TIDMPAGE
RNS Number : 4214B
PageGroup plc
10 January 2018
10 January 2018
PageGroup plc
FOURTH QUARTER AND FULL YEAR 2017 TRADING UPDATE
Q4 Highlights*
-- Group gross profit +13.8% (+11.7% in reported rates) up from +8.8% in Q3, a record quarter
-- EMEA +19.3%: France +28%; Germany +14%
-- Asia Pacific +14.9%: Asia +21%; Greater China +15%; Australia +2%
-- UK (18% of the Group) -2.8%; macro environment impacting some clients and senior candidates
-- Americas +18.8%: US +21%; LatAm +19%; Brazil +14%
-- Technical disciplines (23% of the Group) fastest growing at +25.7%
-- Record headcount of 7,029; investment in 220 fee earners in Q4
-- Strong balance sheet; net cash of c. GBP91m (Q4 2016: GBP93m)
Full Year Results*
-- Group gross profit +9.9% (+14.6% in reported rates) to GBP711.6m, a record year
-- FX increased reported gross profit by GBP29.4m and operating profit by c. GBP6m
-- 22 countries had record gross profit years
-- Increase of 786 fee earners (+16.7%); fee earner to
operational support staff joiners ratio of 85:15, resulting in
overall ratio at a record 78:22
-- Operating profit expected to be ahead of consensus, but
within the range of current market forecasts (Company compiled
consensus of GBP115.0m, with a range of GBP112.0m - GBP119.0m)
* in constant currencies except where stated
Q4 GROSS PROFIT ANALYSIS
Reported (GBPm) Constant
-------------- ----------- --------------------------- ---------
Year-on-year % of Group Q4 2017 Q4 2016 % %
-------------- ----------- -------- -------- ------- ---------
EMEA 50% 90.9 75.9 +19.7% +19.3%
-------------- ----------- -------- -------- ------- ---------
Asia Pacific 18% 33.5 30.9 +8.4% +14.9%
-------------- ----------- -------- -------- ------- ---------
UK 18% 32.9 33.8 -2.8% -2.8%
-------------- ----------- -------- -------- ------- ---------
Americas 14% 25.1 22.7 +11.0% +18.8%
-------------- ----------- -------- -------- ------- ---------
Total 100% 182.4 163.3 +11.7% +13.8%
-------------- ----------- -------- -------- ------- ---------
Permanent 75% 136.1 122.5 +11.1% +13.6%
-------------- ----------- -------- -------- ------- ---------
Temporary 25% 46.3 40.8 +13.6% +14.4%
-------------- ----------- -------- -------- ------- ---------
FULL YEAR GROSS PROFIT ANALYSIS
Reported (GBPm) Constant
-------------- ----------- --------------------------- ---------
Year-on-year % of Group FY 2017 FY 2016 % %
-------------- ----------- -------- -------- ------- ---------
EMEA 47% 332.3 271.9 +22.2% +15.0%
-------------- ----------- -------- -------- ------- ---------
UK 20% 140.8 146.3 -3.8% -3.8%
-------------- ----------- -------- -------- ------- ---------
Asia Pacific 19% 137.2 119.7 +14.6% +10.2%
-------------- ----------- -------- -------- ------- ---------
Americas 14% 101.3 83.1 +21.9% +16.4%
-------------- ----------- -------- -------- ------- ---------
Total 100% 711.6 621.0 +14.6% +9.9%
-------------- ----------- -------- -------- ------- ---------
Permanent 75% 536.4 470.0 +14.1% +9.5%
-------------- ----------- -------- -------- ------- ---------
Temporary 25% 175.2 151.0 +16.0% +10.9%
-------------- ----------- -------- -------- ------- ---------
Steve Ingham, Chief Executive Officer, said:
"The Group delivered record gross profit in both the fourth
quarter and the full year. Our Q4 gross profit of GBP182.4m grew
13.8%, up from 8.8% in Q3, and our full year gross profit of
GBP711.6m was up 9.9% on the prior year in constant currencies.
