statement
For the year ended 31 December 2019
2019 2018
Note GBP'000 GBP'000
Revenue 3 1,653,948 1,549,941
Cost of sales (798,498) (735,039)
Gross profit 3 855,450 814,902
Administrative expenses (708,781) (672,439)
---------- ----------
Operating profit 3 146,669 142,463
Financial income 4 494 631
Financial expenses 4 (2,918) (819)
Profit before tax 3 144,245 142,275
Income tax expense 5 (40,800) (38,572)
---------- ----------
Profit for the year 103,445 103,703
---------- ----------
Attributable to:
Owners of the parent 103,445 103,703
---------- ----------
Earnings per share
Basic earnings per share
(pence) 8 32.2 32.5
Diluted earnings per share
(pence) 8 32.2 32.4
---------- ----------
The above results all relate to continuing operations
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2019
2019 2018
GBP'000 GBP'000
Profit for the year 103,445 103,703
Other comprehensive income/(loss)
for the year
Items that may subsequently be reclassified
to profit and loss:
Currency translation differences (14,842) 4,359
Loss on hedging instruments (939) (988)
Total comprehensive income for the
year 87,664 107,074
--------- --------
Attributable to:
Owners of the parent 87,664 107,074
--------- --------
Consolidated Balance Sheet
As at 31 December 2019
2019 2018
Note GBP'000 GBP'000
Non-current assets
Property, plant and equipment 9 31,925 35,564
Right-of-use assets 2 120,246 -
Intangible assets - Goodwill and
other intangible 2,087 2,019
- Computer software 36,967 31,377
Deferred tax assets 18,915 17,487
Other receivables 10 15,036 12,746
225,176 99,193
---------- ----------
Current assets
Trade and other receivables 10 365,555 349,111
Current tax receivable 13,008 17,206
Cash and cash equivalents 12 97,832 97,673
476,395 463,990
---------- ----------
Total assets 3 701,571 563,183
---------- ----------
Current liabilities
Trade and other payables 11 (215,811) (204,353)
Lease liabilities 2 (29,139) -
Current tax payable (19,110) (20,145)
(264,060) (224,498)
---------- ----------
Net current assets 212,335 239,492
---------- ----------
Non-current liabilities
Other payables 11 (11,613) (19,474)
Deferred tax liabilities (2,038) (630)
Lease liabilities 2 (99,473) -
(113,124) (20,104)
---------- ----------
Total liabilities 3 (377,184) (244,602)
---------- ----------
Net assets 324,387 318,581
---------- ----------
Capital and reserves
Called-up share capital 3,286 3,284
Share premium 99,507 98,502
Capital redemption reserve 932 932
Reserve for shares held in the employee
benefit trust (47,662) (50,673)
Currency translation reserve 19,375 34,217
Retained earnings 248,949 232,319
Total equity 324,387 318,581
---------- ----------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2019
Reserve
for shares
held in
Called-up Capital the Currency
share Share redemption employee translation Retained Total
benefit
capital premium reserve trust reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
January 2018 3,268 92,677 932 (58,931) 29,858 202,253 270,057
---------- -------- ----------- ----------- ------------ --------- ---------
Currency
translation
differences - - - - 4,359 - 4,359
---------- -------- ----------- ----------- ------------ --------- ---------
Net income
recognised
directly in
equity - - - - 4,359 - 4,359
Loss on hedging
instruments - - - - - (988) (988)
Profit for the year
ended 31 December
2018 - - - - - 103,703 103,703
Total comprehensive
income for the
year - - - - 4,359 102,715 107,074
---------- -------- ----------- ----------- ------------ --------- ---------
Purchase of shares
held in employee
benefit trust - - - (11,567) - - (11,567)
Exercise of share
plans 16 5,825 - - - 21,072 26,913
Reserve transfer
when shares held
in the employee
benefit trust vest - - - 19,825 - (19,825) -
Credit in respect
of share schemes - - - - - 7,048 7,048
Credit in respect
of tax on share
schemes - - - - - 368 368
