TIDMPAGE
RNS Number : 9353Q
PageGroup plc
03 March 2021
3 March 2021
Full Year Results for the Year Ended 31 December 2020
PageGroup plc ("PageGroup"), the specialist professional
recruitment company, announces its full year results for the year
ended 31 December 2020.
Financial summary 2020 2019 Change Change
CC*
Revenue GBP1,304.8m GBP1,653.9m -21.1% -20.5%
------------ ------------ -------- --------
Gross profit GBP610.2m GBP855.5m -28.7% -28.1%
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Operating profit GBP17.0m GBP146.7m -88.4% -90.1%
------------ ------------ -------- --------
Profit before tax GBP15.5m GBP144.2m -89.2%
------------ ------------ --------
Basic earnings per share -1.8p 32.2p -105.6%
------------ ------------ --------
Diluted earnings per share -1.8p 32.2p -105.6%
------------ ------------ --------
Total dividend per share (excl.
special dividend) - 13.70p
------------ ------------
Total dividend per share (incl.
special dividend) - 26.43p
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HIGHLIGHTS*
-- 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
-- Group gross profit down 28.1% to GBP610.2m, gross profit per
fee earner down 18.7% to GBP113.3k (2019: GBP140.4k)
-- Conversion rate** decreased to 2.8% (2019: 17.1%)
-- Effective tax rate of 136.9% (2019: 28.3%) driven by profit mix and treatment of losses
-- Fee earner headcount reduced by a net 882 (15%) for the year,
leavers partially offset by the hiring of c. 400 experienced fee
earners
-- Total headcount reduced by a net 1,004 (13%) for the year, closing headcount of 6,694
-- Strong cash position of GBP166m (2019: GBP97.8m)
-- UK Government Furlough income of GBP3.4m to be repaid in 2021
*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, Steve Ingham, Chief Executive Officer, said:
"2020 was an unprecedented year, with all of our markets
impacted by the COVID-19 pandemic. Our focus throughout has been
the protection and wellbeing of our employees, candidates and
clients, whilst progressing our strategy of investment in our
platform to take advantage of the recovery. Our people made
significant sacrifices, predominantly in Q2, with many of our
people taking 20% salary cuts or working four day weeks, and
demonstrated incredible resilience during the last 12 months. I am
incredibly proud of the reaction of our staff in what continues to
be extraordinary times.
"We have a resilient highly diversified business model, with
focus areas such as Technology, Digital, Healthcare and Life
Sciences delivering robust results during the pandemic. Our Interim
business in Germany and the Nikkei domestic market business in
Japan both performed particularly well, with Interim up 6% and
Nikkei up 47% for the year. In total, we invested in the
recruitment of around 400 experienced hires, largely into these
growing disciplines and markets in 2020 and we will continue to
invest in these businesses going forward. We have also continued to
invest in our new operating system, Customer Connect, with around a
third of our fee earners now live on the system. Investments in
innovations also continued, such as in Page Insights, our data
intelligence tool, which provides rich information for our clients
and consultants on hiring trends by specialism and geography, using
internal and external data.
"The Group ended the year with a strong cash position of
GBP166m. As a result, we will repay the GBP3.4m income received in
the UK under the Furlough scheme. We will seek to return to our
policy of Shareholder returns as market conditions improve and we
get more clarity over the trading outlook.
"As we enter 2021, there remains a high degree of global
macro-economic uncertainty in many of our markets, with COVID-19
still a significant global issue and a number of the Group's
markets in lockdown. However, in the UK we are encouraged that the
Brexit deal and the recent Government announcements about lockdown
easing have provided a degree of clarity. We remain confident in
our strategy of maintaining our platform and continuing to invest
carefully in headcount, as well as continuing to roll-out new
technology and innovation. 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."
Enquiries:
PageGroup plc +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 9:00am today. The live presentation can
be viewed by following the link:
https://www.investis-live.com/pagegroup/60127c6249aa2a0e0097e72d/mslf
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 40 18 68 to gain access to the
call
The presentation and recording to accompany the call will be
available on the Company's website later today at:
https://www.page.com/investors/investor-library.aspx
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 via our four
brands of Page Executive, Michael Page, Page Personnel and Page
Outsourcing. 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 around 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, and Page Executive operating at higher
salary levels, have 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,
efficient 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, succession 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 44 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 37 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.
The Group has designated five markets as large, high potential
markets. These are markets that are typically under-developed in
terms of recruitment, but where we have a successful track record
and confidence in their ability to successfully scale operations.
The five large, high potential markets are Germany, Greater China,
Latin America, South East Asia and the US. India and Japan are two
markets which have the potential to be classified in this category
in the future.
We have also designated three disciplines as being high
potential disciplines, namely Healthcare & Life Sciences,
Technology and Digital.
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.
Despite COVID-19, 2020 has given us the opportunity to reflect
on our approach to sustainability. This has allowed us to broaden
the meaning of sustainability and taking a deep dive into at each
element of ESG. From an environmental perspective, during 2020 we
reduced our reported carbon emissions by c. 26%. We have also for
the first time offset our carbon emissions in full. We will
continue to reduce our carbon emissions by converting traditional
electricity to renewable sources, reducing waste and reducing
business travel.
In addition, we have joined the UN Global Compact. The UN Global
Compact provides a framework for developing a more sustainable and
responsible business. We are excited to be joining the largest
corporate sustainability initiative in the world. This is the first
in a series of sustainability initiatives to be released over the
course of 2021.
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;
-- invest through cycles in our High Potential disciplines of
Technology, Digital and Healthcare & Life Sciences;
-- 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 2020 Annual Report and
Accounts, which will be available to shareholders in April
2021.
