TIDMPAGE
RNS Number : 9817B
PageGroup plc
14 October 2020
14 October 2020
PageGroup plc
THIRD QUARTER UPDATE AND COVID-19 STRATEGY
PageGroup ("PageGroup" or the "Group") today issues a trading
update for the third quarter to 30 September 2020 ("Q3") and an
update on the impact of COVID-19.
Q3 Results Summary*
-- Group gross profit of GBP143.5m, -31.9%; (Q2: -47.6%)
-- Exited the quarter in September at -26%
-- Large, High Potential markets (37% of Group) -29%
-- EMEA -24.5%: France -27%; Germany -10%
-- Asia Pacific -28.2%: Greater China -22%; SE Asia -31%; Australia -42%
-- Americas -41.9%: US -39%; Latin America -47%
-- UK -47.9%: Michael Page -47%; Page Personnel -51%
-- Strong cash position, with c. GBP152m of net cash at the end
of September (Q2 2020: c. GBP162m), decrease in Q3 due to the
purchase of GBP12.8m of shares into the Employee Benefit Trust
-- Hiring selectively experienced fee earners, with approaching 300 added in 2020
-- Fee earner headcount reduced by 804 year to date, mainly
recent joiners or those on performance review, 169 of which were in
Q3
* In constant currencies except where stated otherwise
COVID-19 Strategy
-- Focus continues to be on the protection and wellbeing of employees, candidates and clients
-- Continue to protect and invest in the platform to take advantage of the recovery
-- We returned the majority of staff from furlough and all staff to full pay from 1 July
-- Cost base increased in Q3 compared to Q2 as a result of the
planned unwinding of cost saving measures, in line with the Group's
strategy
-- Continued reopening of offices globally, with 125 out of 142
open at the end of September, albeit subject to further local
lockdowns
Commenting, Steve Ingham, Chief Executive Officer, PageGroup,
said:
"During the quarter we continued to focus on protecting our
people, whilst also protecting our trading platform. The improving
activity levels we saw in June progressed further in the quarter.
Overall, gross profit was -31.9%, compared to -47.6% in Q2. We
exited the quarter in September at -26%, with some markets, such as
Mainland China and Japan, either flat or returning to growth.
"The improving trading conditions resulted in the Group making a
small profit in the quarter, despite an increase in our cost base
over Q2 as we returned staff from furlough and to full pay from 1
July.
"We have seen an unprecedented level of interest to join
PageGroup, which has allowed us to selectively hire experienced fee
earners from our competitors. So far this year we have added
approaching 300 experienced fee earners. These hires have been
focused in our targeted areas of investment, such as Technology,
Healthcare & Life Sciences and Contracting, which have also
been more resilient during the pandemic. We have in addition made a
senior appointment into our Page Outsourcing brand to drive our
offering within MSP, RPO and project recruitment.
"PageGroup has a core of engaged and motivated employees. We
will continue to support them and look to add expertise. We know
the future remains unpredictable, but we believe now is the right
time to continue to invest in our flexible and highly diversified
business model. Having seen conditions improve through Q3, we now
look forward to driving improved activity and gross profit in
Q4.
"We are the clear leader in many of our markets, with a highly
experienced senior management team which, we believe, positions us
well to take advantage of opportunities to grow and improve our
business. We have maintained our focus on our long-term vision for
the Group to drive progress towards our strategic goals."
Q3 Gross profit analysis
Reported (GBPm) Constant
Year-on-year % of Group Q3 2020 Q3 2019 % %
----------- -------- -------- ------- ---------
EMEA 54% 76.5 101.6 -24.7% -24.5%
----------- -------- -------- ------- ---------
Asia Pacific 21% 30.3 44.1 -31.2% -28.2%
----------- -------- -------- ------- ---------
Americas 13% 19.1 37.3 -48.8% -41.9%
----------- -------- -------- ------- ---------
UK 12% 17.6 33.8 -47.9% -47.9%
----------- -------- -------- ------- ---------
Total 100% 143.5 216.8 -33.8% -31.9%
----------- -------- -------- ------- ---------
Permanent 72% 103.5 162.5 -36.3% -34.2%
----------- -------- -------- ------- ---------
Temporary 28% 40.0 54.3 -26.3% -25.1%
----------- -------- -------- ------- ---------
Perm/Temp mix
Gross profit from permanent recruitment declined 36.3% in
reported rates and 34.2% in constant currencies, to GBP103.5m (Q3
2019: GBP162.5m). Gross profit from temporary recruitment declined
26.3% in reported rates and 25.1% in constant currencies, to
GBP40.0m (Q3 2019: GBP54.3m). This resulted in a ratio of permanent
to temporary recruitment of 72:28 (Q3 2019: 75:25).