Dividends - - - - - (81,312) (81,312)
16 5,825 - 8,258 - (72,649) (58,550)
---------- -------- ----------- ----------- ------------ --------- ---------
Balance at 31
December 2018 and
1
January 2019 3,284 98,502 932 (50,673) 34,217 232,319 318,581
---------- -------- ----------- ----------- ------------ --------- ---------
Loss on adoption of
IFRS 16 (note
2) - - - - - (1,450) (1,450)
Balance at 1
January 2019
(restated) 3,284 98,502 932 (50,673) 34,217 230,869 317,131
---------- -------- ----------- ----------- ------------ --------- ---------
Currency
translation
differences - - - - (14,842) - (14,842)
---------- -------- ----------- ----------- ------------ --------- ---------
Net expense
recognised
directly in
equity - - - - (14,842) - (14,842)
Loss on hedging
instruments - - - - - (939) (939)
Profit for the year
ended 31 December
2019 - - - - - 103,445 103,445
---------- -------- ----------- ----------- ------------ --------- ---------
Total comprehensive
(loss)/income
for the year - - - - (14,842) 102,506 87,664
---------- -------- ----------- ----------- ------------ --------- ---------
Purchase of shares
held in employee
benefit trust - - - (10,000) - - (10,000)
Exercise of share
plans 2 1,005 - - - 6,236 7,243
Reserve transfer
when shares held
in the employee
benefit trust vest - - - 13,011 - (13,011) -
Credit in respect
of share schemes - - - - - 5,790 5,790
Credit in respect
of tax on share
schemes - - - - - 28 28
Dividends - - - - - (83,469) (83,469)
2 1,005 - 3,011 - (84,426) (80,408)
---------- -------- ----------- ----------- ------------ --------- ---------
Balance at 31
December 2019 3,286 99,507 932 (47,662) 19,375 248,949 324,387
---------- -------- ----------- ----------- ------------ --------- ---------
Condensed Consolidated Statement of Cash Flows
For the year ended 31 December 2019
2019 2018
Note GBP'000 GBP'000
Profit before tax 144,245 142,275
Depreciation and amortisation charges 57,500 19,661
Loss on sale of property, plant and
equipment, and computer software 21 281
Share scheme charges 5,790 7,043
Net finance costs 2,424 181
---------- ---------
Operating cash flow before changes
in working capital 209,980 169,441
Increase in receivables (37,934) (49,278)
Increase in payables 22,036 11,534
---------- ---------
Cash generated from operations 194,082 131,697
Income tax paid (36,960) (41,001)
---------- ---------
Net cash from operating activities 157,122 90,696
---------- ---------
Cash flows from investing activities
Purchases of property, plant and
equipment (9,615) (15,668)
Purchases of intangible assets (16,735) (9,944)
Proceeds from the sale of property,
plant and equipment, and computer
software 1,740 1,204
Interest received 494 631
---------- ---------
Net cash used in investing activities (24,116) (23,777)
---------- ---------
Cash flows from financing activities
Dividends paid (83,469) (81,312)
Interest paid (953) (818)
Lease liability principal repayment (38,215) -
Issue of own shares for the exercise
of options 7,243 26,913
Purchase of shares into the employee
benefit trust (10,000) (11,567)
Net cash used in financing activities (125,394) (66,784)
---------- ---------
Net increase in cash and cash equivalents 7,612 135
Cash and cash equivalents at the
beginning of the year 97,673 95,605
Exchange (loss)/gain on cash and
cash equivalents (7,453) 1,933
Cash and cash equivalents at the
end of the year 12 97,832 97,673
---------- ---------
Notes to the consolidated preliminary results
For the year ended 31 December 2019
1. Corporate information
PageGroup plc (the "Company") is a limited liability company
incorporated in Great Britain and domiciled within the United
Kingdom whose shares are publicly traded. The consolidated
preliminary results of the Company as at and for the year ended 31
December 2019 comprise the Company and its subsidiaries (together
referred to as the "Group").