"In the quarter, Continental Europe, Asia and the Americas
delivered strong performances and we saw improvements and a return
to growth in Australia, Brazil and Singapore. However, the UK
continued to experience challenging market conditions, with the
macro environment impacting some clients and senior candidates.
"Foreign exchange had a negative impact on our fourth quarter
results, reducing our reported gross profit by GBP3.4m and
operating profit by c. GBP1m, mainly due to currency movements in
Asia Pacific and the Americas. However, for the full year, foreign
exchange benefited our results, increasing our reported gross
profit by GBP29.4m and operating profit by c. GBP6m.
"Our strategy of continued investment in our five Large, High
Potential Markets of Greater China, Germany, Latin America, South
East Asia and the US resulted in combined fourth quarter growth,
ahead of the Group average, at +18%. There were some exceptional
individual performances in this strategic category, with the US
+21% and Greater China +15%, driven by Mainland China +23%. In
Germany, where we continue to invest in the temporary and
contracting markets, growth improved from the third quarter, from
+9% to +14%. Latin America delivered a record quarter, up 19%, with
all countries delivering double digit growth, including a return to
growth in Brazil, up +14%. South East Asia grew +27% with Singapore
up +33%, and our newest country, Thailand, profitable and
performing well.
"Elsewhere, France, our second largest market after the UK and
now 17% of the Group, delivered another record performance, +28% in
the quarter. Elsewhere in Continental Europe, we saw a number of
strong performances, with Belgium, Poland, Portugal and Switzerland
all growing in excess of 25%. In Asia, our continued investment in
Japan delivered growth of 41%. Australia, 4% of the Group, was up
2%, an improvement on its performance in Q3 (-2%). The UK, however,
was down -2.8%, with client and candidate confidence levels
continuing to be impacted by the ongoing uncertainty around the
macro environment.
"Our focus on investing in our Large, High Potential Markets, as
well as in businesses experiencing strong growth resulted in 220
additional fee earners in the quarter and 786, +16.7%, in the year.
Total fee earner headcount is now 5,497, with a total headcount of
7,029, giving a ratio of fee earners to operational support of
78:22; all records for the Group.
"Cash generation in the quarter was strong, with net cash of c.
GBP91m at the end of the quarter, after payment of the interim and
special dividends of GBP52.3m on 11 October 2017.
"Looking forward, we remain cautious in several markets as we
enter 2018: primarily in the UK, where we will continue to focus on
protecting margins whilst investing in structural opportunities; in
Australia, where we have invested in headcount and a new office in
Canberra; and in Brazil, which remains challenging, despite a
stronger performance in the fourth quarter. However, we will
continue to invest in our Large High Potential Markets, as well as
in markets with favourable trading conditions, both existing and
new markets, such as India and the Nikkei market in Japan. We will,
as always, continue to focus on driving profitable growth while
being able to respond quickly to changes in market conditions.
"Full year operating profit is expected to be ahead of
consensus, but within the range of current market forecasts*."
* (Company compiled consensus of GBP115.0m, with a range of
GBP112.0m - GBP119.0m)
Group Trading Update
PageGroup delivered fourth quarter gross profit of GBP182.4m, up
13.8% in constant currencies and 11.7% in reported rates. For the
full year, Group gross profit was a record GBP711.6m, up 9.9% in
constant currencies and 14.6% in reported rates.
Foreign Exchange
Foreign exchange impacted the Group negatively in the quarter,
reducing our reported gross profit by 2.1 percentage points or
GBP3.4m and operating profit by c. GBP1m. For the full year,
foreign exchange increased our reported gross profit by c. GBP29.4m
and operating profit by c. GBP6m.
Ongoing Investment
Having added 276 fee earners in H1 2017 and 290 in Q3, we added
a further 220 in Q4, mainly in our Large, High Potential Markets,
as well as those where we saw the greatest growth, such as France
and Japan. Our operational support headcount increased by 59 in the
quarter to leave our fee earner to operational support staff ratio
at the record of 78:22.
