TIDMPAGE
RNS Number : 1676M
PageGroup plc
11 October 2016
11 October 2016
PageGroup plc
THIRD QUARTER 2016 TRADING UPDATE
Highlights - in constant currencies
-- Group gross profit growth of 1.3% (+14.1% in reported)
-- Strongest growth in EMEA +10.4%; Benelux +20%; Southern Europe +14%
-- UK -4.7%, impacted by fragile market conditions
-- Asia Pacific -4.7%; Asia -8%; Australasia +4%
-- North America -11%; US ex-NYC Financial Services market +13%
-- LatAm (ex Brazil) +23%; Brazil -12%
-- Strong balance sheet, net cash c. GBP100m
-- Interim and Special Dividends of GBP31.7m to be paid on 12 October
Q3 GROSS PROFIT ANALYSIS
Reported (GBPm) Constant
-------------- ----------- --------------------------- ---------
Year-on-year % of Group Q3 2016 Q3 2015 % %
-------------- ----------- -------- -------- ------- ---------
EMEA 42% 66.8 51.6 +29.4% +10.4%
-------------- ----------- -------- -------- ------- ---------
UK 24% 37.8 39.7 -4.7% -4.7%
-------------- ----------- -------- -------- ------- ---------
Asia Pacific 20% 32.3 28.3 +14.1% -4.7%
-------------- ----------- -------- -------- ------- ---------
Americas 14% 21.7 19.5 +11.8% -2.0%
-------------- ----------- -------- -------- ------- ---------
Total 100% 158.6 139.1 +14.1% +1.3%
-------------- ----------- -------- -------- ------- ---------
Permanent 75% 119.5 105.1 +13.8% +1.0%
-------------- ----------- -------- -------- ------- ---------
Temporary 25% 39.1 34.0 +14.9% +2.0%
-------------- ----------- -------- -------- ------- ---------
Commenting, Steve Ingham, Chief Executive Officer said:
"The Group delivered gross profit growth of 1.3% in constant
currencies and 14.1% at reported rates. Continental Europe and
Latin America, outside of Brazil, which combined represented almost
half of the Group, delivered strong performances. However, in the
UK, confidence levels remained fragile and below levels seen
earlier in the year. Several of our other larger markets, including
Greater China and Brazil also experienced challenging market
conditions.
"Activity and trading remained stronger at lower salary levels
and in temporary roles and this was reflected by growth of 6% in
our Page Personnel business, where temporary recruitment represents
over 40% of gross profit. Our Michael Page business, where
temporary recruitment represents only 17%, fell by 1%. Overall,
temporary recruitment grew by 2%, compared to 1% in permanent.
"The Group continued to benefit from positive foreign exchange
movements during Q3, which increased reported gross profit by 12.8
percentage points, or GBP17.8m. For the full year, we expect
foreign exchange to increase our reported gross profit by c. GBP45m
and operating profit by c. GBP10m.
"With the prevailing uncertainty in the UK, the challenges in
some of our other larger markets and the unpredictable nature of
the current cycle, we remain cautious in our short-term outlook.
However, we will continue to progress our strategic projects, such
as our European Shared Service Centre, as well as driving
profitable growth and taking advantage of growth markets. As
always, we remain able to respond quickly to any changes in market
conditions.
"Cash generation in the period was particularly strong with net
cash of c. GBP100m at the quarter end, before payment of the
interim and special dividends of GBP31.7m on 12 October. Save for
any further movements in foreign exchange, the Board's expectations
for the full year remain unchanged."
Group Trading Update
PageGroup delivered third quarter gross profit of GBP158.6m, up
1.3% in constant currencies and 14.1% in reported rates.
Foreign Exchange
The Group continued to benefit from positive foreign exchange
movements during Q3, increasing our Q3 reported gross profit by
12.8 percentage points, or GBP17.8m. Cumulatively to the end of Q3,
foreign exchange has increased our reported gross profit by c.
GBP26m and operating profit by c. GBP6m. For the full year, should
current rates continue, we expect foreign exchange to increase our
reported gross profit by c. GBP45m and operating profit by c.
GBP10m.
Ongoing Investment
Having added 206 fee earners in 2015 and 45 in H1 2016, net fee
earner additions increased in Q3 to 132 mainly in our large, high
potential markets. These fee earner additions reflected the markets
in which we saw the greatest growth, particularly Europe, Mainland
China and Latin America, excluding Brazil. Our operational support
headcount increased by just 1 in the quarter and our fee earner to
operational support staff ratio remained at the record of
77:23.
