TIDMPAGE
RNS Number : 4612S
PageGroup plc
09 July 2020
9 July 2020
PageGroup plc
SECOND QUARTER, FIRST HALF AND COVID-19 UPDATE
PageGroup ("PageGroup" or the "Group") today issues a trading
update for the second quarter to 30 June 2020 ("Q2") and an
operational and financial update regarding COVID-19.
Q2 Results Summary*
-- Group gross profit -47.6% (-47.4% in reported rates)
-- Large, High Potential markets (38% of Group) -42%
-- EMEA -42.9%: France -52%; Germany -20%
-- Asia Pacific -41.7%: Greater China -41%; SE Asia -35%; Australia -53%
-- Americas -55.0%: US -49%; Latin America -63%
-- UK -61.5%: Michael Page -60%; Page Personnel -65%
* In constant currencies except where stated otherwise
COVID-19 Operational and Financial Summary
-- Focus continues to be on the protection and wellbeing of employees, candidates and clients
-- Strong cash position, with c. GBP156m of net cash at the end of June (Q1 2020: c. GBP83m)
-- Cost base reduction of c. 21% achieved in Q2, as forecast in April
-- The Group is protecting its platform to take advantage of the recovery when it comes
-- Gradual opening of offices, bringing back people from
furlough and returning all staff to full pay
-- 12-month covenant waiver agreed on the Group's Revolving Credit Facility with BBVA
-- Approval received for the Bank of England's Covid Corporate
Finance Facility ("CCFF"), with a maximum facility of GBP300m
Commenting, Steve Ingham, Chief Executive Officer, PageGroup,
said:
"Our main focus in the first half has been to protect our
people, whilst protecting our platform. I am incredibly proud of
the reaction of our staff in what has been an extraordinary period.
Their response to this crisis has been exceptional. They have
understood the importance of the actions we have taken to protect
our platform and put ourselves in as strong a position as possible
for when the recovery comes. Whilst it is always regrettable to let
any people go, we have chosen not to make wholesale changes and to
retain our proven fee earners.
"PageGroup has a deep core of engaged and motivated employees
and we will continue to support them and look to add expertise over
the coming months and years. We know the future remains
unpredictable, but we believe now is the right time to start
reinvesting in our flexible and highly diversified business model.
Having weathered a particularly challenging Q2, we now look forward
to driving improved activity and gross profit through the second
half.
"We are clear 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 as and when they
arise."
Q2 Gross profit analysis
Reported (GBPm) Constant
Year-on-year % of Group Q2 2020 Q2 2019 % %
----------- -------- -------- ------- ---------
EMEA 53% 63.2 108.9 -41.9% -42.9%
----------- -------- -------- ------- ---------
Asia Pacific 22% 25.6 43.7 -41.6% -41.7%
----------- -------- -------- ------- ---------
Americas 14% 16.0 37.0 -56.8% -55.0%
----------- -------- -------- ------- ---------
UK 11% 13.5 35.1 -61.5% -61.5%
----------- -------- -------- ------- ---------
Total 100% 118.3 224.7 -47.4% -47.6%
----------- -------- -------- ------- ---------
Permanent 66% 78.4 172.1 -54.4% -54.7%
----------- -------- -------- ------- ---------
Temporary 34% 39.9 52.6 -24.2% -24.4%
----------- -------- -------- ------- ---------
H1 Gross profit analysis
Reported (GBPm) Constant
Year-on-year % of Group H1 2020 H1 2019 % %
----------- -------- -------- ------- ---------
EMEA 51% 154.5 213.1 -27.5% -27.4%
----------- -------- -------- ------- ---------
Asia Pacific 19% 56.8 81.8 -30.6% -30.1%
----------- -------- -------- ------- ---------
Americas 16% 46.9 69.2 -32.2% -29.8%
----------- -------- -------- ------- ---------
UK 14% 42.4 69.4 -38.9% -38.9%
----------- -------- -------- ------- ---------
Total 100% 300.6 433.5 -30.7% -30.1%
----------- -------- -------- ------- ---------
Permanent 70% 211.6 330.6 -36.0% -35.5%
----------- -------- -------- ------- ---------
Temporary 30% 89.0 102.9 -13.5% -12.7%
----------- -------- -------- ------- ---------
Perm/Temp mix
Gross profit from permanent recruitment declined -54.4% in
reported rates and -54.7% in constant currencies, to GBP78.4m (Q2
2019: GBP172.1m). Gross profit from temporary recruitment declined
-24.2 % in reported rates and -24.4% in constant currencies, to
GBP39.9m (Q2 2019: GBP52.6m). This resulted in a ratio of permanent
to temporary recruitment of 66:34.