We continue to invest in our digital strategy and have seen this
rewarded in the quarter, as we have been recognised by LinkedIn for
the second time, winning the global award for the Most Socially
Engaged Recruitment Company.
Perm/Temp mix
Our mix of permanent to temporary recruitment reflects the
balance of our business mix, both in terms of brands, where Michael
Page, our largest brand, operating at higher salary levels, has a
naturally higher level of permanent recruitment, as well as our
geographic mix. We are market leaders in regions such as Latin
America, Greater China and South East Asia, where for cultural
reasons, white collar temporary recruitment has only recently
emerged.
Gross profit from permanent recruitment grew 11.1% in reported
rates and 13.6% in constant currencies, to GBP136.1m (Q4 2016:
GBP122.5m) and gross profit from temporary recruitment grew 13.6%
in reported rates and 14.4% in constant currencies, to GBP46.3m (Q4
2016: GBP40.8m). This resulted in a ratio of permanent to temporary
recruitment of 75:25.
Q4 Gross Profit - Discipline analysis
Reported (GBPm) Constant
---------------------------------------------------------------- ----------- ---------------------------- ---------
Year-on-year % of Group Q4 2017 Q4 2016 % %
---------------------------------------------------------------- ----------- -------- --------- ------- ---------
Accounting and Financial Services 37% 67.6 61.9 +9.2% +11.1%
---------------------------------------------------------------- ----------- -------- --------- ------- ---------
Engineering, Property & Construction, Procurement & Supply
Chain 23% 41.9 33.8 +23.9% +25.7%
---------------------------------------------------------------- ----------- -------- --------- ------- ---------
Legal, Technology, HR, Secretarial, Healthcare 23% 41.2 36.7 +12.4% +15.1%
---------------------------------------------------------------- ----------- -------- --------- ------- ---------
Marketing, Sales and Retail 17% 31.7 30.9 +2.6% +4.8%
---------------------------------------------------------------- ----------- -------- --------- ------- ---------
Total 100% 182.4 163.3 +11.7% +13.8%
---------------------------------------------------------------- ----------- -------- --------- ------- ---------
Geographical analysis (unless otherwise stated all growth rates
are in constant currencies)
EMEA Gross Profit (GBPm) Growth Rates
------------------- ---------------------- ----------------------
(50% of Group) Reported Constant
------------------- ----------- --------- ---------- ----------
Q4 2017 vs. Q4
2016 90.9 75.9 +19.7% +19.3%
------------------- ----------- --------- ---------- ----------
2017 vs. 2016 332.3 271.9 +22.2% +15.0%
------------------- ----------- --------- ---------- ----------
Headcount at 31 December 2017: 2,996 (30 September
2017: 2,854)
* France (17% of Group) +28% on Q4 2016
* Germany (7% of Group) +14% on Q4 2016
-------------------------------------------------------------------
In EMEA, gross profit grew 19.3% (Q3 2017: +12.6%) to GBP90.9m,
a record quarter. Both Michael Page and Page Personnel delivered
strong performances, with growth of 20% and 19%, respectively.
Following an investment in fee earner headcount of 124 (+23%) in
the year, our largest country in the region, France, representing
17% of the Group, grew 28%, a record quarter, with strong
performances across all brands. Germany delivered growth of 14%, a
record quarter, and an improvement on Q3 (+9%). Spain delivered
double-digit growth, despite the political uncertainly in
Catalonia. Benelux continued to perform well, with Belgium the
stand out result, and there were strong performances in Poland,
Portugal and Switzerland, all growing in excess of 25%. Overall,
Continental Europe grew 20%.