GROUP RESULTS
GROSS PROFIT Reported CC
Year-on-year % of Group 2020 (GBPm) 2019 (GBPm) % %
----------- ------------ ------------ ------- -------
EMEA 52% 319.4 418.3 -23.7% -24.4%
----------- ------------ ------------ ------- -------
Asia Pacific 20% 121.1 163.3 -25.8% -25.1%
----------- ------------ ------------ ------- -------
Americas 15% 88.8 138.8 -36.0% -31.4%
----------- ------------ ------------ ------- -------
UK 13% 80.9 135.1 -40.0% -40.0%
----------- ------------ ------------ ------- -------
Total 100% 610.2 855.5 -28.7% -28.1%
----------- ------------ ------------ ------- -------
Permanent 72% 436.7 643.8 -32.2% -31.5%
----------- ------------ ------------ ------- -------
Temporary 28% 173.5 211.7 -18.0% -17.8%
----------- ------------ ------------ ------- -------
At constant exchange rates, Group revenue decreased 20.5% and
gross profit decreased 28.1% for the year ended 31 December 2020.
Gross profit per fee earner decreased 18.7% to GBP113.3k (2019:
GBP140.4k). At reported rates, revenue decreased 21.1% to
GBP1,304.8m (2019: GBP1,653.9m) and gross profit decreased 28.7% to
GBP610.2m (2019: GBP855.5m).
The Group's revenue mix between permanent and temporary
placements was 34:66 (2019: 39:61) and for gross profit was 72:28
(2019: 75:25). Revenue from temporary placements comprises the
salaries of those placed, together with the margin charged. This
margin on temporary placements decreased slightly to 20.1% in 2020
(2019: 21.1%). Overall, pricing remained relatively stable across
all regions, although a weaker pricing environment was experienced
in markets more impacted by COVID-19.
In our Large, High Potential markets category, now representing
36% of the Group, gross profit decreased 24.8% in constant
currencies to GBP218.2m. This category performed slightly better
than the rest of the Group, primarily due to the resilience of our
business in Germany.
Total Group headcount decreased by 1,004 in the year to 6,694.
This comprised a net decrease of 882 fee earners (-14.6%) and a
decrease of 122 operational support staff (-7.3%). The reduction in
our fee earner headcount was a response to the tough macro-economic
conditions caused by the COVID-19 pandemic. The leavers were
largely recent joiners who were therefore very inexperienced in
recruitment, or those on performance review. We have continued to
invest in our business model, with approaching 400 experienced fee
earners added to the Group during the year. This additional
headcount was primarily into our strategic areas of investment, as
well as those areas which have been more resilient during the
COVID-19 pandemic. As a result of this reduction in net fee earner
headcount, our fee earner to operational support staff ratio was
77:23 (2019: 78:22). In total, administrative expenses decreased
16.3% to GBP593.2m (2019: GBP708.8m).
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 GBP61.8m
(2019: GBP57.5m). Amortisation relating to our operating system,
PRS, was GBP7.5m (2019: GBP6.2m), which is now concluded.
Throughout this pandemic, all our people have pulled together in
these difficult times. In the second quarter, employees agreed to
reduced working weeks or placement onto government assistance
schemes. 450 of our most senior employees, including the Main and
Executive Boards, agreed to salary cuts of 20%. This, in addition
to access to government assistance schemes, reduced travel, and
reduced client and candidate entertaining, enabled us to achieve a
reduction in our cost base of 21% in Q2, 15% in Q3 and 10% in Q4
compared to March. We are thankful to all our people who agreed to
take salary reductions, work four-day weeks or make other
sacrifices for the long-term benefit of the Group during this
period.
The Group's conversion rate for the year of 2.8% was a decline
from 17.1% in 2019. This was due to the sharp decrease in gross
profit as a result of COVID-19, partly mitigated by the reduction
in headcount and cost saving initiatives.
Conversion rates were impacted in all of the Group's regions.
EMEA was the Group's most resilient region, with a conversion rate
of 9.6%. Asia Pacific also remained profitable, with conditions
improving towards the end of the year and conversion was 3.1%
compared to 12.1% in 2019. The UK and the Americas were most
impacted by the
COVID-19 pandemic, with conversion rates of -12.8% and -7.9% respectively.
A net interest charge of GBP1.5m (2019: GBP2.4m) was primarily
due to an IFRS 16 interest charge of GBP1.7m. Excluding IFRS 16,
the net interest income of GBP0.2m reflected interest income,
albeit in the continued low interest rate environment, partially
offset by borrowing facility charges.
Earnings per share and dividends
In 2020, basic and diluted earnings per share both decreased to
-1.8p (2019: 32.2p), as a result of the reduction in profit due to
the COVID-19 pandemic, as well as an increase in the effective tax
rate.
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 2020, in line with many of its peers, PageGroup announced the
temporary suspension of its dividend policy. This was against a
backdrop of unprecedented global economic disruption and
significant near-term uncertainty caused by the outbreak of
COVID-19 and designed to preserve liquidity. We will seek to
restart our dividend programme as market conditions improve and
greater clarity over the trading outlook is restored.
Cash flow and balance sheet
Cash flow in the year was strong, with GBP169.0m (2019:
GBP194.1m) generated from operations. The closing cash balance was
GBP166.0m at 31 December 2020 (2019: GBP97.8m). The significant
increase in the cash balance compared to 2019 was primarily due to
the unwind of working capital of GBP84.6m, deferral of c. GBP11m of
tax payments and a strong focus on cash collection.