Headcount
In line with our strategy of protecting our platform, whilst
gross profit year to date is down 31%, fee earner headcount is down
only 13%. Having reduced our fee earner headcount by 531 in Q2, we
reduced it at a slower rate in Q3, down 169, as a result of the
approaching 300 experienced fee earners we added in the quarter.
The majority of those who left the Group were recent joiners or
those on performance review. Our operational support headcount fell
by 33, and, as such, our ratio of fee earners to operational
support staff was maintained at 77:23. Overall, the Group had 5,223
fee earners and a total headcount of 6,783 at the end of
September.
Costs
Our monthly cost base through Q2 reduced by 21% compared to
March, due to voluntary salary reductions, four day working weeks,
furlough schemes and a reduction in headcount of 581. Our monthly
average cost base in Q3 was down 15% compared to March, which was
better than the 10% forecasted at the time of the Q2 Trading
Statement. This was due to a net reduction in headcount of 202 in
Q3, lower than estimated bad debt and holidays not taken in Q2
resulting in an increased holiday pay accrual unwind. Our monthly
average cost base through Q4 is forecast to be c. 10% below March,
in line with the September run rate.
Customer Connect
We have continued the roll out of our new operating system,
Customer Connect, which is now live in the UK, Belgium, Poland and
the Middle East & Africa.
Financial Guidance
With COVID-19 continuing to impact the majority of our markets
around the world, particularly with a second wave now impacting
many countries, it remains too uncertain 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 COVID-19 during Q3,
resulting in Group gross profit declining 31.9% in constant
currencies, an improvement from -47.6% in Q2. In constant
currencies, Michael Page was down 30.4%, with Page Personnel
declining 35.2% in the quarter.
Detailed Geographical analysis (unless otherwise stated all
growth rates are in constant currency)
EMEA Gross Profit (GBPm) Growth Rates
(54% of Group) Reported Constant
---------- ---------- ------------- -------------
Q3 2020 vs. Q3 2019 76.5 101.6 -24.7% -24.5%
---------- ---------- ------------- -------------
Headcount at 30 September 2020: 3,021 (30 June 2020: 3,149 including
6 furloughed employees)
* France (16% of Group) -27% (-22% in September)
* Germany (12% of Group) -10% (-9% in September)
* Southern Europe -25% (-19% in September)
* Italy -23% (-14% in September)
* Spain -28% (-24% in September)
* Benelux -31% (-28% in September)
* Middle East and Africa -31% (-26% in September)
In Europe, Middle East and Africa, the improvement in trading
conditions we experienced at the end of June continued into Q3,
down 24.5% overall. Permanent recruitment declined 25% for the
quarter with Temporary down 23%. France and Southern Europe, where
the impact was felt initially most severely, were down 27% and 25%,
respectively. After the somewhat quieter summer months, activity
levels improved and these markets exited in September at -22% and
-19%, respectively. Germany delivered another resilient
performance, declining 10% in the quarter, with trading
consistently strong throughout. This was driven mainly by our
Technology focused Interim business, which proved the most
resilient to the deterioration in macro-economic conditions, +4%
overall. Benelux declined 31%, with Belgium down 24% and the
Netherlands down 33%. The Middle East and Africa declined 31%.
Asia Pacific Gross Profit (GBPm) Growth Rates
(21% of Group) Reported Constant
----------- --------- ------------ ------------
Q3 2020 vs. Q3 2019 30.3 44.1 -31.2% -28.2%
----------- --------- ------------ ------------
Headcount at 30 September 2020: 1,418 (30 June 2020: 1,468)
* Asia (17% of Group) -23% (-10% in September)
* Greater China (9% of Group and 52% of Asia) -22% (-6%
in September)
* Mainland China -11% (flat in September)
* Hong Kong -41% (-23% in September)
* South East Asia -31% (-21% in September)
* Singapore -34% (-24% in September)
* India -32% (-27% in September)
* Japan -16% (+1% in September)
* Australia -42% (-37% in September)
In Asia Pacific, gross profit for Q3 was down 28.2%. Mainland
China, where all our offices remained open throughout the quarter,
declined 11%. The market continued to improve as Q3 progressed and
exited the quarter flat in September. The improvement was driven by
our domestic business, which now represents over half of our
Mainland China business. However, Hong Kong declined 41%, impacted
significantly by both COVID-19 and continuing social unrest.