Asia Pacific Gross Profit Growth Rates
(GBPm)
------------------------- ----------------- ----------------------
(18% of Group) Reported Constant
------------------------- -------- ------- ---------- ----------
Q4 2017 vs. Q4 2016 33.5 30.9 +8.4% +14.9%
------------------------- -------- ------- ---------- ----------
2017 vs. 2016 137.2 119.7 +14.6% +10.2%
------------------------- -------- ------- ---------- ----------
Headcount at 31 December 2017: 1,532 (30 September
2017: 1,438)
* Asia (14% of Group) +21% on Q4 2016
* Greater China (8% of Group and 58% of Asia) +15% on
Q4 2016
* Australasia (4% of Group) +1% on Q4 2016
--------------------------------------------------------------------
In Asia Pacific, gross profit increased 14.9%, up from 13.9% in
Q3. In Asia, which is three quarters of the region, we grew 21%,
with Greater China up 15%. In Mainland China, where we now have 7
offices and c. 350 fee earners, we grew by 23%. In South East Asia,
we grew 27%, with particularly strong performances from Indonesia
and Singapore, which both grew over 30%. Our investment in Japan,
with fee earner headcount up 51% in the last year, delivered a
record quarter with growth of 41%, up from 31% in Q3. In Australia,
following recent fee earner investment, up 25% in the year, and a
new office in Canberra, there was a return to growth, up 2% in
Q4.
Gross Profit
UK (GBPm) Growth Rate
------------------------- ---------------- -------------
(18% of Group)
------------------------- ------- ------- -------------
Q4 2017 vs. Q4 2016 32.9 33.8 -2.8%
------------------------- ------- ------- -------------
2017 vs. 2016 140.8 146.3 -3.8%
------------------------- ------- ------- -------------
Headcount at 31 December 2017: 1,407 (30 September
2017: 1,407)
----------------------------------------------------------
In the UK, the decline in gross profit slowed to -2.8% in the
quarter, from -7.6% in Q3. The macro environment continued to
impact confidence, particularly among some of our multinational
clients and more senior permanent candidates. Both temporary and
permanent recruitment were affected equally. Page Personnel, which
represented 23% of the UK, declined -2% compared to -3% in Michael
Page. Within the disciplines, Financial Services, 5% of the UK,
grew 4%. The Private Sector (87% of the UK) was down 2% and the
Public Sector (13% of the UK) declined by 10%.
Americas Gross Profit Growth Rates
(GBPm)
---------------------- --------------- --------------------
(14% of Group) Reported Constant
---------------------- -------- ----- --------- ---------
Q4 2017 vs. Q4 2016 25.1 22.7 +11.0% +18.8%
---------------------- -------- ----- --------- ---------
2017 vs. 2016 101.3 83.1 +21.9% +16.4%
---------------------- -------- ----- --------- ---------
Headcount at 31 December 2017: 1,094 (30 September
2017: 1,051)
* North America (8% of Group) +19% on Q4 2016
* Latin America (6% of Group) +19% on Q4 2016
-------------------------------------------------------------
In the Americas, we grew 18.8% in the quarter, up marginally
from 18.4% growth in Q3. North America grew 19%, with the US up
21%, where our strategy of diversification continued, with strong
performances from our regional offices (+32%), particularly from
our offices in Chicago, Houston and Los Angeles. Latin America grew
19%, with Brazil, which represented a third of Latin America,
returning to growth, up 14%. All countries in Latin America
delivered double digit growth, with record performances from
Argentina, Mexico and Peru.
Financial Position
Save for the effects of trading in the fourth quarter described
and the payments of the 2017 interim and special dividends
amounting to GBP52.3m on 11 October 2017, there have been no other
significant changes in the financial position of the Group since
the publication of the results for the Third Quarter Trading Update
ended 30 September 2017.
Net cash at 31 December 2017 was in the region of GBP91m (31
December 2016: GBP93m).
Shares
At 31 December 2017 there were 326,808,701 Ordinary shares in
issue, of which 14,311,816 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 11,181,237 shares and
consequently these shares should be excluded when calculating
earnings per share. The total number of voting rights in the
Company is 326,808,701
Cautionary Statement
This Fourth Quarter and Full Year 2017 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 8.30 am today. The live presentation can
be viewed by following the link:
http://www.investis-live.com/pagegroup/5a2522ac1563731100bba23b/tjss
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 08 55 15 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
10 January 2018 at:
http://www.page.com/investors/investor-library
The Group will issue its Full Year Results on 7 March 2018 and
its First Quarter 2018 Trading Update on 11 April 2018.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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