The consolidated preliminary results of the Group for the year
ended 31 December 2019 were approved by the Directors on 4 March
2020. The Annual General Meeting of PageGroup plc will be held at
the registered office, Page House, The Bourne Business Park, 1
Dashwood Lang Road, Addlestone, Surrey, KT15 2QW on 4 June 2020 at
9.30am.
2. Accounting policies
Basis of preparation
Whilst the information included in this preliminary announcement
has been prepared in accordance with the recognition and
measurement criteria of International Financial Reporting Standards
("IFRSs") as adopted for use in the European Union and as issued by
the International Accounting Standards Board, this announcement
does not itself contain sufficient information to comply with
IFRSs.
The consolidated financial statements comprise the financial
statements of the Group as at 31 December 2019 and are presented in
UK Sterling and all values are rounded to the nearest thousand (UK
GBP'000), except when otherwise indicated.
Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Management Report. The Management Report also
includes a summary of the Group's financial position, its cash
flows and its borrowing facilities.
The directors believe the Group is well placed to manage its
business risks successfully. The Group's forecasts and projections,
taking account of reasonably possible changes in trading
performance, show that the Group should be able to operate within
the level of its current committed facilities.
After making enquiries, the directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future, a
period of not less than 12 months from the date of this report.
Accordingly, they continue to adopt the going concern basis in
preparing the Annual Report and Accounts.
Nature of financial information
The financial information contained within this preliminary
announcement for the 12 months to 31 December 2019 and 12 months to
31 December 2018 do not comprise statutory financial statements for
the purpose of the Companies Act 2006, but are derived from those
statements. The statutory accounts for PageGroup plc for the 12
months to 31 December 2018 have been filed with the Registrar of
Companies and those for the 12 months to 31 December 2019 will be
filed following the Company's Annual General Meeting.
The auditors' reports on the accounts for both the 12 months to
31 December 2019 and 12 months to 31 December 2018 were unqualified
and did not include a statement under Section 498 (2) or (3) of the
Companies Act 2006.
The Annual Report and Accounts will be available for
shareholders in April 2020.
New accounting standards, interpretations and amendments adopted
by the Group
The accounting policies adopted in the preparation of the
condensed consolidated preliminary results are consistent with
those followed in the preparation of the Group's annual
consolidated financial statements for the year ended 31 December
2019.
We have completed our review and implementation of "IFRS 16 -
Leases" with the impact being explained in note a).
The Group also adopted IFRIC Interpretation 23 - Uncertainty
over Income Tax Treatment. The Interpretation addresses the
accounting for income taxes when tax treatments involve uncertainty
that affects the application of IAS 12 Income Taxes. The adoption
of IFRIC 23 did not have a material impact on the Group's
results.
The Group applies judgement in identifying uncertainties over
income tax treatments. Since the Group operates in a complex
multinational environment, it assessed whether the Interpretation
had an impact on its consolidated financial statements. The
Company's and the subsidiaries' tax filings in different
jurisdictions include deductions related to transfer pricing and
the taxation authorities may challenge those tax treatments. The
Group has not early adopted any standard, interpretation or
amendment that has been issued but is not yet effective.
a) Adoption of IFRS 16 Leases
IFRS 16 was issued in January 2016 and it replaces IAS 17
Leases, IFRIC 4 Determining whether an Arrangement contains a
Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the
Substance of Transactions Involving the Legal Form of a Lease. IFRS
16 sets out the principles for the recognition, measurement,
presentation and disclosure of leases and requires lessees to
account for all leases under a single on-balance sheet model
similar to the accounting for finance leases under IAS 17. A lessee
can choose to apply the standard using either a full retrospective
approach or a modified retrospective approach.
The Group adopted IFRS 16 using the modified retrospective
method of adoption, with the date of initial application of 1
January 2019. Under this method, the standard is applied
retrospectively, with the cumulative effect of initially applying
the standard recognised at the date of initial application. The
Group elected to use the practical expedient on transition allowing
the standard to be applied only to contracts that were previously
identified as leases applying IAS 17 and IFRIC 4 at the date of
initial application. The Group also elected to use the recognition
exemptions for lease contracts that, at the commencement date, have
a lease term of 12 months or less and do not contain a purchase
option ('short-term leases'), lease contracts for which the
underlying asset is of low value ('low-value assets') and to
exclude initial direct costs from the measurement of the
right-of-use asset at the date of initial application. Hindsight
was used in determining the lease term for those contracts where an
option exists to extend or terminate the lease.