COVID-19 Operational and Financial Update
Our People
Above all else, our priority is to protect the health and safety
of our employees, candidates and clients. Initially, the Group took
action to protect our employees by ensuring that all consultants
were able to work from home. This was implemented swiftly,
benefiting from the Group's experience in our Greater China
business.
As local guidelines have allowed, we have progressively opened
our offices around the world, with 83 out of 142 open as at the end
of June. However, returning to the office is voluntary and we have
modified our offices to keep our people safe and to comply with all
social distancing and local regulatory requirements.
We believe our clear, consistent and frequent communications
through times of great difficulty and uncertainty for everyone, has
given us a workforce that is engaged, motivated and will be the
foundation for building our future success.
Balance Sheet and Liquidity
The Group has a strong balance sheet, with net cash of c.
GBP156m at the end of the quarter. This is up from c. GBP83m at the
end of Q1, due primarily to the partial unwind of our temporary
debtor receivable and a strong focus on cash collection. Debtor
days remain at pre-COVID levels and we are not currently
experiencing increased levels of bad debt. We have good banking
relationships and facilities, including a GBP30m committed
Revolving Credit Facility, expiring in 2022. We have agreed a
covenant waiver for the next 12 months on this facility, to ensure
we retain access to these funds should they be required.
The Group has also been approved for the Bank of England's Covid
Corporate Finance Facility (CCFF). This facility has a maximum
availability of GBP300m, although we do not currently envisage
having to draw down on it.
We continue to model a range of different scenarios to ensure
the Group has sufficient liquidity at all times.
Managing our Cost Base
We have a flexible and highly diversified business model that
enables us to react quickly to changes in market conditions. Our
aim is to balance tight cost management, while ensuring we position
the Group to take full advantage of all opportunities as conditions
improve.
As we outlined in Q1, we sought to reduce our cost base in Q2 by
around 20-25% compared to March. Through a mixture of voluntary
salary cuts, reduced working weeks, government assistance schemes,
reduced travel, and reduced client and candidate entertaining, we
achieved this reduction in our cost base. We are thankful to all
our people who volunteered to take salary reductions, work four day
weeks or make other sacrifices for the long term benefit of the
Group during Q2.
Following the fall in headcount of 132 in Q1, it fell a further
255 in April as previously forecasted, and then a further 326 in
May and June combined. Our Fee earner headcount fell by 531 in Q2,
mainly in the UK and the Americas. These were recent joiners, who
were therefore very inexperienced in recruitment, or those on
performance review. Our operational support headcount decreased by
50 in Q2. Due to this decrease in fee earner headcount, our fee
earner to operational support staff ratio is now 77:23. This
represented 5,392 fee earners and a total headcount of 6,985. This
figure is inclusive of 406 full time furloughed employees in the UK
and the US (327 fee earners and 79 support staff). Where staff are
on partial furlough, as is the case in large parts of Continental
Europe, they are still represented by 1 FTE.
Forward activity levels improving
During Q2, activity levels started to pick up in several of the
Group's markets. We have seen improvements in our main forward
looking KPIs in a number of the Group's markets, such as new
opportunities, candidates sent to clients, interviews and offers.
