TIDMPAGE
RNS Number : 2532T
PageGroup plc
11 October 2017
11 October 2017
PageGroup plc
THIRD QUARTER 2017 TRADING UPDATE
Q3 Highlights - in constant currencies
-- Group gross profit growth of +8.8% (+11.8% in reported rates)
-- EMEA +12.6%; France +21%
-- Asia Pacific +13.9%; Asia +22% (including Greater China +21%); Australia -2%
-- UK -7.6%; Michael Page -8%, Page Personnel -5%
-- Americas +18.4%; US +29%; LatAm +9%
-- Technical disciplines (22% of Group) fastest growing at +17.8%
-- Record headcount of 6,750; +290 fee earners in Q3; +566 (+12%) year to date
-- New record ratio of fee earner to operational support staff: 78:22
-- Strong balance sheet, net cash of c. GBP109m (Q2 2017: GBP89m, Q3 2016: GBP100m)
-- Interim and special dividends paid today, 11 October, of GBP52.3m
Q3 GROSS PROFIT ANALYSIS
Reported (GBPm) Constant
-------------- ----------- --------------------------- ---------
Year-on-year % of Group Q3 2017 Q3 2016 % %
-------------- ----------- -------- -------- ------- ---------
EMEA 45% 79.3 66.8 +18.7% +12.6%
-------------- ----------- -------- -------- ------- ---------
Asia Pacific 21% 37.0 32.3 +14.6% +13.9%
-------------- ----------- -------- -------- ------- ---------
UK 19% 34.9 37.8 -7.6% -7.6%
-------------- ----------- -------- -------- ------- ---------
Americas 15% 26.1 21.7 +20.1% +18.4%
-------------- ----------- -------- -------- ------- ---------
Total 100% 177.3 158.6 +11.8% +8.8%
-------------- ----------- -------- -------- ------- ---------
Permanent 75% 133.4 119.3 +11.8% +9.1%
-------------- ----------- -------- -------- ------- ---------
Temporary 25% 43.9 39.3 +11.9% +7.8%
-------------- ----------- -------- -------- ------- ---------
Steve Ingham, Chief Executive Officer, said:
"The Group delivered gross profit growth of 8.8% in constant
currencies and 11.8% at reported rates. Continental Europe, the
Americas and Asia delivered strong performances. However the UK,
Singapore and Brazil continued to experience challenging market
conditions. The benefit from positive foreign exchange movements
continued, adding c. GBP5 million to our gross profit and c. GBP1
million to operating profit in the quarter. However, if the
exchange rates at the end of Q3 continued, this benefit would
reverse in Q4.
"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 growth of 17%, and they
now represent more than a third of the Group.
"There were particularly strong performances from the US, +29%,
and Greater China, +21%, with Mainland China +26%. Germany was +9%
as we continued to invest in the temporary and contract markets. In
South East Asia, +20% and Latin America +9%, we had exceptional
performances from individual countries such as Argentina,
Indonesia, Malaysia and Peru. Both regions were held back by
challenging markets, in Singapore and Brazil, respectively.
However, each of these countries improved in the quarter and are
now flat year-on-year.
"Elsewhere, France, our second largest market after the UK, and
15% of the Group, continued to grow strongly, +21%. Other countries
in Continental Europe performed well, particularly Belgium, the
Netherlands, Poland and Spain, all growing in excess of 15%. In
Asia, India and Japan also had excellent quarters, growing at 18%
and 31% respectively. The UK, however, was down -7.6%, with client
and candidate confidence levels continuing to be impacted by the
Brexit negotiations and political uncertainty. Australia, 6% of the
Group, was down -2%. However, we have increased fee earner
headcount by 17% year to date to support the management changes
made previously and opened a new office in Canberra.
"Our focus on investing in our Large, High Potential Markets as
well as businesses experiencing strong growth resulted in 290
additional fee earners in the quarter and 566, +12%, since the
start of the year. Total fee earner headcount is now 5,277, with
total headcount at 6,750, which gives a ratio of fee earners to
operational support of 78:22; all new records for the Group.
"Cash generation in the period was strong, with net cash of c.
GBP109m at the end of the quarter. This will reduce today by
GBP52.3m as we pay shareholders both the interim and special
dividends.