The adoption under the Modified Retrospective approach is a
combination of both the Modified (a) and Modified (b) method,
depending on the specific lease. In both cases a full restatement
of comparatives is not necessary. Under both methods the lease
liability is equal to the discounted future lease payments using a
discount rate at the date of initial application. Under Modified
(a) method the right-of-use asset is calculated on a retrospective
basis and an adjustment to reserves is made on transition. Under
Modified (b) method the right-of-use asset is equal to the lease
liability with no reserve adjustment required.
The effect of adopting IFRS 16 as at 1 January 2019
(increase/(decrease)) is as follows:
Impact on the Condensed Consolidated Statement of Financial
Position (increase/(decrease)) as at 1 January 2019
GBP000's
Right-of-use assets 126,189
Prepayments (2,214)
Total Assets 123,975
==========
Liabilities
Lease liabilities (134,479)
Deferred Income 9,054
----------
Total Liabilities (125,425)
----------
Equity 1,450
==========
The opening reserve adjustment of GBP1.45m was originally
disclosed as GBP2.1m in the 2019 Interim announcement. The change
in value was due to further analysis over the lease portfolio.
b) Nature of the effect of adoption of IFRS 16
The Group recognised right-of-use assets and lease liabilities
for those leases previously classified as operating leases, except
for short-term leases and leases of low-value assets. The GBP126.2m
right of use asset recognised on transition related to Property
leases for offices rented (GBP110.6m), Motor Vehicles of (GBP15.2m)
and Other Assets of (GBP0.4m). The right-of-use assets for 21 of
our most significant property leases were recognised based on the
carrying amount as if the standard had always been applied, apart
from the use of the incremental borrowing rate at the date of
initial application. The right-of-use assets for the remaining
leases were recognised based on the amount equal to the lease
liabilities, adjusted for any related prepaid and accrued lease
payments previously recognised. Lease liabilities were recognised
based on the present value of the remaining lease payments,
discounted using the incremental borrowing rate at the date of
initial application.
c) Amounts recognised in the Condensed Consolidated Statement of
Financial Position and Condensed Consolidated Income Statement
Set out below, are the carrying amounts of the Group's
right-of-use assets and lease liabilities and the movements during
the period:
Amounts recognised in the Condensed Consolidated Statement of
Financial Position and Condensed Consolidated Income Statement
2019
Condensed Consolidated Income Statement GBP'000
Depreciation expense (included in Administrative
expenses) (36,600)
Rental expenses (included in Administrative expenses) 38,496
---------
Operating profit 1,896
---------
Finance costs (1,965)
---------
Profit before tax (69)
=========
Lease
Right-of-use Assets Liabilities
--------------------------------------------- -------------
Motor Other
Property Vehicles Equipment Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 January 2019 110,558 15,192 439 126,189 (134,479)
Additions 27,866 7,034 774 35,674 (35,768)
Disposals (577) - - (577) 667
Depreciation expense (27,639) (8,545) (416) (36,600) -
Interest expense - - - - (1,965)
Payments - - - - 38,215
Foreign exchange (4,440) - - (4,440) 4,718
As at 31 December 2019 105,768 13,681 797 120,246 (128,612)
========= ========== =========== ========= =============
d) Summary of new accounting policies
Set out below are the new accounting policies of the Group upon
adoption of IFRS 16, which have been applied from the date of
initial application:
-- Right-of-use assets
The Group recognises right-of-use assets at the commencement
date of the lease (i.e. the date the underlying asset is available
for use). Right-of-use assets are measured at cost, less any
accumulated depreciation and impairment losses, and adjusted for
any remeasurement of lease liabilities. The cost of right-of-use
assets includes the amount of lease liabilities recognised, initial
direct costs incurred, and lease payments made at or before the
commencement date less any lease incentives received. Unless the
Group is reasonably certain to obtain ownership of the leased asset
at the end of the lease term, the recognised right-of-use assets
are depreciated on a straight-line basis over the shorter of its
estimated useful life and the lease term. Right-of-use assets are
subject to impairment.