Several actions were taken during the year to protect liquidity
and ensure a strong cash flow throughout. We deferred tax payments
and utilised government support schemes where available, as well as
ensuring the Group had access to additional liquidity, should this
be required, as described below. We actively protected against
potential downsides from the pandemic, despite remaining confident
in our business model throughout. Due to the continued strong cash
position, we will now be repaying the UK Government Furlough income
of GBP3.4m.
PageGroup maintains a Confidential Invoice Facility with HSBC
whereby the Group has the option to discount receivables in order
to advance cash. The Group also has a Revolving Credit Facility
with BBVA, expiring in 2022, with a total drawable amount of
GBP30m. We have agreed a covenant waiver to the end of the
agreement on this facility, to ensure we retain access to these
funds should they be required. Neither of these facilities were in
use as at 31 December. These facilities are used on an ad hoc basis
to fund any major Group GBP cash outflows. The Group also gained
access to the Bank of England Covid Corporate Finance Facility,
with a limit of GBP300m, which has not been drawn against. We do
not currently expect to draw down on this facility.
Income tax paid in the year was GBP31.7m (2019: GBP37.0m) and
net capital expenditure in 2020 was GBP21.7m (2019: GBP24.6m).
Spending on software was broadly flat on 2019 and was primarily
related to the roll out of our new operating system, Customer
Connect. 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.
Due to the suspension of our dividend policy, no dividend
payments were made during 2020 (2019: GBP83.5m). The lower share
price in 2020 meant that there was a decrease in cash receipts from
share option exercises, with GBP0.4m in 2020, compared to GBP7.2m
in 2019. In 2020, GBP14.4m (2019: GBP10.0m) was also spent on the
purchase of shares by the Employee Benefit Trust to satisfy future
committed obligations under our employee share plans.
The most significant item in our balance sheet was trade
receivables, which amounted to GBP186.1m at 31 December 2020 (2019:
GBP271.1m), comprising permanent fees invoiced and salaries and
fees invoiced in the temporary placement business, but not yet
paid. Day's sales in debtors decreased due to the significant
unwind of our debtor book.
EUROPE, MIDDLE EAST AND AFRICA (EMEA)
EMEA is the Group's largest region, contributing 52% 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 66% and temporary placements 34% 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
(52% of Group in 2020) 2020 2019 Reported CC
------ ------ --------- -------
Gross Profit 319.4 418.3 -23.7% -24.4%
------ ------ --------- -------
Operating Profit 30.6 90.3 -66.1% -66.5%
------ ------ --------- -------
Conversion Rate (%) 9.6% 21.6%
------ ------ --------- -------
In constant currencies, revenue decreased 17.7% on 2019 and
gross profit decreased 24.4%. In reported rates, revenue in the
region was down 16.8% to GBP717.3m (2019: 861.8m) and gross profit
decreased 23.7% to GBP319.4m (2019: GBP418.3m).
Trading conditions were impacted by COVID-19 throughout the
region, with many countries again entering lockdown at the end of
the year. Our largest businesses in the region, France and Germany,
together representing over half of the region by gross profit,
declined 28% and 11%, respectively. Michael Page Interim in
Germany, which is mainly focused on technology, was one of our most
resilient businesses during the pandemic, growing 6% overall for
the year. In our other European markets, Benelux was down 24%,
Southern Europe down 28% with Italy and Spain down 28% and 29%,
respectively. The Middle East and Africa, which represented 3% of
the region, declined 30%.
2020 operating profit decreased 66.1% to GBP30.6m (2019:
GBP90.3m), a conversion rate of 9.6% (2019: 21.6%). The region was
the most resilient to the COVID-19 pandemic and had the highest
conversion rate in the Group. Headcount across the region decreased
by 338 (-10.2%) to 2,979 at the end of 2020 (2019: 3,317).
ASIA PACIFIC
Asia Pacific represented 20% of the Group's gross profit in
2020, with 79% of the region being Asia and 21% 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, approaching 1,200 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 84% and temporary placements 16% of gross profit.
Australia, one of our Large, Proven markets, 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. Page
Personnel has a growing presence and significant potential to
expand and grow market share.
ASIA PACIFIC GBPm Growth rates
(20% of Group in 2020) 2020 2019 Reported CC
------ ------ --------- -------
Gross Profit 121.1 163.3 -25.8% -25.1%
------ ------ --------- -------
Operating Profit 3.8 19.8 -80.9% -81.9%
------ ------ --------- -------
Conversion Rate (%) 3.1% 12.1%
------ ------ --------- -------
In Asia Pacific, in constant currencies, revenue decreased 20.1%
and gross profit decreased by 25.1%. In reported rates, revenue
decreased 21.0% to GBP216.0m (2019: GBP273.4m) and gross profit
decreased 25.8% to GBP121.1m (2019: GBP163.3m).
In Asia, representing 16% of the Group, gross profit declined
22%. Greater China declined 27%, with Hong Kong down 46%.
Conditions improved as the year progressed, with Mainland China
growing 15% in December and social unrest easing in Hong Kong.
South East Asia was down 23% on the prior year, with Singapore down
28%. We opened in the Philippines during the year, our sixth
country in this Large, High Potential market. India, where we have
around 150 fee earners, declined 15%. Japan was down 9% for the
year, though our Nikkei market business delivered a record year, up
47%. Australia declined 35%.
Operating profit decreased 80.9% to GBP3.8m (2019: GBP19.8m),
with the conversion rate down at 3.1% (2019: 12.1%). The region
remained profitable, with conditions improving towards the end of
the year. Headcount across the region declined 294 (-17.5%), ending
the year at 1,385 (2019: 1,679).