"We are pleased with the strong performances across the majority
of our regions. However, there remain a number of challenges as we
continue through 2017 and into 2018: the UK, where we will continue
to focus on protecting margins and investing in structural
opportunities; Australia, where we have invested in headcount and a
new office; and Brazil, which remains challenging, despite results
improving from negative to flat year-on-year growth.
"Elsewhere, we continue to invest to take advantage of markets
with favourable trading conditions, as well as in our Large High
Potential Markets 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. Our outlook for full year operating profit
remains in line with current consensus*."
* Company compiled consensus operating profit of GBP113.0m
Group Trading Update
PageGroup delivered third quarter gross profit of GBP177.3m, up
8.8% in constant currencies and 11.8% in reported rates.
Foreign Exchange
The Group continued to benefit from positive foreign exchange
movements during the quarter, increasing our Q3 reported gross
profit by 3.0 percentage points, or c. GBP5m and operating profit
by c. GBP1m. Cumulatively to the end of Q3, foreign exchange has
increased our reported gross profit by c. GBP33m and operating
profit by c. GBP7m. For the fourth quarter, should exchange rates
at the end of Q3 continue, we expect foreign exchange to reduce our
reported gross profit by c. GBP3m and operating profit by c.
GBP1m.
Ongoing Investment
Having added 227 fee earners in 2016 and 276 in H1 2017, net fee
earner additions increased in Q3 by a further 290 mainly in our
Large, High Potential Markets as well as those where we saw the
greatest growth, such as France and Germany. Our operational
support headcount increased by just 12 in the quarter and our fee
earner to operational support staff ratio improved to a new record
of 78:22.
Perm/Temp mix
Gross profit from permanent recruitment grew 11.8% in reported
rates and 9.1% in constant currencies, to GBP133.4m (Q3 2016:
GBP119.3m) and gross profit from temporary recruitment grew 11.9%
in reported rates and 7.8% in constant currencies, to GBP43.9m (Q3
2016: GBP39.3m). This resulted in a ratio of permanent to temporary
recruitment of 75:25.
Q3 Gross Profit - Discipline analysis
Reported (GBPm) Constant
----------------------------------------------------------------- ----------- --------------------------- ---------
Year-on-year % of Group Q3 2017 Q3 2016 % %
----------------------------------------------------------------- ----------- -------- -------- ------- ---------
Accounting and Financial Services 37% 65.3 60.7 +7.5% +4.7%
----------------------------------------------------------------- ----------- -------- -------- ------- ---------
Legal, Technology, HR, Secretarial, Healthcare 23% 40.6 35.3 +14.9% +12.3%
----------------------------------------------------------------- ----------- -------- -------- ------- ---------
Engineering, Property & Construction, Procurement & Supply Chain 22% 39.6 32.6 +21.5% +17.8%
----------------------------------------------------------------- ----------- -------- -------- ------- ---------
Marketing, Sales & Retail 18% 31.8 30.0 +6.0% +3.2%
----------------------------------------------------------------- ----------- -------- -------- ------- ---------
Total 100% 177.3 158.6 +11.8% +8.8%
----------------------------------------------------------------- ----------- -------- -------- ------- ---------
Geographical analysis (unless otherwise stated all growth rates
are in constant currency)
EMEA Gross Profit (GBPm) Growth Rates
------------------ ---------------------- --------------------
(45% of Group) Reported Constant
------------------ ---------- ---------- --------- ---------
Q3 2017 vs. Q3
2016 79.3 66.8 +18.7% +12.6%
------------------ ---------- ---------- --------- ---------
Headcount at 30 September 2017: 2,854 (30 June
2017: 2,718)
* France (15% of Group) +21% on Q3 2016
* Germany (7% of Group) +9% on Q3 2016
----------------------------------------------------------------
EMEA Q3 gross profit grew 12.6% (Q2 2017: +13.2%). Both Page
Personnel and Michael Page delivered strong performances, with
growth of 14% and 11%, respectively. Following an investment in fee
earner headcount of 78 (14%) YTD, our largest country in the
region, France (+21%) delivered a third successive quarter of
growth in excess of 20%, with strong performances in both brands.
Germany delivered growth of 9%, with a record quarter for our
Interim business. The Netherlands continued to perform well and a
strong performance in Spain drove growth of 10% overall for
Southern Europe. There were record performances in Belgium, Germany
and Poland.