-- Lease liabilities
At the commencement date of the lease, the Group recognises
lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include fixed
payments (including in-substance fixed payments) less any lease
incentives receivable, variable lease payments that depend on an
index or a rate, and amounts expected to be paid under residual
value guarantees. The lease payments also include the exercise
price of a purchase option reasonably certain to be exercised by
the Group and payments of penalties for terminating a lease, if the
lease term reflects the Group exercising the option to terminate.
The variable lease payments that do not depend on an index or a
rate are recognised as expense in the period on which the event or
condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group
uses the incremental borrowing rate at the lease commencement date
if the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of interest and
reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in the
in-substance fixed lease payments or a change in the assessment to
purchase the underlying asset.
-- Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to
its short-term leases of machinery and equipment (i.e., those
leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option). It also
applies the low-value assets recognition exemption to leases of
office equipment that are considered of low value (i.e., below
$5,000). Lease payments on short-term leases and leases of
low-value assets are recognised as an expense on a straight-line
basis over the lease term.
-- Judgement in determining the lease term of contracts with renewal options
The Group determines the lease term as the non-cancellable term
of the lease, together with any periods covered by an option to
extend the lease if it is reasonably certain to be exercised, or
any periods covered by an option to terminate the lease, if it is
reasonably certain not to be exercised.
The Group has the option, under some of its leases to lease the
assets for additional terms of three to ten years. The Group
applies judgement in evaluating whether it is reasonably certain to
exercise the option to renew. That is, it considers all relevant
factors that create an economic incentive for it to exercise the
renewal. After the commencement date, the Group reassesses the
lease term if there is a significant event or change in
circumstances that is within its control and affects its ability to
exercise (or not to exercise) the option to renew (e.g., a change
in business strategy).
3. Segment reporting
All revenues disclosed are derived from external customers.
The accounting policies of the reportable segments are the same
as the Group's accounting policies. Segment operating profit
represents the profit earned by each segment including allocation
of central administration costs. This is the measure reported to
the Group's Board, the chief operating decision maker, for the
purpose of resource allocation and assessment of segment
performance.
(a) Revenue, gross profit and operating profit by reportable segment
Revenue Gross Profit
---------------------- ------------------
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
EMEA 861,827 797,427 418,328 394,337
Asia Pacific 273,437 266,724 163,255 161,158
Americas 205,074 172,265 138,791 121,015
United Kingdom 313,610 313,525 135,076 138,392
1,653,948 1,549,941 855,450 814,902
---------- ---------- -------- --------
Operating Profit
-------------------
2019 2018
GBP'000 GBP'000
EMEA 90,333 85,586
Asia Pacific 19,810 26,765
Americas 19,268 16,720
United Kingdom 17,258 13,392
Operating profit 146,669 142,463
Financial expense (2,424) (188)
Profit before tax 144,245 142,275
--------- --------
The above analysis by destination is not materially different to
analysis by origin.
The analysis below is of the carrying amount of reportable
segment assets, liabilities and non-current assets. Segment assets
and liabilities include items directly attributable to a segment as
well as those that can be allocated on a reasonable basis. The
individual reportable segments exclude current income tax assets
and liabilities. Non-current assets include property, plant and
equipment, computer software, goodwill and other intangible.
(b) Segment assets, liabilities and non-current assets by reportable segment
Total Assets Total Liabilities
------------------ --------------------
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
EMEA 294,597 246,687 196,473 131,948
Asia Pacific 119,110 115,220 45,832 29,803
Americas 111,649 63,012 53,288 22,308
United Kingdom 163,207 121,058 62,481 40,398
-------- -------- --------- ---------
Segment assets/liabilities 688,563 545,977 358,074 224,457
Income tax 13,008 17,206 19,110 20,145
701,571 563,183 377,184 244,602
-------- -------- --------- ---------
Property, Plant
& Equipment Intangible Assets
------------------ --------------------
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
EMEA 12,732 13,654 2,818 3,171
Asia Pacific 5,560 7,161 495 481
Americas 7,471 8,495 162 190
United Kingdom 6,162 6,254 35,579 29,554
31,925 35,564 39,054 33,396
-------- -------- --------- ---------
The below analysis in note (c) relates to the requirement of
IFRS 15 to disclose disaggregated revenue streams.