THE AMERICAS
The Americas represented 15% of the Group's gross profit in
2020, being North America (64% of the region) and Latin America
(36% 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 700
employees in seven countries. There are few international
competitors and none with regional scale. Across the Americas,
permanent placements accounted for 84% of gross profit and
temporary placements 16%.
AMERICAS GBPm Growth rates
(15% of Group in 2020) 2020 2019 Reported CC
------ ------ --------- --------
Gross Profit 88.8 138.8 -36.0% -31.4%
------ ------ --------- --------
Operating Profit -7.0 19.3 -136.4% -147.0%
------ ------ --------- --------
Conversion Rate (%) -7.9% 13.9%
------ ------ --------- --------
In constant currencies, revenue decreased by 17.5% and gross
profit decreased by 31.4%. In reported rates, revenue decreased by
24.8% to GBP154.3m (2019: GBP205.1m) while gross profit decreased
36.0% to GBP88.8m (2019: GBP138.8m).
In North America, gross profit decreased by 30% in constant
currencies. The US declined 30%, with tough trading conditions due
to COVID-19, as well as political uncertainty and social unrest.
Conditions were particularly tough within our largest discipline,
Construction, with sites closed for large periods of the year.
In Latin America, gross profit was down 33% year-on-year in
constant currencies. The region has been one of the most impacted
by COVID-19, having received little governmental support. Brazil
was down 28%, Mexico down 43%, with the other five countries in the
region down 28%, collectively.
Driven by our strategy of maintaining our trading platform in
these two Large, High Potential markets, operating profit decreased
to -GBP7.0m (2019: GBP19.3m), with a conversion rate of -7.9%
(2019: 13.9%). Headcount across the region decreased by 221
(-16.1%) in 2020 to 1,155 (2019: 1,376).
UNITED KINGDOM
The UK represented 13% of the Group's gross profit in 2020,
operating from 25 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 63% and temporary
placements 37% of gross profit.
The UK business operates under all four of our brands, 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 24% of UK gross profit.
UK GBPm
(13% of Group in 2020) 2020 2019 Growth rate
------- ------ -------------
Gross Profit 80.9 135.1 -40.0%
------- ------ -------------
Operating Profit -10.3 17.3 -159.9%
------- ------ -------------
Conversion Rate (%) -12.8% 12.8%
------- ------ -------------
In the UK, revenue decreased 30.7% to GBP217.3m (2019:
GBP313.6m) and gross profit declined 40.0% to GBP80.9m (2019:
GBP135.1m).
The UK was significantly impacted by COVID-19, as well as Brexit
related uncertainty. The Brexit deal has provided a degree of
clarity. Page Personnel declined 44% and Michael Page, which is
focused on more senior opportunities, declined 39%.
Due to this sharp decline in gross profit, operating profit was
down 159.9% to -GBP10.3m, a conversion rate of -12.8%.
Headcount decreased 11.4% to 1,175 at the end of December 2020
(2019: 1,326). Our fee earner headcount reduced by 105 (11.4%) in
response to the challenging trading conditions seen throughout the
year.
OTHER FINANCIAL ITEMS
Foreign exchange
Foreign exchange had a marginal impact on the Group's results
for the year, decreasing revenue by c. GBP9m, gross profit by c.
GBP5m and increasing operating profit by c. GBP2m.
Taxation
The tax charge for the year was GBP21.3m (2019: GBP40.8m). This
represented an effective tax rate of 136.9% (2019: 28.3%). A
summary is shown below.
Reconciliation of effective tax 2020 % 2019 %
rate GBP'000 GBP'000
Profit before taxation 15,544 144,245
--------- ------ --------- ------
Profit before tax multiplied by
the standard rate of corporation
tax in the UK 2,952 19.0 27,406 19.0
--------- ------ --------- ------
Effects of:
--------- ------ --------- ------
Disallowable items and other permanent
differences 1,947 12.5 2,094 1.5
--------- ------ --------- ------
Unrelieved overseas losses 1,954 12.5 2,292 1.6
--------- ------ --------- ------
Derecognition/(recognition) of
overseas losses and other tax
attributes 1,525 9.8 (35) 0
--------- ------ --------- ------
Other tax movements 694 4.5 (26) 0
--------- ------ --------- ------
Higher tax rates on overseas earnings 2,038 13.1 4,239 2.9
--------- ------ --------- ------
Other tax overseas 6,855 44.1 6,501 4.5
--------- ------ --------- ------
Movement of rate difference 662 4.3 (265) (0.2)
--------- ------ --------- ------
Adjustments to tax charge in respect
of prior periods 2,659 17.1 (1,406) (1.0)
--------- ------ --------- ------
Tax expense and effective rate
for the year 21,286 136.9 40,800 28.3
--------- ------ --------- ------
We have generated profits in overseas countries which have
higher rates and we have been subject to additional taxes on
profits which have contributed 61.7% to the tax rate in 2020.
Losses arose in the year that we could not recognise due to the
requirement to have profits against which to offset in the
foreseeable future. In addition, we wrote off deferred tax assets
on losses which expired in the period as well as deferred tax
assets on deductible temporary differences and losses where we do
not consider it probable that there will be taxable profits to
support their recovery in future periods. Together, these two
categories increased the tax rate by 22.3%.
Disallowable and other permanent differences are broadly in line
with 2019, though with the significant reduction in PBT, the impact
on the rate has been much greater. Similarly to 2019, adjustments
in respect of prior periods were one-off in nature, and again have
a higher impact on the rate due to the lower PBT in 2020. Finally
there have been changes to the substantively enacted tax rates
which apply to the calculation of deferred tax, predominately in
the UK (moving from 17% to 19%). Collectively, these three
categories increased the tax rate by 33.9%.