Gross Profit
Asia Pacific (GBPm) Growth Rates
-------------------------- --------------- ------------------------
(21% of Group) Reported Constant
-------------------------- ------- ------ ----------- -----------
Q3 2017 vs. Q3 2016 37.0 32.3 +14.6% +13.9%
-------------------------- ------- ------ ----------- -----------
Headcount at 30 September 2017: 1,438 (30 June
2017: 1,298)
* Asia (15% of Group) +22% on Q3 2016
* Greater China (9% of Group and 61% of Asia) +21% on
Q3 2016
* Australasia (6% of Group) -4% on Q3 2016
---------------------------------------------------------------------
In Asia Pacific, now our second largest region, gross profit
increased 13.9%, up from 6.8% in Q2. Asia, three quarters of the
region, grew 22%, with Greater China showing a notable improvement,
up 21% (Q2 2017: +11%), a record quarter. Mainland China, where we
have a higher proportion of domestic clients, had a particularly
strong performance with growth of 26%. South East Asia grew 20%,
with our newest country, Thailand, performing to plan. Our
investment in Japan, with fee earner headcount up 27% over the last
year, delivered growth of 31%, up from 20% in Q2. In Australia,
which declined by 2%, we have increased fee earner headcount by 17%
year to date to support the management changes made previously and
opened a new office in Canberra. We are confident this will improve
our growth rate in the future. There were record performances from
Greater China, Indonesia, Malaysia and Thailand.
Gross Profit
UK (GBPm) Growth Rate
------------------------ --------------- -------------
(19% of Group)
------------------------ -------- ----- -------------
Q3 2017 vs. Q3 2016 34.9 37.8 -7.6%
------------------------ -------- ----- -------------
Headcount at 30 September 2017: 1,407 (30 June
2017: 1,424)
--------------------------------------------------------
The UK declined 7.6% in the quarter, with Brexit and political
uncertainty continuing to impact confidence, particularly amongst
our multi-national clients and the more senior permanent
candidates. Our temporary business was impacted less, down 2%, with
permanent down 10%. Page Personnel, which represented 22% of the
UK, declined -5% compared to -8% in Michael Page. Within the
disciplines, Property & Construction was our best performing,
with growth of 7%, while Financial Services, now only 5% of the UK,
was flat. Both the Private Sector (88% of the UK) and the Public
Sector (12% of the UK) declined by 8%.
Gross Profit
Americas (GBPm) Growth Rates
----------------------- --------------- --------------------
(15% of Group) Reported Constant
----------------------- -------- ----- --------- ---------
Q3 2017 vs. Q3 2016 26.1 21.7 +20.1% +18.4%
----------------------- -------- ----- --------- ---------
Headcount at 30 September 2017: 1,051 (30 June
2017: 1,008)
* North America (8% of Group) +27% on Q3 2016
* Latin America (7% of Group) +9% on Q3 2016
--------------------------------------------------------------
The Americas was our fastest growing region and grew 18.4% in
constant currencies. North America grew 27% in the quarter, with
the US up 29% and Canada up 3%. In the US, our strategy of
diversification continued, with strong performances from our
regional offices (+31%). We also saw a return to growth in the
Financial Services market in New York, now a quarter of our US
business, which grew 26%. Latin America grew 9%, with Brazil, now a
third of Latin America, flat. Elsewhere, our other countries in
Latin America had another strong quarter, growing 14%. In the
region there were record performances in Argentina, Colombia, Peru
and the US.
Financial Position
Save for the effects of trading in the third quarter described
above and the forthcoming payments of the 2017 interim and special
dividends amounting to GBP52.3m which are being paid today, 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 2017.
Net cash at 30 September 2017, before the payment of the
dividends, was in the region of GBP109m (30 June 2017: GBP89m).
Shares
At 30 September 2017 there were 326,771,276 Ordinary shares in
issue, of which 14,752,475 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 11,621,896 shares and
consequently these shares should be excluded when calculating
earnings per share. The total number of voting rights in the
Company is 326,771,276.
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 9.00 am today. The live presentation can
be viewed by following the link:
http://www.investis-live.com/pagegroup/599317e11eb5570b000b7457/bewa
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 2017 at:
http://www.page.com/investors/investor-library/2017.aspx
The Group will issue its Fourth Quarter Trading Update on 10
January 2018 and its Full Year Results on 7 March 2018.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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