(c) Revenue and gross profit generated from permanent and temporary placements
Revenue Gross Profit
---------------------- ------------------
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
Permanent 649,948 629,136 643,787 621,746
Temporary 1,004,000 920,805 211,663 193,156
1,653,948 1,549,941 855,450 814,902
---------- ---------- -------- --------
The below analyses in notes (d) revenue and gross profit by
discipline (being the professions of candidates placed) and (e)
revenue and gross profit by strategic market have been included as
additional disclosure over and above the requirements of IFRS 8
"Operating Segments".
(d) Revenue and gross profit by discipline
Revenue Gross Profit
---------------------- ------------------
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
Accounting and Financial Services 662,458 610,219 298,648 283,721
Legal, Technology, HR, Secretarial
and Other 442,648 402,321 212,244 196,774
Engineering, Property & Construction,
Procurement & Supply Chain 359,216 345,654 203,275 194,562
Marketing, Sales and Retail 189,626 191,747 141,283 139,845
1,653,948 1,549,941 855,450 814,902
---------- ---------- -------- --------
(e) Revenue and gross profit by strategic market
Revenue Gross Profit
---------------------- ------------------
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
Large, Proven markets 962,424 935,800 426,178 419,102
Large, High Potential
markets 478,950 414,245 298,139 270,311
Small and Medium, High
Margin markets 212,574 199,896 131,133 125,489
1,653,948 1,549,941 855,450 814,902
---------- ---------- -------- --------
4. Financial income / (expenses)
2019 2018
GBP'000 GBP'000
Financial income
Bank interest receivable 494 631
-------- --------
Financial expenses
Bank interest payable (953) (598)
Interest on discounting of French construction participation
tax - (221)
Interest on lease liabilities (1,965) -
(2,918) (819)
-------- --------
5. Taxation
Tax on profit was GBP40.8m (2018: GBP38.6m). This represented an
effective tax rate of 28.3% (2018: 27.1%). The rate is higher than
the effective UK Corporation Tax rate for the year of 19.0% (2018:
19.0%) due to profits and disallowable items of expenditure being
generated in countries where corporation tax rates are higher than
in the UK.
6. Dividends
2019 2018
GBP'000 GBP'000
Amounts recognised as distributions to equity holders in
the year:
Final dividend for the year ended 31 December 2018 of 9.00p
per ordinary share (2017: 8.60p) 28,978 27,433
Interim dividend for the year ended 31 December 2019 of
4.30p per ordinary share (2018: 4.10p) 13,759 13,117
Special dividend for the year ended 31 December 2019 of
12.73p per ordinary share (2018: 12.73p) 40,732 40,762
83,469 81,312
-------- --------
Amounts proposed as distributions to equity holders in the
year:
Proposed final dividend for the year ended 31 December 2019
of 9.40p per ordinary share (2018: 9.00p) 30,154 29,171
-------- --------
The proposed final dividend had not been approved by the Board
at 31 December and therefore has not been included as a liability.
The comparative final dividend at 31 December 2019 was also not
recognised as a liability in the prior year.
The proposed final dividend of 9.40p (2018: 9.00p) per ordinary
share will be paid on 19 June 2020 to shareholders on the register
at the close of business on 22 May 2020.
7. Share-based payments
In accordance with IFRS 2 "Share-based Payment", a charge of
GBP6.8m has been recognised for share options and other share-based
payment arrangements (including social charges) (31 December 2018:
GBP8.4m).