These factors add to the basic UK rate of 19% to give the total
effective tax rate of 136.9%.
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 2020 the Group had 10.3m share options
outstanding, of which 4.2m had vested, but had not been exercised.
During the year, options were granted over 1.8m shares under the
Group's share option plans. Options were exercised over 0.1m
shares, generating GBP0.4m in cash, and options lapsed over 0.7m
shares. At the end of 2020, options remained outstanding over 11.4m
shares, of which 5.3m had vested, but had not been exercised.
During 2020, 3.8m shares were purchased for the Group's Employee
Benefit Trust, and no shares were cancelled (2019: 2.2m shares were
purchased and no shares were cancelled).
Audit tender
Following the competitive tender process during the year, the
Audit Committee has recommended, and the Board has approved the
retaining of Ernst & Young LLP (EY) as the Company's auditor.
The Board will propose the re-appointment of EY as external
auditors for the year ending 31 December 2021 at the Company's
Annual General Meeting in June 2021.
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 2020: Gross profit decreased
28.1% in constant currencies and 28.7% in reported
rates (2019: +5.0% in both constant currencies
and reported rates). This was due to macro-economic
uncertainty as well as rolling lockdowns due
to the COVID-19 pandemic.
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 2020: Geographies: the
percentage increased to 86.7% from 84.2% in
2019, largely as a result of the UK being impacted
most severely by the COVID-19 pandemic.
Disciplines: the percentage was broadly flat
at 65.2% (2019: 65.1%), with the COVID-19 pandemic
affecting the Group's operations in all disciplines.
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 white collar temporary
roles. It gives a guide as to the operational
gearing potential in the business, which is
significantly greater for permanent recruitment.
How we performed in 2020 : T he ratio decreased
to 72:28 (2019: 75:25). As is usually the case
in downturns, permanent recruitment is hit harder
when trading conditions deteriorate. Temporary
and Contracting recruitment was more resilient
to the tougher trading conditions, particularly
in disciplines such as Technology.
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 2020 : The Group saw a
-105.6% fall in Basic EPS to -1.8p. This is
driven by the significant reduction in profits
caused by the challenging trading conditions
due to COVID-19 and the resultant high effective
tax rate.
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 2020: Cash increased to
GBP166.0m (2019: GBP97.8m). The significant
increase in the cash balance compared to 2019
was primarily due to the unwind of working capital
of GBP84.6m, deferral of c. GBP11m of tax payments
and a strong focus on cash collection.
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 2020: Net fee earner headcount
declined by 882, or -14.6% in the year, resulting
in 5,145 fee earners at the end of the year.
We have continued to invest in certain areas
of the Group such as Technology, Contracting,
Healthcare & Life Sciences and Digital, adding
nearly 400 experienced fee earners to the Group
in the year.
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 2020: Productivity decreased
18.7% in constant currencies to GBP113.3k (2019:
GBP140.4k). During the lockdowns, our fee earners
saw a significant reduction in activity, which
together with our strategy of maintaining our
platform of experienced consultants to take
market share when markets recover, resulted
in a short-term drop in productivity.
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 2020: The ratio decreased
to 77:23 from 78:22 in 2019. This was driven
by a decline in our fee earner headcount of
882, in response to the more challenging trading
conditions in many of our markets. Our operational
support staff headcount decreased by 122.
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 2020: The Group's conversion
rate decreased to 2.8% (2019: 17.1%) due to
the sharp decrease in gross profit as a result
of COVID-19, partly mitigated by the reduction
in headcount and cost saving initiatives.
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 2020: We recorded an 83%
positive score for employee engagement in the
latest Employee Survey in 2019. No overall Employee
Survey was performed in 2020, but our Working
Environment Survey told us that 90% of our people
feel our communication tools are effective in
providing the information they need; 85% feel
part of a team despite not being physically
together; 70% see their health and wellbeing
as a top priority for the company; and 84% feel
proud to work at PageGroup.
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 2020: The average tenure
of the Group's management was broadly flat at
12.3 years (2019: 12.5 years).
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
2020 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 2020: Direct GHG emissions
relating to the combustion of fuel remained
broadly flat at 2,023 tonnes CO2e, while Indirect
GHG emissions, through the purchase of energy
such as electricity, decreased by 25.7% to 3,264
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 2020: Energy-derived emissions
were reduced by 4.2% compared with 2019, 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 2020
DEFRA conversion factors. The movements in KPIs are in line with
expectations.