To enable the Group to continue to drive this activity into gross
profit, we have reinstated all of our staff back to full pay from 1
July. Importantly, we want to maximise the engagement, motivation
and loyalty of our people as we as a leadership team will be judged
on how we led this business through this difficult time, measured
by the loyalty and commitment of our experienced people in future
months and years. Compared to March, we expect this to reduce the
saving in our cost base from c. 21% in Q2 to c. 10% in Q3. While
this is to drive future gross profit, there is always a lag between
increased activity and gross profit, particularly within permanent
recruitment. We are taking these actions at this point because we
believe this is the right thing to do, but
clearly this pandemic is also unpredictable and the shape of any
recovery is unknown.
Capitalise on market opportunities
Having lost our fee earners with little experience, we are also
selectively hiring experienced fee earners from the competition at
all levels, where we have seen an unprecedented level of
applications during the period. We believe the Group is well
positioned to take market share as and when trading conditions
improve.
Financial Guidance
With COVID-19 continuing to impact the majority of our markets
around the world, it is too early to estimate the impact on the
Group's operations and, as such, any financial guidance for current
and future years remains suspended. We will monitor the situation
closely and will provide updates when appropriate.
Geographical Analysis
All of the Group's regions were impacted by the COVID-19
pandemic during Q2, resulting in Group gross profit declining
-47.6% in constant currencies, down from -11.7% in Q1. In constant
currencies, Michael Page was down -46.0%, with Page Personnel
declining -51.0% in the quarter.
Detailed Geographical analysis (unless otherwise stated all
growth rates are in constant currency)
EMEA Gross Profit (GBPm) Growth Rates
(53% of Group) Reported Constant
---------- ---------- ------------ ------------
Q2 2020 vs. Q2 2019 63.2 108.9 -41.9% -42.9%
---------- ---------- ------------ ------------
H1 2020 vs. H1 2019 154.5 213.1 -27.5% -27.4%
---------- ---------- ------------ ------------
Headcount at 30 June 2020: 3,149 (including 6 furloughed employees)
(31 March 2020: 3,309)
* France (14% of Group) -52% (-46% in June)
* Germany (13% of Group) -20% (-17% in June)
* Southern Europe -52% (-42% in June)
* Italy -50% (-38% in June)
* Spain -53% (-44% in June)
* Benelux -35% (-34% in June)
* Middle East and Africa -49% (-44% in June)
In Europe, Middle East and Africa, the deterioration in trading
conditions we saw at the end of March continued into Q2, but
conditions improved as the quarter progressed. France and Southern
Europe, where the impact was felt initially most significantly,
were both down -52%. However, activity levels increased during the
quarter and they exited in June at -46% and -42%, respectively.
Germany delivered a resilient performance, declining -20% for the
quarter and improving to -17% in June. This was driven mainly by
our Technology focused Interim business, which proved most
resilient to the deterioration in macro-economic conditions.
Overall Michael Page Interim was flat for the quarter. Benelux
declined -35% with Belgium down -23% and the Netherlands down -40%.
The Middle East and Africa declined -49%. Permanent recruitment
declined -50% for the quarter with Temporary down -27%.
Asia Pacific Gross Profit (GBPm) Growth Rates
(22% of Group) Reported Constant
---------- ---------- ----------- -----------
Q2 2020 vs. Q2 2019 25.6 43.7 -41.6% -41.7%
---------- ---------- ----------- -----------
H1 2020 vs. H1 2019 56.8 81.8 -30.6% -30.1%
---------- ---------- ----------- -----------
Headcount at 30 June 2020: 1,468 (31 March 2020: 1,599)
* Asia (18% of Group) -38% (-40% in June)
* Greater China (9% of Group and 51% of Asia) -41%
(-37% in June)
* Mainland China -27% (-17% in June)
* Hong Kong -62% (-63% in June)
* South East Asia -35% (-41% in June)
* Singapore -46% (-50% in June)
* India -31% (-43% in June)
* Japan -36% (-43% in June)
* Australia -53% (-48% in June)
Mainland China, where all our consultants returned to
office-based working in April, declined by -27%. We saw
improvements as Q2 progressed and exited the quarter in June down
-17%. However, Hong Kong declined -62%, impacted significantly by
both COVID-19 and increased social unrest. Overall, Greater China
declined -41% for the quarter. South East Asia declined by -35%,
with Singapore, which like Mainland China re-opened at the end of
February, went back into lockdown in March, and was particularly
impacted due to its role as an international hub, was down -46%.
