TIDMPAGE
RNS Number : 2320U
PageGroup plc
11 July 2018
11 July 2018
PageGroup plc
SECOND QUARTER AND FIRST HALF 2018 TRADING UPDATE
Q2 Gross profit growth of 16.0%
Q2 Highlights*
-- Strong growth of 16.0% (14.5% in reported rates); a record
quarterly gross profit of GBP208.2m
-- Large, High Potential markets (33% of Group) +24%
-- EMEA +18.6%; France +15%; Germany +25%
-- Asia Pacific +18.4%; Greater China +18%; SE Asia +18%; Australia +10%
-- Launched in Vietnam, fifth country in SE Asia
-- UK (17% of Group) -1.9%; market sentiment remains cautious
-- Strongest growth in Americas +29.2%; US +27%; Latin America +32%; Brazil +23%
-- Technical disciplines fastest growing at +26.4%
-- Record headcount at 7,457, +136 fee earners in Q2 (+183 in Q1); +10 support staff
-- Strong balance sheet, net cash c. GBP85m (Q1 2018: c. GBP91m; Q2 2017: c. GBP89m)
-- 2018 Operating profit expected to be slightly ahead of
consensus of current market forecasts**
* in constant currencies except where stated
** company compiled consensus of GBP134m
Q2 GROSS PROFIT ANALYSIS
Reported (GBPm) Constant
Year-on-year % of Group Q2 2018 Q2 2017 % %
----------- -------- -------- ------- ---------
EMEA 48% 100.0 83.5 +19.8% +18.6%
----------- -------- -------- ------- ---------
Asia Pacific 20% 41.3 35.8 +15.3% +18.4%
----------- -------- -------- ------- ---------
UK 17% 36.0 36.6 -1.9% -1.9%
----------- -------- -------- ------- ---------
Americas 15% 30.9 25.9 +19.6% +29.2%
----------- -------- -------- ------- ---------
Total 100% 208.2 181.8 +14.5% +16.0%
----------- -------- -------- ------- ---------
Permanent 78% 161.5 139.6 +15.7% +17.6%
----------- -------- -------- ------- ---------
Temporary 22% 46.7 42.2 +10.5% +10.7%
----------- -------- -------- ------- ---------
H1 GROSS PROFIT ANALYSIS
Reported (GBPm) Constant
Year-on-year % of Group H1 2018 H1 2017 % %
----------- -------- -------- ------- ---------
EMEA 49% 194.8 162.1 +20.2% +18.5%
----------- -------- -------- ------- ---------
Asia Pacific 19% 74.2 66.7 +11.3% +16.3%
----------- -------- -------- ------- ---------
UK 18% 69.7 73.0 -4.5% -4.5%
----------- -------- -------- ------- ---------
Americas 14% 57.3 50.2 +14.1% +24.9%
----------- -------- -------- ------- ---------
Total 100% 396.0 352.0 +12.5% +14.2%
----------- -------- -------- ------- ---------
Permanent 77% 303.6 267.3 +13.6% +15.8%
----------- -------- -------- ------- ---------
Temporary 23% 92.4 84.7 +9.0% +9.2%
----------- -------- -------- ------- ---------
Commenting, Steve Ingham, Chief Executive Officer said:
"The Group grew 16.0% in constant currencies in Q2, delivering a
record quarterly gross profit of GBP208.2m, with 20 countries
growing over 20%. This is the first time the Group has generated
more than GBP200m in a quarter and is the highest quarterly growth
rate for seven years.
"Our Large, High Potential markets grew 24% collectively, with
all five delivering record quarters. Germany continued its strong
performance from Q1, with growth of 25%. In Asia Pacific, both
Greater China and South East Asia grew 18% and we opened in
Vietnam, our fifth country in South East Asia. The US grew 27% and
Latin America was up 32%, including Brazil up 23% and Mexico up
25%. The other four countries in Latin America, with headcount of
over 300, grew 46% collectively.