Perm/Temp mix
Gross profit from permanent recruitment grew 13.8% in reported
rates and 1.0% in constant currencies, to GBP119.5m (Q3 2015:
GBP105.1m) and gross profit from temporary recruitment grew 14.9%
in reported rates and 2.0% in constant currencies, to GBP39.1m (Q3
2015: GBP34.0m). This resulted in a ratio of permanent to temporary
recruitment of 75:25. Excluding the UK, which experienced a
particularly strong temporary performance in Q3 2015, as well as
the effect of the UK Referendum result in Q3 2016, permanent
recruitment grew 3% and temporary grew 7%. The variation in these
growth rates between permanent and temporary recruitment continued
to be driven primarily by uncertainty in some of our markets,
leading to a lower number of permanent positions being filled and
an increase in the hiring of lower-risk temporary positions.
Q3 Gross Profit - Discipline analysis
Reported (GBPm) Constant
----------------------------------------------------------------- ----------- --------------------------- ---------
Year-on-year % of Group Q3 2016 Q3 2015 % %
----------------------------------------------------------------- ----------- -------- -------- ------- ---------
Finance & Accounting 39% 61.3 55.6 +10.4% -1.3%
----------------------------------------------------------------- ----------- -------- -------- ------- ---------
Legal, Technology, HR, Secretarial, Healthcare 22% 35.3 30.6 +15.4% +1.3%
----------------------------------------------------------------- ----------- -------- -------- ------- ---------
Engineering, Property & Construction, Procurement & Supply Chain 20% 32.2 25.8 +24.5% +10.3%
----------------------------------------------------------------- ----------- -------- -------- ------- ---------
Marketing, Sales & Retail 19% 29.8 27.1 +10.2% -2.0%
----------------------------------------------------------------- ----------- -------- -------- ------- ---------
Total 100% 158.6 139.1 +14.1% +1.3%
----------------------------------------------------------------- ----------- -------- -------- ------- ---------
Geographical analysis (unless otherwise stated all growth rates
are in constant currency)
EMEA Gross Profit (GBPm) Growth Rates
--------------------------- ---------------------- ------------------------
(42% of Group) Reported Constant
--------------------------- ---------- ---------- ----------- -----------
Q3 2016 vs. Q3 2015 66.8 51.6 +29.4% +10.4%
--------------------------- ---------- ---------- ----------- -----------
Headcount at 30 September 2016: 2,486 (30 June 2016: 2,427)
* France (13% of Group) +4% on Q3 2015
* Germany (7% of Group) +16% on Q3 2015
-----------------------------------------------------------------------------
EMEA Q3 gross profit grew 10.4% (Q2 2016: +13.6%). Both Page
Personnel and Michael Page delivered strong performances, with
growth of 13% and 8%, respectively. Our largest country in the
region, France, grew 4% and remained highly profitable, with a
record conversion rate. Growth in Germany improved, growing 16%
(from 8% in Q2), a record quarter, with Page Personnel up 24% (20%
in Q2). The Netherlands, which now represents 10% of the region,
continued to perform strongly, with growth of 19%. Southern Europe
performed well against a tough comparator of 28% in Q3 2015, with
growth of 14%. The Middle East and Africa, representing 5% of the
region, was down 2% (Q2 2016: -18%), as softer comparators
partially offset the continued weakness in oil and gas and ongoing
political instability.
UK Gross Profit (GBPm) Growth Rate
------------------------------ ---------------------- -----------------
(24% of Group)
------------------------------ ---------- ---------- -----------------
Q3 2016 vs. Q3 2015 37.8 39.7 -4.7%
------------------------------ ---------- ---------- -----------------
Headcount at 30 September 2016: 1,449 (30 June 2016: 1,466)
-------------------------------------------------------------------------
The UK declined 4.7% in the quarter, with continued uncertainty
following the result of the UK Referendum particularly impacting
our multi-national clients. Page Personnel, which has the greater
proportion of temporary business and represented 22% of the UK,
declined 3% compared to 5% in Michael Page. Among our disciplines,
Financial Services, which represents 4% of the UK, was down 14%.
Technology was our best performing discipline, with growth of 22%
and we also saw strong performances from our Legal and Logistics
disciplines. The mix of gross profit and growth rates of Private
Sector (88%) and Public Sector (12%) were -4% and -9%
respectively.