India and Japan were down -31% and -36%, respectively, with both
countries impacted later than the rest of the region, with
lockdowns enforced from April. As a result, they both exited the
quarter slower, down -43% in June. Australia declined -53%, with
challenging trading conditions throughout the quarter.
Americas Gross Profit (GBPm) Growth Rates
(14% of Group) Reported Constant
----------- --------- ------------- -------------
Q2 2020 vs. Q2 2019 16.0 37.0 -56.8% -55.0%
----------- --------- ------------- -------------
H1 2020 vs. H1 2019 46.9 69.2 -32.2% -29.8%
----------- --------- ------------- -------------
Headcount at 30 June 2020: 1,184 (including 76 furloughed employees)
(31 March 2020: 1,362)
* North America (10% of Group) -49% (-51% in June)
* US -49% (-52% in June)
* Latin America (4% of Group) -63% (-57% in June)
* Brazil -60% (-47% in June)
* Mexico -63% (-61% in June)
In the Americas, gross profit was down -55.0%. In the US, gross
profit declined -49% in the quarter, with trading conditions
particularly tough in our largest discipline, Property &
Construction. In Latin America, conditions deteriorated sharply,
with gross profit declining by -63%. Brazil, was down -60% and
Mexico, our largest country in the region, was down -63%. Being the
last region affected, we have not yet seen improving activity
levels.
UK Gross Profit (GBPm) Growth Rate
(11% of Group)
---------- ---------- --------------------
Q2 2020 vs. Q2 2019 13.5 35.1 -61.5%
---------- ---------- --------------------
H1 2020 vs. H1 2019 42.4 69.4 -38.9%
---------- ---------- --------------------
Headcount at 30 June 2020: 1,184 (including 324 furloughed employees)
(31 March 2020: 1,296)
* Michael Page -60% (-61% in June)
* Page Personnel -65% (-65% in June)
* Overall, June -62%
In the UK, gross profit declined by -61.5% in the quarter.
Growth slowed to -60% in April and remained broadly flat throughout
the quarter. The impact of COVID-19 had a similar impact on both
Michael Page and Page Personnel, with a decline of -60% and -65%
respectively. Overall for the quarter, Permanent recruitment was
down -74% with Temporary down -32%.
Shares
At 30 June 2020 there were 328,618,774 Ordinary shares in issue,
of which 9,684,918 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 8,031,531 shares and consequently these
shares should be excluded when calculating earnings per share. The
total number of voting rights in the Company is 328,618,774.
Cautionary Statement
This Second Quarter 2020 Trading Update has been prepared solely
to provide additional information to shareholders to assess the
Group's strategies and the potential for those strategies to
succeed. The Trading Update should not be relied on by any other
party or for any other purpose. This Trading Update contains
certain forward-looking statements. These statements are made by
the Directors in good faith based on the information available to
them up to the time of their approval of this Trading Update and
such statements should be treated with caution due to the inherent
uncertainties, including both economic and business risk factors,
underlying any such forward-looking information. This Trading
Update has been prepared for the Group as a whole and therefore
gives greater emphasis to those matters that are significant to
PageGroup and its subsidiary undertakings when viewed as a
whole.
The Group will issue its interim results for the six months
ending 30 June 2020 on 5 August 2020.
Enquiries:
PageGroup +44 (0)20 3077 8172
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 9.00 am today. The live presentation can
be viewed by following the link:
https://www.investis-live.com/pagegroup/5ee75e678ade18100053d055/jhfg
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 03 86 45 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
9 July 2020 at:
https://www.page.com/investors/investor-library.aspx
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END
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