"In our Large, Proven markets, the UK, now 17% of the Group,
with continued impact from the uncertainty related to Brexit, was
down -1.9%, an improvement on the -7.1% in Q1, benefiting from the
timing of Easter. France, 16% of the Group, whilst challenged by
mid-week bank holidays and the disruption of strikes, grew 15%.
Both Italy and the Netherlands grew strongly up 23% and 18%,
respectively. However, the political challenges in Catalonia
limited our growth in Spain to 8%. In Australia, following our
investments in fee earner headcount and a new office in Canberra,
we continued to see improvement, with growth of 10%.
"Outside these two categories, we saw strong growth in the
majority of our other markets. India and Japan had record
performances as a result of our continued investment, growing 27%
and 35% respectively. Other standout performances were Belgium,
Canada and Portugal up 41%, 30% and 34%, respectively.
"Adverse foreign exchange movements impacted our reported
performance, decreasing gross profit by c. GBP3m in Q2.
Demonstrating our continued confidence in many of our markets, the
Group added 136 fee earners in the quarter and now has a record
total headcount of 7,457. This investment has been mainly into our
Large, High Potential markets.
"We are pleased with the Group's strong performance in the first
half. However, there remain challenges in a number of our markets,
including Brexit in the UK, trading in Catalonia and forthcoming
elections in Latin America.
"We will continue to focus on driving profitable growth as we
progress towards our Vision of 10,000 headcount, GBP1bn of gross
profit and GBP200m - GBP250m of operating profit, while being able
to respond quickly to any changes in market conditions. In 2018 we
now expect operating profit to be slightly ahead of the consensus
of current market forecasts*."
*company compiled consensus of GBP134m.
Group Trading Update
PageGroup delivered a record quarterly gross profit of
GBP208.2m, up 16.0% in constant currencies and 14.5% in reported
rates. Adverse foreign exchange movements decreased our reported
gross profit by c. GBP3m in Q2 and c. GBP6m for the first half of
the year. In constant currencies, both Michael Page and Page
Personnel grew 16%.
Headcount
Having added 786 fee earners in 2017, net fee earner additions
in H1 2018 were 319, with 183 in Q1 and 136 in Q2. Our operational
support headcount increased by 10 in the quarter, giving a joiner
ratio of fee earner to operational support staff of 93:7. Our
overall fee earner to operational support staff ratio remained at
the record of 78:22, with 5,816 fee earners and a total headcount
of 7,457.
Perm/Temp mix
In constant currencies, Group gross profit from permanent
recruitment was up 17.6% in Q2, with temporary recruitment growth
slower at 10.7%. Permanent recruitment grew 15.7% in reported rates
to GBP161.5m and temporary recruitment grew 10.5% to GBP46.7m. This
resulted in a ratio of permanent to temporary recruitment of
78:22.
Q2 Gross Profit - Discipline analysis
Reported (GBPm) Constant
Year-on-year % of Group Q2 2018 Q2 2017 % %
----------- -------- -------- ------- ---------
Finance
Accounting and Financial Services 34% 71.8 66.7 +7.7% +9.1%
----------- -------- -------- ------- ---------
Technical
Engineering, Property & Construction, Procurement & Supply
Chain 24% 50.0 39.9 +25.2% +26.4%
----------- -------- -------- ------- ---------
Professional Services
Legal, Technology, HR, Secretarial, Healthcare 24% 49.8 41.4 +20.1% +21.7%
----------- -------- -------- ------- ---------
Marketing, Sales and Retail 18% 36.6 33.8 +8.4% +10.1%
----------- -------- -------- ------- ---------
Total 100% 208.2 181.8 +14.5% +16.0%
----------- -------- -------- ------- ---------
Our strategy to diversify and operate from a more balanced
portfolio of disciplines continued, with the Accounting and
Financial Services disciplines representing 34% of the Group,
whilst the other disciplines now represent two-thirds of the Group,
a new record, up from 63% at the end of 2017. The strongest
performing disciplines continued to be our technical disciplines,
which grew 26.4% collectively in constant currencies and are now
our second largest category. Our Professional Services discipline
category grew 21.7%, with particularly strong growth in our
Technology discipline.