8. Earnings per ordinary share
The calculation of the basic and diluted earnings per share is
based on the following data:
Earnings 2019 2018
Earnings for basic and diluted earnings per share
(GBP'000) 103,445 103,703
-------- --------
Number of shares
Weighted average number of shares used for basic
earnings per share ('000) 320,789 318,877
Dilution effect of share plans ('000) 375 1,627
Diluted weighted average number of shares used for
diluted earnings per share ('000) 321,164 320,504
-------- --------
Basic earnings per share (pence) 32.2 32.5
Diluted earnings per share (pence) 32.2 32.4
9. Property, plant and equipment
Acquisitions and Disposals
During the year ended 31 December 2019 the Group acquired
property, plant and equipment with a cost of GBP9.6m (2018:
GBP15.7m).
Property, plant and equipment with a carrying amount of GBP1.5m
were disposed of during the year ended 31 December 2019 (2018:
GBP1.2m), resulting in a profit on disposal of GBP0.2m (2018: loss
of GBP0.2m).
10. Trade and other receivables
2019 2018
GBP'000 GBP'000
Current
Trade receivables 281,176 297,380
Less allowance for expected credit losses and revenue
reversals (10,081) (9,174)
--------- --------
Net trade receivables 271,095 288,206
Other receivables 10,643 3,814
Accrued income (excluding revenue reversals) 70,421 44,430
Prepayments 13,396 12,661
365,555 349,111
--------- --------
Non-current
Other Receivables 15,036 12,746
--------- --------
11. Trade and other payables
2019 2018
GBP'000 GBP'000
Current
Trade payables 6,702 6,594
Other tax and social security 51,687 58,186
Other payables 31,216 26,870
Accruals 126,206 111,040
Deferred income - 1,663
215,811 204,353
-------- --------
Non-current
Deferred income 10,330 18,453
Other tax and social security 1,283 1,021
11,613 19,474
-------- --------
12. Cash and cash equivalents
2019 2018
GBP'000 GBP'000
Cash at bank and in hand 90,856 97,626
Short-term deposits 6,976 47
-------- --------
Cash and cash equivalents 97,832 97,673
Cash and cash equivalents in the statement of cash
flows 97,832 97,673
-------- --------
The Group operates multi-currency cash concentration and
notional cash pools, and an interest enhancement facility. The
Eurozone subsidiaries and the UK-based Group Treasury subsidiary
participate in the cash concentration arrangement, the Group
Treasury subsidiary retains the notional cash pool and the Asia
Pacific subsidiaries operate the interest enhancement facility. The
structures facilitate interest compensation of cash whilst
supporting working capital requirements.
The Group had a GBP50m invoice financing arrangement, GBP30m
revolving credit facility and GBP21m uncommitted overdraft
facilities to support cash flows across its operations and ensure
rapid access to funds should they be required. None of these were
in use at the year end.
13. Annual General Meeting
The Annual General Meeting of PageGroup plc will be held at Page
House, The Bourne Business Park, 1 Dashwood Lang Road, Addlestone,
Weybridge, Surrey, KT15 2QW on 4 June 2020 at 9.30am.
14. Publication of Annual Report and Accounts
This preliminary statement is not being posted to shareholders.
The Annual Report and Accounts will be posted to shareholders in
due course and will be delivered to the Registrar of Companies
following the Annual General Meeting of the Company.
Copies of the Annual Report and Accounts can be downloaded from
the Company's website
https://www.page.com/presentations/year/2020
Responsibility statement of the directors on the annual
report
The responsibility statement below has been prepared in
connection with the company's full annual report for the year
ending 31 December 2019. Certain parts of the annual report are not
included within this announcement.
We confirm that, to the best of our knowledge:-
a) the financial statements, prepared in accordance with IFRSs
as adopted by the European Union, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
company and the undertakings included in the consolidation taken as
a whole; and
b) the management report, which is incorporated into the
directors' report, includes a fair review of the development and
performance of the business and the position of the company and the
undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties they face.
On behalf of the Board
S Ingham K Stagg
Chief Executive Officer Chief Financial Officer
4 March 2020 4 March 2020
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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March 05, 2020 02:00 ET (07:00 GMT)
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