Asia Pacific Gross Profit (GBPm) Growth Rates
--------------------------- ---------------------- ------------------------
(20% of Group) Reported Constant
--------------------------- ---------- ---------- ----------- -----------
Q3 2016 vs. Q3 2015 32.3 28.3 +14.1% -4.7%
--------------------------- ---------- ---------- ----------- -----------
Headcount at 30 September 2016: 1,220 (30 June 2016: 1,176)
* Asia (14% of Group) -8% on Q3 2015
* Greater China (61% of Asia) -6% on Q3 2015
* Australasia (6% of Group) +4% on Q3 2015
-----------------------------------------------------------------------------
Asia Pacific gross profit declined 4.7%, due to continued
macro-economic concerns over Greater China and related contagion in
the wider Asian region. Asia was down 8%, with Greater China down
6%. With the uncertainty particularly impacting our multi-national
clients and Financial Services, our business in Hong Kong was down
15% against a tough comparator. However, our businesses across
Mainland China grew, collectively up 1%. Australasia, representing
31% of Asia Pacific, grew 4%. In Australia, which grew 2%, trading
in the mining states remained tough, while New South Wales and
Victoria both grew. Page Personnel Australia continued to perform
strongly, with growth of 12%. New Zealand delivered a record
result, with growth of 35%.
Americas Gross Profit (GBPm) Growth Rates
------------------------- ---------------------- ----------------------
(14% of Group) Reported Constant
------------------------- ---------- ---------- ---------- ----------
Q3 2016 vs. Q3 2015 21.7 19.5 +11.8% -2.0%
------------------------- ---------- ---------- ---------- ----------
Headcount at 30 September 2016: 897 (30 June 2016: 850)
* North America (7% of Group) -11% on Q3 2015
* Latin America (7% of Group) +10% on Q3 2015
* Brazil (35% of LatAm) -12% on Q3 2015
-------------------------------------------------------------------------
The Americas declined 2.0% in constant currencies. North America
was down 11% in the quarter, with the USA down 11% and Canada down
12%. While Financial Services for the Group represents only 6% and
was down 10%, we have a far greater exposure to the Financial
Services market in New York, which represented 29% of the US and
was down 41%. Excluding New York Financial Services, the rest of
our US businesses grew 13%, with double-digit growth in Boston,
Houston, Los Angeles, New Jersey and Philadelphia as we continued
to build our wider market presence. Latin America, which
represented 47% of the Americas, grew 10%. Brazil was down 12% on
Q3 2015, but with market conditions looking to have stabilised and
comparators easing, we expect growth rates to improve going
forward. Elsewhere, our other five countries, which now represent
65% of Latin America, had another strong quarter, growing
collectively at 23%. Within this, we saw continued good growth of
19% in Mexico and growth of over 50% in Argentina.
Financial Position
Save for the effects of trading in the third quarter described
above and the forthcoming payments of the 2016 interim and special
dividends amounting to GBP31.7m which will be paid on 12 October
2016, 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 2016.
Net cash at 30 September 2016, before the payment of the
dividends, was in the region of GBP100m (30 June 2016:
GBP73.6m).
Shares
At 30 September 2016 there were 325,957,955 Ordinary shares in
issue, of which 17,656,038 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 14,989,777 shares and
consequently these shares should be excluded when calculating
earnings per share. The total number of voting rights in the
Company is 325,957,955.
Cautionary Statement
This Third Quarter Trading Update has been prepared solely to
provide additional information to shareholders to assess the
Group's strategies and the potential for those strategies to
succeed. The Trading Update should not be relied on by any other
party or for any other purpose. This Trading Update contains
certain forward-looking statements. These statements are made by
the Directors in good faith based on the information available to
them up to the time of their approval of this Trading Update and
such statements should be treated with caution due to the inherent
uncertainties, including both economic and business risk factors,
underlying any such forward-looking information.
This Trading Update has been prepared for the Group as a whole
and therefore gives greater emphasis to those matters that are
significant to PageGroup and its subsidiary undertakings when
viewed as a whole.
Enquiries:
PageGroup +44 (0)20 3077 8425
Steve Ingham, Chief Executive Officer
Kelvin Stagg, Chief Financial Officer
FTI Consulting +44 (0)20 3727 1340
Richard Mountain / Susanne Yule
The Company will host a conference call and presentation for
analysts and investors at 8.30am today. The live presentation can
be viewed by following the link:
http://www.investis-live.com/pagegroup/57e8eb1a536f8c080016e4b5/we8hv3
Please use the following dial-in numbers to join the
conference:
United Kingdom (Local) 020 3059 8125
All other locations +44 20 3059 8125
Please quote "PageGroup" 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
11 October 2016 at:
http://www.page.com/investors/investor-library/2016.aspx
The Group will issue its Fourth Quarter Trading Update on 11
January 2017 and its Full Year Results on 7 March 2017.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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