Steve Ingham Kelvin Stagg
Chief Executive Officer Chief Financial Officer
2 March 2021
Consolidated Income Statement
For the year ended 31 December 2020
2020 2019
Note GBP'000 GBP'000
Revenue 3 1,304,791 1,653,948
Cost of sales (694,542) (798,498)
Gross profit 3 610,249 855,450
Administrative expenses (593,221) (708,781)
---------- -----------
Operating profit 3 17,028 146,669
Financial income 4 588 494
Financial expenses 4 (2,072) (2,918)
Profit before tax 3 15,544 144,245
Income tax expense 5 (21,286) (40,800)
---------- -----------
(Loss)/profit for the year (5,742) 103,445
---------- -----------
Attributable to:
Owners of the parent (5,742) 103,445
---------- -----------
Earnings per share
Basic earnings per share
(pence) 8 (1.8) 32.2
Diluted earnings per share
(pence) 8 (1.8) 32.2
---------- -----------
The above results all relate to continuing
operations
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
2020 2019
GBP'000 GBP'000
(Loss)/profit for the year (5,742) 103,445
Other comprehensive income/(loss)
for the year
Items that may subsequently be reclassified
to profit and loss:
Currency translation differences 5,945 (14,842)
Loss on hedging instruments - (939)
Total comprehensive income for the year 203 87,664
-------- ---------
Attributable to:
Owners of the parent 203 87,664
-------- ---------
Consolidated Balance Sheet
As at 31 December 2020
2020 2019
Note GBP'000 GBP'000
Non-current assets
Property, plant and equipment 9 26,401 31,925
Right-of-use assets 95,414 120,246
Intangible assets - Goodwill and
other intangible 2,097 2,087
- Computer software 39,708 36,967
Deferred tax assets 17,688 18,915
Other receivables 10 13,169 15,036
194,477 225,176
---------- ----------
Current assets
Trade and other receivables 10 252,476 365,555
Current tax receivable 16,889 13,008
Cash and cash equivalents 12 165,987 97,832
435,352 476,395
---------- ----------
Total assets 3 629,829 701,571
---------- ----------
Current liabilities
Trade and other payables 11 (184,022) (215,811)
Lease liabilities (32,711) (29,139)
Current tax payable (12,365) (19,110)
(229,098) (264,060)
---------- ----------
Net current assets 206,254 212,335
---------- ----------
Non-current liabilities
Other payables 11 (12,483) (11,613)
Lease liabilities (70,758) (99,473)
Deferred tax liabilities (1,589) (2,038)
(84,830) (113,124)
---------- ----------
Total liabilities 3 (313,928) (377,184)
---------- ----------
Net assets 315,901 324,387
---------- ----------
Capital and reserves
Called-up share capital 3,286 3,286
Share premium 99,564 99,507
Capital redemption reserve 932 932
Reserve for shares held in the
employee benefit trust (55,498) (47,662)
Currency translation reserve 25,320 19,375
Retained earnings 242,297 248,949
Total equity 315,901 324,387
---------- ----------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2020
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 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 - - - - - (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
Transfer from
reserve for
shares
held in the
employee
benefit
trust - - - 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
and 1 January
2020 3,286 99,507 932 (47,662) 19,375 248,949 324,387
---------- -------- ----------- ----------- ------------ --------- ---------
Currency
translation
differences - - - - 5,945 - 5,945
---------- -------- ----------- ----------- ------------ --------- ---------
Net income
recognised
directly
in equity - - - - 5,945 - 5,945
Loss for the
year ended 31
December
2020 - - - - - (5,742) (5,742)
---------- -------- ----------- ----------- ------------ --------- ---------
Total
comprehensive
income/(loss)
for the year - - - - 5,945 (5,742) 203
---------- -------- ----------- ----------- ------------ --------- ---------
Purchase of
shares held in
employee
benefit trust - - - (14,369) - - (14,369)
Exercise of
share plans - 57 - - - 330 387
Transfer from
reserve for
shares
held in the
employee
benefit
trust - - - 6,533 - (6,533) -
Credit in
respect of
share
schemes - - - - - 5,275 5,275
Credit in
respect of tax
on share
schemes - - - - - 18 18
- 57 - (7,836) - (910) (8,689)
---------- -------- ----------- ----------- ------------ --------- ---------
Balance at 31
December
2020 3,286 99,564 932 (55,498) 25,320 242,297 315,901
---------- -------- ----------- ----------- ------------ --------- ---------
Condensed Consolidated Statement of Cash Flows
For the year ended 31 December 2020
2020 2019
Note GBP'000 GBP'000
Profit before tax 15,544 144,245
Depreciation and amortisation charges 61,782 57,500
Loss on sale of property, plant and equipment,
and computer software 262 21
Share scheme charges 5,275 5,790
Net finance costs 1,484 2,424
--------- ----------
Operating cash flow before changes in working
capital 84,347 209,980
Decrease/(Increase) in receivables 124,370 (37,934)
(Decrease)/Increase in payables (39,760) 22,036
--------- ----------
Cash generated from operations 168,957 194,082
Income tax paid (31,747) (36,960)
--------- ----------
Net cash from operating activities 137,210 157,122
--------- ----------
Cash flows from investing activities
Purchases of property, plant and equipment (4,892) (9,615)
Purchases of intangible assets (17,770) (16,735)
Proceeds from the sale of property, plant and
equipment, and computer software 918 1,740
Interest received 588 494
--------- ----------
Net cash used in investing activities (21,156) (24,116)
--------- ----------
Cash flows from financing activities
Dividends paid - (83,469)
Interest paid (413) (953)
Lease liability principal repayment (39,234) (38,215)
Issue of own shares for the exercise of options 387 7,243
Purchase of shares into the employee benefit
trust (14,369) (10,000)
Net cash used in financing activities (53,629) (125,394)
--------- ----------
Net increase in cash and cash equivalents 62,425 7,612
Cash and cash equivalents at the beginning
of the year 97,832 97,673
Exchange gain/(loss) on cash and cash equivalents 5,730 (7,453)
Cash and cash equivalents at the end of the
year 12 165,987 97,832
--------- ----------
Notes to the consolidated preliminary results
For the year ended 31 December 2020
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 2020 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 2020 were approved by the directors on 2 March
2021. 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 3 June 2021 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 Accounting Standards in
conformity with the requirements of the Companies Act 2006 and
International Financial Reporting Standards adopted pursuant to
Regulation (EC) No.1606/2002 as it applies in the European Union,
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 2020 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 Board has undertaken a review of the Group's forecasts and
associated risks and sensitivities, considering the expected impact
of COVID-19 on trading in the period from the date of approval of
these financial statements to 31 March 2022 (the review
period).