Overall, Greater China declined 22% for the quarter. South East
Asia declined 31%, with Singapore down 34%. We opened in the
Philippines during the quarter, our sixth country in this Large,
High Potential market. Japan was down 16% for the quarter, but
returned to growth in September, with record performances in
Contracting and our Nikkei market business. India, which is now one
of the worst affected countries by COVID-19, declined 32% for the
quarter. Australia declined 42%, with some local lockdowns being
reinstated.
Americas Gross Profit (GBPm) Growth Rates
(13% of Group) Reported Constant
----------- --------- ------------- -------------
Q3 2020 vs. Q3 2019 19.1 37.3 -48.8% -41.9%
----------- --------- ------------- -------------
Headcount at 30 September 2020: 1,162 (30 June 2020: 1,184 including
76 furloughed employees)
* North America (9% of Group) -39% (-37% in September)
* US -39% (-39% in September)
* Latin America (4% of Group) -47% (-34% in September)
* Brazil -40% (-29% in September)
* Mexico -56% (-48% in September)
In the Americas, gross profit for Q3 was down 41.9%. The US
declined 39%, due to significant disruption from COVID-19. Trading
conditions remained particularly tough in Construction, our largest
discipline. In Latin America, also currently one of the worst
affected regions by COVID-19, gross profit declined 47%. Brazil was
down 40% and Mexico, our largest country in the region, was down
56%. Elsewhere in Latin America, trading in Argentina was
particularly challenging, due to the additional impact of high
inflation and currency devaluation, while in Chile trading was also
impacted by social unrest. Conversely, however, our Technology
Contracting business in Colombia performed particularly well.
UK Gross Profit (GBPm) Growth Rate
(12% of Group)
----------- --------- -------------------
Q3 2020 vs. Q3 2019 17.6 33.8 -47.9%
----------- --------- -------------------
Headcount at 30 September 2020: 1,182 (including 65 furloughed
employees) (30 June 2020: 1,184 including 324 furloughed employees)
* Michael Page -47% (-40% in September)
* Page Personnel -51% (-48% in September)
* Overall, September -42%
In the UK, gross profit declined 47.9% in the quarter, improving
from -61.5% in Q2. Conditions continued to improve as the quarter
progressed and we exited September at -42%. The impact of COVID-19
had a similar impact on both Michael Page and Page Personnel, with
declines of 47% and 51% respectively. Overall for the quarter,
Permanent recruitment was down 51% with Temporary down 40%. Trading
in the public sector, down 41%, was less impacted than the private
sector, down 49%.
Financial Position
Save for the effects of Q3 trading detailed above, and the
purchase of shares into the Employee Benefit Trust (EBT) of
GBP12.8m to hedge exposures under the Group's share plans, there
have been no other significant changes in the financial position of
the Group since the publication of the results for the half year
ended 30 June 2020. Net cash at 30 September 2020 was in the region
of GBP152m (Q2 2020: c. GBP162m; Q3 2019: c. GBP92m).
Shares
At 30 September 2020 there were 328,618,774 Ordinary shares in
issue, of which 12,855,658 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 11,290,748 shares and
consequently these shares should be excluded when calculating
earnings per share. The total number of voting rights in the
Company is 328,618,774 .
Cautionary Statement
This Third Quarter 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 Fourth Quarter Trading Update on 13
January 2021.
Enquiries:
PageGroup +44 (0)20 3077 8172
Steve Ingham, Chief Executive Officer
Kelvin Stagg, Chief Financial Officer
FTI Consulting +44 (0)20 3727 1017
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/5f71a7e59dd0d312000c56ab/gfcx
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 15 55 64 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
14 October 2020 at:
https://www.page.com/presentations/year/2020
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