H1 Gross Profit - Discipline analysis
Reported (GBPm) Constant
Year-on-year % of Group H1 2018 H1 2017 % %
----------- -------- -------- ------- ---------
Finance
Accounting and Financial Services 34% 136.3 130.0 +4.9% +6.4%
----------- -------- -------- ------- ---------
Technical
Engineering, Property & Construction, Procurement & Supply
Chain 24% 95.1 76.4 +24.6% +26.1%
----------- -------- -------- ------- ---------
Professional Services
Legal, Technology, HR, Secretarial, Healthcare 24% 94.6 79.3 +19.2% +21.3%
----------- -------- -------- ------- ---------
Marketing, Sales and Retail 18% 70.0 66.3 +5.5% +7.3%
----------- -------- -------- ------- ---------
Total 100% 396.0 352.0 +12.5% +14.2%
----------- -------- -------- ------- ---------
Geographical analysis (unless otherwise stated all growth rates
are in constant currency)
EMEA Gross Profit (GBPm) Growth Rates
(48% of Group) Reported Constant
----------- --------- ---------- ----------
Q2 2018 vs. Q2 2017 100.0 83.5 +19.8% +18.6%
----------- --------- ---------- ----------
H1 2018 vs. H1 2017 194.8 162.1 +20.2% +18.5%
----------- --------- ---------- ----------
Headcount at 30 June 2018: 3,175 (31 March 2018: 3,105)
Gross profit growth in constant currencies:
* France (16% of Group) +15%
* Germany (7% of Group) +25%
EMEA grew gross profit by 18.6% to GBP100.0m, with 7 countries
achieving record quarters. Michael Page and Page Personnel
continued to perform strongly across the region up 21% and 16%,
respectively. France, representing 16% of the Group, grew 15%, a
record quarter, despite challenges of mid-week bank holidays and
the disruption of strikes. Germany, one of our Large, High
Potential markets, grew 25%, a sixth consecutive record quarter.
Michael Page Interim, now around 20% of our German business, grew
38%, up from 31% in Q1. Southern Europe delivered a second
consecutive record quarter, growing 15%, with Italy up 23% and
Spain up 8%, despite continued tough trading conditions in
Catalonia. Benelux grew 24%, with the Netherlands and Belgium up
18% and 41%, respectively. The Middle East and Africa grew 30%,
with a record quarter in the UAE. Fee earner headcount was up 44 in
the quarter, with the highest increases in France and Germany.
Asia Pacific Gross Profit (GBPm) Growth Rates
(20% of Group) Reported Constant
---------- ---------- ---------- ----------
Q2 2018 vs. Q2 2017 41.3 35.8 +15.3% +18.4%
---------- ---------- ---------- ----------
H1 2018 vs. H1 2017 74.2 66.7 +11.3% +16.3%
---------- ---------- ---------- ----------
Headcount at 30 June 2018: 1,660 (31 March 2018: 1,643)
Gross profit growth in constant currencies:
* Asia (15% of Group) +21%
* Greater China (9% of Group and 58% of Asia) +18%
* Australia (5% of Group) +10%
Asia Pacific gross profit grew 18.4%, with 5 countries achieving
record quarters. Greater China, one of our Large, High Potential
markets, grew 18%, a record quarter, with particularly strong
growth in Mainland China, up 22% and a successful first quarter of
trading in our new office in Chengdu. South East Asia, another of
our Large, High Potential markets, recorded strong growth of 18%,
with Singapore up 25% as market conditions continued to improve.
During the quarter, we opened in Vietnam, our fifth country in
South East Asia. In Japan, our investment in headcount in both the
Gaishikei and Nikkei market led to an acceleration in growth to
35%, up from 19% in Q1 2018; a record quarter. India, with now over
100 fee earners, also achieved another record quarter, up 27%.