Following the reduction in activity starting in February 2020,
the Group adopted a number of cost control and cash conservation
measures. Through the second quarter and continuing through the
second half of the year, activity levels started to pick up in
several of the Group's markets. The activity improvements are
reflected in KPIs, such as new opportunities, candidates sent to
clients, interviews and offers in several of our markets. This
trend has continued in line with the Group's Base Case forecast, as
described below.
The Group had GBP166m of cash at 31 December 2020, with no debt
except for IFRS 16 lease liabilities of GBP103.5m. Debt facilities
relevant to the period comprise a committed GBP30m RCF with BBVA
(facility expiring in May 2022 with all covenants waived until the
expiry of the facility), an uncommitted GBP300m government CCFF
(available to March 2022 if drawn in March 2021), an uncommitted UK
trade debtor discounting facility (up to GBP50m depending on debtor
levels) and an uncommitted GBP20m UK bank overdraft facility.
The Group has developed Base Case and Downside scenarios that
demonstrate the Board's best estimate and severe but plausible
downside scenarios respectively for the review period. The Downside
scenario is based on assumptions for gross profit and costs that
take account of the possibility of further COVID-19 lockdowns and
further recessionary pressures, at similar levels to that
experienced in 2020. These are mitigated by the reduction in fee
earner headcount as a result of natural attrition to some extent,
but does not take account of all the other cost containment or cash
preservation measures available to the Group if required. All
scenarios demonstrate significant cash headroom, with no
requirement to utilise any of the facilities.
Having considered the Group's forecasts, the level of cash
resources available to the business and the Group's borrowing
facilities, the Group's geographical and discipline
diversification, limited concentration risk, as well as the ability
to manage the cost base, the Board has concluded that the Group has
adequate resources to continue in operational existence for the
period through to March 2022.
Nature of financial information
The financial information contained within this preliminary
announcement for the 12 months to 31 December 2020 and 12 months to
31 December 2019 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 2019 have been filed with the Registrar of
Companies and those for the 12 months to 31 December 2020 will be
filed following the Company's Annual General Meeting.
The auditors' reports on the accounts for both the 12 months to
31 December 2020 and 12 months to 31 December 2019 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 2021.
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
2020.
The Group has not early adopted any standard, interpretation or
amendment that has been issued but is not yet effective.
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
---------------------- ------------------
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
EMEA 717,294 861,827 319,360 418,328
Asia Pacific 215,959 273,437 121,113 163,255
Americas 154,257 205,074 88,791 138,791
United Kingdom 217,281 313,610 80,985 135,076
1,304,791 1,653,948 610,249 855,450
---------- ---------- -------- --------
Operating Profit
-------------------------------
2020 2019
GBP'000 GBP'000
EMEA 30,605 90,333
Asia Pacific 3,789 19,810
Americas (7,021) 19,268
United Kingdom (10,345) 17,258
Operating profit 17,028 146,669
Financial expense (1,484) (2,424)
Profit before tax 15,544 144,245
----------- -----------------
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
------------------ --------------------
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
EMEA 230,350 294,597 163,961 196,473
Asia Pacific 111,090 119,110 54,899 45,832
Americas 80,662 111,649 41,071 53,288
United Kingdom 190,838 163,207 41,632 62,481
-------- -------- --------- ---------
Segment assets/liabilities 612,940 688,563 301,563 358,074
Income tax 16,889 13,008 12,365 19,110
629,829 701,571 313,928 377,184
-------- -------- --------- ---------
Property, Plant & Equipment Intangible Assets
------------------------------ --------------------
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
EMEA 10,810 12,732 2,666 2,818
Asia Pacific 4,451 5,560 371 495
Americas 6,052 7,471 120 162
United Kingdom 5,088 6,162 38,648 35,579
26,401 31,925 41,805 39,054
-------------- -------------- --------- ---------
Right-of-use assets Lease liabilities
---------------------- --------------------
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
EMEA 47,941 63,270 51,070 65,676
Asia Pacific 13,924 11,981 14,532 13,027
Americas 14,862 20,878 17,590 23,725
United Kingdom 18,687 24,117 20,277 26,184
---------- ---------- --------- ---------
95,414 120,246 103,469 128,612
---------- ---------- --------- ---------
The below analyses in notes (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
---------------------- ------------------
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Permanent 441,467 649,948 436,689 643,787
Temporary 863,324 1,004,000 173,560 211,663
1,304,791 1,653,948 610,249 855,450
---------- ---------- -------- --------
The below analyses in notes (d) revenue and gross profit by
discipline (being the professions of candidates placed) and (e)
revenue and gross profit generated from permanent and temporary
placements 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
---------------------- ------------------
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Accounting and Financial
Services 528,202 662,458 212,243 298,648
Legal, Technology, HR, Secretarial
and Other 374,406 442,648 166,249 212,244
Engineering, Property & Construction,
Procurement & Supply Chain 273,771 359,216 141,829 203,275
Marketing, Sales and Retail 128,412 189,626 89,928 141,283
1,304,791 1,653,948 610,249 855,450
---------- ---------- -------- --------
(e) Revenue and gross profit by strategic market
Revenue Gross Profit
---------------------- ------------------
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Large, Proven markets 728,736 962,424 289,202 426,178
Large, High Potential markets 397,166 478,950 218,196 298,139
Small and Medium, High Margin
markets 178,889 212,574 102,851 131,133
1,304,791 1,653,948 610,249 855,450
---------- ---------- -------- --------
4. Financial income / (expenses)
2020 2019
GBP'000 GBP'000
Financial income
Bank interest receivable 588 494
-------- --------
Financial expenses
Bank interest payable (413) (953)
Interest on lease liabilities (1,659) (1,965)
(2,072) (2,918)
-------- --------
5. Taxation
Tax on profit was GBP21.3m (2019: GBP40.8m). This represented an
effective tax rate of 136.9% (2019: 28.3%).
We have generated profits in overseas countries which have
higher rates and we have been subject to additional taxes on
profits which have contributed 61.7% to the tax rate in 2020.
Losses arose in the year that we could not recognise due to the
requirement to have profits against which to offset in the
foreseeable future. In addition, we wrote off deferred tax assets
on losses which expired in the period as well as deferred tax
assets on deductible temporary differences and losses where we do
not consider it probable that there will be taxable profits to
support their recovery in future periods. Together, these increased
the tax rate by 22.3%.
Disallowable and other permanent differences are broadly in line
with 2019, though with the significant reduction in PBT, the impact
on the rate has been much greater. Similarly to 2019, adjustments
in respect of prior periods were one-off in nature, and again have
a higher impact on the rate due to the lower PBT in 2020. Finally
there have been changes to the substantively enacted tax rates
which apply to the calculation of deferred tax, predominately in
the UK (moving from 17% to 19%). Collectively, these increased the
tax rate by 33.9%.
These factors add to the basic UK rate of 19% to give the total
effective tax rate of 136.9%.
6. Dividends
2020 2019
GBP'000 GBP'000
Amounts recognised as distributions to equity holders
in the year:
Final dividend for the year ended 31 December 2019
of 9.40p per ordinary share (2018: 9.00p) - 28,978
Interim dividend for the year ended 31 December 2020
of 0p per ordinary share (2019: 4.30p) - 13,759
Special dividend for the year ended 31 December 2020
of 0p per ordinary share (2019: 12.73p) - 40,732
- 83,469
---------- --------
Amounts proposed as distributions to equity holders
in the year:
Proposed final dividend for the year ended 31 December
2020 of 0.00p per ordinary share (2019: 9.40p) - 30,154
---------- --------
The proposed final dividend for 2019 of 9.40p per ordinary
share, or GBP30.2m, which was due for payment in June 2020, was
cancelled as a result of the ongoing uncertainty as a result of the
COVID-19 pandemic.
7. Share-based payments
In accordance with IFRS 2 "Share-based Payment", a charge of
GBP4.3m has been recognised for share options and other share-based
payment arrangements (including social charges) (31 December 2019:
GBP6.8m).
8. Earnings per ordinary share
The calculation of the basic and diluted earnings per share is
based on the following data:
Earnings 2020 2019
Earnings for basic and diluted earnings per share
(GBP'000) (5,742) 103,445
-------- --------
Number of shares
Weighted average number of shares used for basic earnings
per share ('000) 319,664 320,789
Dilution effect of share plans ('000) 925 375
Diluted weighted average number of shares used for
diluted earnings per share ('000) 320,589 321,164
-------- --------
Basic earnings per share (pence) (1.8) 32.2
Diluted earnings per share (pence) (1.8) 32.2
The above results all relate to continuing operations.
9. Property, plant and equipment
Acquisitions and Disposals
During the year ended 31 December 2020 the Group acquired
property, plant and equipment with a cost of GBP4.9m (2019:
GBP9.6m).
Property, plant and equipment with a carrying amount of GBP0.8m
were disposed of during the year ended 31 December 2020 (2019:
GBP1.5m), resulting in a loss on disposal of GBP0.3m (2019: loss of
GBP0.2m).
10. Trade and other receivables
2020 2019
GBP'000 GBP'000
Current
Trade receivables 197,195 281,176
Less allowance for expected credit losses and
revenue reversals (11,061) (10,081)
--------- ---------
Net trade receivables 186,134 271,095
Other receivables 4,393 10,643
Accrued income 51,282 70,421
Prepayments 10,667 13,396
252,476 365,555
--------- ---------
Non-current
Other Receivables 13,169 15,036
--------- ---------
11. Trade and other payables
2020 2019
GBP'000 GBP'000
Current
Trade payables 3,993 6,702
Other tax and social security 44,890 51,687
Other payables 35,664 31,216
Accruals 99,475 126,206
184,022 215,811
-------- --------
Non-current
Deferred income 11,836 10,330
Other tax and social security 647 1,283
12,483 11,613
-------- --------
12. Cash and cash equivalents
2020 2019
GBP'000 GBP'000
Cash at bank and in hand 108,849 90,856
Short-term deposits 57,138 6,976
-------- --------
Cash and cash equivalents 165,987 97,832
Cash and cash equivalents in the statement of
cash flows 165,987 97,832
-------- --------
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.
PageGroup maintains a Confidential Invoice Facility with HSBC
whereby the Group has the option to discount facilities in order to
advance cash on its receivables. The facility is used only ad hoc
in case the Group needs to fund any major GBP cash outflow.
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 3 June 2021 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/2021
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 2020. Certain parts of the annual report are not
included within this announcement.
We confirm that, to the best of our knowledge:-
a) that the consolidated financial statements, prepared in
accordance with IFRSs in conformity with the Companies Act 2006 and
IFRSs adopted pursuant to Regulation(EC) No 1606/2002 as it applies
in the European Union, give a true and fair view of the assets,
liabilities, financial position and profit of the parent company
and 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
2 March 2021 2 March 2021
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END
FR DGGDXDDGDGBD
(END) Dow Jones Newswires
March 03, 2021 02:00 ET (07:00 GMT)
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