Following the investment in fee earners in 2017 and the opening of
our new Canberra office in Q3 2017, Australia grew 10%, up from 6%
in Q1 2018. Overall fee earner headcount in the region grew 46 for
the quarter, with increases mainly in Australia, India and
Japan.
UK Gross Profit (GBPm) Growth Rate
(17% of Group)
----------- --------- ----------------
Q2 2018 vs. Q2 2017 36.0 36.6 -1.9%
----------- --------- ----------------
H1 2018 vs. H1 2017 69.7 73.0 -4.5%
----------- --------- ----------------
Headcount at 30 June 2018: 1,395 (31 March 2018: 1,409)
The UK declined -1.9% in the quarter. This was an improvement on
the decline of -7.1% in Q1 2018, in part due to the impact of the
timing of Easter. Our Page Personnel business, which represented
24% of the UK, grew by 5%. However, our Michael Page business,
which is more senior candidate focused, continued to be impacted by
uncertainty, declining -4%. In response to the trading conditions,
fee earner headcount fell by 16.
Americas Gross Profit (GBPm) Growth Rates
(15% of Group) Reported Constant
---------- ---------- ---------- ----------
Q2 2018 vs. Q2 2017 30.9 25.9 +19.6% +29.2%
---------- ---------- ---------- ----------
H1 2018 vs. H1 2017 57.3 50.2 +14.1% +24.9%
---------- ---------- ---------- ----------
Headcount at 30 June 2018: 1,227 (31 March 2018: 1,154)
Gross profit growth in constant currencies:
* North America (9% of Group) +27%
* Latin America (6% of Group) +32%
The Americas continued to be our fastest growing region, up
29.2% to GBP30.9m. North America grew 27%, with the US +27% and
Canada +30%, both achieving record quarters. Our regional offices
continued to perform particularly strongly, up 38%, and now
represent 55% of the US, a proportion that has grown by around 50%
since 2015. In Latin America we grew 32%. The Brazilian market
continued to recover, with growth of 23% for the quarter, up from
12% in Q1 2018. Mexico grew 25% with the other four countries in
Latin America, with headcount of over 300, growing 46%,
collectively. In line with our strategy of investing in our Large,
High Potential markets, fee earner headcount grew 62 in the
quarter.
Financial Position
Other than the effects of trading in the first half, the payment
of a final dividend of GBP27.4m for 2017 and the purchase of shares
into the Employee Benefit Trust (EBT) of c. GBP10m (2017: GBPnil),
there have been no significant changes in the financial position of
the Group since the publication of the results for the year ended
31 December 2017. Net cash at 30 June 2018 was approximately GBP85m
(31 March 2018: c. GBP91m; 30 June 2017: c. GBP89m).
Shares
At 30 June 2018 there were 327,862,127 Ordinary shares in issue,
of which 12,171,163 were held by the EBT. The rights to receive
dividends and to exercise voting rights have been waived by the EBT
over 8,884,861 shares and consequently these shares should be
excluded when calculating earnings per share. The total number of
voting rights in the Company is 327,862,127
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
Further information:
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:
https://www.investis-live.com/pagegroup/5af18476cc5d470e00371fe5/jyrs
Please use the following dial-in numbers to join the
conference:
United Kingdom (Local) 020 3936 2999
All other locations +44 20 3936 2999
Please quote participant access code 98 41 10 to gain access to
the call.
A presentation and recording to accompany the Q2 Trading Update
Presentation will be posted on the Company's website during the
course of the morning of 11 July 2018 at:
http://www.page.com/investors/investor-library/2018.aspx
PageGroup will issue its interim results for the six months
ending 30 June 2018 on 8 August 2018, followed by its Third Quarter
2018 Interim Management Statement on 10 October 2018.
Cautionary Statement
This Second Quarter and First Half 2018 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.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
TSTRMMPTMBJBBPP
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